25366 Federal Register / Vol. 61, No. 98 / Monday, May 20, 1996 / Rules and Regulations

DEPARTMENT OF AGRICULTURE

Cooperative State Research,

Education, and Extension Service

7 CFR Part 3403

Small Business Innovation Research

Grants Program; Administrative

Provisions

AGENCY: Cooperative State Research,

Education, and Extension Service,

USDA.

ACTION: Final rule.

SUMMARY: The Cooperative State

Research, Education, and Extension

Service (CSREES) is amending its

regulations relating to the

administration of the Small Business

Innovation Research (SBIR) Grants

Program, which prescribe the

procedures to be followed annually in

the solicitation of research grant

proposals, the evaluation of such

proposals, and the award of competitive

research grants under this program. This

rule amends those regulations by

encouraging the individuals who are

principally responsible for the scientific

or technical direction of the proposed

work to be designated as the principal

investigator, making it a condition that

Federal funds remain for an extension of

a Phase I grant and that an extension

will not normally exceed 12 months,

requiring that when purchasing

equipment or products with agreement

funds that only American-made items

are purchased to the extent possible,

and making a few additional changes.

CSREES is publishing these regulations

in their entirety in order to enhance

their use by the public and to ensure

expeditious submission and processing

of grant proposals.

(The CSREES was established by Pub. L.

103–354, the Federal Crop Insurance

Reform and Department of Agriculture

Reorganization Act of 1994, and the

functions of the Cooperative State

Research Service (CSRS) were

transferred to the CSREES by the

Secretary of Agriculture in the

Secretary’s Memorandum 1010–1,

October 20, 1994.)

EFFECTIVE DATE: May 20, 1996.

FOR FURTHER INFORMATION CONTACT:

Louise Ebaugh, Director, Office of

Extramural Programs, Cooperative State

Research, Education, and Extension

Service, U.S. Department of Agriculture,

AG Box 2245, Washington, DC 20250–

2245. Telephone: (202) 401–5024.

SUPPLEMENTARY INFORMATION:

Paperwork Reduction

Under the provisions of the

Paperwork Reduction Act of 1980 (44

U.S.C. Chapter 35), the collection of

information requirements contained in

this final rule have been approved

under OMB Document Nos. 0524–0022,

0524–0025, and 0524–0026.

Classification

This rule has been reviewed under

Executive Order 12866, and it has been

determined that it is not a ‘‘significant

regulatory action’’ rule because it will

not have an annual effect on the

economy of $100 million or more or

adversely and materially affect a sector

of the economy, productivity,

competition, jobs, the environment,

public health or safety, or State, local,

or tribal governments or communities.

This rule will not create any serious

inconsistencies or other wise interfere

with any actions taken or planned by

another agency. It will not materially

alter the budgetary impact of

entitlements, grants, user fees or loan

programs and does not raise novel legal

or policy issues arising out of legal

mandates, the President’s priorities, or

principles set forth in Executive Order

No. 12866. In addition, it will not have

a significant impact on a substantial

number of small entities as defined in

the Regulatory Flexibility Act, Pub. L.

96–534 (5 U.S.C. 601 et seq.). This rule

has been reviewed in accordance with

Executive Order No. 12778, Civil Justice

Reform, and the required certification

has been made to OMB. All State and

local laws and regulations that are in

conflict with this rule are preempted.

No retroactive effect is to be given to

this rule. This rule does not require

administrative proceedings before

parties may file suit in court.

Regulatory Analysis

Not required for this rulemaking.

Environmmental Impact Statement

This regulation does not significantly

affect the environment. Therefore, an

environmental impact statement is not

required under the National

Environmental Policy Act of 1969, as

amended.

Catalog of Federal Domestic Assistance

This program is listed in the Catalog

of Federal Domestic Assistance under

No. 10.212, Small Business Innovation

Research (SBIR Program). For the

reasons set forth in the Final Rulerelated Notice to 7 CFR Part 3015,

Subpart V, 48 FR 29115, June 24, 1983,

and pursuant to the Notice found at 52

FR 22831, June 16, 1987, this program

is excluded from the scope of Executive

Order 12372 which requires

intergovernmental consultation with

State and local officials.

Background and Purpose

On June 10, 1988, the Department

published a Final Rule in the Federal

Register (53 FR 21966–21972), which

established Part 3403 of Title 7, Subtitle

B, Chapter XXXIV of the Code of

Federal Regulations, for the purpose of

administering the U.S. Department of

Agriculture’s Small Business Innovation

Research (SBIR) Grants Program

conducted under the authority of the

Small Business Innovation Development

Act of 1982, as amended (15 U.S.C. 638)

and section 630 of the Act making

appropriations for Agriculture, Rural

Development, and Related Agencies’

programs for fiscal year ending

September 30, 1987, and for other

purposes, as made applicable by section

101(a) of Pub. L. No. 99–591, 100 Stat.

3341. This rule established and codified

the procedures to be followed in the

solicitation of competitive small

business innovation research proposals,

the evaluation of such proposals, and

the award of grants under this program.

On September 20, 1991, the Department

published a Final rule in the Federal

Register (56 FR 47882–47889), which

amended the Cooperative State Research

Service (CSRS) regulations relating to

the Small Business Innovation Research

Grants Program. On December 30, 1994,

the Department published a Final Rule

in the Federal Register (59 FR 68072)

which amended 7 CFR Chapter XXXIV

to reflect the abolishment of CSRS and

the establishment of CSREES. On

August 17, 1995, the Department

published a notice in the Federal

Register (60 FR 42990) requesting

comments on proposed revisions to the

Proposed Rule—Small Business

Innovation Research (SBIR) Grants

Program. Interested parties were invited

to submit comments. The Department

received one comment from a Federal

agency. The comment was considered in

developing this final revision.

Comment and Response

General

Comment: The commentor suggested

that the rule be amended to associate

award eligibility and approval

procedures more closely with

performance and financial

accountability.

