Each of the 11 federal agencies has restrictions in place regarding what is allowable vs. an unallowable cost. While many agencies provide slight leeway, the National Institute of Standards and Technology (NIST) is fairly straightforward in what it considers allowable, and pre-award costs are not on the list.
Proposed funding levels must be consistent with the project scope, and only allowable costs that fall within the spending limitations specified in Section 1.03.01 of this NOFO should be included in the budget.
https://www.nist.gov/system/files/documents/2019/06/19/2019_phase_2_nofo_1.pdf
So what is in section 1.03.01? Personnel, Fringe, Travel, Equipment, Supplies, contracts/Subawards, and Other Direct Costs. That’s it. This means that there is no option for pre-award costs at all. That is, costs incurred before the award were made that the small business anticipates being paid back for at the time of the award. While some agencies do this under very specific guidelines, it is rare. The best practice is to avoid incurring any costs before the award. This also means avoiding contingency-based or success fees to prepare your proposal.
What is A Success or Contingency Fee
This type of unallowable fee occurs when a small business concern seeks to pay the grant writing professional who completed their proposal out of grant award funds instead of out of pocket. This type of fee is unallowable by all 11 federal agencies and unethical in the Grant Professionals Association’s eyes, a national organization for professional grant writers. There are many reasons why a success fee should be avoided, but for this conversation, we will focus on the fact that it is unallowable as it is a pre-award cost. To receive an award, a proposal must be created, submitted, and accepted. Only then can funding occur. Creating and submitting the proposal is something that occurred before the award. It falls into the category of a pre-award cost and is not an allowable use of award funds.
How to Avoid Pre-Award Costs
Avoid pre-award costs by only purchasing your business needs and can afford without outside funding until an award is received. Never expect to pay for proposal preparation services with grant award dollars. Research the individual cost requirements for each agency and each solicitation to ensure you are operating in accordance with the cost regulations.
We work with high-growth startups and organizations that support the startup and innovation ecosystem. We build highly specific non-dilutive funding menus, provide proposal preparation services, and measure outcomes of funding through evaluation. Schedule a consult call with us HERE.