Definitions of Research and Development: An Annotated Compilation of Official Sources

The OMB prescribes budget regulations for federal agencies. Part II of Circular A-11 covers development of the president’s budget and provides guidance on agency submissions to OMB. Section 84 of the circular defines budget authority, outlays, and offsetting receipts for the conduct of R&D, construction and rehabilitation of R&D facilities, and R&D equipment.

Conduct of research and development (R&D): Research and experimental development activities are defined as creative and systematic work undertaken in order to increase the stock of knowledge—including knowledge of people, culture, and society—and to devise new applications using available knowledge.

Include:

• Administrative expenses for R&D, such as the operating costs of research facilities and equipment and other overhead costs.

Exclude:

• Investments in physical assets such as major equipment and facilities that support R&D programs. These investments should generally be reported under physical assets.
• Routine product testing, quality control, collection of general-purpose statistics, routine monitoring, and evaluation of an operational program (when that program is not R&D). Spending of this type should generally be reported as non-investment activities.
• Training of scientific and technical personnel should be reported as conduct of education and training. However, if an activity includes a mixture of R&D objectives as well as the education of graduate students, agencies should report under the lowest relevant line item.

Basic research is defined as experimental or theoretical work undertaken primarily to acquire new knowledge of underlying foundations of phenomena and observable facts. Basic research may include activities with broad or general applications in mind, such as the study of how plant genomes change, but should exclude research directed towards a specific application or requirement include, such as the optimization of the genome of a specific crop species.

Applied research is defined as original investigation undertaken in order to acquire new knowledge. Applied research is, however, directed primarily towards a specific practical aim or objective.

Experimental development is defined as creative and systematic work, drawing on knowledge gained from research and practical experience, which is directed at producing new products or processes or improving existing products or processes. Like research, experimental development will result in gaining additional knowledge.

For reporting experimental development activities, include the following:

• The production of materials, devices, and systems or methods, including the design, construction and testing of experimental prototypes.
• Technology demonstrations, in cases where a system or component is being demonstrated at scale for the first time, and it is realistic to expect additional refinements to the design (feedback R&D) following the demonstration. However, not all activities that are identified as “technology demonstrations” are R&D.

Exclude:

• User demonstrations where the cost and benefit of a system are being validated for a specific use case. This includes low-rate initial production activities.
• Pre-production development, which is defined as non-experimental work on a product or system before it goes into full production, including activities such as tooling, and development of production facilities. For example, exclude activities and programs that are categorized as “Operational Systems Development” in the Department of Defense’s budget activity structure. Activities and programs of this type should generally be reported as investments in other major equipment.

Physical assets are land, structures, equipment, and intellectual property (e.g., software or applications) that have an estimated useful life of two years or more; or commodity inventories. This character class code is used to enter amounts for the purchase, construction, manufacture, rehabilitation, or major improvement of physical assets regardless of whether the assets are owned or operated by the Federal Government, States, municipalities, or private individuals. The cost of the asset includes both its purchase price and all other costs incurred to bring it to a form and location suitable for its use. Within this character class code, agencies are also required to identify spending for R&D facilities and major equipment.

For reporting construction of R&D facilities, include the following:

• Construction of facilities that are necessary for the execution of an R&D program. This may include land, major fixed equipment, and supporting infrastructure such as a sewer line, or housing at a remote location. Many laboratory buildings will include a mixture of R&D facilities and office space. The fraction of the building directly related to the conduct R&D may be calculated based on the percentage of the square footage.

Exclude:

• Construction of other facilities, such as office space (which should be reported in the other construction and rehabilitation category on line 1313 or 1314).
• Major movable R&D equipment.

For reporting Major equipment R&D (lines 1321 and 1322), include the following:

• Acquisition, design, or production of major movable equipment, such as mass spectrometers, research vessels, DNA sequencers, and other movable major instruments for use in R&D activities.
• Programs of $1 million or more that are devoted to the purchase or construction of R&D major equipment (see section 84.3(a)).

Exclude:

• Minor equipment purchases, such as personal computers, standard microscopes, and simple spectrometers.