Response: This comment requires a

thorough examination since it has farreaching implications not only for the

SBIR program but for other
Federal Register / Vol. 61, No. 98 / Monday, May 20, 1996 / Rules and Regulations 25367

Departmental programs. The

Department is currently establishing a

committee to evaluate and consider the

suggestions and will respond directly to

the commenting agency when

appropriate. If further changes to the

program are deemed necessary, the

Department will publish a proposed

amendment to the SBIR rule and invite

public comments.

List of Subjects in 7 CFR Part 3403

Grant Programs—Agriculture, Grant

administration.

For the reasons set out in the

preamble, Title 7, Subtitle B, Chapter

XXXIV, Part 3403 of the Code of Federal

Regulations is revised to read as follows:

PART 3403—SMALL BUSINESS

INNOVATION RESEARCH GRANTS

PROGRAM

Subpart A—General Information

Sec.

3403.1 Applicability of regulations.

3403.2 Definitions.

3403.3 Eligibility requirements.

Subpart B—Program Description

3403.4 Three-phase program.

Subpart C—Preparation and Submission of

Proposals

3403.5 Requests for proposals.

3403.6 General content of proposals.

3403.7 Proposal format for phase I

applications.

3403.8 Proposal format for phase II

applications.

3403.9 Submission of proposals.

Subpart D—Proposal Review and

Evaluation

3403.10 Proposal review.

3403.11 Phase I evaluation criteria.

3403.12 Phase II evaluation criteria.

3403.13 Availability of information.

Subpart E—Supplementary Information

3403.14 Terms and conditions of grant

awards.

3403.15 Notice of grant awards.

3403.16 Use of funds; changes.

3403.17 Other Federal statutes and

regulations that apply.

3403.18 Other conditions.

Authority: 5 U.S.C. 638.

Subpart A—General Information

§ 3403.1 Applicability of regulations.

(a) The regulations of this part apply

to small business innovation research

grants awarded under the general

authority of section 630 of the Act

making appropriations for Agriculture,

Rural Development, and Related

Agencies’ programs for fiscal year

ending September 30, 1987, and for

other purposes, as made applicable by

section 101(a) of Public Law 99–591,

100 Stat. 3341, and the provisions of the

Small Business Innovation Development

Act of 1982, as amended (15 U.S.C.

638). The Small Business Innovation

Development Act of 1982, as amended,

mandates that each Federal agency with

an annual extramural budget for

research or research and development in

excess of $100 million participate in a

Small Business Innovation Research

(SBIR) program by reserving a statutory

percentage of its annual extramural

budget for award to small business

concerns for research or research and

development in order to stimulate

technological innovation, use small

business to meet Federal research and

development needs, increase private

sector commercialization of innovations

derived from Federal research and

development, and foster and encourage

the participation of socially and

economically disadvantaged small

business concerns and women-owned

small business concerns in

technological innovation. The U.S.

Department of Agriculture (USDA) will

participate in this program through the

issuance of competitive research grants

which will be administered by the

Office of Competitive Research Grants

and Awards Management, Cooperative

State Research, Education, and

Extension Service (CSREES).

(b) The regulations of this part do not

apply to research grants awarded by the

Department of Agriculture under any

other authority.

§ 3403.2 Definitions.

As used in this part:

Ad hoc reviewers means experts or

consultants, qualified by training and

experience in particular scientific or

technical fields to render expert advice

on the scientific or technical merit of

grant applications in those fields, who

review on an individual basis one or

several of the eligible proposals

submitted to this program in their area

of expertise and who submit to the

Department written evaluations of such

proposals.

Awarding official means any officer or

employee of the Department who has

the authority to issue or modify research

project grant instruments in behalf of

the Department.

Budget period means the interval of

time into which the project period is

divided for budgetary and reporting

purposes.

Commercialization means the process

of developing markets and producing

and delivering products or services for

sale (whether by the originating party or

by others); as used here,

commercialization includes both

government and commercial markets.

Department means the Department of

Agriculture.

Funding agreement is any contract,

grant, or cooperative agreement entered

into between any Federal agency and

any small business for the performance

of experimental, developmental, or

research work funded in whole or in

part by the Federal Government.

Grantee means the small business

concern designated in the grant award

document as the responsible legal entity

to whom a grant is awarded under this

part.

Peer review group means experts or

consultants, qualified by training and

experience in particular scientific or

technical fields to give expert advice on

the scientific and technical merit of

grant application in those fields, who

assemble as a group to discuss and

evaluate all of the eligible proposals

submitted to this program in their area

of expertise.

Principal investigator means a single

individual designated by the grantee in

the grant application and approved by

the Department who is responsible for

the scientific or technical direction of

the project. Therefore, the individual

should have a scientific and technical

background.

Program solicitation is a formal

request for proposals whereby an agency

notifies the small business community

of its research or research and

development needs and interests in

selected areas and invites proposals

from small business concerns in

response to those needs.

Project means the particular activity

within the scope of one of the research

topic areas identified in the annual

solicitation of applications, which is

supported by a grant award under this

part.

Project period means the total length

of time that is approved by the

Department for conducting the research

project as outlined in an approved grant

application.

Research or research and

development (R&D) means any activity

which is:

(1) A systematic, intensive study

directed toward greater knowledge or

understanding of the subject studied;

(2) A systematic study directed

specifically toward applying new

knowledge to meet a recognized need;

or

(3) A systematic application of

knowledge toward the production of

useful materials, devices, and systems

or methods, including design,

development, and improvement of

prototypes and new processes to meet

specific requirements.
25368 Federal Register / Vol. 61, No. 98 / Monday, May 20, 1996 / Rules and Regulations

Research project grant means the

award by the Department of funds to a

grantee to assist in meeting the costs of

conducting for the benefit of the public

an identified project which is intended

and designed to establish, discover,

elucidate, or confirm information or the

underlying mechanisms relating to a

research topic area identified in the

annual solicitation of applications.

