FAR Companion Part 35

Part 35 - Research and Development (R&D) Contracting FC35.000 FC 35.000 Oversight in research contracts with educational and nonprofit institutions. When awarding R&D research and development (R&D) contracts to educational or nonprofit institutions, especially for open-ended research, clearly define the role and time commitment of the principal investigator (PI), who is the lead researcher responsible for managing the project and delivering results.

If the contract is based on the PI’s expertise, name them in the contract as a key personnel, and require approval for any changes to the PI, research focus, objectives, or methods. The PI should maintain active engagement throughout the project and notify the contracting officer of any substantial reduction in level of effort. For institutions with multiple contracts, consider a basic agreement to promote consistency and reduce administrative workload. Review and update these agreements at least annually. This helps ensure the research stays aligned with government expectations while supporting innovation. Additionally, nonprofit, educational, or State institutions performing cost-reimbursement contracts often do not carry insurance. They may claim immunity from liability for torts, or, as State institutions, they may be prohibited by State law from expending funds for insurance. Federal Acquisition Regulation (FAR) Companion When establishing contracts with these entities, see FAR part 28 to ensure appropriate insurance clause coverage.

FC35.002 FC 35.002 Understanding the purpose of R&D contracts.

The primary purpose of contracted R&D programs is to advance scientific and technical knowledge and apply that knowledge to the extent necessary to achieve agency and national goals. Unlike contracts for supplies and services, most R&D contracts are directed toward objectives for which the work or methods cannot be precisely described in advance. It is difficult to judge the probabilities of success or required effort for technical approaches, some of which offer little or no early assurance of full success. The contracting process shall be used to encourage the best sources from the scientific and industrial community to become involved in the program. The program should provide an environment in which the work can be pursued with reasonable flexibility and minimum administrative burden. Federal Acquisition Regulation (FAR) Companion FC35.002 FC 35.002 Recoupment. Recoupment refers to the government’s recovery of government-funded nonrecurring costs from contractors. This applies when contractors sell, lease, or license the resulting products or technology to entities other than the Federal government. If not legally mandated, recoupment should adhere to agency procedures.

FC35.1 FC 35.1 Understanding the different approaches to R&D contracting.

R&D contracts differ fundamentally from supply or service contracts in that they often have undefined or evolving methods and objectives aimed at advancing knowledge or technology. Federal acquisition teams should recognize this unique nature and design contracting approaches that encourage innovation and adaptability by avoiding overly prescriptive requirements. Create contracting environments that minimize administrative burdens to attract and retain top scientific and technical talent. Use outcome-focused language in contracts rather than rigid specifications and allow contractors space to explore alternative technical approaches that may lead to breakthrough solutions. Consider developing more than one source to create long-term competition.

FC35.101 FC 35.101 Developing effective requirements documentation.

Federal acquisition teams benefit from working with technical experts to develop clear, complete requirements documentation tailored to the unique goals of R&D efforts. Effective approaches focus on defining achievable and meaningful objectives that advance agency mission requirements while encouraging problem-solving rather than dictating specific methods. Strong requirements documentation emphasizes research objectives and provides a concise, well-defined understanding of the problem to solve. R&D contracts may identify goals but not how to reach them, as that determination is left up to the contractor – especially in the early or Federal Acquisition Regulation (FAR) Companion exploratory phases. This approach allows contractors the freedom to innovate and apply creative approaches, which is essential to R&D. Requirements documentation works best when aligned with the type and form of contract being used. For example, level-of-effort contracts outline the required technical effort and reporting expectations, while completion contracts describe specific end objectives or milestones. Mixing language from both types within one document can create confusion. Well-structured R&D requirements documentation includes contextual information such as background on prior related work, known phenomena, relevant methodologies, and any constraints related to personnel, environments, or interfaces that may impact the effort. Key elements include clearly identified milestones like testing phases, assessment points, or minimum viable product demonstrations, along with deadlines for progress and delivery. Administrative elements like payment procedures and security requirements also merit clear articulation. Effective requirements documentation avoids rigid, overly detailed performance specifications that could hinder agility and adaptation. Strong documentation sets expectations and guides Federal Acquisition Regulation (FAR) Companion performance while empowering contractors to bring forward their best ideas and keeping government objectives front and center.

FC35.101 FC 35.101 Subcontractor considerations.

R&D contracts are awarded based on the contractor’s technical expertise, so it’s critical to know who will actually perform the work to maintain the integrity and quality of the R&D effort. Contractors should not subcontract technical or scientific tasks without the contracting officer’s prior knowledge and approval. This means, for cost-reimbursement contracts, this information should be gathered during negotiations; for fixed-price contracts, it should still be reviewed to protect the government’s interests. Use FAR clause 52.244-2 to require approval of key subcontracts as appropriate for your R&D contracts.

FC35.101(g) FC 35.101(g) Contract types for R&D.

