At the NIH there are rules governing your allowable indirect cost rate. First time Phase I applicants are allowed to request an indirect cost rate of up to 40% of all direct costs. If you request an indirect cost rate of 25% or less, however, the rate will be granted without further justification. The NIH does not negotiate indirect costs on Phase I proposals. So if you do not have a previously negotiated rate with the federal government you are limited to 40% of all direct costs.
I always recommend first time Phase I applicants request between 25 and 30% in indirect costs. This will cover your most basic indirect costs such as rent and benefits.
SBIR and STTR Phase II NIH applicants are not limited in the amount of indirect costs they can request. Unless you want to provide extensive justification, however, you are only allowed to request an indirect cost rate of 25% or less. Many first time Phase II applicants have been caught up in months of indirect cost rate negotiations. These occur after the notice of grant award which could be 9 or 10 months after submission. In short you could be waiting for over a year to receive funds.
Well the NIH now allows first time applicants to request an indirect cost rate of up to 40% of all direct costs without further justification. This is good news for newbies. Many companies, however, have indirect cost rates much higher than 40% and may still need to request a higher rate. If you do not have a negotiated F&A rate with the federal government just be forewarned that the negotiation process can be lengthy.
To find out how to estimate your indirect cost rate contact SBIR GA!
OK, let’s be honest, the reason you’re taking the time to write an SBIR/STTR proposal is because you’re interested in receiving money. Well, an agency isn’t just going to give you the money. You must first prepare a budget (also known as a cost proposal) which will tell the agency how you plan to use their money.
Your budget will have Direct Costs –costs that you can say are specific to this SBIR/STTR (the actual hours worked on this project, the materials acquired, consumed, or expended specifically for the purpose of this awards, etc.), and Indirect Costs—costs your company will have, whether you receive the SBIR/STTR award or not (rent, utilities, office supplies, etc.). This budget is the budget for THIS SBIR/STTR project—not the budget for your entire company. You will be able to claim only a portion of the company’s Indirect Costs in your SBIR/STTR budget.
Keep in mind, just because it is an expense (whether Direct or Indirect), it doesn’t mean the government will reimburse you for it. You must take into account that there are “allowable” and “unallowable” costs. The FAR (Federal Acquisition Regulation) is the standard set of rules that all federal agencies must abide by when determining expenses, so you need to learn these rules: FAR Subchapter E (General Contracting Requirements), Part 31 (Contract Cost Principles and Procedures).
Examples of unallowable costs:
· Interest and other financial costs
· Fines and penalties
· Lobbying costs
· Most advertising
· Federal income taxes
NOTE: Even within the allowable limits outlined in the FAR, some agencies will have further restrictions for SBIR/STTR, so be sure to read your solicitation and any cost proposal preparation materials provided by the agency.
For the third year, the SBIR Assistance Program for the State of Georgia has exceeded its ever increasing goal in SBIR and STTR awards. For FY08 (ended June 30th), companies who have received help from the program in submitting SBIR and STTR proposals have been selected for over $9 million of this federal R&D funding. Data has revealed that companies that receive guidance from the SBIR Assistance Program are two and a half times more likely to be selected for funding than the average applicant.
So what’s on tap for FY09? The goal is to assist companies that are selected for at least $12 million in awards and to see products reaching the marketplace from assisted companies. Will your company be one of these?