Small business concern means a

concern which at the time of award of

phase I and Phase II funding agreements

meets the following criteria:

(1) Is organized for profit,

independently owned or operated, is

not dominant in the field in which it is

proposing, has its principal place of

business located in the United States,

has a number of employees not

exceeding 500 (full-time, part-time,

temporary, or other) in all affiliated

concerns owned or controlled by a

single parent concern, and meets the

other regulatory requirements outlined

in 13 CFR part 121. Business concerns,

other than licensed investment

companies, or State development

companies qualifying under the Small

Business Investment Act of 1958, 15

U.S.C. 661, et seq., are affiliates of one

another when directly or indirectly one

concern controls or has the power to

control the other or third parties (or

party) control or have the power to

control both. Control can be exercised

through common ownership, common

management, and contractual

relationships. The term ‘‘affiliates’’ is

defined in greater detail in 13 CFR

121.401(a) through (m). The term

‘‘number of employees’’ is defined in 13

CFR 121.407. Business concerns

include, but are not limited to, any

individual, partnership, corporation,

joint venture, association, or

cooperative.

(2) Is at least 51 percent owned, or in

the case of a publicly owned business at

least 51 percent of its voting stock is

owned, by United States citizens or

lawfully admitted permanent resident

aliens.

Socially and economically

disadvantaged individual is a member

of any of the following groups: Black

Americans, Hispanic Americans, Native

Americans, Asian-Pacific Americans, or

Subcontinent Asian Americans, other

groups designated from time to time by

the Small Business Administration

(SBA) to be socially disadvantaged, or

any other individual found to be

socially and economically

disadvantaged by the SBA pursuant to

section 8(a) of the Small Business Act,

15 U.S.C. 637(a).

Socially and economically

disadvantaged small business concern

is one that is:

(1) At least 51 percent owned by

(i) An Indian tribe or a native

Hawaiian organization, or

(ii) One or more socially and

economically disadvantaged

individuals; and

(2) Whose management and daily

business operations are controlled by

one or more socially and economically

disadvantaged individuals.

Subcontract is any agreement, other

than one involving an employeremployee relationship, entered into by a

Federal Government funding agreement

awardee calling for supplies or services

required solely for the performance of

the original funding agreement.

United States means the several

States, the territories and possessions of

the United States, the Commonwealth of

Puerto Rico, the Trust Territory of the

Pacific Islands, and the District of

Columbia.

Women-owned small business

concern means a small business concern

that is at least 51 percent owned by a

woman or women who also control and

operate it. ‘‘Control’’ as used in this

context means exercising the power to

make policy decisions. ‘‘Operate’’ as

used in this context means being

actively involved in the day-to-day

management of the concern.

§ 3403.3 Eligibility requirements.

(a) Eligibility of firm. (1) Each

organization submitting a proposal must

qualify as a small business for research

purposes, as defined in § 3403.2. Joint

ventures and limited partnerships are

eligible to apply for and to receive

research grants under this program,

provided that the entity created

qualifies as a small business in

accordance with section 2(3) of the

Small Business Act (15 U.S.C. 632) and

as defined in § 3403.2 of this part. For

both phase I and phase II the research

must be performed in the United States.

(2) A minimum of two-thirds of the

research or analytical work, as

determined by budget expenditures,

must be performed by the proposing

organization under phase I grants. For

phase II awards, a minimum of one-half

of the research or analytical effort must

be conducted by the proposing firm.

The space used by the SBIR awardee to

conduct the research must be space over

which it has exclusive control for the

period of the grant.

(b) Eligibility of principal investigator.

(1) It is strongly suggested that the

individual responsible for the scientific

or technical direction of the project be

designated as the principal investigator.

In addition, the primary employment of

the principal investigator must be with

the proposing firm at the time of award

and during the conduct of the proposed

research. Primary employment means

that more than one-half of the principal

investigator’s time is spent in the

employ of the small business. Primary

employment with the small business

applicant precludes full-time

employment with another organization.

(2) If the proposed principal

investigator is employed by another

organization (e.g., university or another

company) at the time of submission of

the application, documentation must be

submitted with the proposal from the

principal investigator’s current

employer verifying that, in the event of

an SBIR award, he/she will become a

less-than half-time employee of such

organization and will remain so for the

duration of the SBIR project.

Subpart B—Program Description

§ 3403.4 Three-phase program.

The Small Business Innovation

Research Grants Program will be carried

out in three separate phases described

in this section. The first two phases are

designed to assist USDA in meeting its

research and development objectives

and will be supported with SBIR funds.

The purpose of the third phase is to

pursue the commercial applications or

objectives of the research carried out in

phases I and II through the use of

private or Federal non-SBIR funds.

(a) Phase I is the initial stage in which

the scientific and technical merit and

feasibility of an idea related to one of

the research areas described in the

program solicitation is evaluated,

normally for a period not to exceed 6

months. In special cases, however,

where a proposed research project

requires more than 6 months to

complete, a longer grant period may be

considered. A proposer of a phase I

project with an anticipated duration

beyond 6 months should specify the

length and duration in the proposal at

the time of its submission to USDA in

order for it to be considered at the time

of award. (See § 3403.16(c) for changes

in project period subsequent to award).

(b) Phase II is the principal research

or research and development effort in

which the results from Phase I are

expanded upon and further pursued,

normally for a period not to exceed 24

months. Only those small businesses

previously receiving phase I awards are

eligible to submit phase II proposals.

For each phase I project funded the

awardee may apply for a phase II award

only once. Phase I awardees who for

valid reasons cannot apply for phase II
Federal Register / Vol. 61, No. 98 / Monday, May 20, 1996 / Rules and Regulations 25369

support in the next fiscal year funding

cycle may apply for support not later

than the second fiscal year funding

cycle.

(c) Phase III is to stimulate

technological innovation and the

national return on investment from

research through the pursuit of

commercial objectives resulting from

the work supported by SBIR funding

carried out in phases I and II. This

portion of the project is performed by

the small business firm and privately

funded or Federally funded by a nonSBIR source through the use of a followon funding commitment. A follow-on

funding commitment is an agreement

between the small business firm and a

provider of follow-on capital for a

specified amount of funds to be made

available to the small business for

further development of their effort upon

achieving certain mutually agreed upon

technical objectives during phase II.