The contract type should reflect the maturity and predictability of the work, balancing flexibility with accountability throughout the life of the R&D effort. Federal acquisition teams typically encounter technical uncertainty, evolving requirements, and cost unpredictability in the R&D context that render sealed bidding and fixed-price contract approaches ineffective for early-stage projects. Negotiation is typically required, and selecting the right contract type should involve input from technical experts who can assess the project’s complexity, objectives, and risks. Fixed-price contracts may be appropriate for R&D contracts, if the work can be divided into objective and measurable milestones where the technical and cost risk is reasonable. This approach allows for more control over budget and performance, even in R&D settings. Federal Acquisition Regulation (FAR) Companion Fixed-price level-of-effort contracts can also work well for short-term or well-defined tasks like concept development or problem solving. As the project matures, and design stability and risk diminish and become more tolerable, the acquisition strategy should shift toward more fixed- price arrangements to encourage performance and cost discipline. In many cases, cost-reimbursement contracts are appropriate for R&D (e.g., research in advanced technology applications, early conceptual work on a complex project) because they offer the flexibility needed for exploratory or developmental work where uncertainty about needed resources make it difficult to negotiate an affordable fixed price. However, these “best effort” arrangements increase the government’s exposure to overspending because they provide little incentive to control cost. Contractors are only required to make a good-faith attempt within the agreed budget, so use cost-reimbursement contracts with caution, and consider hybrid arrangements that allow for work to go from cost-type to fixed-price as greater stability in requirements develops and cost profiles are established. Federal Acquisition Regulation (FAR) Companion FC35.102 FC 35.102 Peer and scientific review processes. Use peer or scientific review processes to evaluate submissions, which generally involves a panel of experts evaluating proposals based on their specialized knowledge and experience relevant to the subject matter. Expert panels may include scientists, engineers, and subject matter experts from government, industry, or academia to provide objective assessment of technical merit, feasibility, and potential impact of proposed solutions. Use flexible evaluation frameworks tailored to R&D complexity, recognizing that projects often involve unique challenges and unpredictable outcomes that require moving away from rigid, one-size-fits-all evaluation approaches.

FC35.201 FC 35.201 How to use evaluation criteria for R&D.

Evaluate submissions based on technical merit, including how innovative, feasible, and well- developed the proposed solution appears to be. Limit evaluation factors to a manageable number, focusing on evaluation factors that will serve as meaningful discriminators. Consider the submission’s connection with the agency’s problem, specifically how directly and effectively the proposal addresses critical agency challenges. Assess the funds available and the proposed price for the solution and determine whether the solution's value justifies the price while aligning with agency goals and resource limits. Consider the return on investment (ROI) and evaluate whether the project is affordable given the agency's competing priorities and available funding.

FC35.201 FC 35.201 Merit-based evaluation methods.

Choose R&D solutions based on best technical ideas and organizational competence rather than solely on lowest cost or traditional comparative methods. Prefer merit-based evaluation for R&D acquisitions, given the unique nature of innovation and the difficulty in comparing direct prices between fundamentally different technical approaches.

FC35.201(c) Federal Acquisition Regulation (FAR) Companion FC 35.201(c) Price evaluation in R&D acquisitions. Before heading into negotiations, think critically about the evaluation of price— don't price. Don't just focus on the numbers. In R&D acquisitions, price competition is often limited, and comparing proposals can feel like comparing apples to oranges.

Start by asking what's the cost of walking away with no award? Would it delay the mission or increase costs later? Then, compare what each offer delivers for the price using practical alternative approaches that make sense for unique, innovative solutions. If your solicitation encourages multiple offerors (like in a Broad Agency Announcement, or BAA), that alone can create competitive pressure, fostering inherent economic competition and driving reasonable pricing from the start—even start, even if the solutions differ. Still, you can and should negotiate further to fine-tune the final price. When one proposal is more expensive, ask whether the higher price is tied to real technical advantages. Use a "price-walk" approach: line up two solutions, break down their technical differences, and assign value to those differences. Look for the most similar solution with known pricing to help judge whether the added cost is justified. Avoid writing off solutions as "too Federal Acquisition Regulation (FAR) Companion different to compare." With the right questions and analysis, you can make smarter, more defensible price decisions. Think about the value of what you're buying. Will it improve performance, reduce long-term costs, or strengthen the mission? A return-on-investment mindset helps justify pricing when no clear benchmarks exist. Evaluate the basis of an estimate. Instead of requiring a detailed cost breakdown, look for a well-explained, logical estimate—how estimate. How did the offeror build their price? Are the assumptions clear and supported by solid data? Finally, be cautious about using the budget ceiling as the only check on pricing. Just because a proposal comes in under the ceiling doesn't mean the price is right. Always combine budget info with a broader look at the solution's value, ROI, and pricing logic. These methods help you make sound, supportable decisions—even decisions, even in the complex world of R&D. FC35.403 FC 35.403 Establishing and managing sponsoring agreements for Federally Funded Research and Development Centers (FFRDCs). When working with a FFRDC, a sponsoring agreement helps to establish a clear mission, define responsibilities, and guide the relationship over time. The agreement formalizes the relationship between the government and the FFRDC, defines the FFRDC’s mission, and sets the expectations for periodic reviews. While specific content in an agreement may vary depending on circumstances, the agreement should cover key items like the FFRDC’s mission, how to handle termination or nonrenewal, how to handle assets and liabilities, how to use retained earnings, and rules about competing for non-FFRDC federal work, which is prohibited in FAR 35.403(b)(4). The agreement should also state whether the FFRDC can take on work from entities other than the sponsor and under what conditions. Sponsoring agreements promote transparency, prevent Federal Acquisition Regulation (FAR) Companion confusion, and support long-term success. Review such agreements annually and renew every five years, keeping expectations up to date and ensuring they remain current and relevant.