2024: The FAR - Federal Acquisition Regulations, Part 35

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THE FAR – PART 35

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FAR PART #35:
Research and Development Contracting
SPEAKER: Karri Palmetier
FIRM: Palmetier Law
EMAIL: karri@palmetierlaw.com

Part 35 sets forth the special policies and procedures to contract for research and development (R&D)
⮚ Primary purposes of contracted R&D programs are to:
⮚ Advance scientific and technical knowledge
⮚ Apply that knowledge to achieve agency and national goals
⮚ Key difference with R&D is that requirements and goals are less defined:
⮚ Objectives often cannot be precisely described in advance; and
⮚ Probability of success is difficult to assess or predict
⮚ Part 35 works together with the other sections of the FAR

Publication and Notice
⮚ Contracting Officers are encouraged to:
⮚ Obtain the best sources from the scientific and industrial community
⮚ Provide an environment in which the work can be pursued with reasonable flexibility and
minimum administrative burden
⮚ To meet the goal of broad involvement from the scientific and industrial community, agencies must
continually search for sources (including small business concerns) competent to perform R&D work:
⮚ Publicize needs and requirements early including Part 5 Governmentwide point of entry
⮚ Government team (technical, contracting officers, and small business personnel) must
collaborate early in and throughout the acquisition process
⮚ Publicly provide agency R&D points of contact for potential sources

⮚ R&D requires highly technical, qualified performers
⮚ Technical personnel should recommend potential sources that appear qualified, as a result of:
⮚ Present and past performance of similar work;
⮚ Professional stature and reputation;
⮚ Relative position in a particular field of endeavor;
⮚ Ability to acquire and retain the professional and technical capability, including facilities,
required to perform the work; and
⮚ Other relevant factors
⮚ Contracting officers may conduct market research to assess existence of ideas or prior work in a
specific field of research
⮚ Contracting officers should initially distribute solicitations only to sources technically qualified in the
specific field of science or technology

⮚If not practicable to solicit all apparently qualified sources, may solicit only a reasonable number
⮚ Contracting officers shall furnish copies of solicitation to qualified sources upon request
⮚If a contractor has technology of interest to the Government and developed at private expense,
⮚ First, “there should be no hesitancy to discuss it; however, the concern should be warned that
the Government will not be obligated by the discussion.” FAR 35.007(i)
⮚ May treat as unsolicited proposal under FAR Subpart 15.6
⮚ May justify an exception to competition under FAR 6.302-1(a)(2)(i) if all three elements are met:
⮚ Demonstrates a unique and innovative concept or demonstrates a unique capability to
provide the particular research services proposed;
⮚ Offers a concept or services not otherwise available to the Government; and
⮚ Does not resemble the substance of a pending competitive acquisition

Contract Types
⮚ Government is supposed to use grants or cooperative agreements when the principal purpose of the
transaction is to stimulate or support research and development for another public purpose
⮚ FAR-based contracts are only if government is buying product or services
⮚ Cost reimbursement is preferred due to imprecise specifications, research unknowns, and estimating
costs, usually cost-reimbursement completion
⮚ Cost sharing may be required by law or agency procedures per FAR 16.303 and 42.707(a)

Contract Types
⮚ General preference for fixed price applies to R&D only if goals, objectives, specifications, and cost
estimates are sufficient to permit which depends on the precision of goals, performance objectives,
and specifications for the work
⮚ Levels of effort can be specified in advance (good for short-duration to develop system design
concepts, resolve potential problems, and reduce Government risks)
⮚ Minor projects when the objectives of the research are well defined and there is sufficient
confidence in the cost estimate for price negotiation
⮚May use fixed-price incentive and cost-plus-incentive-fee contracts in that order of preference

