NIH Grants Policy Statement
Part II: Terms and Conditions of NIH Grant Awards
Some of the terms and conditions for grants to for-profit (commercial) organizations vary from the standard terms and conditions included in IIA. In addition, the terms and conditions of the SBIR and STTR programs vary from those otherwise applicable to for-profit organizations. This chapter addresses separately the policies applicable to for-profit organizations generally, and those that apply to SBIR and STTR awards specifically. It also highlights several policies in IIA that apply equally to for-profit and non-profit recipients. If an exception is not stated below or in the NoA, the terms and conditions specified in IIA apply, including requirements for the protection of human subjects and animal welfare.
For-profit organizations are eligible to apply under all NIH programs and support mechanisms unless specifically excluded by statute.
There are no cost principles specifically applicable to grants to for-profit organizations. Therefore, the cost principles for commercial organizations set forth in the FAR (48 CFR part 31.2) generally are used to determine allowable costs under NIH grants to for-profit organizations. As provided in those costs principles, allowable travel costs may not exceed those established by the FTR (available on-line at http://gsa.gov/portal/content/104790). The cost principles in 45 CFR part 74, Appendix E, are used to determine allowable costs under NIH grants to proprietary hospitals.
As provided in 45 CFR part 74.27(a), NIH does not allow for-profit organizations to be reimbursed for IR&D (self-sponsored) costs.
F&A costs are allowable under awards to for-profit organizations.
Except for grants awarded under the SBIR/STTR programs, under an NIH grant, no profit or fee will be provided to a for-profit organization, whether as a grantee or as a consortium participant. A profit or fee under a grant is not a cost, but is an amount in excess of actual allowable direct and F&A costs. In accordance with normal commercial practice, a profit/fee may be paid to a contractor under an NIH grant providing routine goods or services to the grantee.
For-profit organizations generally are subject to the same administrative requirements as non-profit organizations, including those relating to personal property title and management. Exceptions to or elaboration of those requirements for for-profit organizations are indicated below.
For-profit grantees of NIH grants are nonexempt and subject to the requirements in 45 CFR part 74.34, as well as the conditions set forth in Administrative Requirements—Management Systems and Procedures—Property Management System Standards and Administrative Requirements—Management Systems and Procedures—Procurement Systems Standards and Requirements in IIA. Under the conditions specified in 45 CFR part 74.34, for-profit grantees are permitted to retain title to equipment purchased under a research grant though NIH reserves the right to order the transfer of equipment, including title, to NIH or an eligible third party named by the NIH awarding office when such third party is otherwise eligible under existing statutes. In keeping with the provisions of 45 CFR part 74.24, for-profit grantees must not use equipment acquired with NIH funds to provide services to non-Federal organizations for a fee to compete unfairly with private companies that provide equivalent services, unless the terms and conditions of the award provide otherwise, and any user charges shall be treated as program income and must be reported on the FSR. Conditions for the sale of equipment are specified at Administrative Requirements—Management Systems and Procedures—Sale of Real Property, Equipment, and Supplies in IIA.
Intellectual property requirements set forth in 37 CFR part 401 apply to for-profit organizations, whether small businesses or large businesses. However, invention reporting requirements for for-profit organizations differ somewhat from those for non-profit organizations. When the grantee is a for-profit organization, assignment of invention rights to a third party does not require NIH approval, but ongoing reporting remains a requirement for each invention. (See Administrative Requirements—Availability of Research Results: Publications, Intellectual Property Rights, and Sharing Research Resources in IIA.) Additional information about the requirements of 37 CFR part 401 may be obtained from the Division of Extramural Inventions and Technology Resources, OPERA, NIH (see Part III for address and telephone number).
To the extent authorized by law, the Federal government will not make public any information disclosing a Federal government-supported invention.
Consistent with NIH Standard Terms of Award, for-profit grantees, including those under the SBIR/STTR programs, are subject to the additive alternative for the use of program income described in Administrative Requirements—Management Systems and Procedures—Program Income in IIA.
Awards to for-profit organizations are subject to NIH Standard Terms of Award; however, some mechanisms do not allow automatic carryover of unobligated balances of funds. Under those mechanisms, the NIH awarding IC will specify the disposition of the reported unobligated balance in the NoA. (See Administrative Requirements—Changes in Project and Budget in IIA).