OMB Circular A-11. Available at https://www.whitehouse.gov/omb/circulars/.

The Federal Acquisitions Regulations (FAR) were established to codify uniform policies for the acquisition of supplies and services by executive agencies. Basic research is defined in FAR Part 2–Definitions of Words and Terms, subpart 2.101 “Definitions.” Applied research and development are defined in FAR Part 35–Research and Development Contracting, subpart 35.001 “Definitions.” Full text of FAR Parts is available at https://www.acquisition.gov/?q=browsefar.

Basic research means that research directed toward increasing knowledge in science. The primary aim of basic research is a fuller knowledge or understanding of the subject under study, rather than any practical application of that knowledge.

Applied research means the effort that (a) normally follows basic research, but may not be severable from the related basic research; (b) attempts to determine and exploit the potential of scientific discoveries or improvements in technology materials, processes, methods, devices, or techniques; and (c) attempts to advance the state of the art. When being used by contractors in cost principle applications, this term does not include efforts whose principal aim is the design, development, or testing of specific items or services to be considered for sale; these efforts are within the definition of "development," given below.

Development, as used in this part, means the systematic use of scientific and technical knowledge in the design, development, testing, or evaluation of a potential new product or service (or of an improvement in an existing product or service) to meet specific performance requirements or objectives. It includes the functions of design engineering, prototyping, and engineering testing; it excludes subcontracted technical effort that is for the sole purpose of developing an additional source for an existing product.

The Federal Acquisitions Regulations (FAR). Available at https://www.acquisition.gov/?q=browsefar.

The Research, Development, Test, and Evaluation (RDT&E) budget activities are broad categories reflecting different types of DOD science and technology activities. These definitions guide internal budget documents and submissions of data to other government agencies. The following is drawn from DOD’s Financial Management Regulation (DOD 7000.14-R), Volume 2B, Chapter 5 (Research, Development and Evaluation Appropriations). (As a historical artifact from previous DOD budget authority terminology, funds for RDT&E budget activity categories 1 through 7 are sometimes referred to as 6.1 through 6.7.) The full text of Chapter 5 is available at http://comptroller.defense.gov/FMR/vol2b_chapters.aspx.

Budget Activity 1, Basic Research. Basic research is systematic study directed toward greater knowledge or understanding of the fundamental aspects of phenomena and of observable facts without specific applications towards processes or products in mind. It includes all scientific study and experimentation directed toward increasing fundamental knowledge and understanding in those fields of the physical, engineering, environmental, and life sciences related to long-term national security needs. It is farsighted high payoff research that provides the basis for technological progress. Basic research may lead to: (a) subsequent applied research and advanced technology developments in Defense-related technologies, and (b) new and improved military functional capabilities in areas such as communications, detection, tracking, surveillance, propulsion, mobility, guidance and control, navigation, energy conversion, materials and structures, and personnel support. Program elements in this category involve pre-Milestone A efforts.

Budget Activity 2, Applied Research. Applied research is systematic study to understand the means to meet a recognized and specific need. It is a systematic expansion and application of knowledge to develop useful materials, devices, and systems or methods. It may be oriented, ultimately, toward the design, development, and improvement of prototypes and new processes to meet general mission area requirements. Applied research may translate promising basic research into solutions for broadly defined military needs, short of system development. This type of effort may vary from systematic mission-directed research beyond that in Budget Activity 1 to sophisticated breadboard hardware, study, programming and planning efforts that establish the initial feasibility and practicality of proposed solutions to technological challenges. It includes studies, investigations, and non-system specific technology efforts. The dominant characteristic is that applied research is directed toward general military needs with a view toward developing and evaluating the feasibility and practicality of proposed solutions and determining their parameters. Applied Research precedes system specific technology investigations or development. Program control of the Applied Research program element is normally exercised by general level of effort. Program elements in this category involve pre-Milestone B efforts, also known as Concept and Technology Development phase tasks, such as concept exploration efforts and paper studies of alternative concepts for meeting a mission need.