Subpart C—Preparation and

Submission of Proposals

§ 3403.5 Requests for proposals.

(a) Phase I. A program solicitation

requesting phase I proposals will be

prepared each fiscal year in which

funds are made available for this

purpose. The solicitation will contain

information sufficient to enable eligible

applicants to prepare grant proposals

and will include descriptions of specific

research topic areas which the

Department will support during the

fiscal year involved, forms to be

completed and submitted with

proposals, and special requirements. A

notice will be published in the Federal

Register informing the public of the

availability of the program solicitation.

(b) Phase II. For each fiscal year in

which funds are made available for this

purpose, the Department will send a

letter requesting phase II proposals from

the phase I grantees eligible to apply for

phase II funding in that fiscal year. The

letter will be accompanied by the

solicitation which contains information

sufficient to enable eligible applicants to

prepare grant proposals and includes

forms to be submitted with proposals as

well as special requirements.

§ 3403.6 General content of proposals.

(a) The proposed research must be

responsive to one of the USDA program

interests stated in the research topic

descriptions of the program solicitation.

(b) Proposals must cover only

scientific/technological research

activities. A firm must not propose

product development, technical

assistance, demonstration projects,

classified research, or patent

applications. Many of the research

projects supported by the SBIR program

lead to the development of new

products based upon the research

results obtained during the project.

However, projects that seek funding

solely for product development where

no research is involved, i.e. the funds

are needed to permit the development of

a project based on previously completed

research, will not be accepted.

Literature surveys should be conducted

prior to preparing proposals for

submission and must not be proposed as

a part of the SBIR phase I or phase II

effort. Proposals principally for the

development of proven concepts toward

commercialization or for market

research should not be submitted since

such efforts are considered the

responsibility of the private sector and

therefore are not supported by USDA.

(c) A proposal must be limited to only

one topic. The same proposal may not

be submitted under more than one

topic. However, an organization may

submit separate proposals on the same

topic. Where similar research is

discussed under more than one topic,

the proposer should choose that topic

whose description appears most

relevant to the proposer’s research

concept. Duplicate proposals will be

returned to the applicant without

review.

(d) Phase I applicants should submit

a research proposal of no more than 25

pages, including cover page, budget, and

all proposal-related enclosures or

attachments. The text must be prepared

on only one side of the page using

standard size (81⁄2′′ × 11′′; 21.6 cm × 27.9

cm) white paper, 2.5 cm margins and

type no smaller than 11 point font size

regardless of whether it is single or

double spaced. In the interest of equity

to all proposers, no additional

attachments, appendixes, or references

beyond the 25-page limitation will be

considered in the proposal evaluation

process, and proposals in excess of the

25-page limitation will not be

considered for review or award. In

addition, supplementary materials,

revisions, and/or substitutions will not

be accepted after the due date for

proposals. Phase II applicants should

submit a research proposal of no more

than 50 pages, including cover page,

budget, and all proposal-related

enclosures or attachments.

§ 3403.7 Proposal format for phase I

applications.

(a) Cover sheet. Photocopy and

complete Form CSREES–667 in the

program solicitation. The original of the

cover sheet must at a minimum contain

the pen-and-ink signatures of the

proposed principal investigator(s) and

the authorized organizational official. A

proposal which does not contain the

signature of the authorized

organizational official will not be

considered a legal document and will be

returned to the proposing small

business firm without review. All other

copies of the proposal must also contain

a cover sheet, but facsimile or

photocopied signatures will be

accepted. The title should be a brief (80-

character maximum), clear, specific

designation of the research proposed. It

will be used to provide information to

Congress and also will be used in

issuing press releases. Therefore, it

should not contain highly technical

words. In addition, phrases such as

‘‘investigation of’’ or ‘‘research on’’

should not be used.

(b) Project summary. Photocopy and

complete Form CSREES–668 in the

program solicitation. The technical

abstract should include a brief

description of the problem or

opportunity, project objectives, and a

description of the effort. Anticipated

results and potential commercial

applications of the proposed research

also should be summarized in the space

provided. Keywords, to be provided in

the last block on the page, should

characterize the most important aspects

of the project. The project summary of

successful proposals may be published

by USDA and, therefore, should not

contain proprietary information.

(c) Technical content. The main body

of the proposal should include:

(1) Identification and significance of

the problem or opportunity. Clearly

state the specific technical problem or

opportunity addressed and its

importance.

(2) Background and rationale.

Indicate the overall background and

technical approach to the problem or

opportunity and the part that the

proposed research plays in providing

needed results.

(3) Relationship with future research

or research and development. Discuss

the significance of the phase I effort in

providing a foundation for the phase II

R&D effort. State the anticipated results

of the approach if the project is

successful (phases I and II). This should

address:

(i) The technical, economic, social,

and other benefits to the Nation and to

users of the results such as the

commercial sector, the Federal

Government, or other researchers;

(ii) The estimated total cost of the

approach relative to benefits; and, if

appropriate,
25370 Federal Register / Vol. 61, No. 98 / Monday, May 20, 1996 / Rules and Regulations

(iii) Any specific policy issues or

decisions which might be affected by

the results.

(4) Phase I technical objectives. State

the specific objectives of the phase I

research or research and development

effort, including the technical questions

it will try to answer to determine the

feasibility of the proposed approach.

(5) Phase I work plan. This work plan

must provide an explicit, detailed

description of the phase I research or

research and development approach.

The plan should indicate the tasks to be

performed as well as how and where the

work will be carried out. The phase I

effort should attempt to determine the

technical feasibility of the proposed

concept. The work plan should be

linked with the technical objectives of

the research and the questions the effort

is designed to answer. Therefore, it

should flow logically from § 3403.7(c)(4)

of this part. This section should

constitute a substantial portion of the

total proposal.

(6) Related research or research and

development. Describe the significant

research or research and development

activities from relevant literature that

are directly related to the proposed

effort, including any conducted by the

principal investigator or by the

proposing firm, how it relates to the

proposed effort, and any planned

coordination with outside sources. The

proposer must persuade reviewers that

he or she is aware of related research in

the selected subject.