Preparing Solicitations
⮚ Generally, Part 15 with negotiations are normal for R&D because precise specifications required for
Part 14 are not normal or possible for R&D projects
⮚ For complex efforts, provide potential offerors an opportunity to comment on the details of the
requirements as contained in the work statement, the schedule, and any related specifications
⮚ Contracting Officers may
⮚ Require proposals be organized in a way to aid efficient evaluation by technical personnel
⮚ Permit offerors to propose an alternative contract type

⮚ As appropriate, include management capability, experience and past performance, subcontracting
practices, and any other significant evaluation criteria
⮚ Solicitation Must require offerors to
⮚ Describe technical and management approach
⮚ Identify technical uncertainties
⮚ Make specific proposals for the resolution of any uncertainties
⮚ Describe any planned subcontracting of scientific or technical work for any portion of the
experimental, research, or development effort
⮚ Because of the high degree of scientific and technological skill required to conduct R&D,
subcontracting is subject to additional scrutiny and must be evaluated
⮚ Contracting officer should evaluate this information and may obtain an agreement that
protects the Government’s interests

⮚ Solicitation should include evaluation factors to determine the most technically competent; such as
⮚ Understanding of the scope of the work
⮚ Approach to accomplish the scientific and technical objectives or merit of the ideas or concepts
⮚ Availability and competence of experienced engineering, scientific, or other technical personnel
⮚ Pertinent novel ideas in the specific branch of science and technology involved
⮚ Availability, from any source, of necessary research, test, laboratory, or shop facilities
⮚ Offerors’ understanding of details of the work, especially the Government interpretation
⮚ Although cost or price is not normally the controlling factor for R&D, it should not be disregarded to
validate what best satisfies the Government’s requirement at a fair and reasonable cost

Drafting Statements of Work
⮚ Critical and hard part because must accomplish multiple goals: be clear, be complete, accomplish R&D
objectives, and still allow contractors freedom to exercise innovation and creativity
⮚ Describe the area of exploration (Basic Research) or the end objectives (Development and Applied
Research)
⮚ A statement of the area of exploration, tasks to be performed, and objectives of the research or
development effort as appropriate for contract type
⮚ Background information helpful to provide clear understanding of the objective or requirement (e.g.,
any known phenomena, techniques, methodology, or results of related work)
⮚ Factors such as personnel, environment, and interfaces that may constrain the results of the effort
⮚ Reporting requirements and information on additional items required to furnish during performance
⮚ For level-of-effort work statements, an estimate of applicable professional and technical effort
involved
⮚ Any other considerations peculiar to the work to be performed

Drafting Statements of Work
⮚ For R&D, deliverables are usually reports and data and occasionally prototypes, first test articles, etc
⮚ Deliverables should be consistent with the objectives of the effort involved and create a
permanent record of the work accomplished under the contract
⮚ May require use of Standard Form (SF) 298, Report Documentation Page, to complete reports
⮚ Contract must specify deliverables; Part 27 clauses only grant licenses to intellectual property
⮚ Agencies should make R&D contract results available to other Government activities and the private
sector in accordance with agency regulations considering national security, protection of data, and
new-technology dissemination policy. Reports should be sent to the National Technical Information
Service (NTIS) 5285 Port Royal Road Springfield, VA 22161.

Evaluating Proposals
⮚ Generally, an R&D contract should be awarded to the offeror who proposes the best ideas or
concepts and has the highest competence in the specific field of science or technology involved
⮚ Not to obtain capabilities that exceed those needed for successful performance of the work
⮚ When a small business concern would be selected for award but is considered not responsible,
the SBA Certificate of Competency procedures in Subpart 19.6 are followed
⮚ Precise specifications are ordinarily not available, so special care is needed in reviewing the
proposals to assure consistent with the solicitation evaluation factors
⮚ The contracting officer should use the procedures in subpart 15.5 to notify and debrief offerors
⮚ Important to evaluate a contractor’s cost or price estimate, to determine whether the estimate is
reasonable and provide valuable insight into the offeror’s understanding of the project, perception of
risks, and ability to organize and perform the work

