INDEPENDENT RESEARCH AND DEVELOPMENT ENHANCEMENT

SEC. 824. INDEPENDENT RESEARCH AND DEVELOPMENT ENHANCEMENT (a) Revision and Codification of Provision Relating to Allow-ability of Independent Research and Development Costs.— (1) Chapter 139 of title 10, United States Code, is amended by adding at the end the following new section: “§ 2372. Independent research and development “(a) The Secretary of Defense shall prescribe regulations governing the payment, by the Department of Defense, of independent research and development costs or bid and proposal costs. “(b) Payment may be made for independent research and development costs or bid and proposal costs when work for which payment is made is of potential interest to the Department of Defense. “(c) The regulations shall encourage contractors to engage in research and development activities that— “(1) strengthen the defense industrial and technology base of the United States; “(2) enhance the industrial competitiveness of the United States; “(3) promote the development of technologies identified as critical under section 2508 of this title; “(4) increase the development of technologies useful for both the private commercial sector and the public sector; and “(5) develop 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. “(d) (1) Subject to paragraph (3), for each fiscal year following a fiscal year in which independent research and development costs or bid and proposal costs incurred by a person were paid by the Department of Defense in a total amount exceeding $7,000,000, the Secretary of Defense shall enter into an advance agreement with such person regarding the manner and extent to which the Department of Defense may pay independent research and development costs or bid and proposal costs incurred by such person. If such person is a business entity that has a product division that received payments for such costs from the Department of Defense in a total amount exceeding $700,000 during such preceding fiscal year, the Secretary may enter into an advance agreement, regarding payment of the independent research and development costs and bid and proposal costs incurred by such product division. “(2) The agreement shall include the following provisions: “(A) The maximum amount of the costs incurred by such person in that fiscal year that the Department may pay. “(B) The costs that are payable under the agreement, which may be only those costs that are incurred in connection with work referred to in subsection (b) or the attainment of benefits described in subsection (c). “(3) If a person referred to in paragraph (1) does not enter into an advance agreement with the Secretary under paragraph (1) for a fiscal year, the payment of the independent research and development costs and bid and proposal costs incurred by such person during such fiscal year shall be subject to such limitations as the Secretary of Defense may prescribe in the regulations under subsection (a). 104 STAT. 1604 “(4) On October 1, 1994, and October 1 of each third year thereafter, the Secretary may adjust the amounts in paragraph (1) to reflect changes in one or more economic indices that the Secretary considers appropriate for use in making adjustments under this paragraph. “(5) The provisions of this section shall apply only to contracts for which the submission and certification of cost or pricing data are required in accordance with section 2306a of this title.”. (2) The table of sections at the beginning of such chapter is amended by adding at the end the following new item: “2372. Independent research and development.”. (b) Repeal of Superseded Provision.— Section 203 of Public Law 91–441 (10 U.S.C. 2358 note) is repealed.