Section H: Indirect Costs - Overview & Guidance

For

Indirect costs represent the expenses of doing business that are not readily identified with a particular grant, contract, project function or activity, but are necessary for the general operation of the organization and the conduct of activities it performs.  Costs such as rent, the phone bill, utilities, general management and accounting expenses are examples of indirect costs.  An indirect cost rate derived from these costs is unique to each company and can change over time.  It is important that businesses not only develop their own indirect rate and never rely on another company’s rate, but also that they re-evaluate their rate from time to time as conditions in the business change. 

If the applicant organization already has an indirect rate established with a Federal Government Agency, or if it is in the process of negotiating or renegotiating a rate, use that rate in the application.  If this negotiated rate is with another Federal Agency, it must be adjusted to treat any independent research and development (IR&D) costs in accordance with DOE acquisition policy. 

If the applicant organization does not have a current negotiated rate, it should develop a provisional rate for application purposes.  For instructions on how to develop an indirect cost rate, please see the tutorial at SBIR.gov entitled “What are indirect rates and how to develop them.”  The website for this tutorial, available by video and pdf, is listed at right.  Additionally, applicants are encouraged to seek help from a Small Business Development Center (SBDC), a Procurement Technical Assistance Center (PTAC), or from the Senior Corps of Retired Executives (SCORE).  Each of these federally funded programs have personnel who understand government accounting and will be able to assist you with calculating an appropriate indirect cost rate.  For information concerning these programs and finding local service providers, please visit the SBIR.gov site for local assistance (website at right).    

For Phase I applications, if the total proposed for indirect costs plus fringe benefits does not exceed 50% of direct salaries and wages, no documentation is required.  In the sample provided at the right, the proposed IDC rate is 25% and the total IDC funds requested are $38,941.00.  As the total direct salaries and wages, inclusive of fringe benefits, is $87,671.00 the requested IDC is below the 50% threshold.