Broad Agency Announcements (BAA)
⮚ May use a BAA to
⮚ Fulfill requirements for scientific study and experimentation
⮚ Directed toward advancing the state-of-the-art or increasing knowledge or understanding rather
than focusing on a specific system or hardware solution
⮚ Shall only be used when meaningful proposals with varying technical/scientific approaches can be
reasonably anticipated.
⮚ Selection shall be based on technical, importance to agency programs, availability of funds, and, to
the extent appropriate, cost realism and reasonableness

⮚ In preparing a BAA, contracting officers shall
⮚ Publicize the BAA at least annually through SAM.gov and may also publish in noted scientific,
technical, or engineering periodicals. Replaces FAR Subpart 5.2 requirements.
⮚ Describe agency’s research interest, either for individual program requirements or for broadly
defined areas of interest
⮚ Describe criteria for selecting proposals, their relative importance, and method of evaluation
⮚ Specify the period of time during which proposals will be accepted
⮚ Contain instructions for the preparation and submission of proposals

⮚ In evaluating responses to a BAA
⮚ Evaluation must be consistent with evaluation criteria through a peer or scientific review process
⮚ For R&D, contracting officers must use technical personnel during evaluation in contrast to other
areas when it’s optional
⮚ Not required to evaluate proposals against each other because no common work statement
⮚ Must document individual proposal evaluations

Property Considerations
⮚ Part 45 still applies to all R&D contracts
⮚ Vesting title under paragraph (b) of this section is subject to civil rights legislation, 42 U.S.C. 2000d.
⮚ Before title may vest, the contractor must agree that-
⮚ No person in the United States or its outlying areas shall, on the ground of race, color, or
national origin, be excluded from participation in, be denied the benefits of, or be otherwise
subjected to discrimination under this contemplated financial assistance (title to equipment)
⮚ By signing the contract, the contractor accepts and agrees to comply with this requirement

Transitioning to Production/Sustainment
⮚ Successful R&D contracts can lead to production follow-on contracts
⮚ Results show high degree of probability that feasible, and
⮚ Government has determined its minimum requirements and performance objectives
⮚ Progress to fixed-price contracts. The exact timing of when to shift to fixed price will depend on the
R&D process and when the designs are firmly established, risks are reduced, and production tooling,
equipment, and processes are developed and proven.
⮚ If intending to move to production, consider requiring development of technical package (plans,
drawings, specifications, and other descriptive information) to achieve competition in follow-on
production contracts in the statement of work and as a deliverable

Educational Institutions and
Nonprofit Organizations
When working with educational institutions and nonprofits, additional requirements apply:
⮚ State the institution bears primary responsibility for the research
⮚ Require approval to change scope of study, stated objectives, or methodology of the research
⮚ Identify the principal investigator (or project leader) by name if based on individual’s capabilities
⮚ Require the named individual be closely involved and continuously responsible for the research
⮚ Specify the estimated amount of time that individual will devote to the work
⮚ Require contracting officer’s approval to substitute or if substantially less time will be devoted
⮚ The above may still be included even if there are precise objectives or a specific date for
achievement if necessary to exercise oversight and approval over approach, methods, or
schedule
⮚ Insurance requirements. Institutions may request an exemption from insurance requirements or claim
immunity from liability for torts. State institutions may be prohibited by State law from expending
funds for insurance. Refer to FAR 28.311 for appropriate clause coverage.

Educational Institutions and
Nonprofit Organizations
⮚ For property less than $5,000, institution may acquire title to property purchased
⮚ For property exceeding $5,000, one of the following may apply:
⮚ Institution may acquire and retain title without further obligation to the Government;
⮚ Institution’s title is subject to the Government’s right to direct transfer of the title to the
Government or a third party within 12 months after completion; or
⮚ Government obtains title if it furthers the objectives of the agency’s research program
⮚If institution has title, it may charge depreciation, amortization, or use charges with
respect to that equipment under any existing or future Government contract
⮚ Government is not required to transfer title if the contract is performed at
Government installation and continuing need for equipment exists after completion

