North Dakota SBIR/STTR RESOURCE Toolkit
A Guide to SBIR/STTR Federal Funding
North Dakota .
SBIR/STTR in North Dakota Small businesses in North Dakota have received, since 1983, 101 SBIR/STTR awards. These awards total approximately $20.6 million and have been received by 30 firms. According to research conducted by InKnowvation. com, the typical North Dakota SBIR/STTR award recipient is employed by a small business with between 1–4 employees. Looking at North Dakota’s small business R&D
Program Overview The Small Business Innovation Research (SBIR) program strives to stimulate technological innovation, increase and strengthen the role of small business in meeting the R&D needs of the federal government and increase commercial application of government sponsored R&D efforts. The Small Business Technology Transfer Research (STTR) program seeks to also stimulate and foster technological innovation through cooperative research and development activities between small businesses and research institutions.
experience shows a higher success rate from 1983–2004 with NIH ($106 million), DOD ($46 million), NASA ($28 million), DOE ($21 million) and NSF ($12 million). Among the smaller agencies, North Dakota small businesses have
Every federal agency with R&D exceeding $100 million or with budgets for outside/extramural research, must, by law, establish a SBIR/STTR program. Approximately 2.5 percent of each agencies extramural R&D budget must be set aside for the SBIR/ STTR program.
found success with the USDA and the EPA. The North Dakota Opportunity North Dakota averages 3 SBIR awards and 0
Topics range across a broad spectrum of areas, institutes and needs. It is best to understand the mission and needs of the agency, if there is interest in competing for an award.
STTR awards per year. North Dakota is more
Federal agencies participating in the SBIR & STTR (denoted by
successful at attracting Phase I awards. The
an *) programs are either granting or contracting agencies. Figures in parentheses illustrate FY04 funding levels ~$2B:
proportion of Phase I award companies that
Department of Agriculture ($18M) http://www.reeusda.gov/sbir
receive a Phase II is relatively small. The state has not had as much success in the STTR program. The North Dakota SBIR/STTR Program The Center for Innovation (CFI) in Grand
Department of Commerce ($7M) (NOAA) http://www.nmfs.noaa.gov/trade/newgrant.htm (NIST) http://www.nist.gov/sbir Department of Defense* ($1.1B) http://www.acq.osd.mil/sadbu/sbir/
Forks, ND will direct the state’s efforts to
Air Force http://www.afrl.af.mil/sbir/index.htm
capitalize on the SBIR/STTR programs.
Army http://www.aro.army.mil/arowash/rt
Working with small business service providers
BMDO http://www.winbmdo.com/
around the state, the CFI will help qualified
DARPA http://www.darpa.mil/sbir
small businesses compete for federal R&D
Navy http://www.onr.navy.mil/sbir
dollars. Services include assistance in determining if SBIR/ STTR programs are right for your business, tips for getting started, an online SBIR/STTR Resource Toolkit, training opportunities, conferences and events and helping your business network.
SOAC http://soal.socom.mil/index.cfm?page=sadbu&sb=sbir
Department of Education ($9M) http://www.ed.gov/offices/OERI/SBIR/ Department of Energy* ($114M) http://sbir.er.doe.gov/sbir Department of Health and Human Services* ($641M) http://www.nih.gov/grants/funding/sbir.htm 2
$1,000,000, with the intent of developing a Department of Homeland Security ($33M) http://www.hsarpasbir.com/
prototype. In Phase III, outside funds are
Department of Transportation ($4M) http://www.volpe.dot.gov/sbir/
development of the prototype, with the intent of
Environmental Protective Agency ($8M) http://es.epa.gov/ncer/sbir/
to the military or the private sector market.
