SBIR Proposal Writing Basics: Explore Alternative Funding
Gail
& Jim Greenwood,
Copyright © 2011 by
Greenwood Consulting Group, Inc.
Happy
Anniversary! It has been three years now since the SBIR program’s latest
reauthorization expired. It, and companion program STTR, have been kept alive by
more than a dozen continuing resolutions. With uncertainty surrounding whether
the SBIR/STTR programs will be reauthorized, or what they will look like if/when
they are, we recommend that you consider alternative funding sources. Here are
some possibilities.
First,
focus on Phase 3 in your SBIR/STTR proposals and projects. Before you commit to
preparing even a Phase 1 proposal, we recommend you do a preliminary analysis of
the Phase 3 commercialization opportunity of the project. Unless there is a
significant potential payoff in Phase 3, then we recommend that you not
undertake either the Phase 1 or 2 proposal. Phase 3 is where you have a chance
for long term, sustained financial benefit from an SBIR/STTR project (vs.
one-time injection of funds in Phase 1 and Phase 2). By the way, the agencies
are trending towards expecting a significant commercialization discussion in
Phase 1 proposals, so this homework will pay dividends in that it helps you
prepare a more competitive Phase 1 proposal.
Second,
include IR&D and B&P in your indirect/F&A rate. IR&D stands for
“independent research and development,” and is defined as R&D that no
customer is paying you to do. It is different than a customer agreeing to buy a
product after the R&D is done (that would be Phase 3). You can include IR&D
in your indirect rate you charge the government (and your other customers),
which can help fund your new product development.
B&P stands for “bid & proposal,” which means you can actually
include in your indirect rate some money to cover the costs of preparing
proposals. As it becomes more “challenging” to find customers for your
innovation/technology development, this can become an ever-more-important part
of your indirect rate. Warning: not all agencies allow you to charge them IR&D
(NIH and NSF are notable examples), and B&P must be kept to “reasonable”
levels to be allowed.
Third,
always charge fee/profit on your SBIR/STTR projects, and on any other work you
are doing (unless it is disallowed, of course, but it is always allowed at the
SBIR/STTR agencies). You can charge roughly 7% of your contract/grant as
fee/profit on an SBIR/STTR project, and that money is available for you to use
however you want or need to spend it. Put another way, even though NIH and NSF
don’t allow you to include IR&D in your indirect rate, you can charge them
a fee/profit on your SBIR/STTR project and plow that money into IR&D
activities.
Fourth,
look at other government programs. The Federal government has a large number of
funding programs outside of SBIR/STTR, and one or more of them might be
appropriate for your company and the work you want to do. We recommend you do
some searching on the Internet, and also consider consulting with your state’s
Procurement Technical Assistance Center, or PTAC (pronounced pee-tack). Every
state has one, and their job is to help link businesses with government
programs. Check out
http://www.aptac-us.org/new/Govt_Contracting/find.php
to find the center closest to you. You also can explore Fed Biz Ops, the website
on which Federal procurements are listed (https://www.fbo.gov/).
Your
state also may have funding programs that would help you advance your
innovation. For example, if you are lucky enough to live in Oklahoma, you are
lucky enough to be eligible to seek funding through the Oklahoma Center for the
Advancement of Science and Technology (OCAST, http://www.ok.gov/ocast/).
Contact Steven Martinez at steven.martinez@ocast.ok.gov.
Fifth,
look at private sector customers. Even if the ultimate customer for your product
or service is the government, often there is a private sector contractor who
furnishes it to Uncle Sam. You might become a supplier of technology/innovation
to one such contractor. Why would they want to work with you? Because you can
provide technology and innovation quickly and cheaply compared to their own in
house resources, and they are looking for a competitive advantage over other
contractors vying for the same government work.
Another example of working with the private sector is finding industry that is looking for innovative solutions to their challenges. You can identify solution seekers yourself, or consider working through an intermediary that solicits requests for technical assistance from industry and reaches out to innovators, including private sector R&Ders who can meet those needs. One example is NineSigma (www.ninesigma.com). To learn more, contact Dr. Kevin Stark at phd@ninesigma.com
Sixth,
work with SBIR/STTR agencies that are more likely to continue to have small
business outreach programs even if SBIR/STTR are allowed to lapse due to the
slow, perpetual train wreck in Washington. Our crystal ball isn’t perfect, but
what we’ve seen suggests to us that the Dept of Defense and the Dept of Energy
might continue with some small business funding similar to SBIR/STTR even if
these programs are not reauthorized. At the other end of the spectrum, the
recommendation by NIH leadership that $500 million in Stimulus Program funding
that should have gone to SBIR/STTR companies be redirected elsewhere (a
recommendation that Congress honored) suggests that agency would drop SBIR/STTR
and small business like a hot potato if the reauthorization falls through.
In
conclusion, we all hope that the SBIR/STTR programs will soon be reauthorized,
and that the core features of the programs will be retained. However, we think
it is prudent for small firms to consider other ways to fund their innovations
and new technologies, and to grow their businesses.