Writing for SBIR and STTR
To increase the effectiveness of your proposal, we recommend that you do the following before you begin writing the SBIR or STTR proposal:
1. Conduct a literature review to help you:
- Understand the state of the technology
- Identify technological applications and markets
- Distinguish alternative methods to solve the research topic
- See what has been previously funded
- Become familiar with agency missions and solicitation topics
2. Learn more about the process of submitting proposals to federal agencies by talking to federal program managers, support organizations and technology experts in your field. For organizations that might be of assistance, see our list of other resources.
Your SBIR/STTR proposal must not exceed 25 pages. Recommended sections and suggested page lengths are as follows:
- Cover sheet (one page)
- Abstract or project summary (one page)
- Significance of the problem (three pages)
- Research objective (one page)
- Research/work plan (six pages)
- Background and related research (two pages)
- Key personnel (up to five pages depending on the number of key personnel)
- Future research and development (one page)
- Commercial applications (two pages)
- References (one page)
- Budget (one page)
The following sections are based on information from Ohio’s SBIR program and included here with their permission.
Basic Information on Writing a Proposal
In any SBIR solicitation, there are a number of key points that you should look for, and here they are in order of importance:
- Deadline: All SBIR solicitations have specified due dates. The length of your lead time will probably be important in your decision on whether to respond.
- Funding level: All SBIR solicitations contain explicit funding levels expressed in total dollars available and number of awards to be made. The maximum amount per award may be provided as an average dollar amount and/or in anticipated level of effort (such as one person’s year of effort). Use this funding information to determine if responding to this specific solicitation is worth the effort.
- Application instructions: Prospective proposal writers need to understand and be able to comply with particular requirements spelled out in the solicitation to which they are responding. Content and format requirements can be very different for the various federal agencies.
- Scope of work: This is sometimes provided in an explicit statement of work and in great detail. More often, however, the actual scope of work will be determined by the proposer.
- Additional information: Most announcements will contain an address and/or phone number where you can obtain additional materials and application packages, if required.
After reviewing the SBIR solicitation, the following considerations must be addressed.
- Is the selected topic truly a match with your company’s expertise?
- Does your organization’s work in this field enhance the chance for success of the intended proposal?
- What is the principal investigator’s (PI’s) success rate in this field? Are they a good match to the proposed topic?
- Would the use of a consultant enhance your company’s capabilities or the principal investigator’s capabilities?
- What capabilities or resources are you missing that would make you more competitive in this arena?
Decision to Write
The only resources you need to write a winning proposal are time, talent and money. Talent in this case is both technical knowledge and writing talent. If you have these critical resources and satisfactory answers to the five questions above, then the benefits probably outweigh the investment. Consequently, it is time to prepare to write.
The development of a proposal needs to be systematic and orderly. Proposal writing need not be an ordeal. The key to success is to adhere to the following:
- Conduct an honest assessment of your company’s potential specific to the selected topic.
- Prepare adequately before starting to write.
- Seek creative and constructive review and guidance from others as you write.
Addressing Primary Issues
Three questions are basic to the majority of research proposals:
- What do you want to accomplish?
- Why is it important?
- What approach will you take?
By this time in the process, you should have a good idea about what you want to accomplish and what approach you will take. You should have a basic understanding of what you are missing and where to obtain what you need. In other words, you may be ready to start writing a proposal based on a well-conceived research plan. The preceding effort will save you time and money throughout the proposal process. It is essential that you allow sufficient time to prepare any proposal. Plan to write several drafts; allow time to review and revise.
Writing the Proposal
As you initiate the writing process, remember that no amount of skill in writing can disguise research that is poorly designed. No matter how well organized, a proposal that reflects poor methods is usually rejected.
As you write, review and edit, pay close attention to the following:
- Orderly presentation of ideas: Thought units, whether single words, a sentence or a paragraph, or longer sequences, must be orderly.