Budget Activity 3, Advanced Technology Development (ATD). This budget activity includes development of subsystems and components and efforts to integrate subsystems and components into system prototypes for field experiments and/or tests in a simulated environment. Budget Activity 3 includes concept and technology demonstrations of components and subsystems or system models. The models may be form, fit, and function prototypes or scaled models that serve the same demonstration purpose. The results of this type of effort are proof of technological feasibility and assessment of subsystem and component operability and producibility rather than the development of hardware for service use. Projects in this category have a direct relevance to identified military needs. Advanced Technology Development demonstrates the general military utility or cost reduction potential of technology when applied to different types of military equipment or techniques. Program elements in this category involve pre-Milestone B efforts, such as system concept demonstration, joint and Service-specific experiments or Technology Demonstrations and generally have Technology Readiness Levels of 4, 5, or 6. (For further discussion on Technology Readiness Levels, see the Assistant Secretary of Defense for Research and Engineering’s Technology Readiness Assessment (TRA) Guidance.) Projects in this category do not necessarily lead to subsequent development or procurement phases, but should have the goal of moving out of Science and Technology (S&T) and into the acquisition process within the Future Years Defense Program (FYDP). Upon successful completion of projects that have military utility, the technology should be available for transition.

Budget Activity 4, Advanced Component Development and Prototypes (ACD&P). Efforts necessary to evaluate integrated technologies, representative modes or prototype systems in a high fidelity and realistic operating environment are funded in this budget activity. The ACD&P phase includes system specific efforts that help expedite technology transition from the laboratory to operational use. Emphasis is on proving component and subsystem maturity prior to integration in major and complex systems and may involve risk reduction initiatives. Program elements in this category involve efforts prior to Milestone B and are referred to as advanced component development activities and include technology demonstrations. Completion of Technology Readiness Levels 6 and 7 should be achieved for major programs. Program control is exercised at the program and project level. A logical progression of program phases and development and/or production funding must be evident in the FYDP.

Budget Activity 5, System Development and Demonstration (SDD). SDD programs have passed Milestone B approval and are conducting engineering and manufacturing development tasks aimed at meeting validated requirements prior to full-rate production. This budget activity is characterized by major line item projects and program control is exercised by review of individual programs and projects. Prototype performance is near or at planned operational system levels. Characteristics of this budget activity involve mature system development, integration and demonstration to support Milestone C decisions, and conducting live fire test and evaluation and initial operational test and evaluation of production representative articles. A logical progression of program phases and development and production funding must be evident in the FYDP consistent with the Department’s full funding policy.

Budget Activity 6, RDT&E Management Support. This budget activity includes management and support for research, development, test and evaluation efforts and funds to sustain and/or modernize the installations or operations required for general research, development, test and evaluation. Test ranges, military construction, maintenance support of laboratories, operation and maintenance of test aircraft and ships, and studies and analyses in support of the RDT&E program are funded in this budget activity. Costs of laboratory personnel, either in-house or contractor operated, would be assigned to appropriate projects or as a line item in the Basic Research, Applied Research, or ATD program areas, as appropriate. Military construction costs directly related to major development programs are included in this budget activity.

Budget Activity 7, Operational System Development. This budget activity includes development efforts to upgrade systems that have been fielded or have received approval for full rate production and anticipate production funding in the current or subsequent fiscal year. All items are major line item projects that appear as RDT&E Costs of Weapon System Elements in other programs. Program control is exercised by review of individual projects. Programs in this category involve systems that have received approval for Low Rate Initial Production (LRIP). A logical progression of program phases and development and production funding must be evident in the FYDP, consistent with the Department’s full funding policy.

DOD, Financial Management Regulation (DOD 7000.14-R), Volume 2B, Chapter 5. Available at http://comptroller.defense.gov/FMR/vol2b_chapters.aspx.

• Survey of Federal Funds for Research and Development
• Survey of Federal Science and Engineering Support to Universities, Colleges, and Nonprofit Institutions
• FFRDC Research and Development Survey

The Survey of Federal Funds for Research and Development is the primary source of information about federal funding for R&D in the United States. The survey is an annual census completed by the federal agencies that conduct R&D programs. For general information about this survey, please see https://www.nsf.gov/statistics/srvyfedfunds/.

