1rvIF t.73

,w'.'- ___

kO

11ILiPRACTICAL TIGHT-KNIT BRIEFINGS INCLUDING ACTION GUIDELINES ON GOVERNMENT CONTRACT TOPICS

"OTHER TRANSACTIONS"

By Carl L. Vacketta, Richard N. Kuyath, and Holly Emrick Svetz

or at least 50 years, the Federal Government has used a variety ofcontractual arrangements to acquire orL4 support research and development. Traditionally, the vthicle used was the procurement contract. Thistype of instrument, however, is subject to a number of procurement statutes, the Federal AcquisitionRegulation system, and supplementalagencyprocurementregulations (e.g., theDefense FARSupplement)that impose unique cost accounting and allowability rules, administrative requirements, and burdensomesocioeconomic and subcontracting obligations on Government contractors. To avoid some of these costlybarriers to doing business with the Government, Congress authorized the use of two other, more flexiblelegal instruments to�stimulate research for public purposes-(1) the grant, generally used to support auniversity or nonprofit organization in performing basic and applied research, and (2) the cooperativeagreement, which allows for greater Government involvement than is typical with a grant. While these formsofassistan‡e agreements are not subject to the FAR system, they are subject to detailed Office of Managementand Budget Circulars and agency regulations; and some private organizations, especially for-profit commer-cia! firms, have been unwilling to accept even these requirements.

As a result, in 1989 C•ngress temporarily authorized the Defense Advanced Research Projects Agency(DARPA) to utilize another type ofassistance agreement-the so-called "other transaction" (OT)-with the

hope of attracting a greater share of commercialIN BRIEF . research and development.' Since the OT is not a

Legislative Evolution DARPA's Model Research OT procurement contract, grant, or cooperative agree-u Space Act Agreements AgreementI DOD Research 01 Authority Scope

ment, it is arguably not subject to any procurementu DOD Prototype 01 Authority I Term laws, regulations, circulars, or other rules governingOT Types � Project Management these instruments.2 In 1991 , Congress made DARPA'sI Research

I Administration

� Prototype � Accounting & Poyment authority to use OTs for research permanent and� OtherTypes � Disputes extendedtheauthoritytoallofDOD.3Subsequently,

a Patent Riahts01 Solicitation & Award � Data Riglts fl 1993, Congress expanded DARPA's OT authorityI Broad Agency Announcement � Foreign Access To Technology to prototype development.4 Today, all military de-u Research Announcement � Title & Disposition OF Propertyu RFPs & Other Types � Civil Rights Act partments have authority to issue these flexiblea Use OF Competition � Order OF Precedence types of agreements for both research and proto-I Protests a ExecutionConsortium Articles OF Report Requirements

type projects.5

Collaboration � Other Provisionsu Legal Status Cost 5h

Carl L. Vackeua is a Partner and Chair of ¨he Government Contracts

L)� Management.

g Acceptab?e ContributionsPractice Grolt/) in the Washington, D. C. office ofPi/mr & Marburj L.L.P.,- u Member ObligotionsRichard N. Kuyath is Counsel at 3M company in St. Paul, Minnesota.

I Consortium Administrator� Nonqualifying Costs Holly Emrick Svetz isan associate in the Washington. D.C. q[j•ce ofPiper

� Terms & Conditions Pros & Cons OF OTs & Marbury L.L.P.

NO. 98.4 * MARCH 998 FEDERAL PUBLICATIONS INC. c COPYRIGHT 1998 ALL RIGHTS RESERVED

* MAACH BRIEFING PAPERS 1998 *

The OT method of contracting has been usedsuccessfully by the Department of Defense to (a) ex-ploit dual-use (military and commercial) techno10g3, and (b) reduce th‡tim‚ and expense needed toconduct prototype development. DARPA hasawarded over 130OTs involving $2.3 billion. InFiscal Year 1997 alone, 20 avƒrdsforresearch and50 awards for prototypes were made byvarious DODagencies using OT authority. Of the 50 prototypeprojects, 30 were under the Commercial Opera-lions and Support Savings Initiative (COSSI) , whichwas begun in 1997 to reduce the cost of parts andmaintenance for weapons systems. For th‡se 30projects, DOD has invested roughly $100 million;however, ifall 30 COSSfprojects are successful andintroduced into fielded military systems, the DODexpects to save $3 billion on this $100 millioninvestment.6

This BRIEFING PAPER reviews (1) the l‡gislativeevolution ofthe DOD's authority to use OTs, (2) thevarious types of OTs that have been employed,(3) the methods used to solicit the awardofan OT,(4) the terms and conditions typically found in the"Articles of Collaboration " used when an OT isawarded to a consortium rather than to a singlerecipient, (5) the provisions generally included inan OT agreement, using as an example the DARPAmodel research OT agreement, (6) the requirementfor cost sharing under most research and someprototype OTs, and (7) the pros and cons of OTs.

Legislative Evolution

A number of statutory changes have contrib-uted to the evolution ofthe DOD's authority to useOTs for research and prototype developmentprojects.

BRIEFINGPAI ER S

.: -.- - * Although prepared by ex-

',: �::� �- perts, these papers are, of. . ..,y.. ... course, generalized and

. . should not be considered asubstitute for professional ad-vi‡e in specifi‡ situations. *

2

� Space Act Agreements

The term "other transaction" was coited in 1958by Paul Dembling, then General Counsel of theNationalAeronautics and SpaceAdministration (andlater Generai Counsel, General Accounting Office),duringthe drafting oflegislation that resulted in theNational Aeronautics and Space Act of 1958. TheSpace Act authorized NASA to use "contracts, leases,cooperative agreements, or othertransactions. . .in theconduct ofits work" with any governmetnal or non-governmental entity.8 During the first decade of itsexistence, NASAusedsuch "SpaceAct" agreements-including the OT-to obtain "cutting-edge" researchand related prototypes.

Originally, NASApermitted Government fundingto finance research covered by an OT. Since thepassage ofthe Federal Grant and Cooperative Agree-ment Act of 1977, however, NASA has limited OTuse to unfunded arrangements in which no Govern-ment money is provided to the private or publicsector recipient. In that 1977 Act, Congress distin-guished grants and cooperative agreements fromprocurementc”ntractsandspecifiedwheneach typeofinstrumentshould be used. Agrant or cooperativeagreement is to be used when the Governmentintends tO "carry out a public purpose ofsupport orstimulation authorized by alaw" (e.g., research))øAprocurement contract, on the other hand, is to beusedwhen the Governmentintends to acquire "prop-erty or services for the direct benefit oniseofthe linkedStates Goverrirrient.¯UAlthough the OT had: beenused by NASA for almost 20 years, the term "othertransaction" was not identified in the 1977 Act.

� DOD Research 01 Authority

In 1989, Congress authorized the Secretary ofDefense, through DARPA (known from 1993 to

BRI8FINGPAP?RS(ISSN0007-0025)ispublishedinonthlyexceptJanuary(twoissues)andcopyrightedc1998 � va1eieL.Gross,Editor l998calendar.yearsubscription $732 Periodicals postage paid at Washington, DC Pub-lished by Fed‚ral Publications Inc. I 1120 20th Street, NW /Washington, DC20036 http://www.fedpub.com � Postmaster: Send address changes toBriefingPapers I Room500S I 1120 20th Street, NW I Washington, DC 20036.

All rights reserved. Reproduction,storage in a retrieval system, or transmis-sion of this publication or any portion of it in any form or by any means,electronic, mechanical,photocopying, xerography, facsimile, recording, orotherwise, without the written permission of Federal Publications Inc. isprohibited, except that the publisher grants permission to reproduceportions of this publication (not the entire issue) provided that a $2.50per pageper copy fee is paid directly to Copyright Clearance Center (CCC),222 Rosewood Drive, Danvers, MA 01923. (978)750-8400. Fee Code:(0007-0025)/97/$0+$2.50.

* MAR™H BRIEFING PAPERS 1998 *

f/ i 996 as the Advanced Research Projes Agency) toout advanced research projects and in sow doing to "enter into cooperative agreements and

other transactions with any person, any agency orinstrumentality of the United States, any unit ofState or local government, axiy educational institu-don, and any other entity."2 Although the 1989legislation pointed out that an OT was not a pro-curement contract, grant, or cooperative agree-ment, it did not define an ™T. The statute limitedDARPA's authority to enter into OTs to a twoyearperiod ending September 30, 1991 . In 1991 , Con-gress made DARPA's authorhy to use res‡arch OTspermanent and also extended authority to use re-search OTs to the military departments.'4 Subse-qu‡nt amendments made in 1994 permit the DODto use OTs-i.e., "transactions (other than con-tracts, cooperative agreements, and grants) "-for"basic" and "applied" research as well as "advanced"research)5

The DOD's statutory authority to use OTs forresearch-codified at Tide 10 of the U.S. Code at.� 2371-has three conditions. First, the Secretary ofDefense must ensure, "to the maximum extentpracticable," that an OT does not provide for re-search that duplicates research being conductedunder an existing DODprogram)6 Second, "to theextent that the Secretary determines practicable,"

.the Government may not provide more fundingunder the OT than therecipient.'7Congress incor-porated this 50% cost-sharing requirement in theexpectation that the OT recipient would retainintellectual property rights in the results of theresearch project and would thereafter benefit bymarketing the results mi'8 Third, an OTmay be used for a research project "when the use ofa standard contra‡t, grant, or cooperative agree-ment for such project is notfeasible or a/ip ropri at e."9A prior version of this condition permitting re-search OTs to be used "oiziy when the use of astandard contract, grant, or cooperative agree-ment. . .is not feasible or appropriate'ø was soft-ened by a 1996 statutory change deleting the word"only."2' This change was the result of a DODinitiative to increase the flexibility of the militaryservices and to encourage the use of the 10 USC. � 2371 OT for resŠarch.22

The statute further provides that the DOD "shallprescribe regulations" to carry out the authority to