(d) Key personnel and bibliography.

Identify key personnel involved in the

effort, including information on their

directly related education and

experience. For each key person,

provide a chronological list of the most

recent representative publications in the

topic area during the preceding 5 years,

including those in press. (List the

authors (in the same order as they

appear on the paper), the full title, and

the complete reference as these usually

appear in journals. Where vitae are

extensive, summaries that focus on most

relevant experience or publications may

be necessary to meet the proposal size

limitation in phase I and phase II.

(e) Facilities and equipment. Describe

the types, location, and availability of

instrumentation and physical facilities

necessary to carry out the work

proposed. Items of equipment to be

purchased must be fully justified under

this section.

(f) Consultants. Involvement of

university or other consultants in the

planning and research stages of the

project is permitted and may be

particularly helpful to small firms

which have not previously received

Federal research awards. If such

involvement is intended, it should be

described in detail. Proposals must

include letters from proposed

consultants indicating willingness to

serve in order for such participation to

be evaluated during the proposal review

process. (See § 3403.11(d) or

§ 3403.12(5), as appropriate).

(g) Potential post application. Briefly

describe:

(1) Whether and by what means the

proposed research appears to have

potential commercial application; and

(2) Whether and by what means the

proposed research appears to have

potential use by the Federal

Government. Firms with prior USDA

SBIR grant support should summarize

their progress in commercializing the

results of that research. Past

performance in the commercialization

process may be a consideration in award

decisions.

(h) Current and pending support. If a

proposal, substantially the same as the

one being submitted, has been

previously funded or is currently

funded, pending, or about to be

submitted to another Federal agency or

to USDA in a separate action, the

proposer must provide the following

information:

(1) Name and address of the agency(s)

to which a proposal was submitted, or

will be submitted, or from which an

award is expected or has been received.

(2) Date of actual or anticipated

proposal submission or date of award,

as appropriate.

(3) Title of proposal or award,

identifying number assigned by the

agency involved, and the date of

program solicitation under which the

proposal was submitted or the award

was received.

(4) Applicable research topic area for

each proposal submitted or award

received.

(5) Title of research project.

(6) Name and title of principal

investigator for each proposal submitted

or award received. USDA will not make

awards that duplicate research funded

(or to be funded) by other Federal

agencies.

(i) Cost-breakdown on proposal

budget. Photocopy and complete form

CSREES–55 in the program solicitation

only for the phase under which you are

currently applying. (An applicant for

phase I funding should not submit both

phase I and II budgets.) Please note the

following in completing the budget:

(1) Salaries and wages. Indicate the

number and kind of personnel for whom

salary support is sought. For key

personnel, also indicate the number of

work months of involvement to be

supported with USDA funds (see blocks

labeled ‘‘CSREES Funded Work

Months’’), and explain how the level of

compensation was established, e.g., the

hourly rate of pay, the monthly rate of

pay, or the yearly rate of pay.

(2) Equipment. Performing

organizations are expected to have

appropriate facilities, suitably furnished

and equipped. Items of equipment may

be requested provided that they are

specifically identified and adequately

justified, but such requests should

normally not exceed 10% of the budget

for phase I. When purchasing

equipment or a product under the SBIR

funding agreement, the awardee should

purchase only American-made items

whenever possible. Equipment is

defined as an article of nonexpendable,

tangible personal property having a

useful life of more than 2 years and an

acquisition cost of $500 or more per

unit. Vesting of title to equipment

purchased with funds provided under

an SBIR funding agreement will be

determined by USDA based upon

whether such transfer would be more

cost effective than recovery of the

property by the government. Awardees

should plan to lease expensive

equipment.

(3) Travel. The inclusion of travel will

be carefully reviewed with respect to

need and appropriateness for the

research proposed. Foreign travel may

not be included in the phase I budget.

(4) Subcontracting limits.

Subcontracting may not exceed onethird of the research or analytical effort

during phase I. In addition,

subcontractors must perform their

portion of the work in the United States.

If subcontracting costs are anticipated,

they should be indicated in block I, ‘‘All

Other Direct Costs,’’ on the budget

sheet. A breakdown of subcontractual

costs is required. For proposals

involving subcontractual arrangements,

the applicant must submit an agreement

or letter of consent signed by the

subcontractor in order for such

participation to be evaluated during the

proposal review process.

(5) Fee. A reasonable fee not to exceed

7% is permitted under this program. All

fees are subject to negotiation with

USDA. If a fee is requested, the amount

should be indicated in block M on the

budget sheet.

(6) Indirect costs. If available, the

current rate negotiated with the

cognizant Federal negotiating agency

should be used, unless restricted by

statute. Indirect costs may not exceed

the lesser of the negotiated rate or the

rate restricted by statute. If no rate has

been negotiated, a reasonable dollar

amount in lieu of indirect costs may be
Federal Register / Vol. 61, No. 98 / Monday, May 20, 1996 / Rules and Regulations 25371

requested, which will be subject to

approval by USDA. A proposer may

elect not to charge direct costs and,

instead, use all grant funds for direct

costs. If a negotiated rate is used, the

percentage and base should be indicated

in the space allotted under item K on

the budget sheet. If indirect costs are not

charged, the phrase ‘‘None requested’’

should be written in this space.

(7) Cost-sharing. Cost-sharing is

permitted for proposals under this

program; however, cost-sharing is not

required nor will it be an evaluation

factor in considering the competitive

merit of proposals submitted.

(j) Research involving special

considerations. (1) If the proposed

research will involve recombinant DNA

molecules, human subjects at risk, or

laboratory animal care, the proposal

must so indicate and include an

assurance statement (Form CSREES–

662) as the last page of the proposal.

The original of the assurance statement

must at a minimum contain the penand-ink signature of the authorized

organizational official. This form will

not be considered a part of the 25-page

limitation for Phase I proposals and the

50-page limitation for Phase II

proposals. In order to complete the

assurance statement, the proposer may

be required to have the research plan

reviewed and approved by an

appropriate ‘‘Institutional Review

Board’’ prior to commencing actual

substantive work. It is suggested that

proposers contact local universities,

colleges, or nonprofit research

organizations which have established

such reviewing mechanisms to have this

service performed.