R&D: Research and experimental development (R&D) activities are defined as creative and systematic work undertaken in order to increase the stock of knowledge—including knowledge of people, culture, and society—and to devise new applications using available knowledge.

For reporting R&D activities, include the following:

• Administrative expenses for R&D, such as the operating costs of research facilities and equipment and other overhead costs.

Exclude:

• Investments in physical assets such as major equipment and facilities that support R&D programs. These investments should generally be reported under R&D Plant (see Tables 1, 1B, 2, 9, and 13 in the 2020 survey questionnaire available at https://www.nsf.gov/statistics/srvyfedfunds/#qs).
• Routine product testing, quality control, collection of general-purpose statistics, routine monitoring, and evaluation of an operational program (when that program is not R&D).
• Training of scientific and technical personnel should be reported as conduct of education and training.

RDT&E (for DOD only): The Department of Defense’s Research, Development, Test, and Evaluation (RDT&E) can be both (1) activities for the development of a new system, or to expand the performance of fielded systems, and (2) an appropriation. The RDT&E budget activities are broad categories reflecting different types of RDT&E efforts, which include Basic Research (BA 1); Applied Research (BA 2); Advanced Technology Development (ATD) (BA 3); Major Systems Development, which includes Advanced Component Development and Prototypes (ACD&P) (BA 4), System Development and Demonstration (SDD) (BA 5), and RDT&E Management Support (BA 6); and Operational Systems Development (BA 7). The definitions of these categories are established by Department of Defense Instruction 5000.02, “Operation of the Defense Acquisition System.” For more information, see Budget Activities 1 through 7 in the DOD Financial Management Regulation (FMR), Volume 2B, Chapter 5, pages 5-4, 5-5, and 5-6 at http://comptroller.defense.gov/Portals/45/documents/fmr/Volume_02b.pdf.

R&D plant: R&D plant is defined as spending on both R&D facilities and major equipment as defined in Office of Management and Budget (OMB) Circular A-11 Section 84 (Schedule C) and includes physical assets, such as land, structures, equipment, and intellectual property (e.g., software or applications) that have an estimated useful life of two years or more. Reporting for R&D plant includes the purchase, construction, manufacture, rehabilitation, or major improvement of physical assets regardless of whether the assets are owned or operated by the Federal Government, States, municipalities, or private individuals. The cost of the asset includes both its purchase price and all other costs incurred to bring it to a form and location suitable for use.

For reporting construction of R&D facilities and major moveable R&D equipment, include the following:

• Construction of facilities that are necessary for the execution of an R&D program. This may include land, major fixed equipment, and supporting infrastructure such as a sewer line, or housing at a remote location. Many laboratory buildings will include a mixture of R&D facilities and office space. The fraction of the building that is considered to be R&D may be calculated based on the percentage of square footage that is used for R&D.
• Acquisition, design, or production of major moveable equipment, such as mass spectrometers, research vessels, DNA sequencers, and other moveable major instrumentation for use in R&D activities.
• Programs of $1 million or more that are devoted to the purchase or construction of R&D major equipment.

Exclude the following:

• Construction of other non-R&D facilities
• Minor equipment purchases, such as personal computers, standard microscopes, and simple spectrometers (report these costs under total R&D, not R&D Plant)

Obligations for foreign R&D plant are limited to federal funds for facilities that are located abroad and used in support of foreign R&D.

Type of R&D: Type of R&D has three components for non-DOD respondents: basic research, applied research, and development.

Basic research: Basic research is defined as experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundations of phenomena and observable facts. Basic research may include activities with broad or general applications in mind, such as the study of how plant genomes change, but should exclude research directed towards a specific application or requirement, such as the optimization of the genome of a specific crop species. Basic research represents Department of Defense Budget Activity 1.

Applied research: Applied research is defined as original investigation undertaken in order to acquire new knowledge. Applied research is, however, directed primarily towards a specific practical aim or objective. Applied research represents Department of Defense Budget Activity 2.