National Aeronautics & Space Administration* ($121 M) http://sbir.nasa.gov/SBIR/front1.html
SBIR Eligibility
obtained from non-SBIR sources for further creating a commercially viable product to sell
• Organized for profit US business • At least 51 percent owned by individuals; independently operated
National Science Foundation* ($105M) http://www.eng.nsf.gov/sbir/
• Located in the US
Contracting agencies: • • • • • •
Agency establishes plans, protocols, requirements Highly focused/narrow topics Procurement mechanism for DOD & NASA More fiscal requirements Typically Internal Review Agencies: DOD, NASA, EPA, DOC, DOT, ED, HHS/NIH
• 500 or fewer employees (including affiliates) • Principal investigator (PI) primarily employed with small business during project • Allows research institution partners (outsource 33% in Phase I, 50% in Phase II) STTR Awards are given in two phases.
Granting Agencies: • • • • • •
Phase I award amounts can be up to $100,000 for approximately 1 year. The duration for Phase II awards is 2 years and can be up to $500,000.
Investigator initiates research approach Topics are not as specific Assistance mechanism Flexible Typically External Review Agencies: HHS/NIH, ED, DOE, USDA, NSF
STTR Eligibility • Must meet the same criteria as SBIR Program (listed above) • Small business applicant • Cooperative R&D agreement required • Minimum of 40 percent by small business
SBIR Awards are given in three phases. Phase I awards, essentially support 6 months of work to
•
determine the feasibility (technically, scientifically,
Minimum of 30 percent by US research institutions (college, university, federal R&D
commercially) of ideas. Awards tend to range between $60,000 and $150,000. Successful completion of a Phase I awards, provides an opportunity for the company to compete for a Phase II award. In some cases, Phase II is an invitation only process and must be based on the
center, non-profit research organization)
• Intellectual property agreement—patent rights go to small firm; government has limited rights For questions on eligibility, ownership & control contact an SBA size specialist: http://www.sba.gov/size/indexcontacts.html
funded Phase I project. Awards in Phase II support work over a 24–month period and provide $500,000 to
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North Dakota SBIR/STTR Resource Toolkit There are a variety of organizations that provide information, resources and reference material via the Internet. These pages include information on conferences and training opportunities; links to federal agencies;
• ND SBIR/STTR Coordinator www.innovators.net • ND Dept. of Commerce www.business.nd.gov/ • ND Trade Office www.ndto.com • Northwest Food Processors Association http://www.nwfpa.org/nwfpa
resources; news relating to SBIR/STTR
• ND Small Business Development Centers (SBDC) http://www.ndsbdc.org/
programs; search services of previous
• University of North Dakota
solicitation topics, award winners, federal lab R&D resources; venture capital organizations; proposal preparation and evaluation; budgeting
(UND) http://www.und.edu/
• North Dakota State University (NDSU) http://www.ndsu.edu/
and commercialization. Oregon SBIR/STTR program does not endorse or favor one program over another. It is up to the individual researcher, entrepreneur or business owner to conduct due diligence and determine the right fit for their needs. While many websites provide information free of charge, some provide fee-based services.
• Zyn Systems http://www.zyn.com/ • SBA Proposal Information & Tips http://www.sba.gov/library/pubs/bookall.html
• SBIR/STTR Gateway http://www.zyn.com/sbir/ • SBIR Help Desk http://www.sbirhelpdesk.com/ • SBIR Conference Information http://www.sbirworld.com/index.asp
• Pacific Northwest National Lab SBIR Alert Service http://www.pnl.gov/edo/sbir/ • TechLink http://www.techlinkcenter.org/ • PBC, Inc. http://www.pbcinc.com/pbc/index.asp • Greenwood Consulting http://gjgreenwood.home.att.net/ • The SBIR Resource Center http://www.win-sbir.com/
Additional resources regarding federal R&D opportunities, trends, past solicitations and information can be found at the following sites: • NASA STI Bulletin http://www.sti.nasa.gov/ • DOD SBIR/STTR Interactive Topic Information System (SITIS) http://www.dodsbir.net/sitis • DOD Defense Technical Information Center http://www.dtic.mil/dtic.sbir • Air Force Research Lab Tech Connect http://www.afrl.af.mil/techconn/index.html • Air Force Research Lab http://www.afrl.af.mil/index2.html
• US Naval Research Lab http://www.nrl.navy.mil/ • Wright Research Site http://www.wrs.afrl.af.mil/ • DOE Energy Efficiency & Renewable Energy Inventions & Innovation Program http://www.eere.energy.gov/inventions
• Federal Lab Consortium http://www.federallabs.org/ Agency solicitations contain: • A description of the program • Deadline • Information on funding levels, instructions for applying, method of selection & review criteria • Research topics and scope of work
• SBIR Coach http://www.sbircoach.com/ Organizations in ND with a staff member trained in SBIR/STTR: • Government Contract Assistance Program (GCAP) http://www.gcap.org/ • Small Business Administration (SBA) http://www.sba.gov/or/index.html
