Small Business Innovation Research Grants Program, 28780-28790 [06-4649]

Agencies

• DEPARTMENT OF AGRICULTURE
• Cooperative State Research, Education, and Extension Service

[Federal Register Volume 71, Number 96 (Thursday, May 18, 2006)]
[Proposed Rules]
[Pages 28780-28790]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-4649]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 71, No. 96 / Thursday, May 18, 2006 / 
Proposed Rules

[[Page 28780]]



DEPARTMENT OF AGRICULTURE

Cooperative State Research, Education, and Extension Service

7 CFR Part 3403

RIN 0524-AA31


Small Business Innovation Research Grants Program

AGENCY: Cooperative State Research, Education, and Extension Service, 
USDA.

ACTION: Proposed rule.

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SUMMARY: The Cooperative State Research, Education, and Extension 
Service (CSREES) proposes to revise the Small Business Innovation 
Research (SBIR) Grants Program Administrative Regulations to implement 
changes and be compliant with the Small Business Innovation Research 
Policy Directive (67 FR 60072, September 24, 2002).

DATES: Submit comments on or before June 19, 2006.

ADDRESSES: You may submit comments, identified by this RIN number 0524-
AA31, by any of the following methods: E-mail: RFP-OEP@csrees.usda.gov. 
Include Proposed Rule for Small Business Innovation Research Grants 
Program and/or RIN number in the subject line of the message; Fax: 202) 
401-7752; Mail: Policy, Oversight, and Funds Management Branch; Office 
of Extramural Programs; Cooperative State Research, Education, and 
Extension Service; U.S. Department of Agriculture; STOP 2299; 1400 
Independence Avenue, SW.; Washington, DC 20250-2299; Hand Delivery/
Courier: Policy, Oversight, and Funds Management Branch; Office of 
Extramural Programs; Cooperative State Research, Education, and 
Extension Service; U.S. Department of Agriculture; Waterfront Centre, 
Room 2248; 800 9th Street, SW.; Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT: Dr. Deborah Sheely, Director, 
Integrated Programs, Competitive Programs Unit, Cooperative State 
Research, Education, and Extension Service, USDA, STOP 2241, 1400 
Independence Avenue, SW., Washington, DC 20250-2241; telephone, (202) 
401-1924; e-mail, dsheely@csrees.usda.gov.

SUPPLEMENTARY INFORMATION:

Background and Purpose

    In 1982, Congress enacted the Small Business Innovation Development 
Act of 1982, Public Law 97-219 (15 U.S.C. 638), which established the 
Small Business Innovation Research (SBIR) Program. The statutory 
purpose of the SBIR Program is to strengthen the role of innovative 
small business concerns in Federally-funded research and research and 
development (R/R&D). The SBIR Program is a phased process, uniform 
throughout the Federal Government, of soliciting proposals and awarding 
funding agreements for R/R&D to meet stated agency needs or missions. 
To stimulate and foster scientific and technological innovation, 
including increasing commercialization of Federal R/R&D, the program 
must follow a uniform competitive process.
    In December of 2000, Congress enacted the Small Business Innovation 
Research Program Reauthorization Act of 2000, Public Law 106-554. The 
Reauthorization Act extends the SBIR Program through September 30, 
2008, and requires the Small Business Administration (SBA) to clarify 
that rights to data generated during the performance of an SBIR award 
apply to all SBIR awards. In addition, the Act requires that each 
application for a Phase II award contain a succinct commercialization 
plan.
    On September 24, 2002, the SBA revised the SBIR Program Policy 
Directive to reflect statutory amendments to the SBIR Program, and 
provided guidance to Federal agencies for the general conduct of the 
program.
    The U.S. Department of Agriculture participates in the SBIR Program 
through the issuance of competitive research grants by CSREES. The 
Agency proposes revising the existing rule, at 7 CFR part 3403, to 
comply with recent statutory revisions and changes to the SBA Policy 
Directive.
    The following definitions have been added to clarify the provisions 
and in compliance with the Policy Directive: Intellectual Property; 
Innovation; Joint Venture; Outcomes and Outputs; Authorized 
Departmental Officer; Authorized Organizational Representative; 
Essentially equivalent Work; SBIR Technical Data Rights; SBIR Technical 
Data; SBIR Participants; Prototype; Research Project Grant; Small 
Business Concern; and Socially and Economically Disadvantaged Small 
Business Concern. In addition, in Part 3403.4, language was added to 
clarify the eligibility of Phase I recipients, specifically allowing 
those organizations receiving Phase I rights via successor-in-interest 
or novation agreement to be eligible to receive Phase II awards. In 
addition, language clarifying the timing of the submission of Phase II 
proposals during the funding cycle was added. In Part 3403.5 the 
mention of specific forms was deleted in anticipation of electronic 
submission of proposals. The requirement was inserted into Part 3403.7 
that a small business concern that is submitting a proposal for a Phase 
I award must document the extent to which it was able to secure Phase 
III funding if it has received more than 15 Phase II awards during the 
preceding five years.