3

use OTs.23 Although no regulations addressing theuse ofresearch OTs have been developed, the DODhas issued guidance for th‚ use of OTs under 10USC � 2371.24

i DOD Prototype OT Auf horily

In November 1993, encouraged byDARPA's useof research OP]:' authority under 10 USC � 2371 indual-use critical technology programs, Congressauthorized DARPA to use OTs for military prototype(but notfull production) projects. Specifically, � 845of the National Defense Authorization Act for FY1994 included temporary DARPA authority to carryout, under the authority of 10 USC � 2371, "prot”-type projects that are directly relevant to weapons orweapon systems proposed to be acquired or devel-oped by the Department of Defense."25 DARPA'sprototype OT authority under � 845 was originallydue to expire on November 30, 1996, but was ex-tended by the National Defense Authorization Actfor FY 1997 until September 30, 1999.2(1 That Actalso extended the prototype OT authority to theSecretaries of the military' departments and anyother officials designated by the Secretary of Defense.27

Subsequently,in aDecember 14, 1996 memotan-dum, Under Secretary of Defense for Acquisitionand Technology Paul Kaminski, under a delegationof authority from the Secretary of Defense, desig-nated the directors of defense agencies as havingauthority to use � 845 for prototype OTs.28 (Thismemorandum also included-as "guidance only"-a list of statutes applicable to procurement con-tracts but "not necessarily applicable" to OTs.) TheSecretaries of the military departments have sincedelegated prototype OT authority to their majorresearch commands.29

Although the use ofcompetitionis notaddressed in10 USC � 2371, � 845, as amended, requires that"compedtive procedures shall be used" to carry outprototype projects to "the maximum extent practi-cable."3ø Also unlike the DC)D's research OT au-thority, � 845 does not require (1) cost sharing or(2) a determination that a procurement contract,grant, or cooperative agreement is not feasible orappropriate for the project.3' The DOD may, the re-fore, fully fund theprototype project and use theOT in place of any other type of acquisition orassistance agreement.

* MARCH BRIEFING PAPERS iga *

Although no regulations addressing prototypeOTs have been issued, their use, like that of re-search OTs, is addressed in DOD guidance.32

OT Types

OTs for research or prototype projects typicallyinvolve agreementsbetween the DOD and a singleentity or a consortium. formed for the purpose ofcarrying out the OT, although other types of agree-ments or arrangements may also be used. Thevarious types of 0Th can .be funded on a cost-reimbursement, fixed-price, time-and-material, la-bor-hour, or payable-mil‡stone basis.

I Research

Under a research OT (also known as a scienceand technology 01') authorized by 10 USC � 2371,a single recipient or consortium performs basic,applied, or advanced research. To the extent prac-tic…ble, at least 50% of the costs of performing theresearch must be contributed by the non-Govern-ment parties.33 While the Government has enteredintO a number ofresearch OTs with individual for-profit companies (e.g., Intel Corp., Cray Research,The Boeing Co.) , most OTs have been wish c”nsor-tia composed of two or more legal entities (includ-ing commercial firms, defense contractors, federallaboratories, small businesses, and educational in-stitutions) .4 As noted at the outset ofthis Piu, theDOD reporte4 to Congress that DARPA, the AirForc‡, Army, andNavy awarded 20 OTs for.researchin FY 1997.

Under DARPA policy, while a research OT can-not be used where the principal purpose is toacquire goods and services for the direct benefit oruse of the Government, incidental acq—isition ofproperty or setvices is impliedly acceptable.36 Also,DARPA policy precludes using an OT to sponsorbasic research at a single university or nonprofitresearch corporation; the standard grant is to beused for thatpurpose.37 DOD guidance for researchOTs states that such agreements are appropriateonly when at least one for-profit concern, particu-larly a firm that has not traditionally done businesswith the Government, is to be involved in the pei¡E•r-mance of the research project. If this requirementis met, nonprofit concerns may also perform underthe research OT as members of a consortium.38

4

Most research OTs have been fixed-price, "bestefforts"-type contracts, with payments f fixedamounts made for accomp1ishnent of set technicalmilestones.

I Prototype

Under a � 845 prototype OT, a project is under-taken-by a single party or a consortium-that isdirectly relevant toa weapon or weapons system tobe acquired or developed by the DOD.39 Suchprojects may include not onlyweapons systems, butalso subsystems, componts, technology demon-strations, training, simulations, and auxiliary andsupport equipment. Prototype OT projects mayalso include the adaptation, testing, or integrationof commercial items for military purposes.4ø Ac-cording to DARPApolicy, the prototype 01 maybeused-as a precursor to production-to acquiregoods or services for the directbenefit of the Fed-eral Government.4' Prototype OTs have generallyprovided for payment on a cost-reimbursement ormilestone basis.

Like the research OT, the prototype OT is ex-empt from the FAR system policies and proce-dures.42 Both OT types are also exempt from thestandard socioeconomic requirements found in.procurement contracts, although both types re-quire compliance with the requirements ofTitle VIof the Civil Rights Act of 1964 relating to nondis-crimination in federally assisted programs.43 Unlikea research OT, as noted previously, a prototype OTfor a purely military project need not provide forcost sharing.44

The first prototypeOTs were awarded by DA.RT'Ain 1994 for the development of an unmanned airvehicle-called the UAV, TIER TI Plus (GlobalHawk)-to provide surveillance infOrmation to thewar fighter.45 Prototype OTs have been issued forother projects, including (a) the Tier III Minus (lowobservable UAV) Program (Dark Star), (b) theArsenal Ship Program, (c) the Affordable Multi-Missile Manufacturing Program, and (d) cossi:46

The goal of COSSI is to insert commercial itemsinto existing weapons systems to reduce operationand supportcosts.47According to the DOD's annualreport to Congress, 50 prototype OTswer‡ awardedin 1997 (by DARPA, Army, Air Force, Navy, andNational Imagery and MappIng Agency) . Thirty ofthese 50 awards were for COSSI projects.48

o

,i

.

C]

C]

-* MARCH BRIEFING PAPERS 1998 *

i Other Types

In addition to agreements with single commer-cial firms or consortia for research or prototypedevelopment, the DOD has used othertypes of OTagreements or arrang‡ments. They include thefollowing:49

(1) Bailment agreements involving the lend-ing or borrowing of equipment, typicallywith a sharing ofres‡arch or test results.

(2) Parallel or coordinated research agree-ments involving sponsorship of a researchproject related to one or more other re-search projects funded by others and anarrangement to share results or to coordi-nate research to enhance the end result.

(3) Joint funding arrangements with anotherparty to finance a third party's research.

(4) Reimbursable arrangements in whichDARPA or another DOD agency providesservices to a recipient (such as transpor-tation services on an experimental spacelaunch vehicle, an experimental air ve-hide, or an experimental undersea ve-hide) . The recipient would typically pro-vide one or more of its own experimentsto be conducted during the test mission.

OT Solicitation & Award

There is no set method for announcing orsoliciting an OT; several different formats havebeen used. Prior to the Competition in Con-tractingAct of 1984, DARPA and other defenseresearch agencies used the unsolicited proposalas the source of ideas for research projects.CICA, however, made an award based on anunsolicited proposal a noncompetitive processrequiring the Government to prepare ajustifi-cation and approval document,5ø which provedto be time consuming and burdensome. Today,the award of a competitive OT starts with issu-ance of a broad agency announcement (BAA),a research announcement, a request for pro-posais, or some similar type of announcement.Proposals submitted in response to the an-nouncement may be used in combination withoral presentations.

5.

i Broad Agency Announcement

The BAA is a standard method described by theFAR for procuring "research" f•r the direct benefitofthe Government.5' The FAR provides that a BAAmay be used tofuifihl an agency's requirements "forscientific study and experimentation directed to-ward advancing the state-of-the-art or increasingknowledge or understanding rather than focusingon a specific system or hardware solutionDAR?A's practice has been to issue a BAA for aprojectwhere a proctiement contract, cooperativeagreement, grant, or OT may be used, dependingon the circumstances at the time of award. Theprior research and intellectual property rights therecipientbrings to the projectare important factorsin determining which type of agreement will beused. Other factors include whether the recipient isa commercial firm and whether a consortium or asingle recipient is involved.

In DARPA's view, CICA, the Procurement In-tegrity Act,54 the Anti-Kickback Act,55 and the pro-curement protest system56 apply to the BAAwhen aprocurement contract, grant, cooperative agree-ment, or OT is a possible contractual instrument.However, if and when an OT is chosen as theinstrument for award, DARPA takes the positionthat the procurement statutes no longer apply.57

i Research Announcement

IfDARPA determines before issuance of a solicita-don that an OT, grant, or cooperative agreementwill be used, it issues a "researchannouncement." Itis DARPA's position that the procurement statutesand the FAR and: DFARS do not apply to the r‡-search announcement or to the subsequent aw…tdbecause no "procurement" is jnvolv‡d.58

i RFPs & Other Types

Although the FAR, DFARS, and CICA do notapply to OTs, some agencies believe there is suffi-cient flexibility to use the familiar request for pro-posais format for an OT solicitation. The Air Force,for example, suggests use of an RFP in its draftguidance on prototype OTs.59

Other types Of announcements have also beenissued in the OT solicitation pr”cess. For example,the Air F”rce uses a "program research and devel-

* MARCH BRIEFING PAPERS 1996 *,

opment announcement" as well as a BAA for r&

search OTs.6ø

U Use Of Competifion

As noted earlier, � 845, as amended, requiresDOD to use competition to the maximum extentpracticable in awarding a prototype QT. Even inawarding research OTs, however, agencies typically

use competi•ve procedures. In fact, DOD's recentguidance on research OTs requires them to beawarded competitively to the maximum extent prac-ticable.6'

I Protests

Currently, there is no procedure provided bystatute, regulation, or a model OT agreement fora disappointed offeror to challenge the award ofan OT. The GAO procurement protest processremedies violations of procurement statutes andregulations in the solicitation and award of "pro-

curement" contracts,t'2 not OTs. The GAO will,however, consider whether an OT was properlyused in place of a procurement contract.b3 Simi-larly, CICA does not apply to the award ofan OT.64

Although no court has so decided, protests involv-

Ing OTs would arguably fall within thejurisdictionofthe U.S. Court of Federal Claims or the U.S.District Courts to hear protests challenging thesolicitation or award of "contracts" (not limited to"procurement" contracts) undŠr the TuckerAct65and the Administrative Procedure Act,which per-mits a court.toinvalidate agency action found to bearbitrary, capricious, an abuse of discretion, orunlawful.66 :DJJ'A agrees that a procedure forhandling OT protests should be developed,67 andDARPAwou1d presumablybe in favor ofsome typeof agency-controlled alternative dispute resolu-tion process like that implemented by the ArmyMateriel COmmand.

