Each of the 11 agencies that participate in the SBIR (Small Business Innovation Research) program have their own individual policy and guidelines regarding all allowable costs, including pre-award costs. Pre-award costs are any cost the company incurred prior to winning an award. This includes services rendered for business consultation or proposal preparation. By examining the clauses of the policy document, it can be determined what kind of professional service costs are allowable.
While consultant fees are allowable throughout the project, there are guidelines to adhere to regarding how these fees must be handled. It is always preferred that employees not consultants perform work whenever possible. If the applicant foresees a need for continuous consulting services, a scope of work and documentation of ongoing services rendered must be available to support any costs involved in a retainer fee for consultants. This means a one-time service like proposal preparation is not an allowable consultant cost. Proposal preparation costs are a pre-award cost, and as such, any federal funds awarded can not be used to cover this cost as per NSF guidelines. The excerpt below illustrates NSF pre-award guidelines:
602.2 Pre-Award Costs
a. Grantees may incur allowable pre-award costs within the 90 day period immediately preceding the effective date of the grant providing: (1) the approval of pre-award spending is made and documented in accordance with the grantee’s procedures; and (2) the advanced funding is necessary for the effective and economical conduct of the project.
https://www.nsf.gov/pubs/2002/nsf02151/gpm6.jsp
b. Pre-award expenditures are made at the grantee’s risk. Grantee authority to approve pre-award costs does not impose an obligation on NSF: (1) in the absence of appropriations; (2) if an award is not subsequently made; or (3) if an award is made for a lesser amount than the grantee anticipated. c. Requests for pre-award costs for periods exceeding 90 calendar days must be submitted electronically via use of the Notification and Request module in FastLane. Pre-award expenditures prior to funding of an increment within a continuing grant are not subject to this limitation or approval requirement, but are subject to paragraph b. above.
This means that the practice of contingency-based payments for proposal preparation services are not only unethical for a variety of reasons, but also illegal on a federal level. Should an audit occur on a company who chose to disregard this policy, the legal implication will likely take place, including the possibility of having to repay the misappropriated funds.
Contingency-based payments for these types of services are also both unethical and illogical. Many proposal preparation specialists are grant writing professionals. Here is what the Grant Professionals Association (GPA) code of conduct has to say about contingency-based payments:
Compensation:
Members shall work for a salary or fee.
Members may accept performance-based compensation, such as bonuses, provided such bonuses are in accordance with prevailing practices within the members’ own organizations and are not based on a percentage of grant monies.
Members shall not accept or pay a finder’s fee [3], commission [4], or percentage compensation based on grants and shall take care to discourage their organizations from making such payments.
Compensation should not be written into grants unless allowed by the funder.
https://grantprofessionals.org/general/custom.asp?page=ethics
As with any service, full payment for proposal preparation should be provided at the time services are rendered. This means paying for proposal preparation before you submit the proposal, not after the award. Grant proposal professionals put their best effort forth in every proposal with the hopes the client will win an award. They can not “try harder” for the promise of more money if they are already doing their best. Furthermore, grant writers and applicants alike have absolutely zero control over the outcome of the application. The final decision to award a proposal or not rests in the hands of the reviewers. It seems absurd for a client to pay an additional fee to a grant writer for a decision a reviewer, not the grant writer, made.
Reading and understanding all policy guidelines when applying for NSF or any other federal funding is of the utmost importance. Ignorance of the policy is no excuse for breaking the law or your organization’s code of ethics. E.B. Howard Consulting has a strong commitment to both ethics and knowledge. Our staff undergoes ongoing professional development to stay knowledgeable regarding NSF SBIR and other federal guidelines and policies and adheres to a strict code of ethics.
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.