CHAPTER 8

SPECIAL SUBJECTS

I. Research and Development Contracts

1. General. Research and development functions in the Army extend from the discovery of research potentials or the inception of ideas to their final embodiment in items of material, techniques, methods, or processes and include: research to determine principles, materials, or methods of approach to problems leading to the development of items or techniques to fill military requirements; research to discover new scientific capabilities which can be applied to the accomplishment of the military mission; design, testing, and evaluation of new items or modifications to existing items. Research and development contracting (or as it will be called herein, "R & D") is a form of procurement which has as its objective the purchasing of scientific and technical knowledge and skill so as to assist in achieving the mentioned purposes. Numbered prominently among R & D contractors are large research laboratories, universities, and persons or firms whose special qualifications make their services useful in this field. Important among the terms used in R & D contracting are the following:2

2. Basic research. Basic research is the process of acquisition, evaluation, and validation of scientific principles and knowledge carried on without reference to any specific requirement. This type of research is its own objective.

3. Applied research. Applied research is the process of obtaining scientific information required in the solution of specific problems, in order to satisfy existing or anticipated military requirements.

4. Development. Development is the process of reducing to practice the basic data resulting from research. Development has as its purpose the creation of a workable and producible end item, and therefore, is concerned with such factors as cost, selection of materials, mass production capabilities, use potential and other factors

1 See AR 705-5, 21 Dec 1959.

See also Appendix I, AR 705-5, 21 Dec 1959.

related principally to the end item and not to its scientific basis. Because the efficiency of the Army is today so closely related to scientific and technological progress, the Army has been given statutory authority to contract for research and development and to conduct research and development programs. The following authorities are pertinent:

5. Sec. 101(a), Army Organization Act of 1950.3

Except as otherwise prescribed by law, the Secretary of the Army shall be responsible for and shall have the authority necessary to conduct all affairs of the Army Establishment, including but not limited to those necessary or appropriate for the training, operations, administration, logistical support and maintenance, welfare, preparedness and effectiveness, including research and development, and such other activities as may be prescribed by the President or the Secretary of Defense as authorized by law ***. [Emphasis added.]

6. Sec. 104, Army and Air Force Authorization Act of 1949.* The Secretary of the Army is authorized to conduct, engage, and participate in research and development programs related to activities of the Army of the United States and to procure, or contract for the use of, such facilities, equipment, services and supplies as may be required to effectuate such programs.

Funds are made available to the Army for research and development purposes on a "no-year" basis. Although many supply contracts are susceptible of placement within the framework of the Surplus-FundCertified Claims Act," an R & D project does not so conveniently fit within that framework. For example, an R & D contract may require additional obligations after the year during which the contract was let. For this reason, section 303 (b) of the Army and Air Force Authorization Act sets up R & D fund availability as follows:

6

Moneys appropriated to the Departments of the Army, Navy, or Air Force for the procurement of technical military equipment and supplies, the construction of public works, and for research and development * shall remain available until expended unless otherwise provided in the appropriation act concerned. [Emphasis added.]

Sec. 101a, act 28 June 1950, 64 Stat. 264, now codified in 10 U.S.C. § 3012 (1958). Sec. 104, act 10 July 1950, 64 Stat. 322, now codified in 10 U.S.C. § 403 (1958). This statute is not to be regarded as a work of supererogation. Sec. 101 (a) of the Army Organization Act (footnote 3, supra) was intended primarily to make sure that the Secretary of Army had the means and authority to carry out his functions as head of the Army. H. Rep. No. 2110, 81st Cong., 1st Sess., 18 May 1950, 1950 U.S. Code Cong. & Ad. News, p. 2607, 2609. Sec. 104 of the Army & Air Force Authorization Act was intended to convey broad general authority to conduct R & D programs. S. Rep. No. 933, 18 Aug. 1949, 1950 U.S. Code Cong. & Ad. News, p. 2697.

31 U.S.C. § 712a and b. [Note: 31 U.S.C. 1956, 70 Stat. 647. See 31 U.S.C. §§ 701-708

712b was repealed by the act of 25 July (1958).]

Act 10 July 1950, supra, 31 U.S.C. § 649c (1958). For a brief history of this provision, see Conference Report on the bill which subsequently became the Army & Air Force Authorization Act, 1950 U.S. Code Cong. & Ad. News, p. 2696, 2708.

The annual Department of Defense Appropriation Acts have made Army research and development funds "available until expended."