(2) Guidelines to be applied and

observed when conducting such

research are:

(i) Recombinant DNA Molecules.

‘‘Guidelines for Research Involving

Recombinant DNA Molecules’’ issued

by the National Institutes of Health, as

revised.

(ii) Human Subjects at Risk.

Regulations issued by the Department of

Health and Human Services. (See 7 CFR

Part 1c.)

(iii) Laboratory Animal Care.

Regulations issued by the Department of

Agriculture. (See 9 CFR Parts 1, 2, 3,

and 4.)

(k) Proprietary information. (1) If a

proposal contains proprietary

information that constitutes a trade

secret, proprietary commercial or

financial information, confidential

personal information, or data affecting

the national security, it will be treated

in confidence to the extent permitted by

law, provided the information is clearly

marked by the proposer with the term

‘‘confidential proprietary information’’

is confided to a separate page or pages,

and provided the following legend also

appears in the designated area at the

bottom of the proposal’s cover sheet

(Form CSREES–667):

The following pages (specify) contain

proprietary information which (name of

proposing organization) requests not be

released to persons outside the Government,

except for purposes of evaluation.

(2) USDA by law is required to make

the final decision as to whether the

information is required to be kept in

confidence. Information contained in

unsuccessful proposals will remain the

property of the proposer. However,

USDA will retain for one year one file

copy of all proposals received; extra

copies will be destroyed. Public release

of information for any proposal

submitted will be subject to existing

statutory and regulatory requirements.

Any proposal which is funded will be

considered an integral part of the award

and normally will be made available to

the public upon request except for

designated proprietary information that

is determined by USDA to be

proprietary information.

(3) The inclusion of proprietary

information is discouraged unless it is

necessary for the proper evaluation of

the proposal. ‘‘If proprietary information

is to be included, it should be limited,

set apart from other text on a separate

page, and keyed to the text by

numbers.’’ It should be confided to a

few critical technical items which, if

disclosed, could jeopardize the

obtaining of foreign or domestic patents.

Trade secrets, salaries, or other

information which could jeopardize

commercial competitiveness should be

similarly keyed and presented on a

separate page. ‘‘Proposals or reports

which attempt to restrict dissemination

of large amounts of information may be

found unacceptable by USDA. Any

other legend than that listed in

paragraph (k)(1) of this section may be

unacceptable to USDA and may

constitute grounds for return of the

proposal without further

consideration.’’ Without assuming any

liability for inadvertent disclosure,

USDA will limit dissemination of such

information to its employees and, where

necessary for the evaluation of the

proposal, to outside reviewers on a

confidential basis.

(l) Rights in data developed under

SBIR funding Agreement. The SBIR

legislation provides for ‘‘retention of

rights in data generated in the

performance of the contract by the small

business concern.’’

(1) The legislative history clarifies

that the intent of the statute is to

provide authority for the participating

agency to protect technical data

generated under the funding agreement,

and to refrain from disclosing such data

to competitors of the small business

concern or from using the information

to produce future technical procurement

specifications that could harm the small

business concern that discovered and

developed the innovation until the

small business concern has a reasonable

chance to seek patent protection, if

appropriate.

(2) Therefore, except for program

evaluation, participating agencies shall

protect such technical data for a period

of not less than 4 years from the

completion of the project from which

the data were generated unless the

agencies obtain permission to disclose

such data from the contractor or grantee.

The government shall retain a royaltyfree license for government use of any

technical data delivered under an SBIR

funding agreement whether patented or

not.

(m) Organizational management

information. Before the award of an

SBIR funding agreement, USDA requires

the submission of certain organization

management, personnel and financial

information to assure the responsibility

of the proposer. Form CSRS–666

(‘‘Organizational Information’’) and

Form CSRS–665 (‘‘Assurance of

Compliance with the Department of

Agriculture Regulations Under Title VI

of the Civil Rights Act of 1964, as

amended’’) are used for this purpose.

This information is not required unless

a project is recommended for funding,

and then it is submitted on a one-time

basis only. However, new forms should

be submitted if a small business has

undergone significant changes in

organizations, personnel, finance, or

policies including those relating to civil

rights.

§ 3403.8 Proposal format for phase II

applications.

(a) Cover sheet. Follow instructions

found in § 3403.7(a) of this part.

(b) Project summary. Follow

instructions found in § 3403.7(b) of this

part.

(c) Phase I results. The proposal

should contain an extensive section that

lists the phase I objectives and makes

detailed presentation of the phase I

results. This section should establish

the degree to which phase I objectives

were met and feasibility of the proposed

research project was established.

(d) Proposal. Since phase II is the

principal research and development

effort, proposals should be more
25372 Federal Register / Vol. 61, No. 98 / Monday, May 20, 1996 / Rules and Regulations

comprehensive than those submitted

under phase I. However, the outline

contained in § 3403.7(c) of this part

should be followed, tailoring the

information requested to the phase II

project.

(e) Coast breakdown on proposal

budget. (1) For phase II, a detailed

budget is required for each year of

requested support. In addition, a

summary budget is required detailing

the requested support for the overall

project period. Form CSREES–55,

‘‘Proposal Budget,’’ is to be used for this

purpose and may be photocopied as

necessary.

(2) Travel. Foreign travel may be

included as necessary in the phase II

budget. Such a request will be reviewed

with respect to need and

appropriateness for the research

proposed and therefore should be

adequately justified in the proposal.

(3) Subcontracting limits. The

instructions found in § 3403.7(i)(4) of

this part apply to phase II proposals

except that the subcontracting limit is

changed from one-third to one-half of

the research or analytical effort.

(f) Organizational management

information. Each phaser II awarded

will be asked to submit an updated

statement of financial condition (such as

the latest audit report, financial

statements or balance sheet).

