OTs for research and prototype projects typically include agreements between DOD and NASA and a single entity or consortium formed for the purpose of carrying out the OT. The various types of OTs can be funded on a cost reimbursement, fixed price, time-and-material, labor-hour or payable milestone basis.

Research. Under a research OT a single recipient or consortium performs basic, applied or advanced research. To the extent possible, at least 50 percent of the costs of performing the research must be contributed by the non-government parties. While the government has entered into a number of research OTs with individual contractors (e.g. Intel Corp., Cray Research, Boeing Corp.) most OTs have been with consortia composed of two or more legal entities such as commercial firms, government contractors, federal laboratories, small businesses and educational institutions. DARPA and NASA policy excludes research OTs for the principle purpose of acquiring goods and services for the direct benefit or use of the government but rather focuses on furthering state-of-the-art technology for future products or services or enhancing American competitiveness in the world. Use of an OT to sponsor basic research at a university or nonprofit research entity is precluded, preferring use of the standard grant. Use of OTs are considered appropriate only when at least one for-profit concern, particularly a firm that has traditionally not conducted business with the Government is involved.

Prototype. Under a Section 845 prototype OT, a project is undertaken by either a single party or consortium that is directly relevant to a weapon or weapons system acquired or developed by DOD. Such projects may also include subsystems, components, technology demonstrations, training simulations and auxiliary and support equipment. Other common prototype projects include adaptation, testing or integration of commercial items for military purposes. Unlike the research OT, the prototype OT may be used – as a precursor to production – to acquire goods and services for the direct benefit of the government and need not provide for cost sharing arrangements for purely military projects. Like the research OT, the prototype OT is exempt from the FAR and DFARS and standard socioeconomic requirements found in procurement contracts (both, however, require compliance with Title Vl of the Civil Rights Act of 1964 relating to nondiscrimination). Payments are generally provided either on a cost-reimbursement or milestone basis.

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