The requirements for non-Federal audits of for-profit organizations are specified in 45 CFR part 74.26(d). A for-profit organization is required to have a non-Federal audit if, during its fiscal year, it expended a total of $500,000 or more under one or more HHS awards (as a direct grantee and/or under a consortium participant) and at least one of those awards is an HHS grant. 45 CFR part 74.26(d) incorporates the thresholds and deadlines of OMB Circular A-133 but provides for-profit organizations two options regarding the type of audit that will satisfy the audit requirements. The grantee either may have (1) a financial-related audit (as defined in, and in accordance with, the Government Auditing Standards (commonly known as the "Yellow Book"), GPO stock 020-000-00-265-4, of a particular award in accordance with Government Auditing Standards, in those cases where the recipient receives awards under only one HHS program, or (2) an audit that meets the requirements of OMB Circular A-133.
OMB Circular A-133 is available electronically at http://www.whitehouse.gov/sites/default/files/omb/assets/a133/a133_revised_2007.pdf.
The Government Auditing Standards are available electronically at http://www.gao.gov/govaud/ybk01.htm. Audits must be completed and submitted to the National External Audit Review Center within 30 days after receipt of the auditor's report(s), or 9 months after the end of the audit period, i.e., the end of the organization's fiscal year, whichever is earlier. The address is found in Part III.
For-profit organizations expending less than $500,000 a year are not required to have an annual audit for that year but must make their grant-related records available to NIH or other designated officials for review or audit.
NIH is required by statute to reserve a portion of its annual extramural budget for projects under the SBIR and STTR programs. These programs primarily are intended to encourage private-sector commercialization of technology and to increase small business participation in federally funded R&D.
Both the SBIR and STTR programs consist of the following three phases:
There are two major differences between the SBIR and STTR programs:
The NIH Fast-Track application process expedites award decisions and funding of SBIR and STTR Phase II applications for scientifically meritorious projects that have a high potential for commercialization. The Fast-Track process allows Phase I and Phase II grant applications to be submitted and reviewed together. Fast-Track applications receive a single rating. Before submitting applications for Fast-Track review, applicants are strongly encouraged to consult with cognizant NIH program staff. to assure Fast-Track is appropriate. For additional information on the submission of Fast-Track applications, see the SF424 (R&R) SBIR/STTR Application Guide available at http://grants.nih.gov/grants/funding/sbir.htm.
Only United States small business concerns (SBCs) are eligible to submit SBIR and STTR applications. A small business concern is one that, at the time of award for both Phase I and Phase II SBIR awards, meets all of the following criteria. If it appears that an applicant organization does not meet the eligibility requirements, NIH will request a size determination by the SBA. If eligibility is unclear, NIH will not make an SBIR or STTR award until the SBA provides a determination.
For both Phase I and Phase II SBIR/STTR awards, the research or R&D project activity must be performed in its entirety in the United States . (The United States is defined as the 50 States, the territories and possessions of the United States , the Commonwealth of Puerto Rico, the Federated States of Micronesia , the Republic of Palau, the Republic of the Marshall Islands , and the District of Columbia.)
In those rare instances where the study design requires use of a foreign site (e.g., to conduct testing of specific patient populations), the investigator must provide compelling scientific justification in the application for the need/use of a foreign site. Similarly, in those rare instances where it may be necessary to purchase materials from other countries, investigators must thoroughly justify the request. NIH will consider these instances on a case-by-case basis, and they should be discussed with cognizant NIH staff before submitting an application. Approval will not be considered unless the application is being considered for an award. IC program officials have the authority to approve these waiver requests. Whether the request is approved or disapproved, it will be explicitly addressed in the NoA if an award is made. Whenever possible, work outside the United States , which is necessary to the completion of the project, should be supported by funding other than SBIR/STTR.
Applicant organization eligibility is determined at the time of the initial SBIR/STTR award. If a legal action occurs such as a merger or successor-in-interest, that changes the organization status so that they are no longer eligible for the SBIR/STTR programs, existing SBIR/STTR grants can continue. However, the organization would no longer be eligible for any new SBIR/STTR grants.
When there is a desire to transfer an SBIR/STTR grant to a different organization, the new organization must continue to meet the SBIR/STTR program eligibility requirements. Grantees should contact the NIH awarding office to discuss options when considering a move to a new organization.
