Before using a grant or cooperative agreement, the grants officer shall make a positive judgment that an assistance instrument, rather than a procurement contract, is the appropriate instrument, based on the following:

1. (a) Purpose.

   1. (1) The grants officer must judge that the principal purpose of the activity to be carried out under the instrument is to stimulate or support a public purpose (i.e., to provide assistance), rather than acquisition (i.e., to acquire goods and services for the direct benefit of the United States Government). If the principal purpose is acquisition, then the grants officer shall judge that a procurement contract is the appropriate instrument, in accordance with 31 U.S.C. chapter 63 (“Using Procurement Contracts and Grant and Cooperative Agreements”). Assistance instruments shall not be used in such situations, except:

      1. (i) When a statute specifically provides otherwise; or
      2. (ii) When an exemption is granted, in accordance with § 22.220.
   2. (2) For research and development, the appropriate use of grants and cooperative agreements therefore is almost exclusively limited to the performance of selected basic, applied, and advanced research projects. Development projects nearly always shall be performed by contract or other acquisition transaction because their principal purpose is the acquisition of specific deliverable items (e.g., prototypes or other hardware) for the benefit of the Department of Defense.

2. (b) Fee or profit. Payment of fee or profit is consistent with an activity whose principal purpose is the acquisition of goods and services for the direct benefit or use of the United States Government, rather than an activity whose principal purpose is assistance. Therefore, the grants officer shall use a procurement contract, rather than an assistance instrument, in all cases where:

   1. (1) Fee or profit is to be paid to the recipient of the instrument; or
   2. (2) The instrument is to be used to carry out a program where fee or profit is necessary to achieving program objectives.