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 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.

Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act, 5 
U.S.C. 605(b), this rule will not have a significant economic impact on 
a substantial number of small entities for the rule only applies to 
awards issued under the SBIR program.
    CSREES issues SBIR awards to small business concerns (SBC). SBC 
means a concern that, on the date of award for

[[Page 28781]]

both Phase I and Phase II funding agreements: (1) Is organized for 
profit, with a place of business located in the United States, which 
operates primarily within the United States, or which makes a 
significant contribution to the United States economy through the 
payment of taxes or use of American products, materials or labor; (2) 
is in the legal form of an individual proprietorship, partnership, 
limited liability company, corporation, joint venture, association, 
trust or cooperative, except that where the form is a joint venture, 
there can be no more than 49 percent participation by foreign business 
entities in the joint venture; (3) is at least 51 percent owned and 
controlled by one or more individuals who are citizens of, or permanent 
resident aliens in, the United States, except in the case of a joint 
venture, where each entity in the venture must be 51 percent owned and 
controlled by one or more individuals who are citizens of, or permanent 
resident aliens in the United States; and (4) has, including its 
affiliates, not more than 500 employees. The term ``affiliates'' is 
defined in greater detail in 13 CFR 121.103. The term ``number of 
employees'' is defined in 13 CFR 121.106.
    The Small Business Administration (SBA) was given the 
responsibility of issuing policy directives for the general conduct of 
the SBIR Program. In September 1984, the SBA issued a Policy Directive, 
which was subsequently revised in January 1993. To implement statutory 
changes in the Reauthorization Act and to streamline the Policy 
Directive, SBA modified the Policy Directive in 2002 (67 FR 60072, Sept 
24, 2002). This rule is compliant with the 2002 Policy Directive. The 
2002 Policy Directive provides guidance to the SBIR participatory 
Federal agencies for the general operation of the program. Since such 
agencies are compliant with the Policy Directive there is a reduction 
of burden inherent in the consistency amongst the agencies. 
Furthermore, awardees are able to use amounts awarded for indirect 
costs to meet the costs of implementing the regulations. In FY 2007 
funds awarded by CSREES under the SBIR program are available to pay 
full allowable indirect costs. As of April 6, 2006, CSREES has 151 
active SBIR awards which are subject to this rule.

Paperwork Reduction Act

    In accordance with the Office of Management and Budget (OMB) 
regulations (5 CFR Part 1320) which implements the Paperwork Reduction 
Act of 1995 (44 U.S.C. Chapter 35), the information collection and 
recordkeeping requirements that will be imposed in the implementation 
of this proposed rule have been approved under OMB No. 0524-0024, Grant 
Application Forms for the Small Business Innovation Research Grants 
Programs.

Federalism

    We have analyzed this rule under Executive Order 13132, Federalism, 
and have determined that it does not have federalism implications to 
warrant the preparation of a federalism assessment under that order.

Intergovernmental Review

    The Department published notice of the exclusion of this program 
from the scope of Executive Order 12372 which requires 
intergovernmental consultation with State and local officials in the 
Final Rule-Related Notice for 7 CFR part 3015, subpart V, (48 FR 29115, 
June 24, 1983).

Environmental Impact Statement

    This proposed 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.

Regulatory Analysis

    This proposed 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.

