
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 10USC2372]

 
                         TITLE 10--ARMED FORCES
 
                    Subtitle A--General Military Law
 
                PART IV--SERVICE, SUPPLY, AND PROCUREMENT
 
                  CHAPTER 139--RESEARCH AND DEVELOPMENT
 
Sec. 2372. Independent research and development and bid and 
        proposal costs: payments to contractors
        
    (a) Regulations.--The Secretary of Defense shall prescribe 
regulations governing the payment, by the Department of Defense, of 
expenses incurred by contractors for independent research and 
development and bid and proposal costs.
    (b) Costs Allowable as Indirect Expenses.--The regulations 
prescribed pursuant to subsection (a) shall provide that independent 
research and development and bid and proposal costs shall be allowable 
as indirect expenses on covered contracts to the extent that those costs 
are allocable, reasonable, and not otherwise unallowable by law or under 
the Federal Acquisition Regulation.
    (c) Additional Controls.--Subject to subsection (f), the regulations 
prescribed pursuant to subsection (a) may include the following 
provisions:
        (1) A limitation on the allowability of independent research and 
    development and bid and proposal costs to work which the Secretary 
    of Defense determines is of potential interest to the Department of 
    Defense.
        (2) For each of fiscal years 1993 through 1995, a limitation in 
    the case of major contractors that the total amount of the 
    independent research and development and bid and proposal costs that 
    are allowable as expenses of the contractor's covered segments may 
    not exceed the contractor's adjusted maximum reimbursement amount.
        (3) Implementation of regular methods for transmission--
            (A) from the Department of Defense to contractors, in a 
        reasonable manner, of timely and comprehensive information 
        regarding planned or expected Department of Defense future 
        needs; and
            (B) from contractors to the Department of Defense, in a 
        reasonable manner, of information regarding progress by the 
        contractor on the contractor's independent research and 
        development programs.

    (d) Adjusted Maximum Reimbursement Amount.--For purposes of 
subsection (c)(2), the adjusted maximum reimbursement amount for a major 
contractor for a fiscal year is the sum of--
        (1) the total amount of the allowable independent research and 
    development and bid and proposal costs incurred by the contractor 
    during the preceding fiscal year;
        (2) 5 percent of the amount referred to in paragraph (1); and
        (3) if the projected total amount of the independent research 
    and development and bid and proposal costs incurred by the 
    contractor for such fiscal year is greater than the total amount of 
    the independent research and development and bid and proposal costs 
    incurred by the contractor for the preceding fiscal year, the amount 
    that is determined by multiplying the amount referred to in 
    paragraph (1) by the lesser of--
            (A) the percentage by which the projected total amount of 
        such incurred costs for such fiscal year exceeds the total 
        amount of the incurred costs of the contractor for the preceding 
        fiscal year; or
            (B) the estimated percentage rate of inflation from the end 
        of the preceding fiscal year to the end of the fiscal year for 
        which the amount of the limitation is being computed.

    (e) Waiver of Adjusted Maximum Reimbursement Amount.--The Secretary 
of Defense may waive the applicability of any limitation prescribed 
under subsection (c)(2) to any contractor for a fiscal year to the 
extent that the Secretary determines that allowing the contractor to 
exceed the contractor's adjusted maximum reimbursement amount for such 
year--
        (1) is necessary to reimburse such contractor at least to the 
    extent that would have been allowed under regulations as in effect 
    on December 4, 1991; or
        (2) is otherwise in the best interest of the Government.

    (f) Limitations on Regulations.--Regulations prescribed pursuant to 
subsection (c) may not include provisions that would infringe on the 
independence of a contractor to choose which technologies to pursue in 
its independent research and development program.
    (g) Encouragement of Certain Contractor Activities.--The regulations 
under subsection (a) shall encourage contractors to engage in research 
and development activities of potential interest to the Department of 
Defense, including activities intended to accomplish any of the 
following:
        (1) Enabling superior performance of future United States weapon 
    systems and components.
        (2) Reducing acquisition costs and life-cycle costs of military 
    systems.
        (3) Strengthening the defense industrial base and the technology 
    base of the United States.
        (4) Enhancing the industrial competitiveness of the United 
    States.
        (5) Promoting the development of technologies identified as 
    critical under section 2506 of this title.
        (6) Increasing the development and promotion of efficient and 
    effective applications of dual-use technologies.
        (7) Providing 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.

