How to Submit a Winning SBIR Cost Volume
Does this sound familiar: you spent all your time crafting the perfect Technical Volume for your SBIR or STTR and now you only have 40 minutes before the deadline to get the Cost Volume in? We’ve been there. The Volume II or Cost Volume is a crucial aspect to winning an SBIR/STTR as no matter what anyone tells you, you are competing on cost and answering a single question incorrectly can get your proposal disqualified (or DQ’ed) even if the rest of it is a perfect 10/10. Below we tackle the most commonly asked questions, including ones we had ourselves about preparing a cost volume for SBIR and STTR submissions.
Disclaimer: We are not affiliated with the Department of Defense or with the SBIR/STTR program. This advice is the perspective of small business owners who have won SBIRs and STTRs.
How do I estimate my labor costs accurately?
For your first proposal, whether it’s a Phase 1 or Direct to Phase 2, it’s easy to overthink your labor estimates. Time is money when you are a small business so getting to a labor cost estimate quickly is important. The most straightforward way to do this is to:
1- Complete your scope of work and work plan within your technical volume first.
2- Then compare this to a past project to estimate hours by either task or milestone.
3- Have management or key personnel directly review the estimates for accuracy.
4- Use GSA rates for the hours for each role to calculate your final labor estimate.
Small businesses often jump to the third step, which causes unnecessary back and forth and takes valuable time during a proposal submission process.
What profit rate should I set?
You are free to set the profit rate at whatever is accurate for your company. Evaluators can view a proposal with a 0% profit rate with great skepticism, so a low profit margin is not usually something that will make you more competitive. The same goes if the profit margin is too high. The total cost and its relationship to the funding cap is more scrutinized. If you aren't sure what a typical and acceptable profit margin is, we included the range used by a winning small business in our SBIR Cost Volume Calculator and Guide.
Should my total be at the maximum funding cap, or should my business bid lower?
Bid lower if you can. If your cost can come in lower than the funding cap with clear alignment between your budget and your scope of work you do stand a better chance of being selected. SBIR/STTRs are fixed price so what’s on your budget is the maximum of what you’ll get. It’s also important to see if the topic you are proposing is a contract or a grant. You are much more likely to lose a contract to a similarly qualified but lower cost competitor than on a grant.
What common mistakes should I avoid when preparing the Cost Volume?
Ignoring Guidelines: Each agency has specific guidelines for cost volumes. Not adhering to these requirements—such as budget categories, required letters, or submission protocols—can lead to disqualification. If you don’t win, you absolutely do not want it to be on a formatting technicality. Remember to check the BAA for your topic.
Inconsistent Budget and Proposal Narrative: The budget should align with the proposal narrative and work plan. Inconsistencies between the two can create confusion and raise questions about the proposal's credibility. For example, we’ve seen feedback letters where there is a named key personnel whose expected contributions were detailed in the workplan, but the evaluator felt the hours in the cost volume were not sufficient to complete the proposed work.
Lack of Collaboration: Not involving key team members or stakeholders in the budgeting process can lead to oversights. Understandably, you may not want every member of your team to see the level of financial detail in the Cost Volume. However, sharing a list of direct materials without prices to confirm quantity and/or confirming with each named key personnel that their overall estimated hours is reasonable for the scope of work proposed are easy ways to catch any mistakes.
What resources are available to help with Cost Volume creation?
Intrepid offers a cost volume builder excel for SBIRs with an accompanying video strategy guide that can expedite the process for your team. Your best resource internal to your business will be your financial analyst/partner. Broad Agency Announcements can be a daunting page count but contain useful detail when it comes to the requirements for your cost volume.
What are the best practices for incorporating subcontractors into my Cost Volume?
Adding expertise to your proposal with consultants and subcontractors can elevate your compelling narrative on your business’s ability to deliver an innovative solution. Some best practices on incorporating them to the cost volume are:
Provide your subcontractor with a template. An easy way to minimize back and forth or unnecessary data entry is to provide them with a template that covers everything you need to calculate your total cost and represent their contribution in DISP. Intrepid’s cost volume builder separates subs into their own excel tab so you can easily send that to your partner and then quickly copy and paste in their content and let the builder do the calculations for you.
Request the content early. You are required to share some information regarding your subs (what details are dictated by the specific BAA). Make sure to get what you need well before the deadline.
Incorporate any direct materials costs your sub needs into your overall direct material section. Once your scope of work is finalized, ask the question to your sub “Are any materials that you do not already have required to complete the scope of work proposed?”. Clarifying this early will prevent you from having unexpected costs during the period of performance.
With a well-structured cost volume, you’ll enhance your chances of securing funding but also set a solid foundation for the successful execution of your SBIR. Good luck!
