Prepare to Negotiate

Once a proposal is selected for award, generally it is sent to the agency grants/contracts office. Here, the agency personnel will work with the small business representatives to establish a "grant" or "contract" between the SBIR agency and the proposing small business. Successfully achieving this result is contingent on terms of the grant/contract being satisfactorily "negotiated" between the agency and the small business.

Consequently, it is important for small businesspersons to be PREPARED to discuss and negotiate terms of a grant/contract when the call comes from agency representatives about a possible SBIR award.

A key part of these discussions usually focuses on the cost proposal. The small businessperson should have a solid basis for all the cost numbers proposed, so that they can be easily defended if challenged. For example, are the proposed labor hours and mix of personnel consistent with the work to be performed? Are the labor rates in the competitive range and substantiated for each labor category proposed? Is there a basis for non-labor direct costs proposed (e.g., are vendor quotes available)? Are the indirect costs realistic, and based on careful projections or actual indirect cost history?

Is the proposed fee consistent with the agency guidelines for SBIR awards?

Another key part of the discussions with the agency about the grant/contract can be the payment schedule. Some agencies allow flexibility on the invoicing and payment schedule established for a grant or contract. Proper negotiation of the payment terms can have an important effect on cash flow management at the small business.

Generally, Phase 1 negotiations are quite straight forward. However, in Phase 2 (where the dollar amounts are more sizable, up to $750,000), the grant/contract negotiations generally will be more rigorous and substantive.

For both Phase 1 and Phase 2 awards, it is good business practice to be well prepared to address any questions or issues that may arise in the negotiation process.

Inability to defend proposed costs and other proposed terms and conditions may result in unnecessary sacrifices by the small business in the resulting grant/contract. So, be well prepared to discuss and negotiate the SBIR grant/contract with the agency - it will pay off and is good business.