Get Real on your SBIR Indirect Rates

You drive your indirect rates for your SBIR award, not vice-versa.  The normal course of your business activities will determine your indirect rate needs based on the stage of your business.

For example, if you are a first time Phase I business, a 40% safe-harbor F & A rate for NIH (50% salaries and wages for NSF and no safe-harbor for DOD and DHS) should be more than sufficient as benefit and facility needs are minimal given limited full-time equivalents. For first-time Phase II organizations, safe harbor rates are typically adequate. However, key drivers are employee benefits and facility costs (lab space, etc.) that may push you into a negotiation with the government.

As companies mature, benefit, facility and administration costs continue to increase, placing upward pressure on your indirect rates. With that said, a strong understanding of how your business operates and its key cost drivers will help you understand how indirect costs are created, thus computed. Proper planning will avoid your company’s operations being driven by its indirect rates, leading to a greater focus on research and commercialization.

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