Federally Funded Research
and Development Centers (FFRDC)
⮚ What are FFRDCs and why do they exist:
⮚ Meet some special long-term research or development need which cannot be met as effectively
by existing in-house or contractor resources
⮚ Enable agencies to use private sector resources to accomplish tasks that are integral to the
mission and operation of the Sponsor
⮚ Established by a government agency (“Sponsor”) under a Sponsoring Agreement
⮚ Operated, managed, and/or administered by either a university or consortium of universities,
other not-for-profit or nonprofit organization, or an industrial firm
⮚ Operates as an autonomous organization or separate operating unit of a parent organization
⮚ Multiple agency sponsorship is possible if one agency acts as “Primary Sponsor"

⮚ FFRDCs have a special and unique relationship with their Sponsor
⮚ Granted access, beyond that which is common to the normal contractual
relationship, to Government and supplier data, including sensitive and proprietary
data, and to employees and installations equipment and real property
⮚ May not use privileged information or access to compete with the private sector
⮚ Must conduct business in manner befitting special relationship with Sponsor
⮚ Operate in the public interest with objectivity and independence
⮚ Be free from organizational conflicts of interest, and
⮚ Provide full disclosure of its affairs to the Sponsor

⮚ Long-term relationships between the Government and FFRDC’s are encouraged because
⮚ Encourages the FFRDC to maintain currency in its field(s) of expertise
⮚ Provides the continuity that will attract high-quality personnel to the FFRDC
⮚ Helps FFRDC maintain objectivity and independence
⮚ Preserves FFRDC’s familiarity with the needs of its Sponsor(s)
⮚ Provides Sponsor a quick response capability
⮚ National Science Foundation (NSF) maintains a master Government list of FFRDC’s -
https://www.nsf.gov/statistics/ffrdclist/. Sponsors provide information on FFRDC: Sponsoring
Agreement, mission statement, funding data, and type of R&D performed

To establish an FFRDC, or change its basic purpose and mission, Sponsor shall ensure the following:
⮚ Existing sources cannot effectively meet the special research or development needs
⮚ Government has expertise to evaluate the work performed by the FFRDC
⮚ Public notices are published; including Executive Office of the President, Office of Science and
Technology Policy
⮚ Controls are established to ensure that the costs of the services being provided are reasonable
⮚ Government can maintain reasonable continuity in the level of support to the FFRDC, consistent with
its needs and the terms of the Sponsoring Agreement
⮚ FFRDC may not perform quantity production or manufacturing unless authorized by legislation
⮚ Head of the Sponsor approves

New FFRDCs for DoD, DHS, and NASA may not obligate or expend amounts appropriated to the
Department of Defense for purposes of operating an FFRDC that was not in existence before June 2,
1986, until—
 The head of the agency submits to Congress a report with respect to such center that describes the
purpose, mission, and general scope of effort of the center; and
 A period of 60 days, beginning on the date such report is received by Congress, has elapsed

⮚ Written agreement between Sponsor and entity managing FFRDC is required and may take various
forms; a contract, written agreement, or other legal instrument under which an FFRDC accomplishes
effort as long as clearly designated as such by the Sponsor
⮚ Shall state all work placed with the FFRDC must be within the purpose, mission, general scope
of effort, or special competency of the FFRDC
⮚ Shall set forth the basic purpose and mission of the FFRDC stated clearly enough to enable
differentiation between work which should be performed by the FFRDC and that which should be
performed by non-FFRDC’s.
⮚ The term of the agreement will not exceed 5 years, but can be renewed in increments not to exceed
5 years, after periodic review is performed

⮚ Shall also contain the following:
⮚ Provisions for the orderly termination or nonrenewal of the agreement
⮚ Identification of retained earnings (reserves) and plan for their use and disposition
⮚ Prohibit FFRDC from competing with any non-FFRDC concern
⮚ If Nonsponsor work can be accepted, then specify procedures and any limitations on type of
work
⮚ Ensure a periodic reevaluation of the FFRDC before renewal
⮚ Sponsoring Agreement may contain
⮚ Any cost elements which will require advance agreement
⮚ Considerations which will affect negotiation of fees

