What Is a Cooperative Agreement? A Guide for Defense Tech Small Businesses
A cooperative agreement is funded R&D where the government works with you rather than just procuring from you. It sits between a grant and a contract — and for defense tech companies, it opens doors that SBIR alone cannot.
What's the simplest way to explain a cooperative agreement?
A cooperative agreement sits between a grant and a contract. The government isn't buying something from you — that's a contract. And it's not just handing you money to work independently — that's a grant. A cooperative agreement is a funding mechanism where the government expects to be actively involved in your work. Your program officer is at the table with you, not just reviewing deliverables from a distance.
How is it different from a contract?
The core legal distinction is purpose. The federal government uses contracts to acquire goods or services for its direct benefit. Cooperative agreements exist to transfer something of value to a recipient in order to carry out a public purpose — to stimulate or support research and development, not to procure an output.
That distinction matters practically. Cooperative agreements are not subject to the FAR. The regulatory framework is entirely different — governed by 2 CFR Part 200 (the "Uniform Guidance") rather than the Federal Acquisition Regulation. For a company that has only ever worked FAR-based SBIR contracts, this is usually the first surprise.
Cooperative agreements also share similarities with Broad Agency Announcements (BAAs), which are another common pathway for DoD R&D funding. Both offer flexibility and substantial government involvement, but they differ in mechanism and governance. Learn more about BAAs →
What does "substantial involvement" actually mean day-to-day?
It's defined in federal regulation as the distinguishing feature of a cooperative agreement versus a plain grant. In practice it means the government program office participates actively in your work — not as an auditor, but as a collaborator.
Common forms of substantial involvement include:
- Quarterly technical exchanges with the sponsoring program office
- Joint milestone reviews where the government approves or redirects work before the next phase begins
- Co-development of test plans
- Shared prototype evaluation at government facilities
- Coordinated data architecture work to ensure results are transitioning toward operational relevance
The regulation is explicit that substantial involvement must be driven by programmatic need — agencies are prohibited from using cooperative agreements simply to get tighter controls over a recipient. When the government chooses this instrument, it genuinely wants to be in the room.
Who issues cooperative agreements in the defense space?
Primarily DoD research laboratories and their associated offices:
They also appear in DoD BAAs posted on Grants.gov — which is why many SBIR-focused companies miss them entirely. Most defense tech small businesses have DSIP open in one tab and stop there. Grants.gov is a separate search surface with a different audience, and competitive density is often much lower as a result.
Are small businesses and for-profit companies eligible?
Yes. Unlike SBIR, which carries strict eligibility requirements around employee count, ownership structure, and SBC certification, cooperative agreements under DoD basic research BAAs generally do not impose the same constraints. Eligibility is defined in the individual announcement — but for-profit companies, including small businesses with no prior cooperative agreement history, are typically eligible to compete.
Key difference from SBIR
A company that has aged out of SBIR eligibility, taken on outside investment, or grown past the SBC size thresholds can still compete for a cooperative agreement. The path doesn't close.
What happens to our IP?
Ownership of intellectual property developed under a cooperative agreement generally stays with the company. The government typically receives a royalty-free license to use the technical data for government purposes for a defined period — commonly at least four years after project completion — but does not take title to the IP.
The specific terms are negotiated into the award and are generally more flexible than a FAR-based contract because you're working with a grants officer rather than a contracting officer, and the two operate under different authorities and different norms.
Practical note: Companies with strong existing IP should ensure their background IP is clearly documented before award so there's no ambiguity about what was brought in versus what was developed under the agreement.
What's the accounting requirement we need to be aware of?
This is where companies coming from the SBIR world most often get caught off guard. Cooperative agreements are cost-reimbursable, which means you need to demonstrate that your costs are allowable, allocable, and reasonable under 2 CFR Part 200. For-profit organizations follow FAR Part 31 cost principles — familiar territory for most GovCon shops — but the indirect cost treatment works differently than under a procurement contract.
You will likely need a Negotiated Indirect Cost Rate Agreement (NICRA) — a formal arrangement with a federal agency that establishes the indirect cost rate allowable for reimbursement. If your company has never held a cooperative agreement or cost-reimbursable grant, you probably don't have one yet. You'll either need to establish a NICRA with your cognizant federal agency or use a de minimis rate.
Simplified rate for smaller companies
For companies generally with fewer than $10 million in revenue or fewer than 25 employees, the simplified single rate method is typically available, which groups all allowable indirect costs including fringe into a single pool. It's an administrative lift the first time, but straightforward once it's in place.
Can we subcontract under a cooperative agreement?
Yes, with some nuance. The agreement will specify any restrictions on subcontracting, and you must ensure that any subrecipients also comply with 2 CFR Part 200 requirements. The government generally expects the primary awardee to perform the core technical work, consistent with the "substantial involvement" framing — you can't wholesale pass the work to a subcontractor any more than you could under an SBIR Phase I.
Why would a cooperative agreement be more valuable than a Phase I SBIR in the same technology area?
Three reasons worth understanding:
- 1The relationship is deeperYou're not proposing into a solicitation and waiting for a score — you're working directly with the people who will eventually influence or make follow-on procurement decisions. Customer discovery is embedded in the funding itself.
- 2The competition pool is smallerMost defense tech companies are not monitoring Grants.gov. Cooperative agreement BAAs in areas like hypersonics, directed energy, electronic warfare, and AI-driven naval systems consistently receive fewer proposals than comparable SBIR topics — in some cases dramatically fewer.
- 3There's no SBIR eligibility ceilingA company that has aged out of SBIR eligibility, taken on outside investment, or grown past the SBC size thresholds can still compete for a cooperative agreement. The path doesn't close.
Does winning a cooperative agreement help with future contracts?
Consistently, yes — though it's not guaranteed by the instrument itself. The mechanism creates what a procurement contract typically cannot: an extended working relationship with a program office before any formal acquisition begins. The government gets to evaluate your team, your technical approach, and your ability to execute. You get access to the operational problem in a way no proposal document can provide.
Many programs use cooperative agreements as deliberate on-ramps — funding early-stage collaborative research, then following with sole-source or limited-competition contracts once a vendor has demonstrated unique capability. It won't always materialize, but the cooperative agreement establishes the kind of past performance and technical rapport that procurement vehicles then reward.
Where do I find cooperative agreement opportunities in defense?
Grants.gov is the primary federal registry. Search under agency code DOD or filter by individual sub-agencies (ONR, ARO, AFOSR, specific NSWCs). CFDA 12.630 — "Basic, Applied, and Advanced Research in Science and Engineering" — is the program code most commonly associated with DoD basic research cooperative agreements.
SAM.gov also carries some, typically posted as BAAs. Most are not indexed by the tools that SBIR-focused companies use daily, which is part of why competitive density tends to be lower.
For more on BAAs specifically, see our Broad Agency Announcement (BAA) guide.
RallyProp monitors both Grants.gov and SAM.gov so cooperative agreement BAAs surface alongside your SBIR and OTA pipeline — one search surface instead of three.
Sources: Grants.gov · SAM.gov
One-paragraph summary for a team briefing
A cooperative agreement is funded R&D where the government works with you rather than just from you. It's not FAR-governed, so standard procurement contract rules don't apply. IP ownership stays with the company. Accounting requires a NICRA for indirect cost reimbursement — manageable, but requires setup if you haven't held one before. Eligibility is broader than SBIR. Competitive density is typically lower because the audience finding these opportunities is smaller. And the working relationship with the government lab or program office that a cooperative agreement creates is often the most direct path to the follow-on procurement contract that every defense tech small business is ultimately trying to reach.
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