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Agency reviews can be internal (inside agency) or external (university personnel, experts in field). Proposal reviews look at:
• Merit—technical and/or scientific • Importance of the problem—response to agency need, relevance to agency mission • Innovation—technical and/or scientific • Potential opportunities & commercialization plan • Credibility of research team • Budget—appropriateness & justification • Completeness of proposal In preparing a proposal make sure you do the homework! You should: 1. Conduct a literature review—understand the state of the art, identify applications and markets, recognize alternative methods to solve the issue, see what has been previously funded, become familiar with agency missions. 2. Network—talk to program managers and experts in field. 3. Ask for feedback—from others before submission and from reviewers after submission. An SBIR proposal must not exceed 25 pages. Recommended sections and suggested page lengths include:
• • • • • • • • • • •
Cover sheet (1 page) Abstract or project summary (1 page) Significance of the problem (3 page) Research Objective (1 page) Research/Work Plan (6 pages) Background and related research (2 page) Key personnel (5 pages) Future R&D (1 page) Commercial Applications (2 page) References (1 page) Budget (1 page)
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Basic Proposal Writing Information In any SBIR solicitation there are a number of key points you should look for immediately. The topics are not necessarily found in the same order as presented
4. Would the use of a consultant enhance your company’s capabilities or the PI’s capabilities? 5. What capabilities or resources are you missing that would make you more competitive in this arena?
below, however, the next five points are provided in order of importance to you, a prospective writer. 1. Deadline: All SBIR solicitations have specified due dates. The length of your lead time will probably be important in your decision on whether to respond.
2. Funding Level: All SBIR solicitations contain explicit funding levels expressed in total dollars
Decision to Write The only resources you need to write a winning proposal are time, talent, and money. Talent in this case is both technical (expertise) and writing talent. If you have a balance between these critical factors and sufficient satisfactory answers to the five questions above, then the benefits probably outweigh the investment. Consequently, it is time to prepare to write.
available and number of awards to be made. The maximum amount per award may be provided as an average dollar amount and/or in anticipated level of effort (1 man-year of effort, etc.). Use this
funding information to determine if responding to this specific solicitation is worth the effort. 3. Application Instructions: Prospective proposal writers need to understand and be able to comply with particular requirements spelled out in the solicitation to which they are responding. Agencies’ general content and format requirements can be very different and distinct. 4. Scope of Work: This is sometimes provided in an explicit statement of work and in great detail. However, more often, the actual scope of work will be determined by the proposer. 5. Additional Information: Most announcements will contain an address and/or telephone number where you can obtain additional materials and application packages, if required.
The development of a proposal needs to be systematic and orderly. Have a plan to attack the process, don’t wait for the process to attack you. Proposal writing need not be an ordeal. The key to success is to adhere to the following: 1. Conduct an honest assessment of your company’s and individuals’ potential specific to the selected topic; and 2. Prepare adequately before starting to write; and 3. Be open and seek creative and constructive review and guidance as you write. Addressing Primary Issues Three questions are basic to the majority of research proposals:
1. What do you want to accomplish? 2. Why is it important? 3. What approach will you take? By this time in the process you should have a good idea about what you want to accomplish and what approach you will take. You should have a basic understanding of what you are missing and where to obtain what you need. In other words, you may be
Initial Considerations
ready to start writing a proposal based on a well-conceived
After reviewing the SBIR solicitation, the following considerations must be addressed. 1. Is the selected topic truly a match with your company’s expertise? 2. Does your organization’s work in this field enhance the opportunity for success of the proposed proposal? 3. What is the Principal Investigator’s (PI’s) personal track record in this field? Is he/she a true match to the proposed topic work?
research plan. The preceding effort will save you time and money throughout the proposal process. It is essential that you allow sufficient time to prepare any proposal. Plan to write several drafts; allow time for the 4 r’s (review, rethink, revise, redo).
