Budgeting time and salaries on your SBIR grant

As you prepare your 2018 SBIR/STTR proposals, take note of common budget and salary issues/questions that are brought up with our consultants

Time Proposed in the Budget: As our clients are working on their proposal packages we sometimes see issues with regard to time proposed in the budget for the PI, key employees and consultants.  There is variation amongst the agencies regarding suggested time dedicated to the projects or amount of salaries in the budget but there are some solid guidelines you can follow.  First, it is paramount that the PI be employed by the company at least 51% of the time; which translates into they cannot work anywhere else more then 19.6 hours per week. Note, that this doesn’t allow the PI to work ‘half time’ or moonlight on evenings and weekends at the company.  We occasionally hear from University professors who plan on working 20hrs a week at the company while maintaining their full time University position. This will not be acceptable according to SBIR requirements and if this guidline is not followed, the company runs an unnecessary risk during an audit. Note though that primary company employment is not a requirement for 4 of the 5 STTR programs, where the PI can be employed at the non-profit research partner, like the University. NSF is the notable STTR exception where the PI for either an SBIR or STTR must be primarily employed by the company.

PI Effort: A second problem we see with regard to the PI effort is an inappropriate amount of time dedicated to the project. Percent efforts of 10% or less or greater than 90% on projects tend to raise red flags with reviewers.  If the PI doesn’t dedicate enough time to the project, their involvement in directing the work is questioned.  If they indicate too much, then it is suspected the PI is padding their hours on the project.  We’ve seen 100% time listed as PI efforts, which is suspect because that assumes the PI is not doing anything else (answering calls, email, working on new projects) not related to the grant.  We recommend the PI list between 20% and 80% effort on the proposal.  It is interesting to note that the other key personell are often not scrutinized so closely; so there is no requirement that other key employees be 51% employed at the company or that they are listed between 20%-80% effort.

Employee Salary: Another question we see is in regards to the base rate salary requested on the budget. While there are generally no concerns about salaries it is a good idea to make sure the requested salaries are based on an appropriate range for the expertise of the employee. We usually see PI base salary ranges between $80-$120K.  Be aware that granting agencies often have an upper base salary limit for the PI. For NIH this is about $187K/year, and only very senior, well-experienced people could request that without being questioned.  As an aside, we recommend you double check your math for the ultimate salary requested for the project as well. A PI with a base salary of $100K/year who is working on a 6 month Phase I project at 80% time should list $40K as the requested salary.

Consultant Cost: Finally, note too that allowed consultant costs may have a limit depending on the agency. For NIH the guideline is “reasonable based on the going rate for the locale, type of work, and what is normally paid.” NSF limits it to $1000 per 8 hour day; while other agencies have their own limits defined.

- Todd Strother, CTC Senior Technology Consultant