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November 29, 2023

Can Subcontractors Be Used to Perform SBIR Grants?

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When performing SBIR grants, small businesses can collaborate with other organizations through subcontracting to meet project needs, subject to agency-specific limitations. Small businesses must select capable subcontractors, maintain project oversight, report subcontractor details, manage all costs, and address intellectual property concerns while adhering to agency guidelines for successful project execution.

sbirAll of the SBIR agencies allow you to subcontract work to other organizations when performing SBIR grants . Since each agency is responsible for administering the Small Business Innovation Research (SBIR) program, the rules vary slighty by agency. Therefore, you should review your agency’s rules that allow small businesses to collaborate with other organizations, including subcontracting to meet specific project needs. Here are a few caveats you’ll need to consider when developing a subcontracting plan.

Key Points about Subcontracting Work in SBIR Grants

  1. SBIR Grant Eligibility

    The primary awardee must be a small business, and the work must be performed by the small business. However, subcontracting is allowed to meet specific project requirements, such as utilizing outside SMEs to augment your research team.

  2. Subcontracting Limitations

    SBIR grants typically allows for a certain percentage of the work to be subcontracted. The specific subcontracting limitations can vary depending on the agency, so it's essential to review the terms and conditions of your SBIR grant award to understand the allowable subcontracting percentages. Typically, the principal researcher required to do the work described in the grant must be an employee of the small business receiving the award. In addition, the small business must perform at least fifty-one percent of the work required. These requirements however vary by agency.

  3. Subcontractor Selection

    You have the flexibility to augment your capabilities by selecting subcontractors that can provide the expertise or resources necessary to complete the research project successfully. Ensure that your subcontractors have the required capabilities and meet any agency-specific requirements. You should document your specific requirements as well as the criterion that was used to select your subcontractor(s). Typically, this information needs to be included in your SBIR proposal when it is submitted for evaluation.

  4. Oversight

    While you can subcontract work, you are still responsible for the overall management and performance of the SBIR project. This includes ensuring that subcontractors meet their obligations and deliverables as well as managing the overall project budget. Make sure you have clearly defined the scope of work that will be done by your subcontractor(s) and worked with them to establish an adequate budget that can be used to hold your subcontract(s) accountable. Failing to adequately think through these details will jeopardize your ability to meet your contract obligations.

  5. Reporting

    analysisYou may need to provide information about subcontractors, their roles, and their proposed compensation as part of your SBIR proposal. Be prepared to outline the subcontracting plan in your proposal and adhere to the reporting requirements of the funding agency. The reporting requirements can be quite detailed. So you’ll need to put in place project management and accounting systems to satisfy these requirements. 

    If your award was made using a cost-reimbursable contract, then you’ll need to implement a DCAA compliant accounting system that complies with the government’s cost accounting standards. SBIR awards made using cost-reimbursable contracts will be subject to compliance audits, so you’ll need to be prepared to support this audit. The following links provide more information on DCAA Accounting System and the SBIR Grant Audit Requirements

  6. Cost Considerations

    Subcontracting costs may be part of your budget proposal. Ensure that you include subcontracting costs in your budget and justify the need for subcontractors in your project plan. Most of the SBIR agencies allow you to apply general and administrative (G&A) indirect cost to your subcontractor’s cost. When preparing the SBIR proposal you should carefully review the instructions for preparing your cost proposal.

  7. Intellectual Property (IP)

    Be mindful of any IP considerations when subcontracting work. Understand how IP rights will be handled between your small business and the subcontractors and ensure that any IP agreements are documented appropriately.

It's essential to consult the specific agency's SBIR program guidelines and your contract officer to fully understand the subcontracting rules and requirements for your SBIR project, as they may vary slightly between agencies.

Additionally, keeping clear documentation of subcontractor agreements and performance is crucial for successful project execution and compliance with SBIR program regulations.

Learn more about SBIR Commercialization

How Early Compliance Avoids SBIR Delays

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