⮚ FFRDCs may perform work for other than the Sponsor under the Economy Act or other applicable
legislation
⮚ When the work is not otherwise available from the private sector; and
⮚ If allowed by Sponsor
⮚ If contract is pursuant to the Economy Act,
⮚ Sponsor shall be responsible for compliance to ensure work scope is purpose, mission, general
scope of effort, or special competency of the FFRDC
⮚ Nonsponsor shall provide to the Sponsor, any required documentation including any
Determination and Finding required by FAR 17.502-2(c)
⮚ If not pursuant to the Economy Act, then Nonsponsor is responsible for compliance

⮚ Sponsor must periodically review use and need for the FFRDC before renewing Sponsoring
Agreement
⮚ Examine Sponsor’s special technical needs and mission requirements performed by the FFRDC
⮚ Consider alternative sources to meet the Sponsor’s needs
⮚ Assess efficiency and effectiveness of the FFRDC in meeting the Sponsor’s needs, including the
FFRDC’s ability to maintain its objectivity, independence, quick response capability, currency in
its field(s) of expertise, and familiarity with the needs of its Sponsor
⮚ Assess adequacy of the FFRDC management in ensuring a cost-effective operation
⮚ Determine the criteria for establishing the FFRDC continue to be satisfied and the Sponsoring
Agreement complies with FAR 35.017-1

⮚ If the Sponsor determines FFRDC is no longer appropriate, it shall apprise other agencies which use
the FFRDC of the determination and afford them an opportunity to assume sponsorship
⮚ Sponsorship may be transferred to one or more Government agencies, if appropriately justified
⮚ If the FFRDC is not transferred to another Government agency, it shall be phased out and terminated
⮚ Head of Sponsor must approve continuation or termination

Definitions
⮚ Applied Research means the effort that (a) normally follows Basic Research, but may not be severable
from the related Basic Research; (b) attempts to determine and exploit the potential of scientific
discoveries or improvements in technology, materials, processes, methods, devices, or techniques; and (c)
attempts to advance the state of the art. When being used by contractors in cost principle applications, this
term does not include efforts whose principal aim is the design, development, or testing of specific items or
services to be considered for sale; these efforts are within the definition of “Development," given below.
⮚ Basic Research the emphasis is on achieving specified objectives and knowledge rather than on achieving
predetermined end results prescribed in a statement of specific performance characteristics. This
emphasis applies particularly during the early or conceptual phases of the R&D effort.
⮚ Development, as used in this part, means the systematic use of scientific and technical knowledge in the
design, development, testing, or evaluation of a potential new product or service (or of an improvement in
an existing product or service) to meet specific performance requirements or objectives. It includes the
functions of design engineering, prototyping, and engineering testing; it excludes subcontracted technical
effort that is for the sole purpose of developing an additional source for an existing product.

Definitions
⮚ Nonsponsor means any other organization, in or outside of the Federal Government, which funds
specific work to be performed by the FFRDC and is not a party to the sponsoring agreement.
⮚ Primary Sponsor means the lead agency responsible for managing, administering, or monitoring
overall use of the FFRDC under a multiple Sponsorship Agreement.
⮚ Sponsor means the executive agency which manages, administers, monitors, funds, and is
responsible for the overall use of an FFRDC. In the event of multiple sponsors, "sponsor" refers to
the Primary Sponsor.
⮚ Sponsoring Agreement means the written agreement between the Sponsor and entity managing the
FFRDC.

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FAR PART #35:
SPEAKER: Karri Palmetier
FIRM: Palmetier Law
EMAIL: karri@palmetierlaw.com

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2024: The FAR - Federal Acquisition Regulations, Part 35

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2024: The FAR - Federal Acquisition Regulations, Part 35