What is the Budget Section of an SBIR/STTR Proposal?
The budget section on an SBIR/STTR proposal represents the financial plan for the proposed project[1]. It outlines the estimated costs for various aspects of the research and development activities, including personnel salaries, materials and supplies, equipment (agency specific), subcontracting costs, and indirect costs[2]. The budget section should provide a detailed breakdown of the expenses and justify their necessity for the successful completion of the project[2]. It is important to adhere to the specific budget guidelines outlined by the funding agency and ensure that the requested funds are appropriate and reasonable for the proposed work[2][3].
What Can be Included in Your Budget?
Before beginning your budget proposal, it is imperative that you research the maximum allotment for the agency you are applying for. Each agency varies and some have exceptions to the award cap such as the NIH (National Institutes of Health) where you can request more than the maximum amount with appropriate justification. As a general rule of thumb budgets should fall at or below the maximum award amount.
Direct Labor Costs
Direct labor costs in an SBIR budget proposal refer to the expenses associated with the personnel directly involved in the research and development activities of the project[4]. This includes the salaries, wages, and fringe benefits of the individuals working on the project.
To determine the direct labor costs, you should clearly identify the roles and responsibilities of each team member and estimate the number of hours they will dedicate to the project. Multiply the hours by their respective salaries or hourly rates to calculate the labor cost for each individual. Additionally, consider any applicable fringe benefits or overhead costs associated with direct labor.
One helpful resource for calculating and justifying the projected salary of a role is the Bureau of Labor Statistics. Here you can search by occupation and area to determine the average salary offered.
Senior/Key Personnel Salaries
Senior/key personnel are employees with the necessary experience and CVs in the required agency format. Examples of senior personnel include department directors, CEO, COOs, PIs/PDs, etc.
Note: For SBIR - the primary employment of the PD/PI must be with the small business at the time of award and during the conduct of the proposed project.
For STTR – the PD/PI may be employed with a small business or the "partnering" non-profit research institution/university, as long as they have a formal appointment of some sort with the business. This may vary from agency to agency, so it is imperative to review the agency guidelines.
Other Personnel Salaries
In the direct labor portion of the budget proposal, you should also include all part-time and full-time W-2 employees, potential future employees, and projected/required benefits or additional costs regarding their employment salaries.
Equipment
In an SBIR budget proposal, equipment costs refer to the expenses associated with acquiring or renting specialized equipment necessary for the research and development activities[5]. It is important to provide a clear explanation and justification for any equipment costs included in the budget proposal.
When including equipment costs in your budget, make sure to provide detailed information about the equipment, such as its purpose, functionality, and how it directly supports the project objectives. Justify why the equipment is necessary for the successful completion of the proposed research and development activities[6].
It is worth noting that not all equipment costs may be eligible or considered acceptable in an SBIR budget proposal. Common or routine equipment that is already generally available or should be obtained through normal business operations might not be approved as a direct cost[5]. It is encouraged and recommended to leverage communal shared lab facilities or rental use equipment available at places like incubators, machine shops, etc.
To ensure compliance and to understand the specific guidelines and requirements regarding equipment costs for an SBIR budget proposal, it is important to refer to the funding agency's instructions and requirements[5].
Other Direct Costs
Travel
This can include transportation, lodging, meals, and incidentals incurred by project personnel traveling to conferences, meetings, or other project-related activities. Generally, no marketing/BD/international travel is allowed. The situation for which it would be allowed depends on the agency and if the POC approves the trip. Proper justification would be required in this instance.
Consultants
A consultant is typically an individual that would need to provide a quote/letter of support and their CV. The quote offered is what will be used as part of the justification for the budget.
Subcontractors
A subaward/subcontractor is an entity (service provider, university, consulting firm etc.) who will intellectually contribute to your project by partaking in the R&D or by directly performing any of the scope of work proposed. Enter the total subaward amount below. However, you will be required to use a separate budget sheet for every subaward/subcontract to provide a detailed breakdown of this entity's costs. You will also need a letter of commitment (teaming agreement), administrative documents from your proposed subcontractor. Universities acting as sub-awardees often have boilerplate documents for such engagements.