(g) Follow-on funding commitment. If

the proposer has obtained a contingent

commitment for phase III follow-on

funding, it should be forwarded with

the phase II application. It will not

count as part of the 50-page limit for

phase II application.

(h) Documentation of multiple phase

II awards. (1) An applicant that submits

a proposal for a funding agreement for

phase I and that has received more than

15 phase II awards during the preceding

5 fiscal years must document the extent

to which it was able to secure phase III

funding to develop concepts resulting

from previous phase II award. This

documentation should include the name

of the awarding agency, date of award,

funding agreement number, topic or

subtopic title, amount and date of phase

II funding and commercialization status

for each phase II award.

(2) USDA shall collect and retain the

information submitted under paragraph

(h)(1) at least until the General

Accounting Office submits the report

required under section 106 of the Small

Business Research and Development

Enhancement Act of 1992.

§ 3403.9 Submission of proposals.

The program solicitation for phase I

proposals and the letter requesting

phase II proposals will provide the

deadline date for submitting proposals,

the number of copies to be submitted,

and the address where proposals should

be mailed or delivered.

Subpart D—Proposal Review and

Evaluation

§ 3403.10 Proposal review.

(a) All research grant applications will

be acknowledged.

(b) Phase I and phase II proposals will

be judged competitively in a two-stage

process, based primarily upon scientific

or technical merit. First, each proposal

will be screened by USDA scientists to

ensure that it is responsive to stated

requirements contained in the program

solicitation. Proposals found to be

responsive will be technically evaluated

by peer scientists knowledgeable in the

appropriate scientific field using the

criteria listed in § 3403.11 or § 3403.12

of this part, as appropriate. Proposals

found to be nonresponsive will be

returned to the proposing firm without

review.

(c) Both internal and external peer

reviewers may be used during the

technical evaluation stage of this

process. Selections will be made from

among recognized specialists who are

uniquely qualified by training and

experience in their respective fields to

render expert advice on the merit of

proposals received. It is anticipated that

such experts will include those located

in universities, Government, and nonprofit research organizations. If possible,

USDA intends that peer review groups

shall be balanced with minority and

female representation and with an

equitable age distribution.

(d) Technical reviewers will base their

conclusions and recommendations on

information contained in the phase I or

phase II proposal. It cannot be assumed

that reviewers are acquainted with any

experiments referred to within a

proposal, with key individuals, or with

the firm itself. Therefore, the proposal

should be self-contained and written

with the care and thoroughness

accorded papers for publication.

(e) Final decisions will be made by

USDA based upon the ratings assigned

by reviewers and consideration of other

factors, including the potential

commercial application, possible

duplication of other research, any

critical USDA requirements, and budget

limitation. In addition, the follow-on

funding commitment will be a

consideration for phase II proposals.

§ 3403.11 Phase I evaluation criteria.

USDA plans to select for award those

proposals offering the best value to the

Nation, with approximately equal

consideration given to each of the

following criteria except for paragraph

(a) of this section which will receive

twice the value of any of the other

items:

(a) The scientific/technical quality of

the phase I research plan and its

relevance to the stated objectives, with

special emphasis on innovativeness and

originality.

(b) Importance of the problem or

opportunity and anticipated benefits of

the proposed research, if successful.

(c) Adequacy of the phase I objectives

to show incremental progress toward

proving the feasibility of approach.

(d) Qualifications of the principal

investigator(s), other key staff and

consultants, and the probable adequacy

of available or obtainable

instrumentation and facilities.

§ 3403.12 Phase II evaluation criteria.

(a) A phase II proposal may be

submitted only by a phase I awardee.

The phase II proposal will be reviewed

for overall merit based on the following

criteria with each item receiving

approximately equal weight except for

paragraphs (a) (1) and (2) of this section,

which will receive twice the value of

any of the other items:

(1) The scientific/technical quality of

the proposed research, with special

emphasis on innovativeness and

originality.

(2) Degree to which phase I objectives

were met and feasibility was

established.

(3) The technical, economic, and/or

social importance of the problem or

opportunity and anticipated benefits if

Phase II research is successful.

(4) The adequacy of the phase II

objectives to meet the problem or

opportunity.

(5) The qualifications of the principal

investigator(s) and other key personnel

to carry out the proposed work.

(6) Reasonableness of the budget

requested for the work proposed.

(b) In the event that two or more

phase II proposals are of approximately

equal technical merit, the follow-on

funding commitment for continued

development in phase III will be an

important consideration. The value of

the commitment will depend upon the

degree of commitment made by nonFederal investors, with the maximum

value resulting from a signed agreement

with reasonable terms for an amount at

least equal to the funding requested

from USDA in phase II.

§ 3403.13 Availability of information.

Information regarding the peer review

process will be made available to the

extent permitted under the Freedom of
Federal Register / Vol. 61, No. 98 / Monday, May 20, 1996 / Rules and Regulations 25373

Information Act (5 U.S.C. 552), the

Privacy Act (5 U.S.C. 552a), the SBIR

policy Directive, and implementing

Departmental and other Federal

regulations. Implementing Departmental

regulations are found at 7 CFR part 1.

Subpart E—Supplementary

Information

§ 3403.14 Terms and conditions of grant

awards.

Within the limit of funds available for

such purpose, the awarding official

shall make research project grants to

those responsible, eligible applicants

whose proposals are judged most

meritorious in the announced program

areas under the evaluation criteria and

procedures set forth in this part. The

beginning of the project period shall be

no later than September 30 of the

Federal fiscal year in which the project

is approved for support. All funds

granted under this part shall be

expended solely for the purpose for

which the funds are granted in

accordance with the approved

application and budget, the regulations

of this part, the terms and conditions of

the award, the Federal Acquisition

Regulation (48 CFR part 31), and the

Department’s Uniform Federal

Assistance Regulations (7 CFR part

3015).

§ 3403.15 Notice of grant awards.

(a) The grant award document shall

include, at a minimum, the following:

(1) Legal name and address of

performing organization.

(2) Title of project.

(3) Name(s) and address(es) of

Principal Investigator(s).

(4) Identifying grant number assigned

by the Department.