Experimental development: Experimental development is defined as creative and systematic work, drawing on knowledge gained from research and practical experience, which is directed at producing new products or processes or improving existing products or processes. Like research, experimental development will result in gaining additional knowledge.

For reporting experimental development activities, include the following:

• The production of materials, devices, and systems or methods, including the design, construction, and testing of experimental prototypes.
• Technology demonstrations, in cases where a system or component is being demonstrated at scale for the first time, and it is realistic to expect additional refinements to the design (feedback R&D) following the demonstration. However, not all activities that are identified as “technology demonstrations” are R&D.

For DOD Agencies, development itself is divided into three categories: advanced technology development, major systems development, and operational systems development.

• Advanced technology development: This category is used for activities in DOD’s Budget Activity 3. For more information, see Budget Activity 3 on pages 5-4 and 5-5 of the DOD Financial Management Regulation (FMR), Volume 2B, Chapter 5, at http://comptroller.defense.gov/Portals/45/documents/fmr/Volume_02b.pdf.
• Major systems development: This category is used for activities in DOD’s Budget Activities 4 through 6. For more information, see Budget Activities 4 through 6 on page 5-5 of the DOD Financial Management Regulation (FMR), Volume 2B, Chapter 5 at http://comptroller.defense.gov/Portals/45/documents/fmr/Volume_02b.pdf.
• NOTE: As of the FY 2016 data collection, major systems development no longer includes Budget Activity 7.
• Operational systems development: This category is used for activities in DOD’s Budget Activity 7. For more information, see Budget Activity 7 on page 5–6 of the DOD Financial Management Regulation (FMR), Volume 2B, Chapter 5 at http://comptroller.defense.gov/Portals/45/documents/fmr/Volume_02b.pdf.

NCSES, Survey of Federal Funds for R&D forms, available at https://www.nsf.gov/statistics/srvyfedfunds/#qs.

This NCSES survey is congressionally mandated and is the only source of comprehensive data on federal science and engineering funding to individual academic and nonprofit institutions. For general information see https://www.nsf.gov/statistics/srvyfedsupport/.

Research and development (R&D) activities are defined as creative and systematic work undertaken in order to increase the stock of knowledge—including knowledge of people, culture, and society—and to devise new applications using available knowledge.

For reporting R&D activities, include the following:

• Administrative expenses for R&D, such as the operating costs of research facilities and equipment and other overhead costs.

Exclude:

• Investments in physical assets such as major equipment and facilities that support R&D programs. These investments should generally be reported under physical assets, discussed under R&D plant.
• Routine product testing, quality control, collection of general-purpose statistics, routine monitoring, and evaluation of an operational program (when that program is not R&D). Spending of this type should generally be reported as non-investment activities.
• Training of scientific and technical personnel should be reported as conduct of education and training.

Advanced technology development (DOD only) is one of the two categories the Department of Defense uses for development (the “D” in R&D). The category advanced technology development is used for the activities in DOD’s Budget Activity 3, Advanced Technology Development (ATD). For more information, see Budget Activity 3 on pages 5-4 to 5-5 of the DOD Financial Management Regulation (FMR), Volume 2B, Chapter 5, at http://comptroller.defense.gov/portals/45/documents/fmr/current/02b/02b_05.pdf.

Major systems development (DOD only) is the second of the two categories the Department of Defense uses for development. The category major systems development is used for activities in DOD’s Budget Activities 4 through 6. For more information, see Budget Activities 4 through 6 (Advanced Component Development and Prototypes [ACD&P], System Development and Demonstration [SDD], and RDT&E Management Support) on page 5-5 of the DOD Financial Management Regulation (FMR), Volume 2B, Chapter 5 at http://comptroller.defense.gov/portals/45/documents/fmr/current/02b/02b_05.pdf.

NOTE: As of FY 2016 data collection, major systems development no longer includes Budget Activity 7.

