[Federal Register Volume 62, Number 91 (Monday, May 12, 1997)]
[Rules and Regulations]
[Pages 26168-26174]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-12153]



[[Page 26167]]

_______________________________________________________________________

Part V





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. 62, No. 91 / Monday, May 12, 1997 / Rules and 
Regulations  

[[Page 26168]]



DEPARTMENT OF AGRICULTURE

Cooperative State Research, Education, and Extension Service

7 CFR Part 3403

RIN 0524-AA08


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 identifying information 
that will be specified in the annual solicitation as opposed to this 
rule. CSREES is republishing these regulations in their entirety with 
the proposed amendments in order to enhance their use by the public and 
to ensure expeditious submission and processing of grant proposals.

DATES: Effective May 12, 1997.

FOR FURTHER INFORMATION CONTACT: Louise Ebaugh; Director; Office of 
Extramural Programs; Cooperative State Research, Education, and 
Extension Service; U.S. Department of Agriculture; Washington, DC 
20250. Telephone: (202) 720-9181.

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 rule have been approved under the Office of 
Management and Budget (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 
otherwise 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, the Department certifies that the rule will not 
have a significant impact on a substantial number of small entities as 
defined in the Regulatory Flexibility Act, Pub. L. No. 96-534 (5 U.S.C. 
601 et seq.).

Regulatory Analysis

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. 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.

Environmental 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 Public Law 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 May 
15, 1996, the Department published a Final Rule in the Federal Register 
(61 FR 25366) amending 7 CFR Chapter XXXIV by encouraging 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. On March 11, 
1997, the Department published a Notice in the Federal Register (62 FR 
11256-11263) proposing the amendment of this rule and inviting comments 
from interested individuals and organizations. Written comments were 
requested by April 10, 1997. No comments were received.

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.

[[Page 26169]]

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  Availability of information.

Subpart E--Supplementary Information

3403.12  Terms and conditions of grant awards
3403.13  Notice of grant awards.
3403.14  Use of funds; changes.
3403.15  Other Federal statutes and regulations that apply.
3403.16  Other conditions.

    Authority: 15 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 on 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 concern 
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 
applications 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.
    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

[[Page 26170]]

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, 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 requesting supplies or services required solely for 
the performance of the funding agreement.
    United States means the fifty 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 organization. (1) Each organization submitting a 
proposal must qualify as a small business concern 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 concern in accordance with section 2(3) of the Small 
Business Act (15 U.S.C. 632) and as defined in Sec. 3403.2. 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 organization. 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 small business concern 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 
concern. 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. 3403.14(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 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 concern 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 concern and a provider of follow-on capital 
for a specified amount of funds to be made available to the small 
business concern for further development of their effort upon achieving 
certain mutually agreed upon technical objectives during phase II.

[[Page 26171]]

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 small business concern 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) The limitation on the length of phase I and phase II proposals, 
text instructions, and the formatting instructions will be identified 
in the annual solicitation.


Sec. 3403.7  Proposal format for phase I applications.

    (a) The following items relate to phase I applications. Further 
instructions or descriptions for these items as well as any additional 
items to be included will be provided in the annual solicitation, as 
necessary.
    (1) Proposal cover sheet. Photocopy and complete Form CSREES-667 in 
the program solicitation. The original of the proposal cover sheet must 
at a minimum contain the pen-and-ink signatures of the proposed 
principal investigator(s) and the authorized organizational official.
    (2) 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.
    (3) Technical content. The main body of the proposal should 
include:
    (i) Identification and significance of the problem or opportunity.
    (ii) Background and rationale.
    (iii) Relationship with future research or research and 
development.
    (iv) Phase I technical objectives.
    (v) Phase I work plan.
    (vi) Related research or research and development.
    (4) Key personnel and bibliography. Identify key personnel involved 
in the effort, including information on their directly related 
education and experience.
    (5) 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.
    (6) 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.
    (7) Potential post application. Briefly describe:
    (i) Whether and by what means the proposed research appears to have 
potential commercial application;
    (ii) Whether and by what means the proposed research appears to 
have potential use by the Federal Government; and
    (iii) Whether and by what means the proposed research will satisfy 
the public interest.
    (8) 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:
    (i) 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.
    (ii) Date of actual or anticipated proposal submission or date of 
award, as appropriate.
    (iii) 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.
    (iv) Applicable research topic area for each proposal submitted or 
award received.
    (v) Title of research project.
    (vi) 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.
    (9) Cost breakdown on proposal budget. Photocopy and complete the 
budget form 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.)
    (10) Research involving special considerations. 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

[[Page 26172]]

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. 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'' (IRB) prior to commencing actual 
substantive work. If an IRB review is required, USDA will not release 
funds for an award until proper documentation of the IRB approval is 
submitted to and accepted by USDA. It is suggested that proposers 
contact local universities, colleges, or nonprofit research 
organizations which have established such reviewing mechanisms to have 
this service performed.
    (11) Proprietary information. (i) 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'' and provided the following legend appears in the 
designated area at the bottom of the proposal 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.