Writing the Proposal As you initiate the writing process, remember that no amount of skill in writing can disguise research that is poorly designed. No matter how well organized, a proposal that reflects poor methods is most often rejected.
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As you write, review, and edit pay close attention to the following:
1. Orderly presentation of ideas: Thought units, whether single words, a sentence or a paragraph, or longer sequences, must be orderly.
hours are multiplied by the relevant hourly rate and the results are totaled. Overhead Rate The overhead rate is the means by which overhead
2. Smoothness of expression: Scientific prose serves a different
costs are spread among all projects. It is a percentage
pur-pose than creative writing. The aim of your SBIR proposal
which is typically calculated by dividing the total of
should be one of clear and logical scientific communication.
overhead costs (the ―pool‖) by the dollar amount of direct
3. Economy of expression: Since you have a 25-page limit on SBIR
labor (the ―base‖). Note that the pool and base are period
proposals, avoid redundancy, wordiness, jargon, and evasiveness.
expenses, which means they are calculated for a period
4. Precision and clarity in word choice: Make certain that every word means exactly what you intend it to mean.
of time (usually a year) and not for a specific project. Thus, the base consists of all direct labor expected to be used on all projects during the year.
Preparing an SBIR Cost Proposal Indirect Costs
The Basics
Any costs which are not identifiable with a specific
It’s not uncommon for SBIR proposal writers to feel more comfortable with the technical part of the proposal than with cost estimation. However, the cost proposal or budget is an integral part of the total proposal. First, it is important to understand the terms and process of preparing a cost proposal in order to
project are called ―indirect.‖ Examples are rent, utilities, office supplies, salaries/wages of personnel not working on direct activities, fringe benefits. Some expenses such as tools and travel may be direct or indirect depending on the purpose. In larger companies, indirect costs are
comply with government requirements. Just as significant, an
broken down between overhead and G&A (general and
inadequate budget may hamper a firm’s ability to perform the work proposed. Some companies omit indirect costs or fee from a proposal due to a lack of understanding of how these items are calculated. However, rent, utilities, fringe benefits and supplies are real costs and must be covered somehow.
The following is an introduction to the basic elements, definitions and rules related to SBIR cost proposals. Although not comprehensive, the information should be helpful to companies in areas where more clarification may be necessary when preparing the budget section of a proposal.
administrative) costs. In smaller companies, all indirect costs are added together to form the overhead pool.
Other Direct Costs All direct costs not included in direct materials or direct labor are included in this category. Direct travel, consultants and special equipment or testing are typically classified as other direct costs. General and Administrative Rate The G&A rate, as it is commonly known, is the means
Basic Elements of a Cost Proposal
by
which
general
management
and
administrative costs are spread among the projects.
Although each agency has specific guidelines and format for
For companies with less than about 50 employees, it
cost proposals or budgets, the basic elements are as follows:
is usually not necessary to calculate a G&A rate. One indirect rate (the overhead rate) is sufficient.
Direct Materials Costs which are identified specifically with a particular project or
The G&A rate is calculated by dividing the total amount of G&A expenses (including management/ planning labor costs, accounting and legal expenses and marketing expenses) by the sum of direct labor costs and overhead costs.
contract are called ―direct costs.‖ Thus, direct materials are those goods or services which are purchased for and used directly on a specific project. Subcontract costs may be included in this section.