7. Negotiation of R & D contracts. Contracts for research or development are generally made by negotiation rather than by formal advertising. The reasons are obvious: the absence of fixed requirements and specifications make competitive bidding normally impracticable, and technical or scientific qualifications and capabilities usually are of more importance than price in selecting an R & D contractor. In recognition of these facts, section 2(c) of the Armed Services Procurement Act authorizes negotiation of contracts when:8 (11) the agency head determines that the purchase or contract is for experimental, developmental, or research work, for the manufacture or furnishing of supplies for experimentation, research or test The power of the agency head (ie., the Secretary of the military department or Under Secretary or any Assistant Secretary) to make the determination required by section 2(c) (11) is "delegable only to a chief officer responsible for procurement and only with respect to contracts which will not require the expenditure of more than $25,000." Because of the many research contracts let to universities and educational institutions, the authority to negotiate contracts "for any service to be rendered by any university, college, or other educational institution" contained in section 2(c) (5) of the Armed Services Procurement Act 10 is also important in the field of R & D. Additional authority to negotiate exists under the act of 15 July 1939 " which provides:

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'Department of Defense Appropriation Act, 1958, Title III, Department of the Army, "Research and Development Army," act 10 July 1952, 66 Stat. 517, 522; Department of Defense Appropriation Act, 1954, Title III, Department of the Army, "Research and Development Army," act 1 Aug. 1953, 67 Stat. 336, 341; Department of Defense Appropriation Act, 1955, Title IV, Department of the Army, "Research and Development," 68 Stat. 337, 341. Apparently the reason the foregoing provisions make R & D appropriations expressly available until expended (although the "available until expended" provision of sec. 303(b) of the Army & Air Force Authorization Act cited in the text is otherwise applicable) is that each of the acts contains a general provision to the effect that no appropriation in the acts shall be available until expended unless expressly so provided in the act appropriating them or other appropriation act (§ 622 of the appropriation act for 1953, supra, 66 Stat. 517, 535; § 619 of the appropriation act for 1954, supra, 67 Stat. 336, 352; § 713 of the appropriation act for 1955, supra, 68 Stat. 337, 352.) A bill was introduced in the Senate (84th Cong., 1st Sess., S. 797) to assist in eliminating the confusion. The bill proposed that 303(b) be modified to provide that funds of the type specified therein shall remain available until expended when so provided in the appropriation act concerned. See 101 Cong. Rec. 762 (28 Jan 1955).

Now codified as 10 U.S.C. § 2304 (a) (11) (1958). See the discussion of this section in S. Rep. 571, 80th Cong., 1st Sess., 16 July 1947, the so-called "Byrd Report." The section is a restatement of authority to negotiate made available to the Navy in the act creating the Office of Naval Research (§ 6, act 1 Aug. 1946, 60 Stat. 779, 780; 5 U.S.C. § 475e). During World War II, the Army had authority to negotiate R & D contracts pursuant to the act of 29 July 1940, 54 Stat. 712, former 50 U.S.C, App. 1171 and Title II, First War Powers Act, 50 U.S.C. App. 611.

Sec. 7(b), Armed Services Procurement Act; now codified in 10 U.S.C. § 2311 (1958). 10 Now codified as 10 U.S.C. § 2304 (a) (5) (1958).

11 53 Stat. 1042; now codified as 10 U.S.C. § 4504 (1958).

The Secretary of the Army may, at his discretion, purchase abroad or in the United States with or without competition, by contract or otherwise, such ordnance, signal, and chemical-warfare equipment, supplies parts, accessories, or designs thereof, as may be necessary in his judgment for experimental or test purposes in the development of the best kind of equipment or supplies required for the national defense. Nothing herein contained shall be construed to waive or alter the provisions of Revised Statutes, section 3709, when purchases are made in quantity.

8. Organization. The Department of Defense Reorganization Act of 1958 12 established the Director of Defense Research and Engineering who takes precedence in the Department of Defense after the Secretary of Defense, the Deputy Secretary of Defense, and the Secretaries of the Armed Services. Under the direction, authority and control of the Secretary of Defense, he supervises all research and engineering activities in the Department. He is the principal adviser and staff assistant to the Secretary of Defense in the following functional fields:13

(1) Scientific and technical matters.

(2) Basic and applied research.

(3) Research, development, test and evaluation of weapons, weapons systems and Defense materiel.

(4) Design and engineering for suitability, producibility, reliability, and materials conservation.

