We talk to hundreds of NIH grantee recipients every year and the most common mistake they make is to accept the “no questions asked” 40% indirect rate when they propose their grants.
We equate the 40% rate to be analogous to a size 4 shoe. The government encourages you to wear it, but it fits very few businesses.
As the grantees that we speak to at our webinars realize that the 40% rate will substantially limit the success of their business, they frequently make their second most common mistake – they decide to wait until they receive a fundable priority score before taking action to request a higher rate.
Try to put yourself in the Government’s shoes….the grantee was ok with the 40% indirect rate when they proposed the grant and when they realized that they won, now they want to re-negotiate the price.
The government’s response is about what you’d expect if you were treated that way. They will provide a 10% temporary indirect rate until the new rate is negotiated. And DFAS, the audit arm of NIH, is usually backlogged for better than 12 months, so now your choices are bad and worse. Talk about two wrong turns!
The right way to correct your mistake is to proactively project the right indirect rate for your business, make the submission and get yourself into DFAS’s cue. Then relax – they won’t take action on your information until a grant specialist calls them for indirect rate information on your company.
When you receive a notice from you grant specialist that your proposal score is within the funding pay line, we can let the grant specialist know about the mistake in the cost portion of your proposal and call DFAS and request that your indirect rate increase be considered immediately. The logic being – you proactively attempted to correct the mistake you made when you filled out the cost portion of the proposal. The government wants to do business with you and they don’t want to harm you, so they will respond (if you call the right people).
Please help yourself and download the indirect rate projection template from the “free” section of our website to get started. It’s about a 20 minute exercise and can add hundreds of thousands of dollars to your phase 2 award.
Ed Jameson, CPA
- SBIR 102-2: Negotiating an Indirect Rate for SBIR’s »
- SBIR 102-1: How Past Indirect Rates Effect Future Rate Negotiations »
- SBIR 102-4: Projecting Indirect Rates for the Cost Portion of Your Next Proposal »
- Phase 2 Cost Proposal Questions? Get our Free Indirect Rate Worksheet »
- “$400,000 – that’s on every proposal – right?” »