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  • Question

    Is there any guidance for acquisition professionals regarding what activities are considered Research and development? Is there any guidance given for the selection of the NAICS code?


    Answer

    1.  See FAR 19.303 for guidance on selection of NAICS code.  Below is partial content from FAR 19.303, Determining NAICS and Size Standards.

    (a)
    (1) The contracting officer shall determine that appropriate North American Industry Classification System (NAICS) code and related small business size standard and include them in solicitations above the micro-purchase threshold. For information on size standards matched to industry NAICS codes, including the use of new NAICS codes, see also 19.102(a)

    (2) The contracting officer shall select the NAICS code which best describes the principal purpose of the product or service being acquired. Primary consideration is given to the industry descriptions in the U.S. NAICS Manual, the product or service description in the solicitation and any attachments to it, the relative value and importance of the components of the procurement making up the end item being procured, and the function of the goods or services being purchased. A procurement is usually classified according to the component which accounts for the greatest percentage of contract value. A concern that submits an offer or quote for a contract where the NAICS code assigned to the contract is one for supplies, and furnishes a product it did not itself manufacture or produce, is categorized as a nonmanufacturer and deemed small if it meets the requirements of 19.102(f). (b) If different products or services are required in the same solicitation, the solicitation shall identify the appropriate small business size standard for each product or service.

    2.  FAR part 35 gives the definitions for R&D Contracting.  R&D to acquisition of major systems is covered in FAR part 34.  Independent research and development (IR&D) is covered at 31.205-18.  Below is from FAR 35.001
    “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.
    “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."


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