- Smoothness of expression: Scientific writing serves a different purpose than creative writing. The aim of your SBIR proposal should be one of clear and logical scientific communication.
- Economy of expression: Since you have a 25-page limit on SBIR proposals, avoid redundancy, wordiness, jargon and evasiveness.
- Be precise and clear in your choice of words: Make certain that every word means exactly what you intend it to mean and that it will be clear to those who read your proposal.
After drafting the proposal, it can be very helpful to ask for feedback from researchers, colleagues, SBIR/STTR consultants and other experts before submission.
Preparing an SBIR Cost Proposal
It’s not uncommon for SBIR proposal writers to feel more comfortable with the technical part of the proposal than with cost estimation. However, the cost proposal or budget is an integral part of the total proposal. First, it is important to understand the terms and process of preparing a cost proposal in order to comply with government requirements. Just as significant, an inadequate budget may hamper a firm’s ability to perform the work proposed. Some companies omit indirect costs or fees from a proposal due to a lack of understanding of how these items are calculated. However, rent, utilities, fringe benefits and supplies are real costs and must be covered.
The following is an introduction to the basic elements, definitions and rules related to SBIR cost proposals. Although not comprehensive, the information should be helpful to companies in areas where more clarification may be necessary when preparing the budget section of a proposal. Although each agency has specific guidelines and formats for cost proposals or budgets, the basic elements are as follows in this section on costs and fees.
Costs which are identified specifically with a particular project or contract are called “direct costs.” Thus, direct materials are those goods or services that are purchased for and used directly on a specific project. Subcontract costs may be included in this section.
This is the most important element and frequently the largest dollar amount in a Phase I proposal. Careful estimates must be made of the number of hours that the principal investigator, key personnel, and other employees will work on the contract or grant if awarded. These hours are multiplied by the relevant hourly rate, and the results are totaled.
The overhead rate is the means by which overhead costs are spread among all projects. It is a percentage that is typically calculated by dividing the total of overhead costs (or the pool) by the dollar amount of direct labor (or the base). Note that the pool and base are period expenses, which means they are calculated for a period of time (usually a year) and not for a specific project. Thus, the base consists of all direct labor expected to be used on all projects during the year.
Any costs that are not identifiable with a specific project are called “indirect costs.” Examples are rent, utilities, office supplies, salaries/wages of personnel not working on direct activities and benefits. Some expenses such as tools and travel may be direct or indirect depending on the purpose. In larger companies, indirect costs are broken down between overhead and general and administrative (G and A) costs. In smaller companies, all indirect costs are added together to form the overhead pool.
Other Direct Costs
All direct costs not included in direct materials or direct labor are included in this category. Direct travel, consultants and special equipment or testing are typically classified as other direct costs.
General and Administrative Rate
The G and A rate, as it is commonly known, is the means by which general management and administrative costs are spread among the projects. For companies with less than about 50 employees, it is usually not necessary to calculate a G and A rate. One indirect rate (the overhead rate) is sufficient. The G and A rate is calculated by dividing the total amount of G and A expenses (including management/planning labor costs, accounting costs and legal expenses, and marketing expenditures) by the sum of direct labor costs and overhead costs.
Fees or Profits
A fee or profit, usually calculated as a percentage of total costs, is available to small businesses under the SBIR program. The general requirement is the fee must be reasonable, although some agencies give more specific guidance. For example, the amount of fee approved for awards under the current Public Health Service omnibus solicitation may not exceed 7 percent of total costs. For all agencies, the sum of the proposed fee plus costs may not exceed the maximum award amount specified in the solicitation.
General Rules and Guidelines
Allowable and Unallowable Costs
In general, costs are allowed if they are reasonable, can be allocated to one or more projects or contracts (either directly or indirectly), and if they are not classified as unallowable in the Federal Acquisition Regulations (FARs). If costs do not meet these criteria, they cannot be included in cost proposals (either as direct costs or in the calculation of indirect rates), and these costs will not be paid by the government.
