False Claims in Independent Research and Development (IRandD): Federal District Court Adopts ATK Thiokol as the Knowledge Standard

Many government contractors, like other private enterprises, invest heavily in research and development (R&D) to improve the products and services they offer, in hopes of better meeting their customers’ needs.  When those R&D efforts are “independent” of any particular contract—hence “IR&D” or “IRAD”—the associated costs are properly allocated to the contractor’s indirect cost pools, rather than charged directly to any one customer.  This makes good sense, and is reflected in the Federal Acquisition Regulation (FAR) cost principles at 31.205-18, which provides that costs of performing basic or applied research, development, and systems and other concept formulation studies are generally allowable as IR&D so long as they are not “sponsored by a grant or required in the performance of a contract.”  This regulatory guidance is vague, though, and years of debating what it really means for R&D efforts to be “required in the performance of a contract” ultimately led to the Federal Circuit’s landmark decision in ATK Thiokol, Inc.