FAR 31.109 Advance Agreements

[here_2_help]

Dang it! I was sitting on the 405 this afternoon (if you know the 405 then you know there wasn't much to do except think). I was stewing over this and then the answer came to me -- deferred IR&D -- it's quite likely this contractor qualifies for that treatment.

I'm embarrassed I didn't think of it earlier. My only excuse is that I've never actually met a contractor who could qualify for the treatment -- all my contractors have active IR&D programs going.

See 31.205-18.

(d) Deferred IR&D costs.

(1) IR&D costs that were incurred in previous accounting periods are unallowable, except when a contractor has developed a specific product at its own risk in anticipation of recovering the development costs in the sale price of the product provided that—

(i) The total amount of IR&D costs applicable to the product can be identified;

(ii) The proration of such costs to sales of the product is reasonable;

(iii) The contractor had no Government business during the time that the costs were incurred or did not allocate IR&D costs to Government contracts except to prorate the cost of developing a specific product to the sales of that product; and

(iv) No costs of current IR&D programs are allocated to Government work except to prorate the costs of developing a specific product to the sales of that product.

(2) When deferred costs are recognized, the contract (except firm-fixed-price and fixed-price with economic price adjustment) will include a specific provision setting forth the amount of deferred IR&D costs that are allocable to the contract. The negotiation memorandum will state the circumstances pertaining to the case and the reason for accepting the deferred costs.

Problem solved. And all that controversy is now mooted.

[here_2_help]

Vern,

Yes, Terry's and Karen's duet together is one of the best parts of the YIR conference.

Karen is quite an impressive person, as a glance at her bio will show. Terry is as well.

I know them both; we exchange emails from time to time. I'm sincerely honored that seeing them made you think of me.

H2H