Independent Research & Development (IR&D) is a technical research and development effort by industry that is not sponsored by or required in the performance of a contract. It consists of projects within (1) Basic Research and (2) Applied Research & Development, (3) Development, and (4) System and other concept formulation studies. Contractors can recover a portion of their IR&D costs by including them as an allowable indirect expense on government contracts to the extent that those costs are allocable and reasonable. In addition, DoD permits major defense contractors to include allowable IR&D costs as indirect expenses on defense contracts to the extent that the IR&D activities are potentially of interest to DoD.
Definition: Independent Research & Development (IRAD) is research and development (R&D) activities conducted by private companies that have potential interest to the DoD.
Main IR&D References
Independent Research & Development (IR&D) Categories
Independent research and development (IR&D) is the cost of a contractor’s projects that fall into one of the following four categories:
- Basic research: a scientific study done to learn more about science. The main goal of basic research is to learn more about or understand the subject being studied, not to find ways to use that information in the real world.
- Applied research: Applied research is work that: 1) usually comes after basic research but may not be able to be separated from it; 2) tries to figure out and use the potential of scientific discoveries or improvements in technology, materials, processes, methods, devices, or techniques; and 3) tries to move state of the art forward. Applied research doesn’t include efforts whose main goal is to design, develop, or test specific products or services that might be sold. These kinds of efforts fall under “development” in this section.
- Development: the use of scientific and technical knowledge in the design, development, testing, or evaluation of a potential new product or service (or an improvement to an existing product or service) to meet specific performance requirements or goals.
- Systems and other concept formulation studies: are made up of analyses and studies that are either tied to specific IR&D projects or are meant to find desirable new systems, equipment, or components or to make changes and improvements to systems, equipment, or components that already exist.
Potential Independent Research & Development (IR&D) Categories of Interest
The seven (7) categories of IR&D activities that are of potential interest to DoD are:
- Enable superior performance of future U.S. weapon systems and components.
- Reduce acquisition costs and life-cycle costs of military systems.
- Strengthen the defense industrial and technology base of the United States.
- Enhance the industrial competitiveness of the United States.
- Promote the development of technologies identified as critical under 10 U.S.C. 2522 “Armament retooling and manufacturing”.
- Increase the development and promotion of efficient and effective applications of dual-use technologies.
- Provide efficient and effective technologies for achieving such environmental benefits as improved environmental data gathering, environmental cleanup and restoration, pollution reduction in manufacturing, environmental conservation, and environmentally safe management of facilities.
Independent Research & Development (IR&D) Rules
IR&D governing Laws and Regulations: 
- Public Law (10 USC § 2372) Section 802 of the National Defense Authorization Act for Fiscal Years 1992 and 1993 (Public Law 102-190, December 5, 1991) provides for payment of independent research and development and bid and proposal costs under defense contracts.
- Federal Acquisition Regulation (FAR) 31.205-18. This regulation provides the contract cost principles and procedures for IR&D and B&P costs under government contracts, including: definitions of IR&D and B&P costs, cost allowability, deferred IR&D costs, and cooperative arrangements.
- Defense Federal Acquisition Regulation Supplement (DFARS) 231.205-18. This regulation provides the contract cost principles and procedures for IR&D and B&P costs under defense contracts, including: definitions of covered contract, covered segment, and major contractor; cost allowability; and a list of activities that are of potential interest to DoD. For major defense contractors, allowable IR&D/B&P costs are limited to those for projects that are of potential interest to DoD. The cognizant administrative contracting officer (ACO) or corporate ACO determines whether the IR&D/B&P projects are of potential interest to DoD.
- Defense Federal Acquisition Regulation Supplement (DFARS) 242.771. This regulation provides the contract administration functions relating to IR&D and B&P costs incurred by major defense contractors, including the responsibilities of: the cognizant ACO or corporate ACO, the Defense Contract Management Agency or the Military Department responsible for performing contract administration functions, and the Director of Defense Research and Engineering.
- Cost Accounting Standard (CAS) 420. This regulation provides criteria for the accumulation and allocation of IR&D and B&P costs to cost objectives based on the beneficial or causal relationship between such costs and cost objectives.
Independent Research & Development (IR&D) Reporting
On January 30th, the Federal Register updated the new Defense Federal Acquisition Regulation Supplement (DFARS) Rule, revising requirements for reporting IR&D project data. Firms that receive reimbursements totaling more than $11 million in IR&D/Bid and Proposal costs to covered contracts must submit annual IR&D updates. The rule also encourages firms below the $11 million threshold to voluntarily submit IR&D project data so that department acquisition and science and technology (S&T) program managers can gain visibility and potentially leverage their projects.
Independent Research & Development (IR&D) Database 
The Defense Technical Information Center (DTIC) collects and maintains thousands of IR&D project summaries submitted by defense contractors in a restricted-access database. The database contains a short description of each IR&D project and a contractor’s point of contact. Contractor submissions are voluntary, but most major defense contractors provide project information. The IR&D database offers contractors a means of publicizing technical capabilities to potential DoD customers.
What is a Bid and Proposal
“Bid and Proposal” is the work that a contractor does to prepare, present, and support bids and proposals for possible Government or non-Government contracts. B&P can involve very technical work, sometimes a continuation of IR&D work that has already been done. B&P, not IR&D, refers to the technical work that goes into creating and preparing technical data to support bid or proposal activities. The B&P definition also includes administrative costs that have to do with B&P operations. B&P does not include the price of work that is paid for by a grant, a cooperative agreement, or is needed to complete a contract.
- IR&D does not include the costs of an effort sponsored by a grant or required in the performance of a contract.
- IR&D effort shall not include technical effort expended in developing and preparing technical data to support submitting a bid or proposal.
- DoD added a new rule in 2012 that all IRAD projects for major contractors must be reported to the Defense Technical Information Center (DTIC) every year for their prices to be allowed.
AcqLinks and References:
- DoD Directive 3204.1 ”IR&D and Bid and Proposal (B&P) Program” – 10 May 1999
- DoD Instruction 3204.01 “DoD Policy for Oversight of Independent Research and Development (IR&D)”
- Website: FAR 31.205 – 18 “Independent Research & Development (IR&D) and Bid and Proposal Cost”
- DFARS 242.771 “Independent Research and Development and Bid and Proposal Costs”
- DFARS 231.2 “Contracts with Commercial Organizations”
- White Paper: FAR 31.205-18, R&D and B&P Cost by Karen L. Manos
-  Website: DoD Independent Research & Development
- Website: Public Law (10 USC § 2372) Section 802
- Website: Air Force IR&D Program
- Website: Army IR&D Program
- Website: Navy IR&D Program
- Website: Defense Innovation Marketplace
- Website: Defense Technical Information Center (DTIC)