Consortium Articles Of Collaboration

Most OTs are issued to a cOnsortium68 instead ofto a single recipient. Before a consortium entersinto an OT, the Government agency will usuallyrequire the consortium to submit "Articles of Col-laboration" or an equivalent document. This agreement-separate aid distinct from the OT agree-ment-will set forth the relative rights and respon-

sibilities ofthe members ofthe consortium thatwillperform the OT research or protoyp‡ develop-mentprOjeCt. There no prescriledformatfor thisdocument. Its purpose is to memorialize the work-

ing re1ationhip between its members while theyperform the OT work; however, the consortiumdoes not constitute a new legal entity.

In addition to defining the members' rights andresponsibilities, the Articles ”f Collaborati”n willprescribe how the members will interact with oneanother. Ata minimum, the Articles shouldprovide

the following information:

(a) � The name ofthe consortium and its mcm-bership.

(b) Who is authorized to negotiate on behalfof the consortium.

6

(c) Who is authorized to sign the OT agree-ment (and modifications thereto) andcommit other members. (In some Articles,one memberS

is given this authority; inothers, each member is required to signthe OT agreement and a¤y modifi‡ations.)

( d) The consortium's technical and businessgoals.

(e) The time period during which the Ar-tides are to remain in effect.

(f) The management and organizadonal..structure of the consortium (e.g., howdecisions will be made, who has the au-thbrity to vote on what issues, etc.).

(g) Who has administrative and payment re-sponsibilities for the consortium and whatprocedures will be followed for disburse-ment of Government funds to members.

(h) Pertinent terms and conditions, includ-. ing (I) the procedures for handling pro-prietary information, (2) the bases uponwhich the OT and the Articles may beterminated, (3) the members' rights inforeground „nd background intellectualproperty, and (4) the disputes resolutionprocedure to be followed.

Key provisions commonly found in, consortium Ar-tides of Collaboration are discussed below.

n

[1

* MAFCH BRIEFING PAPERS 1998 *

i Legal Status

M earlier noted, the consortium usually js not aseparate legal entity; each member is considered anindependent contractor. Therefore, you shouldinclude a disclaimer in the Articles that the consor-tium is not to be considered or construed as ajointventure, partnership, or any other type of legalentity. Also, you should consider providing a noticeabout the consortium formation to the FederalTrade Commission and the Department ofJusticeto obtain certainjointventure antitrust protectionsunder the NationalCooperative Research and Pro-duction Act of 1993.

i Member Obligations

Each member ofthe consortium should agree touse its best efforts (or reasonable commercial ef-forts) to perform the research tasks assigned underthe OT's statement ofwork. Authority to review andnegotiate the OTagreement (and anyamendments)is usually given to one representative of the consor-tium, often called the "Consortium Administrator."This article should also establish the procedures forvoluntarywithdrawal ofa memb‡rand the member'sremaining obligations after withdrawal.

i Management

The consortium is normalIy managed by aboardconsisting of a representative from each memberThe "Management" article should describe the fre-quency of management board meetings and theprocedures forvoting on issues before the board. Insome consortia, it may be appropriate to establishtwo boards: one to manage the overall operation ofthe consortium and: one to manag‡ technologydevelopment. The article should also address howthe managem‡nt board will treat a member thatdefaults on its obligations, and how that membermay be forced to withdraw from the consortium.

I Consortium Administrator

The Articles ofCollaboration should speciir theresponsibilities of the Consortium Administrator.The Administrator is the representative ofthe con-sortium member with the administrative point-of-contact authority for the consortium with the Goy-ernment. (In some instances, a representative of anonmemberofthe consortium, such as a university, is

7

given the role of Consortium Administrator.) TheAdministrator receives all Government paymentsand is responsible for disbursing funds to the mem-bers in accordance with a specified formula. It iscommon for the Administrator to be paid a fee bythe other members (from the Government fund-ing) for these efforts.

i Terms & Conditions

(1 ) Intellectual Property-The "Intellectual Prop-erty" article is usually th‡ most importtnt and mostdifficult to negotiate. In some cases, separate intel-lectualpropertyagreements are negotiated betweenmembers.

Each member's rights in intellectual property-developed solely orjointly under the OT-shouldbe set forth. You should also address what rights, ifany, each member will receive in background intel-lectual property that is owned or controlled byother members and was developed outside the OTbut is necessary to practice the foreground iitellec-tual property. In addition, you should address whatrights, if any, each member will receive in intellec-tuai property developed by the other membersunder the OT (i.e., foreground technology) . At aminimum, this article should provide that eachmember obtains a license under the other mcm-bers' foregroind andbackground nte1lectual prop-erty for the sole purpose of conducting the OTresearch.

(2) Termination--The "Termination" article gen-emily covers how the consortium may termjnatc theOT agreem‡ntfor convenience based upon a deter-mination that the research projectwill not producebeneficial results. In addidon, the article shouldspecif' any other grounds on which the membersmay terminate the Articles ofCollaboration, such asthe Government's failure to award the consortiuman OT within a certain time period.

(3) DisputesProcess-A¤other important article isone that establishes a process for resolving mcm-bers' disputes. This article should provide that, if adispute arises, the issue is to be first addressed bymanagement executives ofthe various memb‡rs. Ifthe matter cannot be resolved by these executiveswithin a specified time period, the dispute shouldbe elevated to mediation (or arbitration if the ar-tide so provides) . Ifmediation is unsuccessful after

* MARCH BRIEFING PAPERS 1998 *

a specified time period, any member should bepermitted to bring an action in a court of compe-tentjurisdiction.

Goverriinglaw should also be specified for inter-pr‡tation of the Articles and the resolution ofdisputes. Jn addition, the "Disputes" article mayaddress how members handle OT disputes be-tween (a) the consortium and the Governmentand (b) the consortium and third parties.

(4) LiabilityDisclaimerAnother provision oftenfound in the consortium Articles of Collaborationis a disclaimer ofliability between th‡ consortiummembers. In this disclaimer, you should considercovering (a) indirect, incidental, consequential, orspecial damages and (b) any express or impliedwarranty (including the warranties of merchant-abilityandfitnessfora particularpurpose) relalingto the research project.

(5) Other-Other terms or conditions may beincluded hi the Articles of Collaboratiofl, such asthose forindemnification, advertising, notices, andwaiver of member rights granted under the Ar-tides.

DARPAs Model Res‚arch OT Agreement

DARPA has prepared two model research OTagreements-one for a single party and the otherfora consortium. BothDARPAmodels are similar incontent.7ø The Air Force has also prepared (a) twomodel research OT agreements-.one for a singleparty and one for a consottium-and (b) a modelprototype OT agreement.7' In addition, the DODhas developed a prototype OT cost-share agreementfor dual-use technology projects under the COSSIProgram.72 Ea‡h of these model OTs is a "bestefforts" agreement, providing for the payment offixed amounts for the accomplishment of milestonetasks.

All of the model OT agreements are muchshorter and simpler than a statidard FARcov-cred proctirŠment contract. Also, the exemptionofOTs from the requirements applicable to pro-curement contracts permits the parties to nego-tiate the terms and conditions of an OT agree-ment under a "freedom of cOntract" mode notgenerally permitted under the FAR system. Theparties are often mu‡h more able under an OT

8

agreement than under a procurement contractto adopt commercial practices and to tailor theagreement's terms and conditi•i to a particularprogram. According to DARPA, all ofthe articlesor provisions in its model OT agreements arenegotiable and subjectto modification exceptforthe "Civil Rights Act of 1964" article.73 Experi-ence has shown, however, that DARPA is generally unwilling to make major changes in the ar-tides covering patents, disputes, and foreign ac-cess to technology.

DARPA's model research OT agreement with aconsortium consists of a cover sheet, 13 articles goy-erning the terms and conditions, and five attach-ments. The attachments include (1) the statementofwork, (2) the specified reporting requiremenis,(3) a schedule ofpayments and payable milestones,(4) the funding schedule, and (5) a list of Govern-ment and consortium representatives. The key pro-visions in DARPA's model research OT agreementwith a consortium are discussed below.74

I Scope

Article I, "Scope of the Agreement," is, in manyrespects, similar to the "recitals" section fOund in acommercial contract. It sets forth the researchprogram's "vision statement," includes any terms tobe defined, and incorporates by reference the state-ment ofwork. It is preparedjointly by DARPA andthe consirtium members.

Under this article, the Government is to havecontinuo—s involvement with the consortium, andboth parties are bound by a duty •fgood.faith andbest research efforts in achieving the OT goals. Theparties agree that the OT's principal purpose is tosupport and stimulate the consortium to provide itsbest efforts towards the research project and not toacquire property or services for the Government'sdirect benefit or use. The article states thatthe FARand DFARS apply only if specifically referenced inthe OT agreeiiient.

Although the consortium agrees to perform "acoordinated research and development program"for a particular effort, it does not guarantee thatthe research goals will be accomplished. The con-sortiumis only obligated to use its "best researchefforts" to achieve these goals In consideration forits efforts, the consortium is to be paid fixed

o

r]

n

'1

* MARCH BRIEFING PAPERS 1998 *

amounts as it accomplishes "payable milestones."(Use of payable milestones-under which pay-ment is.made for the accomplished tasks, not foractual incurred costs-enables the parties to elimi-nate any requirements for application of the FARcost principles and for compliance with the uniqueGovernment accounting practic‚s.) Since the OTis a "best efforts" agreement, the only penalty forfailing to accomplish a milestone task is not gettingpaid. Thus, the key to success is to negotiate tech-nical milestones that can be met with relativelylittle risk.

