Aerospace R&E Audit Technique GuideJanuary 28, 2005
Page iI.
Introduction............................................................................................................................................1
A.
Focus of Aerospace ATG...............................................................................................................1
B.
Applicability of Aerospace ATG....................................................................................................1
C.
Industry Overview/Description......................................................................................................1
II.
Contracting.........................................................................................................................................1
A.
General...........................................................................................................................................1
1.
Government Contracting................................................................................................................2
2.
Commercial Contracting.................................................................................................................2
B.
Contract Types................................................................................................................................2
1.
Fixed-Price Family of Contracts.....................................................................................................3
2.
Cost-Plus Family of Contracts........................................................................................................3
3.
Other...............................................................................................................................................4
C.
Standard Sections of a Contract......................................................................................................4
III.
Contracting Activities.........................................................................................................................5
A.
Contracting Stages..........................................................................................................................5
1.
Request for Proposal.......................................................................................................................5
2.
Bid & Proposal...............................................................................................................................6
3.
Awards / Authorization..................................................................................................................6
B.
Development Activities..................................................................................................................7
1.
Design Phase..................................................................................................................................7
2.
Development Testing......................................................................................................................7
3.
Certification....................................................................................................................................8
4.
Preparation for Production..............................................................................................................8
5.
Deliverable Production Units per CLIN.........................................................................................8
IV.
Rules of Law.......................................................................................................................................9
A.
Research & Experimental Expenditures IRC § 174 Overview.......................................................9
B.
Qualified Research Expense & Activities Flowchart (IRC § 41(b) & (d))...................................11
C.
Computation Flowchart (IRC § 41(c) & (f))................................................................................13
V.
Issues Peculiar to the Aerospace Industry........................................................................................14
A.
Funded Research..........................................................................................................................14
1.
Two-Part Test...............................................................................................................................14
2.
Funded Research Considerations..................................................................................................15
B.
Cascading Credit..........................................................................................................................18
1.
Prime Contractor Level................................................................................................................19
2.
Subcontractor Level......................................................................................................................20
C.
Other Issue Analysis.....................................................................................................................20
1.
After Commercial Production.......................................................................................................20
2.
Adaptation / Duplication (e.g. Reverse Engineering)...................................................................23
3.
Business Component....................................................................................................................24
4.
IRC § 174 Consideration..............................................................................................................25
5.
Multiple Prototypes......................................................................................................................25
6.
Mock-ups and Models..................................................................................................................26
7.
Special Tooling & Special Test Equipment..................................................................................26
8.
Tooling-up....................................................................................................................................27
9.
Testing..........................................................................................................................................27
D.
IRC § 41(d) – Qualified Research................................................................................................28
1.
Bid & Proposal Cost.....................................................................................................................28
2.
Program Management...................................................................................................................28
3.
Safety............................................................................................................................................28
4.
Training........................................................................................................................................28
5.
Technical Writing.........................................................................................................................28
6.
Research Outside the United States..............................................................................................29
7.
FAA Certification Costs...............................................................................................................29
E.
IRC § 41(b) Expense Items..........................................................................................................29
1.
Wages-Direct Supervision............................................................................................................30
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