One of the most powerful tools in the government’s arsenal for shaping and even controlling individuals, organizations and corporations is the power to write the regulations that implement laws. Lawmakers pass laws that sound good in press statements or on the floor of the House or Senate. But when they have to be implemented and the bureaucracy sets about writing implementing regulations, that’s when the problems start. The government is required to estimate some of the consequences of new regulations such as the man-hours required to respond. Unfortunately, there is no requirement to assess the unintended consequences of such regulations, although they can be substantial and negative.
One example of this is a new proposed regulation that requires defense companies to provide detailed information on their independent research and development (IR&D) to the Department of Defense (DoD). According to the Pentagon, IR&D is “R&D initiated and conducted by defense contractors independent of DoD control and without direct DoD funding.” In essence, IR&D is a cost of doing business that DoD encourages because it results in innovative research that benefits not only the companies but defense programs and the overall defense enterprise. Companies perform IR&D in order to improve their competitive position by inventing new technologies, improving the performance of existing systems and reducing the costs of current activities and processes. The government gains by being able to leverage the private sector and by allowing the inventive energies of U.S. workers and companies to flourish.
Let me give you one example. ITT Defense has always been well known in the area of radio-frequency countermeasures. It decided to enter the arena of infrared countermeasures used against shoulder-fired surface-to-air missiles. So it used IR&D money to develop a proprietary laser seeker/tracker unit with features that ITT believes made it superior to the systems then on the market. Now ITT Defense is competing with a number of long-standing infrared countermeasure companies for a contract to provide the Common Infrared Countermeasure System for all Army helicopters. Without IR&D, ITT Defense would not be a competitor and the Army, the Pentagon and the nation would be poorer for it.
Now DoD is proposing to amend federal acquisition regulations to require contractors to report IR&D projects generating annual costs in excess of $50,000. The stated purpose of this revision of the regulations is “to increase effectiveness by providing visibility into the technical content of industry IR&D activities to meet DoD needs and promote the technical prowess of the industry.” The information received would be placed in a database presumably accessible to government officials and contractors involved in the R&D process.
This is an odd decision for a number of reasons. One is that DoD already keeps track of IR&D expenditures. As bidders on government contracts defense companies are already required to report on IR&D expenditures for accounting purposes. So DoD already appears to have the necessary level of visibility into IR&D on which to make efficiency decisions. Another oddity is that government wants visibility down to the level of $50,000 projects. What the government will acquire with this specification is a mountain of reports which they will be unable to digest or appreciate. A department that cannot successfully manage billion dollar programs is unlikely to be able to coordinate or even establish oversight over thousands of small research projects.
Moreover, like many regulatory efforts, this one has some significant potentially negative unintended consequences. The current proposal sounds like an effort by DoD to assert control over corporate IR&D. In other words, the government is proposing to gather information for the purpose of directing or shaping private, non-government sponsored R&D. This cannot be a good thing. The central point behind IR&D is to allow companies to be creative, take risks and explore new technological possibilities. It makes no sense for the government to threaten the integrity of the process or to burden it with additional paperwork and costs.
Then there is the security of the data gathered by DoD. In light of recent reports regarding massive hacking of DoD-sponsored research activities, creation of a database of IR&D sounds like it would be bad for security. Also, since IR&D is proprietary work that companies pursue in order to better their competitive positions, without strict controls over access to the data, which seemingly would contravene the purpose of collecting it in the first place, the proposal would seem to threaten the very purpose for which IR&D is undertaken.
The ultimate concern is that this is the “camel’s nose” leading to a DoD attempt to gain access to and even control over technical data rights. There is a massive fight going on between private contractors and DoD over ownership of the technical data rights associated with platforms, weapons systems and technologies developed for the Pentagon. Companies have the right to charge for such data when it has been developed with private money. DoD hates paying for the data. Even the perception of an attempt to sneak technical data out the back door could have a chilling effect on defense IR&D.
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