@Retreadfed and @Vern Edwards:  Thanks for that input - are you saying that firms were open to R&D contracts as a way to bring in revenue in lean times?  Or what did the contractors get out of the deal that made it attractive?  Were these firms in question new to government contracting, or was having ongoing government work part of their strategy?

4 hours ago, Patrick Mathern said:

what did the contractors get out of the deal that made it attractive? 

As I recall, many of the contractors had commercial operations that would benefit from government funded research.  Although they could claim tax deductions for self funded R&D, that was not the same as actually having the government pay for research they could exploit commercially.  This was particularly true for companies in the pharmaceutical, computing and materials fields.

On 9/27/2021 at 12:35 PM, Neil Roberts said:

DOD scheduled a series of public hearings in 2019 following a 2019 GAO report regarding contractor financing and profit policies. See https://www.gao.gov/assets/gao-19-406.pdf 

I remember the latest change to working capital policies went over like a lead balloon.  From the report:

“In August 2018, DOD introduced a proposed rule that was intended to use contract financing rates to help incentivize contractor performance and to implement Section 831. The proposed rule would have set a base progress payment rate for large businesses (specifically, for other than small businesses) at 50 percent and small businesses at 90 percent. At the same time, however, the proposed rule provided opportunities to increase the rate if the contractor achieved certain enterprise-wide priorities such as meeting contract delivery dates.”

Was the rule-maker too aware of the linkage between USG financing and internal rate of return?  Was this perhaps just feigned outrage by industry advocates?  Regardless of the optics at this enterprise level, we at the working level could all learn a thing or two by understanding the buying power of IRR.