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ARPA-H funds high-impact research projects that move fast. Our efforts are ambitious. Decades compress into years. But high-risk doesn’t mean reckless. The reason we can make tough bets and deliver on them is because of how we chart a clear course from healthcare idea to real-world capability.
Innovation also guides our stewardship of taxpayer dollars. Flexible contracting allows projects to be defined by discrete milestones that ladder to overall success. For prospective proposers who are most familiar with traditional grant funding, it is helpful to understand that ARPA-H awards operate differently.
Using Other Transactions (OTs) allows contracting that is tailored to the needs of each project. One unique aspect of OTs is the milestone-based payment structure, where negotiated milestones, deliverables, and exit criteria are used to define and assess progress throughout the term of the project.
A government approach that works for industry
We start with big ideas. A strong research proposal has a solid map for achieving success. This includes both a plan for the work to be done and a realistic budget. OTs provide flexibility with contracting processes, including a payment system that is more commercial-like than some other, more constrained, federal mechanisms.
The Government and you, the performer, negotiate the milestone plan before award, including the technical milestone definitions, required deliverables, exit criteria, and associated payment approach. The contracted work is therefore structured around observable technical events that mark progress. Successful completion of the milestone triggers the approval of the negotiated payment. With clearly documented requirements, payable milestones help ARPA-H track efforts and progress.
Milestone payments
The predetermined value of each milestone, along with the deliverable criteria required to invoice for payment, are agreed upon during pre-award negotiations. For example, it may be appropriate to have a milestone due soon after award for initial effort activities with a smaller payment amount compared to a later milestone focused on completion of an experiment or product demo. Larger payments are typically acceptable for technically complex inflection points (e.g. validated prototypes, first in vivo data, bake-offs, clinical enrollment threshold with analysis).
To invoice for a payment, performers must complete and document the milestone requirements. The Program Manager will confirm completion of milestones in writing which authorizes performers to invoice for particular milestones and amounts.
Importantly, ARPA-H does not allow for partial payments. All deliverables due for an associated milestone are submitted and must meet the exit criteria in order to warrant approval by the Program Manager before performers can invoice for payment. It is therefore critical that performers are in constant communication with the Program Manager and Agreement Officer to avoid payment delays.
Delivering on a milestone
For milestone-based payments to work well, each milestone should be defined in a way that makes completion objectively verifiable. The exit criteria should be written in a way that is explicitly clear on what success means from a payment perspective. Milestones are not tied to specific outcomes, but rather to performance. If the performer meets the general intent of the milestone yet the milestone event (e.g. a test result) was unsuccessful, in most cases you still earn the full milestone payment amount. Performers are not penalized for pursuing hard research goals.
A sound agreement defines well-crafted deliverables that demonstrate progress towards established milestones for all parties. Deliverables are not vague activities; they should be objective so the Program Manager can clearly and easily verify them for payment. These details ensure continuous forward progress, holding performers and Program Managers accountable for the use of federal research dollars.
The full scope
ARPA-H Programs may run anywhere from 12 months to five years. Typically, programs and their milestone plans are organized into discrete time frames or phases. A phase is a natural point to pause and consider whether the results from that phase are encouraging enough to continue into the next phase, or option, of the agreement. A pivot may be necessary if there are concerns at any time around progress or continued feasibility.
Performers have a greater chance to move into another phase/option period if they demonstrate resounding success in prior phases/options. However, the decision is up to the government, upon the advice of the Program Manager, to elect whether continued investment in the next phase/option period is warranted or not. Program Mangers will meet with performers frequently to ensure the work is on track.
More on contracting with ARPA-H
If you want to learn more about how ARPA-H's model works differently than traditional federal funding agencies, explore the rest of the ARPA-H 101 insight series. Prospective performers can also familiarize themselves with a sample Other Transaction Agreement on the Submission Resources page. Additional trainings and resources can be found on the ARPA-H Other Transaction Community webpage.
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