The DARPA model is a cost-share agreement,under which a total estimated project cost (cover-ing both Government and consortium funding) isspecified. If either DARPA or the consortium isunable to provide its respective total cost contribu-tion, the other party is entitled to r‡duce its projectfunding by a proportional amount.

. Term

Article ]I, "Term," specifies the period ofperfor-mance. Ifall funds are expended before the ‡nd ofthe term, the parties have no obligation to continuefurther performance and may cease developmentat that point (This right is similar to that foundunder the FAR "Limitation ofCost" clause for cost-reimbursement procurement contracts.75)

In addition, this article provides that the OT maybeterminated forthe convenience ofeitherDARPAor the consortium by written nofice to the otherparty, subject to two limitations. First, the noticemust be preceded by consultation between theparties. Second, a determinatiOn mustbe made thatthe projectwill not produce beneficial results corn-mensurate with the expenditure of resources Inthe evrt oftermination, both parties are obligatedto neg”tiate in good faith a reasonable and timelyadjustment ofall outstanding issues. fa negotiatedadjustment is not possible, the issues are tO beresolved under the "Disputes" article. The Govern-ment, however, has no obligation to reimburse theconsOrtium beyond the last completed and paidmilestone if the consortium terminates the OT.

I Project Management

Article 1H, "Management of the Project," pro-vides that the consortium is to b run by a Consor-

tium Management Committee (CMC) composedof one voting representative from each consor-tium member. The CMC isresponsible for techni-cal, programmatic, reporting, financial, and ad-ministrative matters. The DARPA Program Man-ageris to participate in all CMC meetings. TheCMC's decisions are binding exceptfor the follow-ing types of decisions that are subject to DARPAapproval: (a) changesto the Articles of Collabora-tion if they substantially alter the relationship Ofthe parties as originally agreed upon, (b) changesto, or elimination of, any DARPA funding alloca-tion to any member, (c) technical or fundingrevisions to the OT, and (d) admission to theconsortium of additional or replacement mcm-bers.

Quarterly technical meetings arc held betweenconsortium members and the DARPA ProgramManager. All technical decisions must be made by amajority or consensus vote of the CMC and theDARPA Program Manager.

The program management and planning pro-cess is subject to both quarterly and annual reviewsby the CMC and the DARI'A Program Manager.The CMC (with DARPA Program Manager review)is responsible for preparing an overall annual pro-gram plan in the first quarter of each year's perfor-mance. The plan. should consolidate all prior ad-justments in the research schedule, including revi-sions to payable milestones.

I Administration

Under Article W, "Agreement Administration,"one representative of the consortium is appointedto be the Consortium Administrator, whose respon-sibilities are set forth in the Articles of Collabora-tion. This Administrator is the consortium's repre-sentative to DARPA for administrative and contrac-tual matters. The ConsortiumAdministrator's coun-terpart is the 'DARPAAgreements Officer," who isresponsible for granting all approvals required bythe OT agreement. (This officer is equivalent to theContracting Officer in a procurement contractunder the FAR.)

Another representative is appointed to be theconsortium's representative to :DAJYA for techni-cal matters. This representative's counterpart is theDARPA Program Manager.

* MAACH BRIEFING'PAPERS 1998 *

i Accounting & Payment i Disputes

Article V, "Ob1igatkt and Payment," requiresthe consortium to maintain an accounting systemthat complies with generally accepted accountingprinciples. In addition, the consortium is respon-sible for maintaining adequate records to accountfor Government fund The articlealso notes thatthe parties recognize that the consortium is only aconduit and cannot inc–r or allocate any indirectcosts of its own to a niember's costs incurred directlypursuant to the OT.

Significantly, nostatutory Government OT auditright exists, and many comniercial companies willnot permit such an audit oftheir own records as amatter of policy. Nevertheless, Article V gives theGovernment the right to examine or audit theconsortium's (or any member's) relevant financialrecords for three years after expiration of the OTterm. You should bea*are that under appropriatecircumstances, DARPA may be illing to modiI'this article to provide that any audit done on behalfof the Government will be performed by a mutuallyacceptable certified public accounting firm.

'The article provides for periodic payments to bemade for the accomplishment of payable mile-Stones. Examples of payable milestones that couldbe negotiated indude completion ofa demonstta-tion test, establishing, program goals and objectives,delivery of preliminary design, and conpletion ofpreliminary design reviews. Quarterly payments arecommon, although more frequent payments can benegotiated. You should structure the payable mile-stones to provide an adequate supply of programfunding. Asufficient supply offunding throughoutthe program is particularly important for consor-tiurn members that are small businesses or non-profit firms that cannot afford long delays in pay-ment. .

Mter each milestone is accomplished, that mile-stone completion must be documented and pro-vided to the DARPA Program Manager for reviewand verification. Thereafter, the DARPA ProgramManager is responsible for providing notice of mile-stone accomplishment to the DARPA AgreementsOfficer, who will approve the invoice and process itfor payment. The Government's liability to makepayment, however, is limited to those funds obli-gated under the OT.

Under Article VI, "Disputes,", all disputes are tobe resolved by discussibn and rmitiial agreement ofthe parties "as soon as practicable." If negotiationdoes not resolve the dispute, the agdeved partymay document the dispute in writing, including therelevant facts, the unresolved issues, and the rem-'edy sought, and request a joint decision of theDARPA Deputy Director for Management and asenior executive appointed by the CMC. The otherparty is then obligated to submit a response to thematter in dispute within 30 days. Thereafter, thesetwQ senior officials are to conduct a review andrender ajointwritten decision (within 30 days) thatis final and binding. .

io.

In the absence ofajoint decision, the dispute canbe submitted in writing to the Director of DARPAfor a final and binding administrative decision. Ifthe dispute involves a monetary claim, recovery islimited to "direct damages" (actual costs) incurredup to the amount of the funding DARPA has dis-bursed as ofthe tirnethe dispute arose.

Because the DARPA Director's decision is finaland binding to th‚ extent permitted by law, topermitjudicial review, it is advisable to modify thearticle so that any 4ecision is subject to theWunderlich Act, which precludes contract clausesfrom preventingjudil review of an agency deci-sion on a dispute.75 Although no court has yet sodecided, Tucker Act jurisdiction of the Court ofFederal Claims and. the t.S. Disfrict CQUrtS shouldbe available. ThisActprovides, among other things,for broad court jurisdiction over claims foundedupon any contract, expiess or implied, with theFederal Government.77 (The ConttactDisputes Actof 197878 prObably does notj apply t9 an OT, al-though this is not certain. For instance, in a proto-type OT, where (1) the services or prototype arebeing acquir‡dfor the directbenefit ofthe Govern-rnentor(2) the Governmentacquiresandtakes titleto the prototype, the CDA might arguably applybecause the CDA applies, among other things, tothe "procurement of property" and the "procure-ment of services."79)

Patent Rights

Article VII, "Patent Rights," is similar to the FAR"Patent Rights-Retention by the Contractor"

o

n

* MARCH BRIEFING PAPERS 1998 *

clause.80.Under this article, the consortium retainstitle to any inventions conceived or first actuallyreduced to practice in performance ¢f the OT-i.e., so-called "subject inventions." DARPA receivesa nonexclusive, nontransferable, irrevocable, paid-up license to practice, or have practiced, on behalfofthe United States the subject invention through-out the world. The consortium may elect to providefull or partial rights it has retained to any memb‡rorother third party. (Because the consortium is nota legai entity, it may be desirable in this article torevise the term "consortium" to read "consortiummember. ") The article also includes "PreferencefQr American Industry" and "Government March-In Rights provisions corresponding to those in theFAR clause.St

The provisions in DARPA's "PatentRights" articleare based on the requirements of the Bayh-DoleAct:82 While thisAct does notapply to an OT, itisusedby DARPA as a starting point in negotiations onpatent rights under OTs.83 The Act establishes auniform policy on the allocation of patent rights toinventions made by universities and small businessesreceiving Government support to conduct research.A 1983 presidential memorandum extended thisstatutory policy to cover large businesses as w‡ll.84

Under the Act and presidential memorandum, therecipient ofGovernment funding retains title to anyinventions conceived or first reduced to practiceunder the contract, grant, or cooperative agreementthat funds the research. In return, the Governmentretains (a) a paid-up license to use the invention forits own purpose (including competitive procure-ments) &5 and (b) march-in rights to license the inven-tion for commercial purposes if the invention title-holder fails to take reasonable steps to achieve prac-tical application.86 There are other requirementsunder the Bayh-Dole Act that, if met, allow therecipient to maintain the invention as a trade secretforashortperiod oftime beforehaving to file a patentapplication.87 .

Individual situations may warrant the consor-tiurn taking exception to the standard allocation ofpatent rights under the DARPA model agreement.You maybe able to negotiate a change to the "Patent.Rights" article based on a detailed explanation ofthe consortium's needs.88 Factors to be consideredwhen negotiating patent licenses of a differentscope include (1) past investments funded by the

11

consortium (or any member) or the Government,(2) present contributions, and (3) potential corn-merciai markets.8 If the Government has been thepredominantcontributorin prioryears to the effortthat provides the foundation for the planned re-search, DOD policy provides that the OT agree-ment "Patent Rights" article must include the Bayh-Dole Act requirements. If, however, a consortium(or any member) has contributed more substan-tially through prior investments in the particulartechnology, the "Patent Rights" article may be lessrestrictive to allow the consortium or a member tobenefit more directly from its investments.

