SBIR Proposal Writing Basics

SBIR Proposal Writing Basics: No Employee Ever Spends 100% of Their Time on an

SBIR/STTR Project, So Don’t Assume It in Your Budget

Gail & Jim Greenwood, Greenwood Consulting Group, Inc.

This month, we want to address a very common problem that we see with SBIR and STTR cost proposals. The problem is when your cost proposal shows that one or more of your employees will spend 100% of their time on the proposed project. A related problem is claiming in the cost proposal that one or more of your employees will spend 100% of their time doing only "direct " work, and therefore do no "indirect" work.

It is virtually impossible for an employee to spend 100% of their time on an SBIR/STTR project (or any other project, for that matter). All they have to do is attend a staff meeting, answer a call or email that is not project related, or help write a proposal (even a Phase 2 proposal for your current Phase 1 project), and they are no longer spending 100% of their time on the project. Therefore, you should never show an employee of your firm working 100% of their time on the proposed SBIR/STTR project. This means that if you have a six month Phase 1 project and the employee makes $50k per year, you should propose something less than $25k for the direct salary that they will earn while working on the proposed project.

Similarly, it is impossible for an employee to spend 100% of their time just working on billable projects or "direct" activities. They will always spend some of their time doing "indirect" activities, like attending conferences and professional meetings, pulling together their timesheet, or schmoozing with a prospective customer. Therefore, when you are developing your indirect rate (or F&A rate, if that term is more familiar to you who work with the grant agencies), and you are estimating how your employees will split their time between direct and indirect work, never have an employee whose time is shown as 100% on direct work. We think it will be hard for any employee to work more than 90% of their time on project work, so at least 10% of their time and salary will need to be shown as indirect. And note that you will need to prove the claimed employee’s split between direct and indirect by having him or her accurately record his or her hours on a timesheet.

Government accounting is a complex and befuddling beast. But it is easy to not make the naïve and erroneous mistake of claiming one of your employees will spend 100% of their time on one project, or on nothing but billable projects.