Gail & Jim Greenwood, Greenwood Consulting Group, Inc.

Copyright © 2004 by Greenwood Consulting Group, Inc.

So, once you’ve been awarded an SBIR or STTR Phase I project, the next step is to do the work, right? Well, not exactly. Between these two parts of the Phase I process there an important step which we will talk about in this article.

Sometimes it is not entirely obvious whether you have won a Phase I award. Different agencies contact you at different points in the decision making process. Some contact you to let you know what "score" was assigned to your proposal by the reviewers, while others tell you that you are a winner subject to some "formalities." We have even seen a letter that said "this is to inform you that you are not authorized to start working on the Phase I we haven’t awarded to you yet."

Therefore, the first step is to contact the agency to find out the meaning of the email or letter you receive. Are you a winner? Are you a winner contingent on some paperwork? Are you in contention but not yet a winner and, if so, when will you know if you are a winner?

Even if you get a great score from the reviewers, and even if the agency tells you that they want to make an award, you can expect to have to jump through a hoop of discussion and negotiation. What kind of discussion and negotiation? It can vary a lot from agency to agency and from one project to another, but let’s focus on two common areas.

First, anticipate that the agency will want to ask some questions about your cost proposal. Remember that all of your calculations and estimates probably got honed down to a page or two at the back of your Phase I proposal; the agency now will want to get some of the detail behind that summary. The agency may ask about a number that looks odd to them—something like a large figure for travel, or very rounded number for materials. They also often ask about the hourly rate you are requesting for one of your team members—they want assurances that it is a legitimate figure, accurately or reasonably estimated, and not higher than what other clients have paid for his or her services.

In anticipation of this, make sure that your costs are well documented and based on what the Feds say are allowable and reasonable. Make sure you have that documentation in a file that you can easily reference during the discussion. And if you have learned more about government accounting and things like unallowable costs in the time since you submitted the Phase I SBIR/STTR proposal, and you now know some of the figures in the cost proposal are not legit, then be prepared to explain the error and how the budget changes as a result of correcting it.

Second, expect the agency to ask for your concurrence to a slew of laws, regulations, and other legalisms. They likely won’t verbally ask you about them, but instead the language for your Phase I grant or contract will probably include something like "I hereby certify that I am in compliance with and will abide by the following clauses in the Federal Acquisition Regulation..." You probably glaze over the list of clauses like a deer in headlights, and the temptation is high to just sign the dang contract or grant and hope you are in compliance, but that is dangerous. Instead, we encourage you to look up each clause, and do your darnedest to understand what it requires of you—and then take steps to get into compliance as you start on the Phase I project. By the way, that Federal Acquisition Regulation (FAR) is available on line; one ready source is www.arnet.gov/far.

Okay, so it is clear that the agency is prepared to make the award to you, you have answered all their questions about your cost proposal, and you have signed in blood that you will follow the 10 Commandments (aka the FAR clauses specified in your contract or grant)—does that mean that you can now start on the project?

The answer usually is "not yet," but in some cases "yes." In most agencies, you are not authorized to begin work until you get official notice to proceed. The one exception to this is a couple of the agencies that indicate it is okay to begin "incurring costs" up to 60 or 90 days before the formal start of the project. If your agency allows this early start, then read the fine print—will they reimburse you for any costs you incur during that period if (for some unforeseen reason) the agency ultimately fails to make the Phase I award? Some of the agencies will but most will not, indicating that you are "at risk" if you make an early start.

We do know some companies that start Phase I projects routinely before formal go ahead is received, but we discourage you from doing this unless the agency has one of the aforementioned early start programs. Otherwise, if you start early, your time sheets (which you are expected to keep on SBIR and STTR projects, but that’s a subject for another article) and other accounting records will be inconsistent with your billing to the government, in terms of when you claim work was done. That can cause you some grief during a Federal Government audit of your SBIR/STTR project. Instead, we encourage you to be persistent but not pesky in encouraging the agency to give you an official notice to proceed so you can get going with the Government’s blessing.