Generally, under SBIR Phase I awards, a minimum of two-thirds or 67 percent of the research or analytical effort must be carried out by the SBC. Payments, in the aggregate, to consultants, consortium participants and contractors for portions of the scientific/technical effort generally may not exceed 33 percent of the total requested amount.
Generally under SBIR Phase II awards a minimum of one-half or 50 percent of the research or analytical effort must be carried out by the SBC. In addition, payments, in the aggregate, to consultants, consortium participants, and contractors for portions of the scientific/technical effort generally may not exceed 50 percent of the total requested amount.
For STTR awards (both Phase I and Phase II), at least 40 percent of the work must be performed by the SBC and at least 30 percent of the work must be performed by the single, non-profit research institution. These percentages are Congressionally mandated and waivers are not permitted. The basis for determining the percentage of work to be performed by each of the cooperating parties is the total of direct and F&A costs attributable to each party, unless otherwise described and justified in the "Consortium/Contractual Arrangements" portion of the of the grant application.
The Multiple Program Director/Principal Investigator (multiple PD/PI) option is available for NIH SBIR/STTR applicants for team science efforts. All of the policy and requirements described in Multi PD/PI apply to SBIR/STTR projects, with the exception of sections that are not relevant to the SBIR/STTR program (e.g., new investigators, multi-project applications). In addition, the following criteria apply to multiple PD/PI SBC applicants and awards:
For-profit organizations receiving SBIR/STTR awards generally are subject to the same public policy requirements as non-profit organizations. However, the requirements concerning disclosure of financial conflicts of interest (see Public Policy Requirements, Objectives, and Other Appropriation Mandates—Financial Conflict of Interest in IIA) do not apply to applications or awards under Phase I of the SBIR/STTR programs. The requirements do, however, apply to Phase II applications and awards.
SBA SBIR and STTR Policy Directives provide program levels for SBIR and STTR programs based on statutory guidelines. However, these directives also give agencies discretion to exceed these levels when the proposed budget and requested period of support are fully justified and scientifically appropriate in relation to the proposed research. In general the levels are:
Some ICs offer Phase II SBIR/STTR awardees the opportunity to apply for Phase II Competing Renewal awards. These are available for those projects that require extraordinary time and effort in the R&D phase and may or may not require FDA approval for the development of such projects, including drugs, devices, vaccines, therapeutics, and medical implants related to the mission of the IC. Only those small business concerns who have been awarded a Phase II are eligible to apply for the Phase II Competing Renewal award. Program levels are:
Applicants must request an appropriate level in the competing application; applications will not be adjusted after submission.
A reasonable profit or fee may be paid to a SBC receiving an award under Phase I or Phase II of the SBIR and STTR programs. The profit or fee is not considered a "cost" for purposes of determining allowable use, program income accountability, or audit thresholds. The profit or fee may be used by the SBC for any purpose, including additional effort under the SBIR/STTR award. It is intended to provide a reasonable profit consistent with normal profit margins for for-profit organizations for R&D work; however, the amount of the profit or fee normally will not exceed seven (7) percent of total costs (direct and F&A) for each phase of the project. The profit or fee should be drawn from PMS in increments proportional to the drawdown of funds for direct and F&A costs. The profit or fee applies solely to the SBC receiving the SBIR/STTR award and not to any other participant; however, in accordance with normal commercial practice, the SBC may pay a profit or fee to a contractor providing routine goods or services to the SBC under the grant.
If the applicant SBC has a currently effective F&A cost rate(s) with a Federal agency, such rate(s) should be used when calculating proposed F&A costs for an NIH application. NIH ICs use the term F&A costs for all types of applicants and recipients; however, for-profit organizations will find that DFAS and organizations external to NIH refer to these costs as indirect costs. (However, the rates(s) must be adjusted for IR&D expenses, which are not allowable under HHS awards.) If the applicant SBC does not have a currently effective negotiated indirect cost rate with a Federal agency, the applicant should propose estimated F&A costs at a rate not to exceed 40 percent of the total direct costs. However, SBCs are reminded that only actual F&A costs are to be charged to projects. (If awarded at a rate of 40 percent or less, the rate used to charge actual F&A costs to projects cannot exceed the awarded rate unless the SBC negotiates an indirect cost rate(s) with a Federal agency.) NIH will not negotiate indirect cost rates for Phase I awards.
