Kathleen:

I've seen their interpretation before.  Some of these you win, some you
lose.  But if there are overriding reasons why you are using separate
subcontracts each year, you should be able to win this.

If you award a one year contract for the performance of a section of
your SOW, you should be able to charge F&A up to the first $25K of each
such sub.  If you then go back to that sub for another portion of the
SOW, you should be able to  charge F&A on that as well, IF there is a
new subaward number, and IF there was no continuance clause in their
original proposal.  Added points if there are different portions of the
SOW, too.

If the original sub states that it is a one year award with an option,
you're sunk.  If their initial proposal offers additional scope work at
a price and you award the second year for that scope at that price,
you're sunk there, too.

In your case, though, you're receiving annual funding levels based upon
a proposal.  You may or may not get the award.  You may or may not get
all the funding you've requested.  You could not reasonably award a
multi-year award to a sub when the funds to cover are not forthcoming
from the sponsor.  You have no choice but to issue unique awards for
which you should be able to receive F&A on the first $25K for each of
these even though they are the same SOW.  You effectively have to
renegotiate each new sub.

I'm on your side in this one.

Greg Schmidt

Harris, Kathleen wrote:

>My question concerns the calculation of MTDC on awards from the Small
>Business Administration although it may have implications for other federal
>sponsors. I am especially interested in hearing from other institutions that
>administer small business development centers with subcenters.
>
>Our institution has for some years received funds from the Small Business
>Administration to operate small business development centers in this region.
>Each year we submit a proposal and each year we receive a new award for this
>purpose. We then issue subawards to three other entities that operate the
>subcenters. Because we issue and close out new subawards each year we have
>included the first $25,000 of each subaward in our calculation of MTDC.
>
>We recently received the results of an audit with the following
>disallowance:
>
>        The indirect cost agreement and OMB Circulars only allow a host
>institution to calculate indirect cost of the first $25,000 of each new
>subcontract because of the initial costs incurred in the bidding process. In
>subsequent years, the Host is not to include any subcontract costs in the
>indirect cost calculation.  This inclusion resulted in the overstatement of
>indirect cost match by $32,750 on the SF-269. This amount needs to be
>disallowed from their indirect cost calculation.
>
>Attached to the audit report was a 1997 letter from the DHHS Division of
>Cost Allocation. We believe the letter supports our position, but the SBA
>auditors interpret it as allowing the inclusion of the first $25,000 of each
>subaward only when a truly open and competitive bidding process occurs.
>
>We have submitted additional information to SBA pointing out that for each
>subaward we go through proposal, negotiation, and closeout every year, but
>the SBA auditors have not changed their position.
>
>Have other institutions had similar disallowances? If so, what was the final
>outcome?
>
>Thanks in advance.
>
>Kathleen
>
>Kathleen Harris
>Associate Vice President for Research
>Texas Tech University
>203 Holden Hall
>Lubbock, TX 79409-1035
>Phone: 806-742-3884
>FAX: 806-742-3892
>www.ors.ttu.edu
>
>
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