We further believe that the administrative impracticality of

a proposal that IR&D should be reimbursed only when identified as of

direct or indirect benefit "to a specific contract" will also be

established.

Such a proposed requirement not only ignores the wide

range of basic and applied research but also the fact that such

endeavors can and do take place years in advance "of a specific contract

The Why of Independent Research and Development

Companies engage in IR&D for the following reasons:

To achieve a requisite level of new knowledge to be competitive

in chosen fields of technical activity.

To acquire a technological competence which will provide a reasonable basis for acceptance of the technical risks involved.

innovation.

To survive in a business which depends heavily on technical

As long as the government relies on private industry for its weapon systems development, its policies must be framed to obtain optimum benefits from the private enterprise system. By promulgating technical and fiscal policies which encourage rather than discourage IR&D the government uses a time honored and proven method of achieving keen competition between defense contractors, thereby meeting the objectives of existing procurement statutes.

Encouragement of IR&D by government agencies often comes through briefing seminars where an agency's problems and requirements, both present and envisioned, are outlined to industry and an appeal made that

study and technology be directed to those areas. As a result, specific requests for proposals to develop and build hardware are received by those who have accomplished sufficient preliminary research and development, independently, to respond efficiently and effectively.

Thus, we see how IR&D provides a continuous flow of new technology

and competence by which the requirements of the future can be met.

The necessity for this activity was pointed up by Dr. Foster, DoD's Director of Research and Engineering, as follows:

"It is virtually impossible for a country, an
industry or a company to remain healthy or
competitive, indeed to survive, without pushing
forward the frontiers of technology. It is a
rare field of business in which a company can
sustain itself over a long term with the same
product in the same market.

Nowhere is this

more applicable than in the defense and space

industry."

Note that Dr. Foster first referred to a country remaining healthy and competitive by pushing forward the frontiers of technology. Historically, it has been the policy of the United States to be competitive

as a nation by encouraging intense competition within its industrially based, independent, free-enterprise economy.

Government-sponsored research and development, coupled with IR&D, provides the technological superiority in weaponry upon which our national security is based. Both are essential.

Government-sponsored

research and development is the process by which the government determines the characteristics of specific weapons or equipment. IR&D provides the reservoir of technological capability which makes possible the acquisition of future generations of weapons and equipment having optimum effectiveness.

Any substantial reduction in the level of support afforded either of these research and development activities would seriously degrade our future defense capability. The long lead times involved in weapon systems development emphasize the validity of the proposition that what is or is not done today determines what can or cannot be done tomorrow.

The rapid response of American industry to the government's needs in times of national emergencies would not have been, or will not be, possible without the technological competence provided by both sponsored and independent research and development.

Why IR&D Should Be Independent

It is to the government's advantage to preserve the independent nature of a contractor's research and development effort. It permits

a contractor to apply his technical resources to those technologies and programs in which his capabilities are highest and which, therefore, will be of greatest benefit to the customer.

A contractor's independence also provides a flexibility that cannot be achieved through external controls. At any given time, a company is in the best position to evaluate its own best ideas and prospects. When research projects are judged not fruitful in terms of technical success or practical application, they are abandoned. A new approach or entirely new project is substituted.

It is this

freedom to exploit quickly and effectively promising concepts or

results and to curtail technical efforts not achieving their objectives
that is vital to the success of a contractor's technical activities
and to his ability to meet customer requirements.

The curtailment to any substantial degree of IR&D would necessitate government sponsorship or direct contracting for research and development to fill the technological gap that would result from such action. This would be impractical, if not impossible, for the following reasons:

(1) the government could not possibly and has never presumed to have the capability to originate all the ideas worth pursuing;

(2) the government could not effectively act as the sole judge

and arbiter of the potential of all embryonic ideas; and

(3) the government could not possibly administer such a "nationalized" research and development effort unless the number of government scientists, engineers and technical managers were sharply increased. In effect this

could mean the return of the arsenal concept which in the past has amply

demonstrated it is neither adequately competitive nor sufficiently innovative.

How IR&D is Managed and Funded

Contractors do not have unlimited resources of either technical skills or funding. Therefore, a high degree of management control is exercised to achieve the most useful results from these limited

resources. Control of IR&D programs is vested in those who are most familiar with the company's needs and potential, most knowledgeable in the management of a competitive enterprise, and are held directly responsible for the success of the effort. These are extremely powerful motives and incentives; their benefits are evident in the quantum jumps achieved by American technology.

The following procedures are typical of the management approach to controlling this effort by major contractors and exemplify the degree of care and concern focused on this effort.

An IR&D program starts with submission of desired projects from top engineering managers. Each includes a technical analysis, a schedule, personnel requirements, and probability of success and the potential payoff. Also submitted are projects started in prior years that are considered worthy of continued funding. All projects, existing and proposed, are rated against each other and ranked in order of

importance.