Remember - subaward budgets will be included in the 33.3% outsourcing cap of SBIRs. STTRs require a minimum of 30% to be subcontracted by a university and a minimum of 40% to be budgeted for the applicant company. The remaining 30% can be allocated to either entity or other entities or consultants.
Materials
This would include the cost of necessary materials such as, but not limited to, office supplies, technical literature, computer hardware, lab supplies, and biological materials. An important thing to note is that all materials need to be individually itemized. Alongside this, there is the requirement to have sufficient justification such as quotes.
Note: anything over $5k is to be classified under equipment.
Indirect Costs
Indirect costs on an SBIR budget proposal refer to the expenses that are not directly attributable to a specific project but are necessary for conducting business operations[4]. These costs are typically incurred for activities or services that benefit the overall organization or multiple projects. Examples of indirect costs include rent, utilities, general administration, and accounting[4][7].
In an SBIR budget proposal, indirect costs are usually accounted for using an indirect cost rate. This rate is determined by dividing the total allowable indirect costs by an appropriate base, such as total direct labor costs or total direct costs. The resulting rate is then applied to the applicable base to calculate the indirect costs for the project[7].
It is important to note that the indirect cost rate used in an SBIR budget proposal must be based on a negotiated rate agreement with the relevant federal agency, or an appropriate simplified method may be utilized if a negotiated rate agreement is not in place[6]. It is crucial to carefully follow the guidelines provided by the funding agency regarding the calculation and documentation of indirect costs[7].
In an SBIR budget proposal, indirect costs are usually accounted for using an indirect cost rate. This rate is determined by dividing the total allowable indirect costs by an appropriate base, such as total direct labor costs or total direct costs. The resulting rate is then applied to the applicable base to calculate the indirect costs for the project[7].
It is important to note that the indirect cost rate used in an SBIR budget proposal must be based on a negotiated rate agreement with the relevant federal agency, or an appropriate simplified method may be utilized if a negotiated rate agreement is not in place[6]. It is crucial to carefully follow the guidelines provided by the funding agency regarding the calculation and documentation of indirect costs[7].
Please keep in mind that specific policies and guidelines regarding indirect costs may vary among different funding agencies. To ensure accuracy and compliance, it is essential to refer to the specific instructions and requirements provided by the funding agency for the SBIR program.
Note: If your organization has no negotiated rate with a federal agency, and no previous experience with Federal indirect cost rate negotiation, you may request up to 40% of the total direct costs, with appropriate justification. If you have already budgeted benefits as a direct cost, then you can request ~20% of the total direct costs. Software companies should keep indirect costs as low as possible, and can be as low as 10%, also known as a de minimis rate, which usually does not require much justification.
Tips on Preparing Your Budget Proposal
Creating a proper budget proposal is crucial when applying for an SBIR grant. Here are some key steps to help you develop an effective budget:
Understand the Guidelines: Familiarize yourself with the specific budget guidelines provided by the funding agency. Ensure that you adhere to these guidelines while preparing your budget.
Justify the Budget: Provide a clear and concise justification for each proposed expense, emphasizing its necessity for the successful completion of the project. Be transparent about how the allocated funds will be utilized and how they align with the proposed objectives.
Review and Revise: Once you have drafted the budget proposal, review it carefully for accuracy and coherence. Ensure that all calculations are correct, and that the budget aligns with the project's scope and objectives. Even after the budget has been submitted it is important to keep in mind that you still can revise and update your budget as needed if the overall proposal receives great scores and is set up for funding. With all this in mind, there is no need to get extremely caught up in the details because you will be able to edit the budget later. The primary focus would be to ensure that all key pieces are included and that compliance requirements are met. Many of the proposals are rejected due to compliance violations. TurboSBIR ensures compliance throughout the entire process.
Seek Input and Support: Consider seeking input from financial experts or colleagues experienced in grant applications. Having additional eyes to review your budget proposal can provide valuable feedback and catch any items that may have been left out.
Remember that a well-prepared budget proposal demonstrates your understanding of the project's financial requirements and enhances the credibility of your grant application.
Completing a quality and detailed budget section of your proposal can be a daunting task. The recommended next step is to refer to quality and reliable resources to deepen your understanding of this process. TurboSBIR is a great resource that can help by providing expert grant writing support, successful grant samples, agency specific templates, and a step-by-step workflow, to guide your application.
