FAR 31.205-48—Research and development costs.
Plain-English Summary
FAR 31.205-48 addresses how to treat research and development (R&D) costs when they are sponsored by a grant or required under a contract. It ties the meaning of R&D to the technical effort described in FAR 31.205-18, but limits this subsection to work that is either funded by a grant or performed because a contract requires it. The key practical issue is cost recovery: if the contractor spends more on the R&D effort than the price of the contract or the amount of the grant, the excess cannot be charged to any other Government contract. In other words, the Government will not pay twice for the same R&D effort, and a contractor cannot shift overruns from one sponsored R&D effort to another Government contract. This section matters because it protects the Government from bearing costs beyond the agreed sponsorship amount and requires contractors to track R&D funding and overruns carefully. It is especially important for contractors performing sponsored research, development projects, or other technical efforts where funding limits and cost allowability must be monitored closely.
Key Rules
R&D uses 31.205-18 meaning
For this subsection, research and development means the type of technical effort described in FAR 31.205-18. The section does not create a new definition; it borrows the existing one and applies it only in the sponsored or contract-required context.
Sponsored by grant or contract
The rule applies when the R&D effort is sponsored by a grant or required in the performance of a contract. That means the cost treatment depends on the funding vehicle and whether the work is specifically obligated under a contract.
Overrun is unallowable elsewhere
If the contractor incurs R&D costs above the price of the contract or the amount of the grant, the excess is unallowable under any other Government contract. The contractor cannot reallocate the overage to another Government-funded effort.
No cross-subsidizing Government work
The section prevents shifting R&D overruns from one sponsored project to another. Each grant or contract stands on its own funding limit for allowability purposes.
Cost ceiling follows sponsorship amount
The allowable amount of R&D cost is effectively capped by the contract price or grant amount for that sponsored effort. Costs beyond that cap are not recoverable from the Government through other contracts.
Responsibilities
Contractor
Track R&D costs against the specific contract price or grant amount, ensure costs stay within the sponsored funding limit, and prevent any excess from being billed or allocated to other Government contracts.
Contracting Officer
Review proposed and incurred costs for allowability, ensure the contract terms and funding structure clearly identify the sponsored R&D effort, and reject attempts to charge overruns from one sponsored project to another Government contract.
Granting Agency / Sponsoring Activity
Establish the grant amount or contract price that defines the funding limit for the sponsored R&D effort and monitor whether the effort remains within that limit.
Cost/Finance Personnel
Apply accounting controls that segregate sponsored R&D costs, identify overruns promptly, and ensure unallowable excess costs are excluded from Government billings and indirect cost pools where applicable.
Practical Implications
Contractors need project-level cost tracking for sponsored R&D so they can spot overruns before they become unallowable charges.
If a research project runs over budget, the excess generally becomes the contractor’s responsibility rather than something that can be moved to another Government contract.
This rule is a common audit issue because improper cost transfers can look like attempts to shift unallowable overages to other contracts.
Contract language and accounting records should clearly show whether the effort is grant-sponsored or contract-required, since that affects how the rule applies.
Even if the work is technically related to other Government projects, the excess cost from one sponsored R&D effort cannot be recovered from those other projects.
Official Regulatory Text
Research and development , as used in this subsection, means the type of technical effort described in 31.205-18 but sponsored by a grant or required in the performance of a contract. When costs are incurred in excess of either the price of a contract or amount of a grant for research and development effort, the excess is unallowable under any other Government contract.