Experience has shown that DARPA will, ifjusti-fled, (a) delaythe effective date oftheGovernmentpurpose license right (e.g., the Government licensewill begin five years afterexpiration ofthe OT term),(b) define what reasonable efforts toward practicalapplication the consortium must make to precludeexercise of Government march-in rights, and(c) permit a member of the consortium to retainthe invention as a trade secret for an unspecifiedperiodoftime undercertaincircumstances.9' Otherconcessions that may be granted by DARPA includeallowing a co¤sortium member more time thanpermitted under the standard Bayh-Dole patentprovisions to (1) notifythe Governmentofasubjectinvention froth the time the inventor discloses-itWithin the commercial firm or (2) inform the Goy-ernment whether it intends to take title to theinyention.2

In nearly all cases, however, DARPA will insistthat the "Patent Rights" article provide for Govern-ment march-in rights to allow it to license subjectinventions to third pariies for commercial purposesif the title holder fails to take steps to achievepractical application of the invention within a rea-sonable time. Exceptions,however, maybe made incertain circumstances (e.g., ifthe consortium mcm-ber is providing most of the funding for a researchproject, aid the Government is providing a muchsmaller share) .

You should note that the DARPA model agree-ment "Patent iights" arti‡le does not contain Para-graph (g) ofthe FAR "PatentRights-Retention bythe Contractor" clause. Under Paragraph (g) , "Sub-contracts," (1) a subcontractor retainS all rightsprovided to the prime contractorand (2) the primecontractor cannot, as part of the consideration for

-* MARCH BRIEFING PAPERS 1998 *

awarding the subcontract, obtain rights in thesubcontractor's subjectinventions.94Language simi-lar to that in Paragraph (g) has been interpreted asprohibiting a prime contractor from taking even anonexciusive license in the subcontractor's subjectinventions.95Thus, where thisprovision is included,the only practical way a prime contra‡tor can obtainsuch rights is to negotiate a separatelicensing agree-ment with the Subcontractor under which separateconsideration is given by the prime for rights in thesubcontractor's subject inventions. Under theDARPA "Patent Rights" article, however, the con-sortium members are free to negotiate rights intheirsubcontractors' subjectinventions. The "PatentRights" article must be "flowed down" to all: subcon-tracts or lower-tier agreements for experimental,developmental, or research work.

Similarly, the DARPA Model ResearchOT agree-ment does not contain a provision like thatfound inAlternate I to the FAR "Authorization and Consent"clause, under which a contractor is authorized toinfringe any U.S.. patent in the performance of aresearch contract.96 DARPA's position is that itcannotlegallyinclude thistype ofprovision becausethe research is not being performed "for" the Goy-ernment within the meaning of 28. USC � 1498,which provides that when such authorization isgranted, the patent owner can sue only the overn-mentin the U.S. CourtofFederalClaimsforreason-able royalties. The patent owner cannot sue thecontractor for damages or obtain an injunctionagainst the contractor to block use of the patent.You may, however, be able to negotiate the indu-sion ofsuch a provision in aprotolypeOT agreement,where the research is being performedfortheGov-ernment. Ifan "Authorization and Consent" clauseis included in a prototype OT agreement, the con-tractormaybe required to "flow d”wn" the clause toall subcontracts over a certain dollar amount.

Data Rights

Article VIII, "Data Rights," provides that sincemixed Government-consortium funding is in-volved, the Goyernmentwill receive "G”vernmentpurpose rights" in any data deliveredunderthe OT.Also, as consideration for the Government fund-mg, the consortium must reduce to practical appli-cation any items, components, and processes de-veloped under the OT. The "Data Rights" articlemustbe"floweddown" to allsubcontracts ”rlower-

12

tier agreements for experimental, developmental,or research work.

"Governmentpurpose rights" are defined as therights to use, duplicate, or disclose data, in whole orin part and inany manner, for Government purposesonly and to have or permit others to do so forGovernment purposes .nly. "Data" are deffl•ed tomean recorded information, regardless ofform ormethod of recording, which includes, but is notlimited to, technical data, software, trade secrets,and mask works (semiconductor integrated dir-

cuits) . The term does not include financial, admin-istrative, cost, pri‡ing, or management information, and it does not include subject inventior.Note that the DARPA article places no time limit onthe Government purpose rights in such data, incontrast to the DFARS "Data Rights" clauses. Underthe DFARS clauses, the Government has Govern-ment purpose rights in technical data and com-puter software developed with mixed funding forfive years (or other period negotiated) followingexecution of the contract, after which time theGovernment obtains unlimited rights in the dataand software.97 . .

Th‚ DARPA model "Data Rights" article alsoprovides thatifthe Government ‡xercises its marchin rights with respect to subject inventions, theconsortium agrees-uponwritten requestfrom theGovernment-to deliver (at no additional cost tothe Government) all data necessary to achieve prac-tical application within 60 days from the date of the�written request. With respectto the delivered data,,the Government obtains "unlimited rights," mean-ing the right to use, duplicate, release, or disclosedata, in whole or in part, in any manner and for anypurpose whatsoever, and to have or permit others todo so.

In addition, under the "Data i.ights" article, theconsortium agrees that, with respect to data neces-sary to achieve practical application, DARPA hasthe right (similar to march-in rights) to require theconsortium to deliver any data DARPA determinesis necessary (a) because the consortium (or as-signee) has not taken effective steps, consistentwiththe OT agreement, to achieve practical applicationof the technology developed during OT perfor-mance, (b) to alleviate health or safety needs thatare not reasonably satisfied by the consortium,assignee, or their licensee, or (c) to meet require-

o

O* MARCH BRIEFING PAPERS 1998 *

ments for public use that are not reasonably satis-fled by the consortium, assignee, or licensee. Theconsortium further agrees to retain and maintain ingood condition-for a specified number of yearsafterOT completion or termination as agreed to bythe parties-all data necessary to achieve practicalapplication.

U Foreign Access To Technology

Article IX, "Foreign Access to Technol•gy," re-stricts access by foreign firms or institutions totethnology developments made under the OT. Thepurpose of this provision is to ensure that theprincipal economic benefit of the OT research willbe to the U.S. economy.98The controls establishedby this article, which are not found in a procure-ment contract, are in addition to those imposed bythe International Traffic in Arms Regulations,99 theDOD Industrial Security Regulation,'øø and theDepartment of Commerce Export Regulations.'0'

Like the "Patent Rights" and "Data Rights" articles,this article must be "flowed down" to all subcon-tracts for experimental, developmental, or researchwork.

Underthe article, any transfer by the consortiumof 'technology" developed under the OT to a for-eign firm or institution is subject to DARPA ap-provaI. The transfer may be prohibite4 if there areadverse consequences to the national security inter-ests or economic vitality ofthe United States. "Tech-nology" is broadly defined to include discoveries,innovations, know-how, inventions (whether pat-entable or not) , and computer software to whichownership rights accrue. A "technology transfer"includes the sale ofa company and a sale or licens-ing of technology. However, a "transfer" does notinclude (1) the sale of a product or component,(2) the license of software or documentation re-lated to the sale of a product or component, (3) atransfer to a foreign subsidiary of a consorti£mmember for purposes related to the OT, or (4) atransfer that provides access to technology to aforeign entity that is an approved source of supplyor source forthe conduct ofOT research, providedthat this transfer is limited to that necessary to allowthe foreign entity to perform its approved roleunder tile OT agreement.

Under the terms of this article, the prohibitionon technology transfers to a foreign firm or institu-

13

tion applies for a negotiated time period, such as upto three years after OT expiration. If a technologytransfer is made without DARPA approval duringthe period the restrictions on transfer are in effect,the consortium (a) will be forced to refund theDARPA funds paid for the development of thetechnology, and (b) the Government will obtain anonexclusive, nontransferable, irrevocable, paid-up license to practice, or have practiced, on behalfofthe United States the technologythroughout theworld for Government and any and all other pur-poses.

Although DARPA prefers to use its standard"Foreign Access to Technology" article withoutmodification, the article's proyisions are open tonegotiation. To effect a change, however, the con-sortium will be required to establish that any pro-posed modification will retain most ofthe manifac-turing capability and know-how associated with thedeveloped technology in the United States. Anyexisting licensing agreement that any consortiummember has with a foreign entity canbe addressedin an amendment to the article or in a side agree-ment. DARPA's preferred method for addressingindustry's concerns aboutplanned fOreign access isto negotiate advance approval Within the article'sterms.

U Title & Disposition Of Property

The DARPA model research OT agreement hastwo versions ofArticle X, "Title and Disposition ofProperty. " The firstcovers research programs whereno "significant" property (i.e., ta¤gible personalpropertywith an acquisition value less than $50,000)is expected to be acquired by the consortium toperform OT work. The second version covers re-search programs under which the consortium ex-pects to acquire property with an acquisition valuegreater than $50,000. (In this event, the DARPAAg reements Officer's prior written approvai is re-quired.)

Both versions contain the following two require-ments: (1) title to each item ofproperty greater orless than $50,000 vests in the consortium (with nofurther obligation of the parties, unless otherwisedetermined by the DARPA Agreements Officer),and (2) the consortium must maintain, repair,protect, and preserve ali property acquired at itsown expense. Also, both versions provide that, at

* MARCH BRIEFING PAPERS i *

completion ofthe OT term, propertywithan acqui-sition value greater than $50,000 is to be (a) pur-chased by the consortium at an agreed-upon price,based on fair market value, and the sale proceedsgiven to DARPA, (b) transferred to a Governmentresearch facility, with title and ownership beingtransferred to the Government, (c) donated to amutually agreed-upon university or t‡chnical learn-ing center for research purposes, or (d) disposed ofby any other DARPA-approved disposition proce-dure. This disposal process precludes the consor-tium or its members from obtaining (a) thle toproperty at no cost, unless the property is deter-mined to have little or no value and (b) an unfaircompetitive advantage)02

There is no statutory requirement that the Gowernment obtain title to property under 10 USC� 2371 . DARPA's policy is that property should notbe acquired under a research OT (or a prototypeOT) unless the property is specifically necessary toaccomplish the OT's statement ofwork. Even whennecessary, however, the property acquisition costsmaybe so prohibitive that Government cost sharingis needed to cquire the property under the re-search OT. In such cases, even though the propertyis acquired with Government funding, an indi-vidual consortium member is usually allowed toretain title to the property and is encouraged to useexisting commercial or Government sytenis forproperty control)ø3 Whil‡ the Government doesnotobtain titleto the property, itretains the right toparticipate in the determination of the property'sdisposition, as specified in Article X. You shouldnote that many commercial companies are unableto (1) track items of property by acquisition valuepurchased under research programs or (2) complywith certain r‡quirements of Article X. Bear inmind, however, that the language of this article isnegotiable:

Unlike property acquired under a research OT,property acquired under a prototype OT is for theprimary benefit of the DOD. Thus, if the prototypeOT is a cost-reimbursement agreement, the Goy-ernment usually takes title to property upon acqui-sition. However, ifthe prototype OT is a fixed-price-type agreement and payments are made upon ac-complishment oftechnical milestones, the.Govern-ment may only require title to deliverable end itemsand not to ancillary property. 104

. Civil Rights Act

The only socioeconomic teq—irement includedin the DARPA model is Article XI, "Civil RightsAct."This provision requires each consortium mcm-berto (a) complywithTitle VloftheCivilRightsActof 1964 concerning nondiscrimina•on in federallyassisted programs'ø5 and (b) provide a certificationto that effect. There is no requirement that the"Civil Rights Act" article be' "flowed down" to sub-contractors.