(5) Project period, which specifies

how long the Department intends to

support the effort.

(6) Total amount of Federal financial

assistance approved during the project

period.

(7) Legal authorities under which the

grant is awarded.

(8) Approved budget plan for

categorizing allocable project funds to

accomplish the stated purpose of the

grant award.

(9) Other information or provisions

deemed necessary by the Department to

carry out its granting activities or to

accomplish the purpose of a particular

research project grant.

(b) The notice of grant award, in the

form of a letter, will provide pertinent

instructions and information to the

grantee which are not included in the

grant award document described in

paragraph (a).

§ 3403.16 Use of funds; changes.

(a) Delegation of fiscal responsibility.

The grantee may not in whole or in part

delegate or transfer to another person,

institution, or organization the

responsibility for use or expenditure of

grant funds.

(b) Change in project plans. (1) The

permissible changes by the grantee,

principal investigator(s), or other key

project personnel in the approved

research project grant shall be limited to

changes in methodology, techniques, or

other aspects of the project to expedite

achievement of the project’s approved

goals. If the grantee and/or the principal

investigator(s) are uncertain as to

whether a change complies with this

provision, the question must be referred

to the Department for a final

determination.

(2) Changes in approved goals, or

objectives, shall be requested by the

grantee and approved in writing by the

Department prior to effecting such

changes. In no event shall requests for

such changes be approved which are

outside the scope of the original

approved project.

(3) Changes in approved project

leadership or the replacement or

reassignment of other key project

personnel shall be requested by the

grantee and approved in writing by the

Department prior to effecting such

changes.

(4) Transfers of actual performance of

the substantive programmatic work in

whole or in part and provisions for

payment of funds, whether or not

Federal funds are involved, shall be

requested by the grantee and approved

in writing by the Department prior to

effecting such transfers.

(c) Changes in project period. The

project period may be extended by the

Department to complete or fulfill the

purposes of an approved project

provided Federal funds remain. The

extension shall be conditioned upon

prior request by the grantee and

approval in writing by the Department.

In such cases the extension will not

normally exceed 12 months, the phase

I award will still be limited to $55,000,

and the submission of a Phase II

proposal will be delayed by one year.

The extension allows the grantee to

continue expending the remaining

Federal funds for the intended purpose

over the extension period. In instances

where no Federal funds remain, it is

unnecessary to approve an extension

since the purpose of the extension is to

continue using Federal funds. The

grantee may opt to continue the Phase

I project after the grant’s termination

and closeout, however, the grantee

would have to do so without additional

Federal funds. In the latter case, no

communication with USDA is

necessary. However, the maximum

delay for submission of a Phase II

proposal remains as specified in

§ 3403.4(b).

(d) Changes in approved budget.

Changes in an approved budget shall be

requested by the grantee and approved

in writing by the Department prior to

instituting such changes if the revision

will:

(1) Involve transfers of amounts

budgeted for indirect costs to absorb

increase in direct costs;

(2) Involve transfers of amounts

budgeted for direct costs to

accommodate changes in indirect cost

rates negotiated during a budget period

and not approved when a grant was

awarded;

(3) Result in a need or claim for the

award of additional funds; or

(4) Involve transfers or expenditures

of amounts requiring prior approval as

set forth in the Departmental regulations

or in the grant award.

§ 3403.17 Other Federal statutes and

regulations that apply.

Several other Federal statutes and/or

regulations apply to grant proposals

considered for review or to research

project grants awarded under this part.

These include but are not limited to:

7 CFR Part 1—USDA implementation of

Freedom of Information Act.

7 CFR Part 1c—USDA implementation of

the Federal Policy for the Protection of

Human Subjects;

7 CFR Part 3—USDA implementation of

OMB Circular A–129, Managing Federal

Credit Programs.

7 CFR Part 15, Subpart A—USDA

implementation of Title VI of the Civil Rights

Act of 1964, as amended.

7 CFR Part 3015—USDA Uniform Federal

Assistance Regulations, implementing OMB

directives where applicable (i.e., Circular

Nos. A–102, A–110, A–87, A–21, and A–122)

and incorporating provisions of 31 U.S.C.

6301–6308 (formerly the Federal Grant and

Cooperative Agreement Act of 1977, Public

Law 95–224), as well as general policy

requirements applicable to recipients of

Departmental financial assistance.

7 CFR Part 3017, as amended—USDA

implementation of Governmentwide

Debarment and Suspension

(Nonprocurement) and Governmentwide

Requirements for Drug-Free Workplace

(Grants), as amended.

7 CFR Part 3018—USDA implementation

of New Restrictions on Lobbying. Imposes

new prohibitions and requirements for

disclosure and certification related to

lobbying on recipients of Federal contracts,

grants, cooperative agreements, and loans.

7 CFR Part 3407—CSREES procedures to

implement the National Environmental

Policy Act;
25374 Federal Register / Vol. 61, No. 98 / Monday, May 20, 1996 / Rules and Regulations

48 CFR Part 31—Contract Cost Principles

and Procedures of the Federal Acquisition

Regulation.

29 U.S.C. 794, section 504—Rehabilitation

Act of 1973, and 7 CFR Part 15B (USDA

implementation of statute), prohibiting

discrimination based upon physical or

mental handicap in Federally assisted

programs.

35 U.S.C. 200 et seq.—Bayh-Dole Act,

controlling allocation of rights to inventions

made by employees of small business firms

and domestic nonprofit organizations,

including universities, in Federally assisted

programs (implementing regulations are

contained in 37 CFR Part 401).

§ 3403.18 Other conditions.

The Department may, with respect to

any research project grant, impose

additional conditions prior to or at the

time of any award when, in the

Department’s judgment, such conditions

are necessary to assure or protect

advancement of the approved project,

the interests of the public, or the

conservation of grant funds.

Done at Washington, D.C., this 10th day of

May, 1996.

B.H. Robinson,

Administrator, Cooperative State Research,

Education, and Extension Service.

[FR Doc. 96–12375 Filed 5–17–96; 8:45 am]

BILLING CODE 3410–22–M