Some of the most common types of unallowable costs are:
- Interest and other financial costs
- Bad debts
- Most contributions/donations
- Certain entertainment costs
- Fines and penalties
- Organizational expenses
- Unreasonable compensation
- Federal income taxes
- Sales promotion
- Trade shows and conventions
- Most advertising
- Lobbying costs
- Certain legal costs
- Cost of acquiring a patent (unless required by contract and the federal government will own the patent)
The general rule for travel is that allowable costs are limited to the amounts set by the government for travel by government employees. Travel costs for lodging, meals and incidentals may generally not exceed the per diem rates published by the government in the Federal Acquisition Regulations. The per diem rates are set by locality, so it is necessary to consult these rates when preparing a cost proposal that includes travel. Actual costs that exceed these limits may be allowed on a case-by-case basis with sufficient written justification.
Developing an Adequate Accounting System
From the government’s point of view, the main criterion for adequacy is: can the business properly segregate and accumulate costs? In other words, does the firm’s accounting system distinguish between direct and indirect costs and between allowable and unallowable costs, and is there a system for tracking and accumulating costs by contract (or grant)? The minimum components are a chart of accounts, a timecard system with specific codes for projects and indirect labor, a chart of accounts, and the appropriate journals and project cost summaries. A well-constructed, detailed annual budget is an excellent starting point.
Types of Contracts
Some agencies, such as the Public Health Service of HHS and the National Science Foundation, make awards in the form of grants. The Department of Defense and other agencies award contracts. There are two main forms of contracts used in the SBIR Program: Firm Fixed Price (FFP) and Cost Plus Fixed Fee (CPFF). The great majority of Phase I contracts are FFP; Phase II contracts are either FFP or cost-reimbursement contracts such as CPFF.
The main characteristics of a Firm Fixed Price contract are:
- The federal agency and contractor agree to a fixed price that cannot be adjusted due to actual costs. The contractor bears all the cost risk.
- The contractor is required to deliver the end product(s) described in the contract (the deliverables) even if it costs more than the amount of the contract to do so. Therefore, the deliverables must be specified carefully.
- There is usually more oversight by audit agencies (such as the Defense Contract Audit Agency or DCAA) prior to award with FFP contracts.
- Contract financing is generally obtained by submitting progress payment requests.
- FFP contracts are relatively simple to administer.
The main characteristics of a Cost Plus Fixed Fee contract are:
- The federal agency reimburses the contractor for allowable incurred costs plus a fee. Thus, the federal agency bears the cost risk.
- The contractor is required to make satisfactory progress and usually must deliver the end product described in the contract to earn the fee.
- Although a pre-award survey may be performed, there is generally more oversight at the end of a CPFF contract. An incurred cost audit is required before the remaining costs and fee are paid.
- The contractor is paid when an approved invoice (public voucher) is submitted.
- CPFF contracts are more complex to administer and require compliance with more cost regulations.
Seek Feedback After Submitting Proposal
Ask for feedback from federal agency staff and reviewers after submission to learn how to improve your future submissions. If you’re going to put in the time to do a proposal, getting feedback from those who evaluate proposals is an excellent strategy for increasing the success rate of future proposals.
The Following Publications Contain Additional Information
Information for Contractors, by the Department of Defense’s Defense Contract Audit Agency, DCAAP 7641.90, July 1998. 703–767–3274
Federal Acquisition Regulations, Superintendent of Documents, U.S. Government Printing Office, Washington DC, 20402. Federal Acquisition Regulations (FARs) and other reference manuals also are available from the Commerce Clearing House, www.cch.com
Accounting Guide for Government Contracts, Commerce Clearing House, 800–835–5224, www.cch.com
An SBIR Program Development Blueprint, by James R. Atchison, Kettering, OH, 513–294–7394
For more information about SBIR/STTR grants, see the webpages listed above.