14

­ Order Of Precedence

Article XII, "Order ofPrecedence," provides.that.in the Švent ofany inconsistency between languagein the OT agreement and the consortium's ArticlesofCollaboration, the inconsistencyis to be resolvedby giving preference in the following order: ( i ) theOT agreement, (2) attachments to the OT agree-ment, and (3) the consortium Articles of Collabora-tion.

I Execution

The final provision, Article XIII, "Execution,"points out that the written OT agreement super-sedes all prior and contemporaneous agreementsand discussions of the parties, whether oral orwritten. Also, the OT agreement is to be revised onlyby written consent of the CMC and the DARPAAgreements Officer.

There is no particular requirement as to whomust sign the OT agreement on behalf of theconsortium. The agreement could, for example, beexecuted by ali the consortium members individu-ally or signed by one member. so authorized by theArticles of Collaboration)ø

I Report Requirements

The DARPA model OT agreement includes "Re-port Requirements" (Attachment 2) under whichreports mustbe "delivered or otherwise made avail-able" to the Goyernment. This allows DARPA tohve access to relevant information without creat-ing an "agency record" that could be subject torelease to third parties under the Freedom of Infor-mation Act (FOIA) . Access to instead of delivery ofproprietary data is used to keep the DARPA Pro-gram Manager and the DARPAAgreements Officerinformed ofresearch progress (e.g., through mec¡-

O

* MARCH BRIEFING PAPERS 1996 *

ings, briefings, and summary reports) . 'ø7You shouldnote that the National Defense Authorization Actfor W 1998 amended 10 USC � 2371 to expresslyexempt 01 (and cooperative agreement) propos-als, business plans, and confidential technical infor-mation from disclosure under FOJA for a period offive years.'ø8

i Other Provisions

At least three FAR clauses regularly found inprocurementcontracts are absentfrom the DARPAmodel research OT agreement. These are the "De-fault," "Changes," and "Excusable Delay" clauses. nparticular, you should consider adding an "Excus-able Delay" provision to an O1 agreement so thatthe consortium members will not be considered tobe in default where an excusable delay (e.g., astrike) in perforrnanc‡ has occurted.

Cost Sharing

As earlier noted, research OTs are required bystatute toprovide for5O-50 costsharingbetween theGovernment and the OT recipient to the extentdetermined practi‡al.'r This 50% cost-sharing re-uirement can be waived,'to but such waivers are

difficultto obtain in practice. In contrast, prototypeOTs by statute do notrequire any i)' Butcost sharing is not prohibited, and prototype OTshave on occasiOn required some form of cost shar-ing-aithough frequently much less than 50%. Incertain competitive selections, a proposai with acost share in excess of 50% may receive a higherscore than one with 50% or less."2

Where a consortium is performing the researchOT, the 50% cost-sharingrequirementmustbe metby the consortium as a whole. Thus, one or moremembers can make larger cost-sharing contribu-tions to make up for any shortfall by aflother mem-ber. For example, a large commercial firm couldcostshare on behalfofa nonprofit organization andusŠ that cost-sharing contribution as leverage toobtain intellectual property license rights from thenonprofit entity.

i Acceptable Contributions

€ost-sharing requirements maybe saUsfied witheither cash or concurrent in-kind contributions.

i 5

The value of past research may also be au accept-able contribution.

( 1 ) Cash Cont¤butiOns-This category ofcost shareincludes the contribution offunds to acquire mate-rial, buy equipment, pay for labor (including ben-efits and direct overhead associated with that la-bor) , and for other cash outlays-all for the perfor-mance of the OT's statement of work. The cashcontribution can be derived fr“m your owi com-pany funds or from ”utside sources (such as dona-fions from state or local governments or funds fromventure capitalists) . The cash may also come fromnonfederal contract or grant revenues or fromprofit or fee on a fed&al procurement contract..Acompany's own source offunds may include corpo-rate retained earnings, current or prospective inde-pendent research and development (IR&D) funds,or any other indirect cost pool allocation."3 In acompetitive selection, DARPA will evalu…te cashcontributions more favorably than in-kind contri-butions because cash contributions demonstrate astronger itm'4

IR&D funds are considered a company's own in-house funds and maybe used as a source ofOT cashcost share, even though these same funds remaineligible for reimbursement by the Government un-der a FAR-covered contract. The relevant FAR costprinciple specifically lists IR&D effort performedunder cooperative arrangements with DARPA pur-suant to 10 USC � 2371. (e.g., an OT) as allowableIR&D costs, if the work performed would have beenallowed as contractor IR&D cost had there been nocooperativearra'5 The IR&D project, how-ever, must be relevant to the OT project to be eligible

nr' In a competitiveselection, concur-rent IR&D projects that are relevant to the OTprojectwill be evaluated as high qualit' cost

(2) In-Kind Cont¤butions-In-kind cost-share con-tributions include the.reasonable fair market valueof equipment, materials, intellectual property, andother property used in performance of the OT'sstatement ofwork. "Fair marketvalue" is defined tomean what a prudent businessman would pay forthe use of the property-not the cost of develop-ment or manufacture of the property."8 Notwith-standing this definition, in-kind cost-share contri-butions are difficult to quant' (e.g., determiningthe value of the use of capital equipment or facili-ties).

* MARCH BRIEFING PAPERS 1998 *

(3) Value ofPast Research-Although cash t con-current in-kind contributions are the preferredtypes of cost share, DARPA will accept the value ofprior research under certain circumstances-e.g.,where the OT recipient possesses significant techni-cal knowledge but is unable or unwilling to provideother cash or in-kind contributions)'9

I Nonqualifying Costs

Certain types ofc”stswill notquaUfyas cash or in-kind contributions to cost sharing. For instance,DARPA's OT guidance provides that the forgoneprofits or fees for the instant efforts and the cost ofwork done on past or concurrent procurementcontracts or subcontracts are unallowable as a cost-share triti'20

Pros & Cons Of Ois

OTs, particu1arly when compared with procure-mentcontracts, presentboth benefitsand concernsfor participants, ashighlighted in an extensive studyofDARPA's use ofresearch OTs performed by theInstitute for Defense Analysis (IDA) in 1995. In itsreport, the IDA summarized the pros and ‡ons ofOTs basedon the experiences ofOT participants)2'

Among the benefitsofusing OTs noted by the partici-pants were the following:

(i ) ProjectFeasibility-Participants in anumber ofOT projects reported that their projects wouldnever have been attempted under a procurementcontract The reasons cited included procurementcontract requirements regarding mandated intel-lectual property rights, compliance with Govern-ment cost accounting systems, and subcontracting.

(2) Project Administration-The elimination un-der an OT of administrative burdens found in aprocurement contract generally made project ad-ministration simpler and increased research pro-ductivity.

(3) Consortium-The self.governing ™T consor-tium structure made possible information-sharing

io

based on mutual trust-even with diverse or corn-peting participants Contract disputes were rare.Use ofaconsortium sometimeslezIto newbusinessopportunities. The consortium structure was oftenmore effectiye for carrying out research than theprime-subcontractor relationship in a procurementcontract.

(4) PayableMilestones-Use ofpayable milestonesfocusing on progress rather than on expenditureswas universally well regarded.

(5) Patent Rights-.The OT flexibility regardingpatent rights was beneficial since the Bayh-Dole Actdoes not apply to OTs.'22

(6) Self-Policing Structure---OTs were no moresusceptible to waste, fraud, and abuse than procure-ment contracts despite the absence of many "pro.tective" rules. Since consortia police themselves,they tend to prevent "misbthavior" by individualmembers.

. (7) Cost Sharing-Cost sharing helped ensurecommitment, enabled cons¢riium members to usehigher quality employees than they could normallyafford using only their own funds, and allowedcompanies to do research theywere interested in-all with the GovernmŠnt paying half the cost (in aresearch OT).

The IDA study also reported the concerns of OTparticipants, including the following:

(a) CoizsortiumFormation-Forming a consortiumwas difficult and time consuming. Critical decisionsmust be made early, and a detailed Articles of Col-laboration documentwas important to establish theroles and responsibilities ofall members clearly. Thechoice ofan effective consortium leaderwas essentialto ith success.

(b) Cost Sharing-Cost sharing was seen nega-lively by certain consortium members that did nothave the resources to cost share, particularly smallfirms and traditional defense contractors.

[1

s

EJ

[IJ

* MARCH BRIEFING PAPERS 1998 *

* GUIDELINES *These Guidelines are designed to assist you in

understanding what an OT is and how an OTagreement is used. They are not, however, a substi-tute for professional representation in any specificsituation.

1. Remember that under a research OT the Goy-ernmentwill, to the extentpracticable, require youto cost-share a minimum of 50% of the ft•nding.Under aprototypeOT for a military project, althoughthere is no statutory mandate for cost sharing by therecipient, the Government may encourage (or evenrequire) some cost sharing.

