Companies, government agencies and not-for-profit organizations wish to conduct specific research activities that will generate useful and valuable intellectual property will fund research using a research contract.
In some cases, a bidding process may be involved, but it is always the sponsor that has the lead in defining the scope of work. The project will usually involve very specific deliverables and milestones (not just reports) under a tight timeline. As the project results may be more strategic and competitive in nature, as compared to other research partnerships, the sponsor will want very tight control over publications and exclusive control over the arising intellectual property. In fact, it is not unusual for these contracts to automatically confer rights (possibly even ownership) of the arising intellectual property to the sponsor.
These contracts can be good sources of research funding. They are priced to include the full cost of the research. (For more information see Budgeting a contract.)
The research team should preferentially include more senior research personnel, like post-doctoral fellows, research assistants, and professionals. Given the nature of these contracts, it is not always recommended to include Masters and/or Ph.D. candidates, certainly not unless the work is distinct and separate from the students’ thesis.