R&D plant is defined as R&D facilities, intellectual property (e.g., software or applications); major fixed equipment, such as reactors, wind tunnels, and particle accelerators; and major moveable equipment, such as mass spectrometers, research vessels, DNA sequencers, and other major moveable instruments for use in R&D activities. Amounts include acquisition of, construction of, major repairs to, or alterations in structures, works, equipment, facilities, or land for use in R&D activities at federal or nonfederal installations. Excluded from the R&D plant category are costs of expendable or movable equipment (e.g., simple spectrometers, standard microscopes), personal computers, and office furniture and equipment. Also excluded are the costs of predesign studies (e.g., those undertaken before commitment to a specific facility).

These excluded costs are reported under “total conduct of research and development.”

If the R&D facilities are a larger facility devoted to other purposes as well, the funds should be distributed among the categories of support involved as appropriate. In general, another category that would be involved is facilities and equipment for instruction in S&E.

NCSES, Survey of Federal Science and Engineering Support to Universities, Colleges, and Nonprofit Institutions, available at https://www.nsf.gov/statistics/srvyfedsupport/#qs.

The FFRDC Research and Development Survey is the primary source of information on separately budgeted R&D expenditures at federally funded research and development centers (FFRDCs) in the United States. Conducted annually for university-administered FFRDCs since FY 1953 and all FFRDCs since FY 2001, the survey collects information on R&D expenditures by source of funds and types of research and expenses. The survey is an annual census of the full population of eligible FFRDCs. See https://www.nsf.gov/statistics/srvyffrdc/ for more on this survey https://www.nsf.gov/statistics/ffrdclist/ for the Master List of FFRDCs maintained by NCSES.

Research and Development (R&D)

R&D is creative and systematic work undertaken in order to increase the stock of knowledge— including knowledge of humankind, culture, and society—and to devise new applications of available knowledge. R&D covers three activities defined below—basic research, applied research, and experimental development.

• Basic research is experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundations of phenomena and observable facts, without any particular application or use in view.
• Applied research is original investigation undertaken in order to acquire new knowledge. It is directed primarily towards a specific, practical aim or objective.
• Experimental development is systematic work, drawing on knowledge gained from research and practical experience and producing additional knowledge, which is directed to producing new products or processes or to improving existing products or processes.

NCSES, FFRDC R&D Survey forms, available at https://www.nsf.gov/statistics/srvyffrdc/.

This NCSES survey is the only source for comprehensive, uniform statistics regarding the extent of R&D activity performed and funded by departments and agencies in each of the nation’s 50 state governments, the government of the District of Columbia, and the government of Puerto Rico. For general information, see https://www.nsf.gov/statistics/srvystaterd/.

R&D comprise creative and systematic work undertaken in order to increase the stock of knowledge—including knowledge of humankind, culture, and society—and to devise new applications of available knowledge.

• R&D is aimed at new findings (novel)
• It has not been done before
• It may produce findings that could be published in academic journals
• It includes ideas that could be patented
• R&D focuses on original concepts or ideas (creative)
• Increases our knowledge of the subject
• Helps create new products or applications
• R&D outcomes are uncertain (because it’s never been done before)
• Solutions are not always obvious or expected
• Uncertain about, cost, time, or ability to achieve results
• R&D is planned and budgeted (systematic)
• Projects processes and outcomes are documented
• Projects are planned and managed
• R&D results in solutions that others may find useful (transferable)
• Findings can be generalized to other situations and locations
• Findings are reproducible

What is NOT R&D?

• Construction and acquisition of land and facilities used primarily for R&D (reported separately in this survey)
• Fixed equipment used primarily for R&D (reported separately in this survey)
• Program planning and evaluation
• Business development services for new companies
• Commercialization (includes promoting/producing the products/services from R&D projects)
• Economic/policy/feasibility studies
• General patient services
• Information systems
• Management studies
• Marketing of products/services
• Market research or analysis
• Routine data collection/dissemination
• Routine monitoring/testing
• Strategic planning
• Technology transfer

NCSES, Survey of State Government R&D forms. Available at https://www.nsf.gov/statistics/srvystaterd/#qs.