    (h) Major Contractors.--A contractor shall be considered to be a 
major contractor for the purposes of subsection (c) for any fiscal year 
if for the preceding fiscal year the contractor's covered segments 
allocated to Department of Defense contracts a total of more than 
$10,000,000 in independent research and development and bid and proposal 
costs.
    (i) Definitions.--In this section:
        (1) Covered contract.--The term ``covered contract'' has the 
    meaning given that term in section 2324(l) of this title.
        (2) Covered segment.--The term ``covered segment'', with respect 
    to a contractor, means a product division of the contractor that 
    allocated more than $1,000,000 in independent research and 
    development and bid and proposal costs to Department of Defense 
    contracts during the preceding fiscal year. In the case of a 
    contractor that has no product divisions, such term means the 
    contractor as a whole.

(Added Pub. L. 101-510, div. A, title VIII, Sec. 824(a)(1), Nov. 5, 
1990, 104 Stat. 1603; amended Pub. L. 102-25, title VII, Sec. 701(c), 
Apr. 6, 1991, 105 Stat. 113; Pub. L. 102-190, div. A, title VIII, 
Sec. 802(a)(1), Dec. 5, 1991, 105 Stat. 1412; Pub. L. 102-484, div. A, 
title X, Sec. 1052(27), Oct. 23, 1992, 106 Stat. 2500; Pub. L. 103-35, 
title II, Sec. 201(c)(5), May 31, 1993, 107 Stat. 98; Pub. L. 104-106, 
div. D, title XLIII, Sec. 4321(b)(11), Feb. 10, 1996, 110 Stat. 672.)


                               Amendments

    1996--Subsec. (i)(1). Pub. L. 104-106 substituted ``2324(l)'' for 
``2324(m)''.
    1993--Subsec. (g)(5). Pub. L. 103-35 substituted ``section 2506'' 
for ``section 2522''.
    1992--Subsec. (e)(1). Pub. L. 102-484 substituted ``on December 4, 
1991'' for ``on the day before the date of the enactment of the National 
Defense Authorization Act for Fiscal Years 1992 and 1993''.
    1991--Pub. L. 102-190 substituted section catchline for one which 
read ``Independent research and development'' and amended text 
generally, substituting present provisions for provisions authorizing 
payment of independent research and development or bid and proposal 
costs, encouraging contractors to engage in research and development 
activities, and authorizing advance agreements regarding the manner and 
extent in which the Department of Defense may pay independent research 
and development costs or bid and proposal costs.
    Subsec. (d)(2)(B). Pub. L. 102-25 substituted ``subsection (b), 
including'' for ``subsection (b) or''.


                    Effective Date of 1996 Amendment

    For effective date and applicability of amendment by Pub. L. 104-
106, see section 4401 of Pub. L. 104-106, set out as a note under 
section 251 of Title 41, Public Contracts.


                    Effective Date of 1991 Amendment

    Section 802(e) of Pub. L. 102-190 provided that: ``The amendments 
made by this section [amending this section and section 2330 of this 
title] shall take effect on October 1, 1992, and shall apply to 
independent research and development and bid and proposal costs incurred 
by a contractor during fiscal years of that contractor that begin on or 
after that date.''


                               Regulations

    Section 802(b) of Pub. L. 102-190 provided that: ``The Secretary of 
Defense shall prescribe proposed regulations to implement the amendment 
made by subsection (a)(1) [amending this section] not later than April 
1, 1992, and shall prescribe final regulations for that purpose not 
later than June 1, 1992.''


                Study by Office of Technology Assessment

    Section 802(c) of Pub. L. 102-190 directed Director of the Office of 
Technology Assessment to conduct a study to determine effect of 
regulations prescribed under this section on the achievement of policy 
stated in subsec. (g) of this section and submit a report containing 
results of such study to Committees on Armed Services of Senate and 
House of Representatives not later than Dec. 1, 1995, prior to repeal by 
Pub. L. 103-160, div. A, title II, Sec. 266, Nov. 30, 1993, 107 Stat. 
1611.