Direct Labor This is the most important element and frequently the largest dollar amount in a Phase I proposal. Careful estimates must be made of the number of hours the principal investigator, key personnel and other employees will work on the contract or grant if awarded. These 7
Profit or Fee A fee or profit, usually calculated as a percentage of
preparing a cost proposal which includes travel. Actual costs which exceed these limits may be allowed on a case by case basis with sufficient written justification.
total costs, is available to small businesses under the SBIR program. The general requirement is the fee
Developing an Adequate Accounting System
must be reasonable, although some agencies give
From the government’s point of view, the main criterion for ―adequacy‖
more specific guidance. For example, the amount of
is: can the business properly segregate and accumulate costs? In
fee approved for awards under the current Public
other words, does the firm’s accounting system distinguish between
Health Service omnibus solicitation may not exceed 7
direct and indirect costs and between allowable and unallowable
percent of total costs. For all agencies, the sum of the
costs, and is there a system for tracking and accumulating costs by
proposed fee plus costs may not exceed the
contract (or grant)? The minimum components are a chart of
maximum award amount specified in the solicitation.
accounts, a timecard system with specific codes for projects and indirect labor, a chart of accounts and the appropriate journals and
General Rules and Guidelines Allowable and Unallowable Costs
project cost summaries. A well-constructed, detailed annual budget is an excellent starting point.
In general, costs are allowed if they are reasonable, can
Types of Contracts
be allocated to one or more projects or contracts (either
Some agencies, such as the Public Health Service of HHS and the
directly or indirectly) and if they are not classified as
National Science Foundation, make awards in the form of grants.
unallowable in the Federal Acquisition Regulations
The Department of Defense and other agencies award contracts.
(FARs). If costs do not meet these criteria, they cannot
There are two main forms of contracts used in the SBIR Program:
be included in cost proposals (either as direct costs or in
Firm Fixed Price (FFP) and Cost Plus Fixed Fee (CPFF). The great
the calculation of indirect rates) and they will not be paid
majority of Phase I contracts are FFP; Phase II contracts are either
by the government. Some of the most common types of
FFP or cost-reimbursement contracts such as CPFF.
unallowable costs are:
• • • • • • • • • • • • •
interest and other financial costs bad debts most contributions/donations certain entertainment costs fines and penalties organizational expenses unreasonable compensation federal income taxes sales promotion trade shows, conventions most advertising lobbying costs certain legal costs
• cost of prosecuting a patent (unless required by contract and government will retain patent).
The main characteristics of a Firm Fixed Price contract are: • The Government and contractor agree to a fixed price which cannot be adjusted due to cost experience. The contractor bears all the cost risk. • The contractor is required to deliver the end product(s) described in the contract (called the "deliverables"), even if it costs more than the amount of the contract to do so. Therefore, the deliverables must be specified carefully. • There is usually more oversight by audit agencies (such as the Defense Contract Audit Agency or DCAA) prior to award with FFP contracts. • Contract financing is generally obtained by submitting Progress Payment requests. • FFP contracts are relatively simple to administer. The main characteristics of a Cost Plus Fixed Fee contract are: • The Government reimburses the contractor for allowable incurred
Travel The general rule for travel is that allowable costs are limited to the amounts set by the government for travel by government employees. Travel costs for lodging, meals and incidentals may generally not exceed the per diem rates published by the government in the Federal
costs plus a fee. Thus, the Government bears the cost risk.
• The contractor is required to make satisfactory progress and usually must deliver the end product described in the contract to earn the fee. Legally, the contractor can "put his pencil down" when all costs agreed to in the contract have been incurred and reimbursed.
Acquisition Regulations. The per diem rates are set by locality, so it is necessary to consult these rates when 8
• Although a pre-award survey may be performed, there is generally more oversight at the end of a CPFF contract. An "incurred cost" audit is required before the remaining costs and fee are paid.
• The contractor is paid when an approved invoice (Public Voucher) is submitted. • CPFF contracts are more complex to administer and require compliance with more cost regulations. Additional Information Books Information for Contractors, by DoD Defense Contract Audit Agency, DCAAP 7641.90, July 1998. 703–767–3274. Federal Acquisition Regulations, Superintendent of Documents, U.S. Government Printing Office, Washington DC, 20402. Accounting Guide for Government Contracts, Commerce Clearing House, 800–835–5224. Federal Acquisition Regulations (FARs) and other reference manuals also are available from CCH.
A SBIR Program Development Blueprint, by James R. Atchison, Kettering, OH, 513–294–7394
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