Book Description

The Department of Defense (DOD) maintains a policy that is designed to reimburse defense contractors for a portion of their spending on Independent Research and Development (IR & D). DOD pays for a great deal of research and development directly through contracts. IR & D is research and development that DOD does not contract for directly. IR & D policy is designed to encourage defense contractors to invest in this form of research and development despite the lack of direct contracts for research and development. It is often associated with Bid and Proposal (B & P) funds, which DOD provides to contractors in a similar way. Those who support maintaining the independence of IR & D argue that it increases private spending on defense research and development, provides defense options that government officials may not think of, and enhances the transfer of technology from scientists to weapons developers by giving developers a direct stake in the scientists' work. Section II presents a simple economic model of IR & D. Section III uses this model to review the economic approach taken in each study. Section IV compares the studies' estimates of the size of subsidy created by IR & D policy and the effects of IR & D policy on private spending on IR & D. Section V concludes the comparison and suggests directions for future research.