[Federal Register Volume 61, Number 98 (Monday, May 20, 1996)]
[Rules and Regulations]
[Pages 25366-25374]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-12375]




[[Page 25365]]


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Part IV





Department of Agriculture





_______________________________________________________________________



Cooperative State Research, Education, and Extension Service



_______________________________________________________________________



7 CFR Part 3403



Small Business Innovation Research Grants Program; Administrative 
Provisions; Final Rule

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

[[Page 25366]]



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 Rule-related 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 
far-reaching implications not only for the SBIR program but for other

[[Page 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


Sec. 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.


Sec. 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.

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    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 employer-
employee 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.


Sec. 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 Sec. 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 Sec. 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


Sec. 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 Sec. 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

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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 non-SBIR source through the use of a follow-on 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


Sec. 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.


Sec. 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 (8\1/2\''  x  11''; 21.6 cm  x  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.


Sec. 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,

[[Page 25370]]

    (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 Sec. 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 
Sec. 3403.11(d) or Sec. 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 one-third 
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

[[Page 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 pen-and-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 
royalty-free 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.


Sec. 3403.8  Proposal format for phase II applications.

    (a) Cover sheet. Follow instructions found in Sec. 3403.7(a) of 
this part.
    (b) Project summary. Follow instructions found in Sec. 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

[[Page 25372]]

comprehensive than those submitted under phase I. However, the outline 
contained in Sec. 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 
Sec. 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.


Sec. 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


Sec. 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 Sec. 3403.11 
or Sec. 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 
non-profit 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.


Sec. 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.


Sec. 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 non-Federal 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.


Sec. 3403.13  Availability of information.

    Information regarding the peer review process will be made 
available to the extent permitted under the Freedom of

[[Page 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


Sec. 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).


Sec. 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).


Sec. 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 
Sec. 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.


Sec. 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;

[[Page 25374]]

    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).


Sec. 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