Most companies chasing defense work are hunting for a contract with a dollar value attached, which is an understandable way to break into the Department of Defense (DoD).
There is another way into the defense innovation ecosystem, one that does not pay but may still be worthwhile depending on your strategy and objectives: the Cooperative Research and Development Agreement (CRADA).
For businesses doing interesting research and development (R&D), a CRADA can open the door to collaboration with federal laboratories, work alongside federal government scientists and use of federal government equipment and facilities. In many instances, it also lets the business own intellectual property (IP) developed while performing the CRADA.
What a CRADA Actually Is
A CRADA is a contract vehicle designed to transfer technology from federal labs, such as those run by DoD or the Department of Energy, to state and local governments, universities, nonprofits, corporations, partnerships and others in the private sector to further innovation. The rules governing CRADAs come from the Federal Technology Transfer Act of 1986, detailed in 15 U.S.C. § 3710a. The law defines what terms and conditions a CRADA must include and how IP and resources are shared, licensed or owned.
In essence, a CRADA is a partnership between a federal lab and a non-federal party to perform research or development together. The federal government provides personnel, services, facilities, equipment, licenses to IP or other resources, with or without reimbursement. The non-federal party provides funds, personnel, services, facilities, equipment, licenses to IP or other resources.
A CRADA is not a procurement contract so it is not a Federal Acquisition Regulation (FAR) or Defense Federal Acquisition Regulation Supplement (DFARS) contract, not a Small Business Innovation Research (SBIR) award, not an Other Transaction Authority and not a cooperative agreement.
Under a CRADA, neither party is buying anything from the other. By law, the federal government may not pay the non-federal party. Depending on the CRADA terms, money either flows from the non-federal party to the federal government or no money changes hands at all.
The point is to collaborate and share IP.
Why CRADAs May Be Worthwhile
Contractors still get real value from entering a CRADA with the federal government:
- Federal government labs have equipment, expertise and facilities that most companies, especially small businesses, could never build on their own. A CRADA gets a contractor into the federal lab to use these resources.
- Intellectual Property. The contractor, usually called the collaborating party, retains title to IP it developed. A CRADA permits the federal government lab to license IP developed under the CRADA to the contractor. In exchange, the federal government keeps a nonexclusive, nontransferable, irrevocable, paid-up license for government purposes. That means the government can use the IP for any government reason, anywhere in the government; it just cannot use the IP for a commercial purpose.
- If a contractor brings trade secrets or confidential commercial or financial information as part of performing a CRADA, that information cannot be disclosed. Information developed under the CRADA can be shielded even from Freedom of Information Act (FOIA) requests, for up to five years (and, for certain nuclear technology, up to 30 years). That eases a common contractor fear: that the federal government will publicly release trade secrets or other confidential information in response to a FOIA request.
Preference for Small Business
Small businesses get a preference in CRADA awards. Federal agencies must give special consideration to small businesses and consortia that include them when deciding who gets a CRADA. That is not a suggestion; it is a legal requirement.
Businesses located in the United States that agree products developed under a CRADA will be manufactured substantially in the United States also get a preference. For businesses controlled by a foreign company or foreign government, the federal agency must consider whether that foreign government lets U.S. entities into its labs on comparable terms as under U.S. CRADAs. That reciprocity question comes into play whenever there is foreign control.
If you have been following the inbound-investment, outbound-investment, and technology-transfer themes we covered in our National Defense Authorization Act deep dive for FY26, you already know why Congress cares who is on the other side of these deals.
What to Do Now
If a CRADA sounds like it might fit, here is where to start:
- Figure out the federal agency that fits with your R&D. Federal agencies, particularly the labs at DoD and Energy, publish their technology-transfer offices and priorities. Do the market research to find the agency that fits with what you are building. Here are two:
- Identify your own IP before signing a CRADA. Know what you developed, how it was funded, what you own, what you bring to the CRADA, what you want to walk out with, and have documented support for your position on the IP. Negotiate IP rights deliberately and up front, not as an afterthought.
- Build in time. The federal government gets a 30-day window to disapprove or require changes to a proposed CRADA. Federal labs are often operated by a contractor. At contractor-operated federal labs, a joint work statement must be reviewed and approved by the contractor operating the lab in addition to review of the CRADA itself, and nothing gets signed until both are approved. Build this into your timeline.
- Make it clear if you are a small business. The law requires the federal government to give preferences to small business. The federal agency knows you are a small business when you tell them.
- A CRADA does not erase other regulatory obligations. A CRADA does not erase requirements to comply with the International Traffic in Arms Regulations (ITAR), the Export Administration Regulations (EAR), cybersecurity requirements or foreign-ownership, control or influence concerns. Make sure you understand and comply with these obligations.
A CRADA will not deliver cash flow. But a well-negotiated and well-executed CRADA can give a contractor access to federal government resources where defense and national-security innovation is percolating, and it usually lets the contractor keep the value it helps create. Depending on your growth strategy, that may be well worth it. As Benjamin Franklin is often credited with saying, “an investment in knowledge pays the best interest.”
