SBIR Proposal Writing Basics

SBIR Proposal Writing Basics: Consultant Compensation Limits on NSF SBIR Proposals

Gail & Jim Greenwood, Greenwood Consulting Group, Inc.

It is often appropriate for an SBIR applicant to include one or more technical consultants on their proposal. A consultant, which is defined here as an individual (vs. a company or institution), may be able to bring additional expertise, experience, qualifications and/or reputation that can help round out the applicant’s team that will be performing the proposed SBIR R&D project.

For years, applicants to National Science Foundation (NSF) have felt constrained by the limitation that a consultant on an NSF SBIR cannot be paid more than a specified amount. This limitation has not been specified for any other SBIR/STTR agency except NSF. The dollar amount of the limitation has increased over time, since it is tied to a Federal pay grade that has increased with inflation, but currently stands at only $548 per day. Applicants have wondered how they can bring the best technical consultants to their NSF SBIR project at what many feel is a very low daily rate.

The most recent NSF Phase I SBIR/STTR solicitation (http://www.nsf.gov/pubs/2006/nsf06598/nsf06958.html, due date of December 4, 2006 ) makes an important clarification about the consultant compensation issue. On page 11, the instructions for preparing a Phase I proposal state that “The maximum consulting rate under this solicitation is $548 per day. This rate is exclusive of any indirect costs, travel, per diem, clerical services, fringe benefits and supplies.”

What NSF is saying is that your consultant can not earn compensation for their time performing technical work on the SBIR project of more than $548 per day, but their total charge to your company for services can exceed this amount by the consultant’s indirect costs as well as other direct costs like project related travel. Therefore, if your consultant has an indirect rate of 75% of direct labor, will work 10 days on your project, and anticipates a two-day trip on your project at a cost of $1500, their compensation under NSF’s limit could be ($548*10)*1.75+1500 = $11,090. That far exceeds the direct labor compensation allowed by NSF of $548*10 = $5480.

Two words of advice, then, for those of you who will be submitting an NSF SBIR proposal involving a consultant:

First, realize the $548/day “cap” pertains only to the consultant’s compensation for their labor on your SBIR project, and therefore you can include in your NSF SBIR proposal a higher daily rate that includes indirect costs and non-labor direct costs like project related travel.

Second, you and your consultant will need to be prepared to justify to NSF, during grant negotiations, why the amount of consultant compensation you are budgeting is in line with the NSF cap. That means the consultant needs to be receiving not more than $548/day for their labor on the NSF SBIR project, they need to have a reasonably estimated indirect rate, and they need to have a reasonable estimate for non-labor direct costs like project travel.

This should be great news for those of you who have sought to bring the best qualified technical consultants to your NSF SBIR proposals, but didn’t know how you could afford them under the $548 per day “cap.”