January 22, 2020
What budget-related documents are required for Phase I and Phase II proposals?
Whether you are submitting a Phase I or Phase II SBIR/STTR proposal, you must provide detailed information on the budget for the proposed work, together with supporting documents that include your justification for the requested budget, quotes for equipment or services that you will need to carry out your project, and budget information and documentation for any collaborators who will receive a share of the award as a subaward. The budget is a central component of any proposal, and it reflects the structure of your proposed project in terms of the team of personnel, consultants, and collaborators required, the resources you will need, and the project timeline. The budget will be an evolving component of your proposal, and it is a good idea to make use of a spreadsheet to track the various elements and automatically apply the relevant calculations to ensure that your budget fits within the appropriate limits.
Budget structures for SBIR and STTR grants
The difference in structure between SBIR and STTR grants is reflected in the general structure of their budgets. Specifically, while at least 67% of the award must be used to pay the costs of the small business concern in an SBIR grant, leaving up to 33% of the award to support academic collaborators and pay consultants, STTR grants only require that a minimum of 40% and 30% of the award is apportioned to the small business and academic collaborators, respectively. An academic collaborator on an STTR grant can therefore receive up to 60% of the award to support their contribution to the project. These percentages reflect the “internal” (small business) and “external” (collaborators and consultants) components of the budget.
It is important to note that consultants are an external expense rather than an internal expense of the small business. Consequently, if you are applying for an SBIR grant, consultants’ fees do not count towards the 67% of the award that goes to the small business; instead, they must be paid from the remaining 33% of the award that also supports academic collaborators. One of the advantages of the STTR program is that it provides more flexibility, allowing a much greater share of the award to be allocated to academic collaborators and consultants.
Direct vs. indirect costs
A budget includes both “direct” and “indirect” costs, and it is important to understand what these comprise. Direct costs are those directly associated with the performance of the project and include salaries for personnel, any materials or equipment that are needed, and the cost of any work done by a contract research organization or core facility on a fee-for-service basis. The cost of renting lab space or other facilities for the project can also be included in the direct costs. The indirect cost component of the budget provides money for expenses such as administrative costs or overheads not directly associated with the project. For the small business, the indirect costs are typically calculated as 40% of the business’ direct costs (not including any subawards associated with collaborators). For any collaborator that will receive a subaward, their research institution will have their own agreed indirect rate that they will charge based on the direct costs in the subaward budget.In addition to the direct and indirect costs, the budget includes a 7% fee (based on the sum of the direct and indirect costs) that is awarded to the small business as a profit.
How detailed should the budget be, and what needs to be itemized?
The information you provide needs to be sufficiently detailed to justify the requested budget amount. For key personnel and other personnel, such as postdoctoral researchers, technicians and programmers, you must state in the budget their position, their base salary and the number of months of effort that they will dedicate to the project, and their roles should be explained in the budget justification document. For consultants, only the total cost is required in the budget, but their role, hourly fee and agreed number of hours should be included in the budget justification. Equipment must be itemized in the budget if the requested amount for a piece of equipment (or for multiple units of the same equipment) exceeds $5000. In general, key materials and supplies should be itemized in the budget justification document, but basic lab supplies do not need to be itemized.
Is there anything I can’t include in my budget?
Certain items cannot be included in your budget. Examples include patent preparation and advertising costs, payment of fines, and alcoholic beverages. The NIH’s Office of Acquisition Management and Policy provides a list of unallowable/unallocable costs at https://oamp.od.nih.gov/dfas/indirect-cost-branch/indirect-cost-submission/unallowableunallocable-costs.