    (ii) 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.
    (iii) 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 confined 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 
(a)(11)(i) 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.
    (12) 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.''
    (i) 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.
    (ii) 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.
    (13) Organizational management information. Before the award of an 
SBIR funding agreement, USDA requires the submission of certain 
organizational management, personnel and financial information to 
assure the responsibility of the proposer. 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 information should be 
submitted if a small business concern has undergone significant changes 
in organization, personnel, finance, or policies including those 
relating to civil rights.
    (b) Reserved.


Sec. 3403.8(b)  Reserved Proposal format for phase II applications.

    (a) The following items relate to phase II applications. Further 
instructions or descriptions for these items as well as any additional 
items to be included will be identified in the annual solicitation, as 
necessary.
    (1) Proposal cover sheet. Follow instructions found in 
Sec. 3403.7(a)(1).
    (2) Project summary. Follow instructions found in 
Sec. 3403.7(a)(2).
    (3) 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.
    (4) Proposal. Since phase II is the principal research and 
development effort, proposals should be more comprehensive than those 
submitted under phase I. However, the outline contained in 
Sec. 3403.7(a)(3) should be followed, tailoring the information 
requested to the phase II project.
    (5) Cost breakdown on proposal budget. 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.
    (6) Organizational management information. Each phase II awardee 
will be asked to submit an updated statement of financial condition 
(such as the latest audit report, financial statements or balance 
sheet).
    (7) 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.
    (8) Documentation of multiple phase II awards. (i) An applicant 
that submits a proposal for a funding agreement for phase I and 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 
awards. 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.
    (ii) USDA shall collect and retain the information submitted under 
paragraph (a)(8)(i) of this section at least until the General 
Accounting Office submits the report required under section 106 of the

[[Page 26173]]

Small Business Research and Development Enhancement Act of 1992.
    (b) Reserved.


Sec. 3403.9(b)  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 identified in the 
annual solicitation, 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. 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. 3403.11  Availability of information.

    Information regarding the peer review process will be made 
available to the extent permitted under the Freedom of 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. 3403.12  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 the annual solicitation. 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. 3403.13   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 the 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 for the 
project period.
    (7) Legal authorities under which the grant is awarded.
    (8) Approved budget plan for categorizing 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) of 
this section.


Sec. 3403.14  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 paragraph, the question must be referred to the Authorized 
Departmental Officer (ADO) for a final determination.
    (2) Changes in approved goals, or objectives, shall be requested by 
the grantee and approved in writing by the ADO 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 ADO 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 ADO prior to effecting such transfers.
    (c) Changes in project period. The project period may be extended 
by the ADO to complete or fulfill the purposes of an approved project 
provided Federal funds remain. The extension shall be conditioned upon 
a prior request by the grantee and approval in writing by the

[[Page 26174]]

ADO. In such cases the extension will not normally exceed 12 months, 
the phase I award will still be limited to the approved award amount, 
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 ADO prior to 
instituting such changes if the revision will:
    (1) Involve transfers of amounts budgeted for indirect costs to 
absorb an 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. 3403.15  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 the Federal 
Grant and Cooperative Agreement Act of 1977, Pub. L. 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;
    9 CFR Parts 1, 2, 3, and 4--USDA implementation of the Act of 
August 24, 1966, Public Law 89-544, as amended (commonly known as 
the Laboratory Animal Welfare Act).
    48 CFR Part 31--Contract Cost Principles and Procedures of the 
Federal Acquisition Regulation.
    29 U.S.C. 794, section 504--Rehabiliation 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. 3403.16  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 5th day of May 1997.
Colien Hefferan,
Associate Administrator, Cooperative State Research, Education, and 
Extension Service
[FR Doc. 97-12153 Filed 5-9-97; 8:45 am]
BILLING CODE 3410-22-P