If the applicant SBC has a currently effective negotiated indirect cost rate(s) with a Federal agency, such rate(s) should be used when calculating proposed F&A costs for an NIH application. (However, the rates(s) must be adjusted for IR&D expenses, which are not allowable under HHS awards.) If the applicant SBC does not have a currently effective negotiated indirect cost rate with a Federal agency, the applicant should propose an estimated F&A rate in the application. If the requested F&A cost rate is 40 percent of total direct costs or less, no further justification is required at the time of award, and F&A costs will be awarded at the requested rate. However, SBCs are reminded that only actual F&A costs may be charged to projects. If awarded at a rate of 40 percent or less of total direct costs, the rate used to charge actual F&A costs to projects cannot exceed the awarded rate unless the SBC negotiates an indirect cost rate(s) with DFAS. DFAS—the office authorized to negotiate indirect cost rates with SBC's receiving NIH SBIR/STTR awards—will negotiate indirect cost rates for SBCs receiving Phase II awards that requested a rate greater than 40 percent of total direct costs.
Upon request, the applicant SBC should provide DFAS with an indirect cost proposal and supporting financial data for its most recently completed fiscal year. If financial data is not available for the most recently completed fiscal year, the applicant should submit a proposal showing estimated rates with supporting documentation. Further information about DFAS is available at its Web site or by telephone (see Part III).
For-profit organizations that receive SBIR/STTR awards generally are subject to the same administrative requirements as non-profit organizations.
NIH will not support market research, including studies of the literature that lead to a new or expanded statement of work, under the grant. For purposes of the SBIR/STTR programs, "market research" is the systematic gathering, editing, recording, computing, and analyzing of data about problems relating to the sale and distribution of the subject of the proposed research. It includes various types of research, such as the size of potential markets and potential sales volume, the identification of consumers most apt to purchase the products, and the advertising media most likely to stimulate their purchases. However, "market research" does not include activities under a research plan or protocol that include a survey of the public as part of the objectives of the project to determine the impact of the subject of the research on the behavior of individuals.
Rights to data, including software developed under the terms of any funding agreement resulting from an NIH award, shall remain with the grantee except that any such copyrighted material shall be subject to a royalty-free, nonexclusive and irrevocable license to the Federal government to reproduce, publish or otherwise use the material, and to authorize others to do so for Federal purposes. In addition, under the SBIR/STTR programs, in contrast to awards to for-profit organizations under other support mechanisms, such data shall not be released outside the Federal government without the grantee's permission for a period of 4 years from completion of the project.
Rights in Data Developed Under SBIR Funding Agreement. The Small Business Innovation Research Program Reauthorization Act of 2000, Public Law 106-554, amended section 9 of the Act (15 U.S.C. 638), referred to as the "Act" provides for "retention by an SBC of the rights to data generated by the concern in the performance of an SBIR award."
The STTR program requires that the small business grantee and the single, non-profit research institution execute an agreement allocating between the parties intellectual property rights and rights, if any, to carry out follow-on research, development, or commercialization of the subject research. (A model agreement, entitled "Allocation of Rights in Intellectual Property and Rights to Carry Out Follow-On Research, Development, or Commercialization," is available at the NIH Web site at http://grants.nih.gov/grants/funding/sbir.htm.) By signing the face page of the grant application, the SBC's AOR certifies that the agreement with the research institution will be effective at the time the grant award is made. A copy of the agreement must be furnished upon request to the NIH awarding IC.
SBIR/STTR grantees are covered by 35 U.S.C. 200-212 and 37 CFR part 401 with respect to inventions and patents (see Grants to For-Profit Organizations—Administrative Requirements—Intellectual Property in this chapter).
Applicants for SBIR Phase II funding of $500,000 or more of direct costs in any single year must comply with the NIH policy on data sharing as modified by the Small Business Act. If the final data would not be amenable to sharing, e.g., proprietary data, the SBC should explain that in the application. In addition, as indicated under Intellectual Property in this chapter, whether or not the award meets the threshold for data sharing, NIH will not release data outside the Federal government without the grantee's permission for a period of 4 years from completion of the project. The entire policy may be found at http://grants.nih.gov/grants/policy/data_sharing.