2. Ifyou are a Government contractor, remem-ber that IR&D costs-as defined in the FAR costprinciples-qualifr as OT cost-share cont¤butions ifthe IR&Dproject is releu4nt to the OT's statement ofwork.

3. Before offering to cost share on a prototype OTas a competitive measure, be sure you un4erstandthe DOD'splan to transition the program to produc-tion, ifone exists. Currently, the DOD must converta prototype project to a FAR-covered procurementcontract for production, which may affect planningand pricing of the prototype OT phase.

4. When you are offered the opportunity to corn-ment on an OT draft solicitation, suggest that aprotest procedure be included. A process using anindependentagencyofficial (atleast one level abovethe Agreements Officer) as the protest officer willlikely be acceptable to the DOD.

5. Ifyou are considering aforeiz entity 's participa-tion in a consortium to cariy out an OT, begin anopen discussion with the DOD Program Managerbefore entering into the Articles ”f Collaboration orexpending any proposal costs. With sufficientjusti-fication, the Government may permit a foreignentity to work on a project.

1/ National Defense Authorization Act forFYs 1990 and 1991, P.L. 101-189,� 251 (a), 1 03 Stat. 1 352, 1403 (Nov. 29,1989) (adding lo USC � 2371).

2/ See Under Secy. of Defense for Acquisi-tion &Technology, Memorandum to Secys.

6. Remember that selection of an effective Con-sortium Administratoris one of the keys to a well-runconsortium. The Administrator mustbe willing andable to dedicate significant time and effort to coor-dinating each member's activities and to keepingeach member's interests in mindwhen negotiatingthe OT agreement and any modifications.

7. Take advantage of the OT's flexibility to nego-tiateterms and conditions that make sense given theparticular circumstances involved. Unlike under aprocurement contract. or cooperative agreement,you should be able to negotiate changes to the"Patent" and "Data Rights" articles of the OT agree-ment. Also, be sure in your negotiations to addressissues not covered in a model OT agreement, whenapplicable (e.g., "risk of loss" and "suitability foruse" of any Government-furnished property).

8. Be careful to protect proprietary patents andtechnical data developed by your company beforeentering into the OT. The Government shouldobtain only limited or restricted rights in such intellec-tuai property.

9. Take advantage of the model OT's "ReportRequirements" provision under which required re-ports may be either "delivered or otherwise madeavailable" to the Government. This will allow theDOD to have access to relevant documents andproprietary data without unnecessarily creating"agency records" that may be subject to releaseunder FOIA. Keep the DOD Program Manager andthe DOD Agreements Officer informed of resear‡hprogress through meetings, briefings, and deliveryof summary reports but do not deliver the dataunless there is no alternative.

lo. Consider proposing an alternative to the"Disputes" article In the model: OT agreement thatspecifies binding arbitration or some other form ofalternative dispute resolution.

* REFERENCES *of the MifltaryDepts. & Dirs. of DefenseAgencies, i O U.S.C. 2371 , Section 845,Authority To Carry Out Certain Proto-type Projects (Dec. 14, 1996) (listingstatutes inapplicable to OTs).

3! National Defense Authorization Act forFYs 1 992 and 1 993, P.L. 1 02-1 90, � 826,

17

105 Stat. 1290. 1442 (Dec. 5, 1991)(amending 10 USC � 2371).

4! National Defense Authorization Act forFY 1994, P.L. 103-160, � 845, 107 Stat.

.1547, 1721 (Nov. 30, 1993); .10 USC� 2371 (note).

* MARCH BRIEFING PAPERS 1998 *

51 Note 3, supra, � 826(a) (amending i O 22/ See DOD, Final Reportof the Integrated (July 1 1 , i 997); Air Force: Air Force Or-

USC � 2371 ); National Defense Authori- Product Team, "The Services' Use of lo der 751 .1 (Jan. 27, 1 994); Commander,

zation Act for FY 1997, P.1. 1 04-201 , USC 2371 'Other Transactions' and Sec- Air Force Materiel Command, Memoran-dum to Dir. of Contracting, Air Force �� 804(a), 110 Stat. 2422, 2605 (Sept. tio¤845PrototypeAuthorities"(1996)(aVail-

23, 1996) (amendIng P.L. 103-160, note ableat<http://www.afmc/wpafb.af.mil/1-IQ- Materiel Command, Delegatlon of Au-

4, supra, � 845(a)). AFMC/Pklpktlotjump.htm>); Asst. Secy. thority To Enter Into and Vest Title toof the Navy for Research, Dey. & Acquisi- Equipment Purchased Under Contracts,tion,MemorandumforChlefofNaval Re- Grants, Cooperative Agreements, and

6! DOD, "Annual Report on Cooperative search, "Guidance on the Use of Other OtherTransactlons"(Feb.l5, 1994); Dir.Agreements and Other Transactions TransactionAuthorityUnderloUSC237l," ofContractlng, AirForce Materiel Corn-Entered Into During FY97 Under 10 USC Enclosure 1 (July 1 1 , 1 997) (available at rnand, Memorandum to Research& Dey.

2371 ." See 40 GC 81 <http://www.abm.rda.hq.navy.mil/ Commanders, Delegatlon of Authorityotpolicy.html>). To Enter Into 'Other Transactions' for

.

ResearchProjects(July25, 1996); Asst.7/ P.L. 85-568, 72 Stat. 426 (1958) (codi- Secy. of the Air Force for Acquisition.

tied at 42USC � 2451 et seq.). Memorandum,Section 8450f PubllcLaw23! 10 USC � 2371(g). 103-160, as Modified by Section 804 of

Public Law 104-201, AuthorityTo Carry8F 42USC 2473(c)(5)(emphasisadded). OutcertainPrototype Projects" (May 6,

24/ See Dir. of Defense Research & Engrg., 997).

9! P.L.95-224,92Stat.3(1978),asamended Memorandum to Secys. of the Military

byP.L.97-258,96Stat.877,1003(1982) Depts. & Dir. of ARPA, "Grants, Coop-

(codified at 31 USC � 6301 et seq.). erative Agreements, and OtherTransac- 30/ P.L. 03-160, note 4, supra, � 845(b)(2).tions" & Attachment 1, intenm Guid- as amended by P.L. 104-201, note 5,ance for Military Departments and Ad- supra � 804(a)(2)

'loi 31 USC � 6304, 6305. va¤ced ResŠarch Projects Agency onGrants, Cooperative Agreements and'OtherTransactions'" (Feb. 8, 1 994); Dir.

11! 31 USC � 6303 (emphasis added). ofDefense Research & Engrg., Supple- 31/ RL. 1o316O, note4, supra, � 845(b)(1),ment to 1994 Int‚rim Guidance Memo- as amended by P.L. 104-201, note 5,randum for lo U.S.C. � 2371" (June 5, supra, � 804(c)).

12! Note 1, supra (emphasis added). 1996);Dir.ofDefenseResearch&Engrg.,. Memorandum for Secys. of the Military

Depts., Instruments for Stimulation or13/ Note 1, supra. Support of Re‚earch" .& Attachment, 32/ See note 2,supra.

"Supplement to 1994 Interim Guidancefor 10 U.S.C. � 2371" (Dec. 2, 1997)

14F Note 3, supra. (available at.httx//alpha.lml.org/dodgars/>)(addressinglechnologylnvestmentagree ,' 1 0USC � 2371 (e)(1 )(B).

m‚nts" combining cooperative agreements. . . . .15! Federal Acquisition Streamhning Act of and research 0Th

1994,P.L. 1O3-355, 1301(b), lO8Stat.3243, 3285 (Oct. 13, 1994) (amending 34! See Institute for Defense Analysis, Par-

10 USC �2371). ticlpant Views of Advanced Research25/ P.L. 103-1 60, note 4, supra, � 845(a). Projects Agency Other Transactions 4 &

app. A (Nov. 1995) (available at <htlp:/I16! 1 0USC � 2371 (e)(l )(A). www.darpa.mil/d1793/>).

. 26/ P.L. 104-201, note 5, supra, � 804(b)

17/ 10 USC � 2371(e)(1)(B). (amending P.L. 103-160. note 4, supra,�845(c)). 35! DOD, note 6, supra.

18! See Senate Comm. on Armed Services,Report on the National Defense Authori-zatlon ActforFY 1997, S. Rep. No. 267, 27/ P.L. 10420l, note 5, supra, � 804(a) 36/ ARPA, Draft Guidance for Use of Other

104th Cong., 2d Sess. 314 (May 13, (amending P.L. 103-160, note 4, supra, Transactions 1 (Feb. 1995); Supple-

1996); House Armed Services Comm., � 845(a)). ment to 1994 Interim Guidance for 10

ReportontheNationalDefenseAuthori- USC � 2371' (DeC. 2, 1997), note 24,

zation Act for FY 1995, FIR. Rep. No. supra, at3, �II.B.l.499, 103d Cong., 2d Sess. 285 (May 10,

28/ Note 2, supra.1994).

37/ ARPA, note 36, supra.

19/ 10USC 2371(e)(2)(emphaslsadded). 29/ E.g., Navy: Asst. Secy. ofthe Navy forResearch, Dey. & Acquisition, Memo-randa, "Delegation of Authority To Enter 38/ Supplement to 1 994 InterIm Guidance

20F See 10 USC � 2371(e)(3)(1995) (em- Into Grants, Cooperative Agreements, for 10 USC � 2371" (D‚c. 2, 1997), note

phasis added).and 'OtherTransactions'" (May 9, 1 996), 24, supra, at 3, �lI.B.2.Delegation of Authority To Enter Into

Grants, Cooperative Agreements, and'Other Transactions'" (Feb. 21, 1997),

21! P.b. 1 04-201 , note 5, supra, � 267(a)(5) and"Guidance onthe Use of'OtherTrans- 39! P.L. 1 03-1 60, note 4, supra, � 845(a), as-

(amending 10 USC � 2371(e)). actions' Authority Under 10 USC 2371' ame¤ded by P.L. 104-201 , note 5, supra.

