Most Appropriate Contract Type for Research and Development

[rios0311]

I'd like to know what is an appropriate contract type for research contracts. I'm referring to mostly exploratory research or initial research on R&D contracts where, usually, a research report is the only deliverable due at the end of the contract.

I'm aware of Firm Fixed Price Level of Effort Term contracts (I've never used one), but I'm concerned about awarding a contract for a fixed amount when the program office really doesn't know how to estimate the price of the research. We've usually based everything on estimates and have awarded mostly Time-and-Materials contracts for these types of efforts. But after some thought and consideration, I've come to think that T&M contracts are not well suited for this type of service.

One of the concerns I have is that many of these contracts are written with options. How can I have optional periods when there is only one deliverable at the end of the POP of the last option? In other words, if I fail to exercise an option we don't get our deliverable. I think that's a complete misuse of a T&M contract.

You might suggest that I don't need options because I've described a contract for non-severable services. The problem then becomes the funding. Many times program offices don't have the funds to fully fund a non severable contract that may last 2, 3 or 4 years. I may be wrong, but I think that non-severable service contracts must be fully funded up front in order to be in compliance with the Bona Fide Needs rule. That's a question I posted in a earlier thread.

Returning to the subject of Firm Fixed Price Level of Effort Term contracts; can they be for non-severable services? I think that each unit of effort would be a complete service, but I'm not familiar enough with this contract type.

[pmh]

Each situation will be different, but a good starting point is FAR 35.006: "( c ) Because the absence of precise specifications and difficulties in estimating costs with accuracy (resulting in a lack of confidence in cost estimates) normally precludes using fixed-price contracting for R&D, the use of cost-reimbursement contracts is usually appropriate (see Subpart 16.3)."

[rios0311]

Thank you.