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Sub-award or Fee for Service: Know the Difference for Your SBIR/STTR Proposal

March 2nd, 2015 | by Andrea Johanson

Whether they’re preparing an SBIR/STTR proposal for the April 5 NIH deadline or for another agency, one of the most confusing issues that companies face in preparing their project budgets is whether a relationship with an external organization should be a sub-award or a fee-for-service. It’s common in an SBIR, and required for an STTR, to have a sub-award to a non-profit research institution. In addition to a formal sub-award, there are other relationships the small business might have with outside entities.

Why do you care? Because these relationships are dealt with very differently in the proposal and in subsequent management of project funds. This is something you need to know in order to correctly fill in the application forms, and then to effectively (and legally!) manage the award.

Below are the official definitions, followed by a list of bullet points that will help you decide if a relationship should be a sub-award or a fee for service.

Sub-award (also called a consortium agreement)
A sub-award is an agreement between the recipient of a prime award (grant or contract) and another organization (educational institution or other entity) in support of a sponsored project in which any substantive programmatic activity is carried out by the other organization, which is a separate legal entity, administratively independent of the prime award recipient. The involvement of the sub-awardee organization is that of actually performing a portion of the programmatic activity, as opposed to simply providing a routine service to the prime award recipient.

The following factors indicate a sub-award. The other organization:

  • has (some) responsibility for programmatic decision making
  • contributes to the scholarly/scientific conduct of the project as described in the statement of work for the prime award
  • uses the funding to carry out its own program, as compared to simply providing goods or services to the small business
  • provides matching funds or cost sharing
  • conduct of the work requires considerable discretionary judgment and the unique expertise of the other organization
  • performance is measured against the objectives of the main (prime) award
  • investigator would be considered as a co-author of publications resulting from the work performed under the main award

Fee for Service
A fee for service agreement is an agreement between the recipient of a prime award (grant or contract) and another organization (educational institution or other entity) in support of a sponsored project in which the other organization merely provides a routine service for the prime award recipient.

The following factors indicate a fee for service agreement. The other organization:

  • provides a routine service (e.g., equipment fabrication or repair, data processing, performing routine analytical testing services, etc.)
  • provides the goods or services as part of its normal business operations
  • provides similar goods or services to many different purchasers
  • operates in a competitive environment (i.e., competes with others who can provide a similar service)
  • provides services of a repetitive nature or goods of a commonly available kind
  • provides the service in support of the prime award recipient’s project (rather than the organization’s own project)
  • assumes the risk if performance is more costly or time consuming than expected

As is often the case, there are some gray areas, and some nuances to this process, but this gives you the basics covering most cases. As always, BBCetc is here to help!

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Andrea Johanson, PhD, is a Principal Consultant and chief NIH guru for BBCetc.

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Start Your SBIR/STTR Budget by Knowing the Basics

February 9th, 2015 | by Kris Bergman

What’s your opinion? Does your SBIR/STTR project drive the budget or does the budget drive the project? Yes, this is a trick question. Actually, an appropriate budget is one that is in harmony with the proposed work, serving as an important guidepost in assessing a project’s feasibility in light of company resources. So the answer

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Our TOP 10 TIPS FOR SBIR/STTR SUCCESS

January 16th, 2015 | by Jayne Berkaw

We prepared our top 10 tips to have at our display table at the National SBIR/STTR Conference in Austin, TX, last November. We received lots of nice comments on it and with 2015 just getting underway, we thought it a good time to share them on our blog. 1. TEND TO THE BASICS EARLY Take care

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Policies & Procedures are a Must, So Buckle Down and Get it Done

October 24th, 2014 | by Kris Bergman

Most Policies & Procedures (P&P) manuals sit in a corner collecting dust and are pulled out only as a reference of last resort. But take note, SBIR/STTR applicants and awardees, agencies expect you to have P&Ps in place to serve as your bible for managing your funds and activities. And practically speaking, if you ever

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Market Research is Key to Commercialization Success

September 26th, 2014 | by Michael Kurek

Articulating a compelling commercialization strategy in your SBIR/STTR proposal is more important than ever for funding success. A credible commercialization plan must be built on a foundation of current and relevant information about the commercial opportunity you’re pursuing. The process of gathering, analyzing and interpreting that information is called Market Research. Market research is used

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Check Out New Subtopics for Latest NSF SBIR/STTR Cycle

September 3rd, 2014 | by Michael Kurek

The National Science Foundation (NSF) has released its latest SBIR solicitation with a submission deadline of December 2, 2014. We can expect the STTR solicitation to be coming shortly. In the meantime there are some new technology subtopics that you should check out: Biomedical Technologies (BM) BM5. Noninvasive Imaging of Brain Function Educational Technologies and

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Broad Area Announcements Offer an Additional Funding Source

August 18th, 2014 | by Becky Aistrup

Although they are not generally small business set-asides, Broad Area Announcements (BAAs) can be an R&D funding source for small companies to consider in addition to the various agency SBIR/STTR programs. The BAA is a competitive solicitation process used to obtain proposals for basic and applied research, as well as for that part of development

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Budget Justification an Important, yet Underutilized Part of Proposals

July 16th, 2014 | by Kris Bergman

If you’re preparing an SBIR/STTR proposal for the upcoming Aug. 5 NIH or other agency deadline don’t underestimate the power of your budget justification. Numbers on a spreadsheet are only half of the story. Reviewers need to see WHY you are spending money on the things in your budget. Here are some important things to remember:

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What to Do — and Not Do — to Get Your Technology in Front of DOD

June 30th, 2014 | by Jayne Berkaw

Chad Darr, Director of Product Development for Loc Performance Products, Inc. knows a thing or two about getting products in front of the Dept. of Defense. Located in Plymouth, MI, Loc is an SBIR awardee and a full-service manufacturer of large CNC (Computer Numerical Control) machined components and mechanical assemblies for military and commercial applications.

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Strategic Partnering for SBIR-Stage Companies: Finding Your Strategic Partner

June 11th, 2014 | by Michael Kurek

This is the third in a BBCetc series on various aspects of finding, consummating, and maintaining a productive inter-company partnership. Part one / Part two In many ways, the process of finding the right strategic partner is not much different than finding the right customer for your product. Both involve identifying and understanding a problem.

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