Within the Army, top-level supervision over R & D operation is exercised by the Director of Research and Development 14 who is at the level of, but does not have all the statutory authority of, the Assistant Secretaries of the Army.15 The Army Staff officer responsible for research and development is the Chief of Research and Development.16

9. Legal authority. Important in any consideration of legal authorities pertaining to R & D in the military departments is the act of 16 July 1952." This statute provides, inter alia:

(1) For the establishment of R & D panels and committees within each of the military departments (sec. 1).18

(2) Authorization for contracts for services and use of facilities to be made for five-year periods with right to extend for not to exceed five years (subject to the availability of appropriations) (sec. 3).19

1972 Stat. 520, 9(a); 5 U.S.C. § 171c(b) (1958).

18 Department of Defense Directive 5129.1, 10 Feb 1959.

14 Department of the Army General Orders No. 6, 1 Mar 1960.

15 For example: 10 U.S.C. § 2311 (1958) requires that certain determinations be made by the head of an agency, which term includes the Secretary, the Under Secretary, or any Assistant Secretary of the Army, but not a "Director". 10 U.S.C. 2302 (1958).

10 Par. 29, AR 10-5, 22 May 1957.

17 66 Stat. 725.

18 10 U.S.C. § 174 (1958).

19 10 U.S.C. § 2352 (1958).

(3) Authorization relating to the acquisition, construction, or
furnishing of R & D facilities and equipment (sec. 4).20
(4) Authorization to contract for the indemnification of R & D
contractors against liabilities not covered by insurance (sec.
5).21

(5) Authorization for the Secretaries of the military depart-
ments to prescribe relaxed regulations relating to the "Item-

20 Sec. 4 of the act provides: "Facilities and equipment furnished to contractors.—Any contract of the military departments for research or development, or both, may provide for the acquisition or construction by, or furnishing to, the contractor of such research, developmental, or test facilities and equipment as may be determined by the Secretary concerned to be necessary for the performance thereof. Such research, developmental, or test facilities and equipment, including specialized housing therefor, may be acquired or constructed at Government expense, and may be furnished to the contractor by lease, loan, or sale at fair value, and with or without reimbursement to the Government for the use thereof: Provided, That nothing contained in this subsection shall be deemed to authorize new construction or improvements having general utility: Provided further, That nothing contained herein shall be deemed to authorize the installation or construction of facilities on property not owned by the Government which would not be readily removable or separable without unreasonable expense or unreasonable loss of value; unless adequate provision is made in the contract for (1) reimbursement to the Government of the fair value of such facilities upon the completion or termination of the contract, or within a reasonable time thereafter, or (2) an option in the Government to acquire the underlying land, or (3) such other provisions as will in the opinion of the Secretary concerned be adequate to protect the Government's interest in such facilities: And provided further, That all moneys arising from sales or reimbursement under this section shall be covered into the Treasury as miscellaneous receipts, except to the extent otherwise authorized by law with respect to contractor-acquired property. The Secretary of each of the military departments shall transmit to the Congress reports covering contracts for research or development entered into during each six months following the enactment of this Act. Each such report shall contain (1) a list of each contract for research or development entered into during such period the total cost of which to the Government will exceed $50,000, and (2) specific information with respect to each such contract, except that specific information the disclosure of which he deems incompatible with the security of the United States may be excluded from such reports. (July 16, 1952, c.882, § 4, 66 Stat. 725.)" Now codified in 10 U.S.C. §§ 2353, 2357 (1958).

"Sec. 5 of the act provides: "Contractors indemnifled against liability to third persons and loss or damage to property.-With the approval of the Secretary concerned, any contract of the military departments for research or development, or both, may provide that the Government will indemnify the contractor against either or both of the following to the extent that they arise out of direct performance of said contract and are not compensated by insurance or otherwise: (1) Liability on account of claims (including reasonable expenses of litigation or settlement of such claims) by third persons, including employees of the contractor, for death, bodily injury, or loss of or damage to property, arising as a result of a risk defined in the contract to be unusually hazardous: Provided, That any contract so providing shall also contain appropriate provisions for notice to the Government of suits or actions filed or claims made, against the contractor, with respect to any alleged liability for such death, bodily injury, or loss of or damage to property, and for control of or assistance in the defense of any such suit, action, or claims, by the Government, at its election; and (2) loss of or damage to property of the contractor arising as a result of a risk defined in the contract to be unusually hazardous: And provided further, That no payment shall be made by the Government under authority of this section unless the amount thereof shall first have been certified to be just and reasonable by the Secretary concerned or by an official of the department designated for such purpose by the Secretary. Any such payment may be made, with the approval of the Secretary concerned, out of any funds obligated for the performance of such contract or out of funds available for research and development work and not otherwise obligated; or out of any funds appropriated by the Congress for the making of such payments. (July 16, 1952, c. 882, 5, 66 Stat. 726.)" Now codified in 10 U.S.C. 2354 (1958).