Research, Development, Test and Evaluation (RDT&E)

Research, Development, Test and Evaluation (RDT&E) is the DoD appropriation category dedicated to moving defense technologies from scientific concept through system maturation and into operational testing. Unlike Operations and Maintenance (O&M) dollars that sustain existing capabilities or procurement dollars that buy fielded systems in quantity, RDT&E funds the discovery and validation work that precedes full-rate production. For technology companies, research institutions, and defense primes, RDT&E is the gateway into DoD's acquisition pipeline.

What is RDT&E?

RDT&E is a multi-year appropriation, which distinguishes it from annual O&M funding. Congress typically authorizes RDT&E dollars to remain available for obligation over two fiscal years, giving program offices more flexibility to manage the inherently unpredictable timelines of research and testing work.

DoD structures RDT&E spending across seven budget activity categories, ranging from Budget Activity 1 (basic research at universities and laboratories) through Budget Activity 7 (operational systems development for production-representative systems). The categorization matters for contractors because it determines which type of entity typically competes for the work and at what technology readiness level. Budget Activity 1 and 2 efforts commonly involve university and nonprofit research organizations through grants and cooperative agreements, while Budget Activities 4 through 6 draw primarily on defense contractors working under FAR-based contracts.

The principal solicitation mechanisms for RDT&E-funded work include Broad Agency Announcements (BAAs) governed by FAR 35.016, Small Business Innovation Research (SBIR) programs under 15 U.S.C. 638, Small Business Technology Transfer (STTR) awards, and Other Transaction Authority (OTA) agreements under 10 U.S.C. 4022. RDT&E dollars also fund the development portions of Major Defense Acquisition Programs (MDAPs) tracked under DODI 5000.02.

Why it matters for contractors

RDT&E funding creates the earliest entry points into DoD programs. Contractors who win an RDT&E-stage effort - a technology demonstration, a prototype contract, or an SBIR Phase II - establish past performance and technical credibility that positions them favorably when the program transitions to procurement. This sequencing makes RDT&E pursuit a long-game business development strategy, not just a near-term revenue play.

From a cost accounting perspective, RDT&E contract work is typically cost-reimbursable, meaning contractors must maintain compliant accounting systems under CAS and FAR Part 31. Winning RDT&E work often requires Earned Value Management System (EVMS) compliance for efforts above DFARS thresholds. Contractors should also track the annual President's Budget release (typically February), which includes RDT&E exhibit R-2 forms that detail each program's funding profile, providing advance notice of planned solicitations.

The SBIR program carves out a specific portion of each agency's extramural RDT&E budget for small businesses, currently set at 3.2 percent of the agency's extramural R&D budget under the SBIR/STTR Reauthorization Act.

Example

A defense electronics firm responds to an Air Force BAA for advanced radar signal processing research. The award is a cost-plus-fixed-fee contract funded from Budget Activity 3 (advanced technology development) RDT&E dollars. The two-year availability of RDT&E funds gives the program office flexibility to execute the contract even if the award slips from one fiscal year into the next. If the prototype performs well, the program may transition into a Budget Activity 5 system development contract funded under a separate procurement or continued RDT&E line.