18

n* MARCH BRIEFING PAPERS

40/ DARPA, Memorandum of Law for Distil-bution, "Subject: Scope of Section 845Prototype Authority" 6-7 (available at<http://www.darpa.mil/cmo/pages-scope.html>).

41! Note 40, supra.

42/ Note4O,supra,at7-8; Dunn, "PrototypeProjects Under Section 845 of the Na-tional Defense Authorization Act" 5 (un-publIshed manuscript on file with theauthors).

43! See Civil Rights Act of 1964, P.L. 88-352, � 601-605, 78 Stat. 241 (1964);ARPA, note 36, supra, at lOE.

44! Compare 28 USC � 2371(e)(1)(B) withP.L. 103-1 60, note 4, supra, as amendedby P.L. 104-201, note 5, supra, �804.

45! Duhn, note 42, supra, at 6-9.

46/ DOD, note 22, supra, at 24.

47! See COSSI website at<http:I/www.datpa.mIl/jdupo/index.html>.

48/ DOD. note 6, supra.

49/ Dunn, "UsingOtherTransactions in Co-operative Government-Industry Relation-ships To Support the Development andApplication of Affordable Technology" 7(unpublishedmanuscript on file with theauthors); ARPA, note 36, supra, at 2.

50F See 10 USC � 2304(f).

51/ FAR 35.016.

52! FAR 35.01 6(a).

53F See 10 USC � 2301 et seq.

54/ 41 UC �423. See generally Arnavas,"The Procurement Integrity Act/Editionli," Briefing Papers No. 97-12 (Nov.1997).

55/ 41 USC � 51-58.

56/ See 31 USC � 3551 et seq..

57/ Telephone conversation between Rich-ard L. Dunn, DARPA General Counsel,and Ri”hardN Kuyath (Aug. 1997). SeeEnergy Conversion Devices, Comp. Gen.Dec B-260514, 95-2 CPD 121 (deny-ing a protest regardingDARPA'suse ofa¤ OT i¤stead of a procurement contractbecause the protester failed to prove aprocurement contract was required). Seealso note 2, supra.

58/ Telephone conversation,note57, supra.See Materials from DARPA ContractingOfficer Representative Course (Dec.1997).

59/ See Draft Air FOrce Guide, "Section 845of Public Law 103-160, 'Other Transac-tions for Prototype'" 9 (July 10, 1997).

60/ AirForce Materiel Command FAR Supple-ment pt. 5335.90. See also Air Force,The:PRDA/BAA GUide (rev. ed. Mar. 29,i 996) (available at<http://www.wl.wpaf b.af.mi?/contractlprdag.htm>).

61/ "Supplement to 1994lnterim Guidancefor 10 U.S.C. � 2371" (Dec. 2, 1997).note 24. supra, at 4. � ll.B.

62! See3l USC 3551 etseq;4CFR pt. 21See also note 2, supra.

1998 *

67/ Note 40, supra, at 10.

68/ Note 34, supra, at 4.

69! P.L. 98-462, 98 Stat. 1815 (1984), as.

amended by P.L. 103-42, 107 Stat. 117

.. (June 10, 1993) (codified at 15 USC� 43014305).

63! See Energy Conversion Devices, note.57, supra.

64/ See 10 USC �2301 et seq. See also note2, supra.

65! 28 USC � 1491(b).

66/ 5 USC � 706. See American Bar Assn.,Draft Ad Hoc working Group Analysis onthe Applicabilityof Certain Procurement-Related Statutes t Utilization of OtherTransactions Authority for PrOductiOn ofPrototypes ofWeapons orWeapons Sys-tems app. A, at A-46, A-47 (July 25,1997).

19

70! DAAPA Model Research OTAgreements(Jan. 31, 1997) ("Company Model" and"Consortium Model") In Materials fromDARPAAcquisitionConference (Mar.17-18, 1997), "Use ofthe 10 USC 2371 andSection 845 AuthoritIes" atTab N. SeeBolos, "A Report on the Use of 10 USC2371 'Other Transaction' Authority and10 USC 2371 Section 845 PrototypeAuthority in the Department of Defense"26-32 (Mar. 1997).

71/ TheAirForceModel Research OTAgree-ment Is available at <http://www.afmc.wpafb.af.mil/organlzationslHOEAFMC/PK/pktlindeLhtm> atAssistance Regulationsand Guides, Module 2-Awards & Con-sortia. The Air Force Model Prototype01 Agreement is available at <http://www.afmc.*pafb.af.mil/HQ-AFMC/PK/pkt.o.j—mp.htm>.

72/ See note 47, supra.

73/ ARPA, note 36, supra, at 3, 10.

74F For a discussion Of a priorversion of thismodel agreement, see Kuyath, The Un-tapped Potential of the Department ofDefense's 'Other Transaction' Author-ity," 24 Pub. Cont. L.J. 521, 542-560(Summer 1995).

75/ FAR 52.232-20.

76! 41 USC � 321, 322.

7-il See 2BUSC � 1346(a)(2), 1491 (a).

78! 41 USC �601-6i3.

79! See 41 USC � 602.

80/ FAR2.227-l2.

* MARCH BRIEFING PAPERS 1998 *

81! See FAR 52.227-12, paras. (i), (j).

82! 35 USC � 20O-212.

83! ARPA, note 36, supra, at 9. But seeNASA Memorandum, Technology Rein-yestment Project (TAP): Fu¤ded SpaceAct Agreements and Intellectual Prop-erty Rights" (May 28, 1993) (insistingthat funded Space Act agreements neednot be restricted by the Bayh-Dole Actand that inve¤tion rights may be freelynegotiated).

84! President's Memorandum for Heads ofExec. Depts. and Agencies,, Govern-ment Patent Policy" (Feb. 19, 1983). Seealso Exec. Order 12591, � 1(b)(4) (Apr.10, 1987).

85! Se‚ 35 USC � 202; FAR 52.22712,para. (b).

86! See �35 USC � 203; FAR 52227-12,para. (j). The Government's march-inrights with respect to subject invenlionsmade under a contract, grant, or coop-erative agreement have apparently notbeen exercised in anyr‚portŠd i¤stance.See Nash, Schooner& O'Brien, The Goy-ernment Contracts Reference Book 339(1998).

87! See 35 USC � 202(c)(1); FAR 52.227-12, para. (c).

88! ARPA, note 36, supra, at 9.

89! Supplement to 1994 Interim Guidancefor 10 USC � 2371" (Dec. 2, 1997), note24, supra, at 6, � lI.D.2; DARPA Memo-randui'n, Intellectual Property" 8 (avail-able at<http://www.darp.¤iil.cmo/pages/intellectuaLhtml>).

90! SuppIement to 1994 Interim Guidancefor 10 USC � 2371"(Dec. 2, 1997), note24, supra, at 6, � II.D2; DARPA Memo-randum, note89, supra.

91! GAO. DOD Research: Acquiring Researchby Nontraditional Means 7 (GAO/N SIAD-96-11, Mar. 29, 1996).

92! DARPA Memorandum, note 89, supra;"Supplement to 1994 Interi¤ Guidance

for 10 USC 237? (Dec. 2, 1997), note24, supra, at 6, � II.D.3 note 91 � supra.

93! DARPA Memorandum, note 89, supra;"Supplement to 1994 Interim Guidancefor 10 USC � 2371" (Dec. 2, 1997), note24, supr…, at 6, � II.D.4.

94! FAR 52.227-12, para. (g).

95! Rawicz & Nash, Patents and TechnicalData 220, 221 (1983).

96! FAR 52.227-1, alt I.

97! See DFARS 252.227-7013, pƒra. (b)(2)(Rights in Technical Data-Noncommer-cial ItemS" clause); DFARS 252.2277014,para. (b)(2) ("Rights in NoncommercialCOmputer Software and Noncommercial

. Computer Software Documentation"clause).

98! ARPA, note 36, supra, at 10; "Suppl‚-ment to 1994 Interim Guidance for 10U.S.C. � 2371" (Dec. 2, 1997), note 24,supra, at 6, 11 ILD.5.

99! 22 CFR pt. 121 et seq.

100! DOD Directive 20.22-R, industrialSecurity Regulation."

lol/ 15 CFR pt. 770 et seq.

102! DARPAMemorandurn,"Acqulsitionof Prop-erty Under Other Transactions for Re-search and OtherTransactions for Proto-types" 3 (available at <http://www.darpa.mil/cmo/pages/property.html>).

103/ Note 12, supra, at 2.

104! Note 102, supra.

105/ See 42 USC � 2000-d.

106! ARPA, note 36, supra, at 5-6.

20

107! Dunn, Cooperative Government-Indus-try Relationships To Develop andCom-mercialize Technology" 16 (unpubllsh‚dmanuscript on filewith the authors).

108! P.L. 105-85, � 832, 1 1 1 Stat. 1629,1841(Nov. 18, 1997) (adding 10 US€ 2371 (I)).

109! bUSC � ?371(e)(1)(B).

110! "Supplement to 1994 Interim Guidancefor 10 U.S.C. � 2371" (Dec.2, 1997),note 24, supra, at 4, � Il.B.3.

1111 10USC2371 note.

112! DARPA Memorandum, "Cost Sharing" 3

.(available at<http://www.darpa.mIl/cmo/pages/cost.html>).

113! Note 112, supra, at2.

114! Note 112, supra.

115! FAR 31.205-18(e).

116! Note 112, supra.

11! Note 112, supra.

118! Note 112, supra, at2.

119! Note 1 1 2, supra. But see "Supplement to1994 Interim Guidanc‚ for 10 U.S.C.� 2371" (Dec. 2, 1997), note 24, supra,at 5, � ll.0 (prohibiting the use of pastresearch as cost share).

120! Note 112, supra, at?.

121! Note 34, supra, � 5, "FIndings and Par-ticipant Suggestions."

122! S. Rep. No. 267, note 18, supra; H.R.Rep. No. 499, note 18, supra; H.R.Rep.No. 31 1 , lO2dCong., lstSess.576 (1991),reprinted In 1991 U.S.C.C.A.N. 1132.

[�1