Every agency has guidelines on what is and is not allowable regarding pre-award costs for SBIR. It is important to read and understand the agency’s individual guidelines regarding allowable costs before applying for the proposal and creating a project budget. Advertising and public relations, alterations and renovations, child care costs, dues, and membership fees, and countless other expenditures are addressed in the guidelines. There are many aspects of the guidelines, but for the purpose of this post, we will be discussing our role as paid consultants in preparing the proposal. In the NIH table of allowable costs, a subsection clearly illustrates NIH guidelines on the use of federal awards to fund contingency-based payments for grant preparation professionals.
Unallowable: Payments made by the NIH awarding ICThe NIH organizational component responsible for a particular grant program or set of activities. The terms “NIH IC,” or “awarding IC” are used throughout this document to designate a point of contact for advice and interpretation of grant requirements and to establish the focal point for requesting necessary prior approvals or changes in the terms and conditions of the award. to the non-Federal entity’s “contingency reserve” or any similar payment made for events the occurrence of which cannot be foretold with certainty as to the time or intensity, or with an assurance of their happening, are unallowable under non-construction grants. Contingency funds do not include pension funds, self-insurance funds, and normal accruals (also see Reserve Funds in this exhibit). (See also Construction Grants-Allowable and Unallowable Costs and Activities in IIB concerning contingency funds under construction grants).
This means that unless an individual NIH solicitation clearly states otherwise, paying for pre-award services such as proposal preparation are unallowable costs and federal award funds can not be used to cover these costs. The NIH’s decision to create this allowable cost guideline is supported by both ethical guidelines from the Grant Professionals Association (GPA) and pure logic. Here are several reasons why contingency-based payments for proposal preparation simply do not make sense.
- Grant preparation professionals apply their best effort to ALL proposals with the intent to secure funding. A contingency-based payment lends itself to the incorrect notion that a true professional would “try harder” for the promise of a larger payment.
- Both clients and proposal preparers have absolutely no control over which proposals are awarded and which are not. While grant professionals do everything in their power to write a winning proposal by following guidelines and illustrating the project’s merits thoroughly, once a proposal is submitted, the rest is out of their (and the client’s) control. The review panel is a separate entity that can approve or deny any proposal and is out of the control of applicants – so how can one justify paying an additional fee to the proposal preparation expert for something that the reviewers (not proposal preparation team) do? An additional fee somehow falsely implies that those who prepare the proposal have some control over the reviewer’s decision, which is completely untrue and highly illogical.
- For ethical reasons, it would be inappropriate on the part of an applicant to have a proposal preparation expert to accept funds that are coming out of an award. It is well known that these costs are not allowable (at least on the part of the grant writer) since federally awarded funds do not cover costs incurred before the award. The unfortunate effect of award money being used fraudulently to pay for proposal preparation is that it takes funding away from the project itself. These awards are meant to fuel novel scientific innovations and high-level research and development that could have a positive impact on society at large. What a shame to waste them on illegal and unethical payments for unscrupulous people.
- The applicant could face unpleasant legal implications from misappropriating funds in this way, regardless of whether or not they were aware that what they were doing was illegal or unethical. Should the applicant ever be audited, this unallowable service fee would be apparent and could land the applicant in legal trouble. The applicant may even be liable for paying back the misappropriated funds.
- Proposal preparation is a service like any other. Payment for services rendered should occur in full at the time of service. A client wouldn’t pay their personal trainer more if they won a road race, so why would a client be expected to pay an additional fee to their grant writer if an award was won?
E.B. Howard Consulting takes pride in upholding all ethical guidelines and staying informed on individual agency guidelines. As an accredited member of the GPA we are bound by the ethical guidelines therein. Each member of the team receives ongoing training and professional development to improve their knowledge as it relates to both ethical considerations and NIH (and other agency) policy guidelines. We will never ask any client for a contingency-based payment (in fact we have turned clients down for offering them) and we help every client understand the guidelines and limitations that accompany the use of federal SBIR dollars.
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