SBIR Proposal Writing Basics

SBIR Proposal Writing Basics: Limits on Using Federal Labs on SBIR Projects

Gail & Jim Greenwood, Greenwood Consulting Group, Inc.

As many of you know, it is permissible and often advisable to subcontract part of an SBIR award to another entity to bolster your credentials (and ability) for performing your innovative project. On a Phase 1 SBIR award, you can subcontract up to 1/3 of the project, while on a Phase 2 you can subcontract up to ½ of the project. The rules are different for STTR, but we’re focusing on SBIR in this article.

One of the sticky parts of subcontracting on an SBIR project is when you try to sub to a Federal Laboratory. In years past, you had a lot of freedom to propose a Federal Lab as a subcontractor, but those rules have changed.

First, we need to clarify that there are different types of Federal Laboratories. Our focus in this article is on Federally Funded Research and Development Centers , or FFRDCs. Sometimes also known as Government Owned, Contractor Operated (or GOCOs), these Federal Labs are distinguished by their workers being employees of a third-party contractor who runs the Lab under contract to the Federal Government. For example, Sandia National Laboratories is run by Lockheed Martin Corporation, with Lockheed under contract with the Federal government (specifically the U.S. Department of Energy). The other type of Federal Laboratory is referred to as Government Owned, Government Operated (GOGO), where the workers at the Lab are employees of the Federal government.

Fun facts, no? Well, the reason we’ve enlightened you is because you generally cannot use a GOGO as a subcontractor on your SBIR award. But when it comes to GOCOs or FFRDCs, there are opportunities to use them.

Basically, the recent policy directive from the US Small Business Administration (SBA) says that you cannot use FFRDCs/GOCOs as subcontractors on your SBIR project unless you get a waiver from SBA to do so. The waiver basically requires that you demonstrate that the FFRDC/GOCO has unique capabilities that you cannot get elsewhere in the United States , and that you were not coerced into using the FFRDC/GOCO on your project.

The bad news is that you have to get the waiver. The good news is that they are generally granted, provided you meet the uniqueness/no coercion criteria. So if you are willing to jump through this additional hoop, you are generally allowed to use FFRDCs/GOCOs when it is justifiable to do so.

Oh, there’s a little bit of additional bad news: some agencies do not like to make awards to SBIR proposers who have included FFRDCs/GOCOs on their projects. Sometimes the agency to which you are submitting the proposal, and the agency that funds the FFRDC/GOCO to which you are intending to subcontract, do not see eye-to-eye.

We’ll close with some words of advice.

First, do not shy away from using FFRDCs/GOCOs on your SBIR proposal if you feel you can meet the uniqueness/no coercion tests. We taxpayers spend a lot of money every year funding these Federal Laboratories, and they have some incredible talent and resources that you should use in your SBIR projects when it makes sense to do so.

Second, be prepared to jump through the SBA waiver hurdle if you do use an FFRDC/GOCO. They aren’t too onerous, and we’d be happy to refer you to a friend who has a 100% success record getting waivers approved by SBA, if you want to tap into this person’s knowledge and abilities.

Third, before you include an FFRDC/GOCO on your proposal, talk with the agency to which you are submitting it to get some sense for its receptiveness to inclusion of the Federal Lab on your proposal. Some folks are happy to consider SBIR proposals with FFRDCs on them, while others are, well, remember that “bad blood” thing we mentioned earlier.

Finally, now that you know of the sensitivity of using FFRDCs/GOCOs on SBIR proposals, we strongly recommend that you do an extra good job of justifying the use of a particular Federal Lab in your proposal. Don’t just say “we’re going to use Los Alamos National Lab because they seem like nice people,” but instead specify what expertise/resources LANL can bring to your project that you can’t get elsewhere and that could mean the difference between success or failure of your innovative approach to solving an important problem.