In cooperation with the program official, the contracting officer must assess the reasonableness of the total estimated budget to perform the RD&D that will be supported by the agreement.

(a) Labor. Much of the budget likely will involve direct labor and associated indirect costs, which may be represented together as a “loaded” labor rate. The program official is an essential advisor on reasonableness of the overall level of effort and its composition by labor category. The contracting officer also may rely on experience with other awards as the basis for determining reasonableness.

(b) Real property and equipment. In almost all cases, the project costs should normally include only depreciation or use charges for real property and equipment of for-profit participants, in accordance with §603.680. Remember that the budget for an expenditure-based TIA may not include depreciation of a participant's property as a direct cost of the project if that participant's practice is to charge the depreciation of that type of property as an indirect cost, as many organizations do.