Unfunded Mandates Reform Act

    Pursuant to Title II of the Unfunded Mandates Reform Act of 1995 
(Pub. L. 104-4), the Department assessed the effects of this rulemaking 
action on State, local, and tribal governments, and the public. This 
action does not compel the expenditure of $100 million or more by any 
State, local, or tribal government, or anyone in the private sector. 
Therefore, a statement under section 202 of the Unfunded Mandates 
Reform Act of 1995 is not required.

Consultation and Coordination With Indian Tribal Governments

    This rule does not have tribal implications and thus no further 
action is required under Executive Order 13175.

Energy Supply

    The proposed rule is not a significant energy action for purposes 
of Executive Order 13211, Actions Concerning Regulations that 
Significantly Affect Supply (May 18, 2001).
    CSREES is soliciting public comments regarding this proposed rule 
and will consider and address such comments in subsequent rulemaking on 
this subject. Comments should be submitted as provided for in the 
ADDRESSES and DATES portions of this proposed rule.

List of Subjects in 7 CFR Part 3403

    Small business innovation research, Small business, Research, 
Research and development.

    For the reasons stated in the preamble, CSREES proposes to revise 7 
CFR part 3403 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 of Proposals
3403.5 Program solicitation.
3403.6 Content of proposals.
3403.7 Proposal format for Phase I applications.
3403.8 Proposal format for Phase II applications.
Subpart D--Submission and Evaluation of Proposals
3403.9 Submission of proposals.
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.
3404.16 Other considerations.

    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 1987, and for other 
purposes as made applicable by section 101(a) of Pub. L. 99-591, 100 
Stat. 3341, and the provisions of the Small Business Innovation 
Development Act of 1982, as amended (15 U.S.C. 638), and the Small

[[Page 28782]]

Business Innovation Research Program Reauthorization Act of 2000, Pub. 
L. 106-554, which extends the SBIR Program through September 30, 2008. 
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 
Department will participate in this program through the issuance of 
competitive research grants which will be administered by the Office of 
Extramural Programs, CSREES.
    (b) The regulations of this part do not apply to research grants 
awarded by the Department 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 technical merit of the 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.
    Applicant is the organizational entity that, at the time of award, 
will qualify as a small business concern and that submits a grant 
application for a funding agreement under the SBIR Program.
    Authorized departmental officer (ADO) means the Secretary or any 
employee of the Department who has the authority to issue or modify 
grant instruments on behalf of the Secretary. The ADO is also referred 
to as the Funding Agreement Officer.
    Authorized organizational representative (AOR) means the president, 
director, or chief executive officer or other designated official of 
the applicant organization who has the authority to commit the 
resources of the organization.
    Budget Period means the interval of time into which the project 
period is divided for budgetary and reporting purposes.
    Commercialization is the process of developing marketable products 
or services and producing and delivering products or services for sale 
(whether by the originating party or by others) to Government or 
commercial markets.
    CSREES means the Cooperative State Research, Education and 
Extension Service.
    Department means the U.S. Department of Agriculture.
    Essentially equivalent work occurs when:
    (1) Substantially the same research is proposed for funding in more 
than one grant application submitted to the same Federal agency;
    (2) Substantially the same research is submitted to two or more 
different Federal agencies for review and funding consideration; or
    (3) A specific research objective and the research design for 
accomplishing an objective are the same or closely related in two or 
more proposals or awards, regardless of the funding source.
    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, 
including products or services funded in whole or in part by the 
Federal Government.
    A grant is a financial assistance mechanism providing money, 
property, or both to an eligible entity to carry out the approved 
project or activity, and substantial programmatic involvement by 
Government is not anticipated.
    Grantee means the small business concern designated in the grant 
award document as the responsible legal entity to whom the grant is 
awarded under this part.
    Innovation is something new or improved, having marketable 
potential including:
    (1) Development of new technologies,
    (2) Refinement of existing technologies, or
    (3) Development of new applications for existing technologies.
    Intellectual property means the separate and distinct types of 
intangible property that are referred to collectively as ``intellectual 
property,'' including but not limited to: Patents, trademarks, 
copyrights, trade secrets, SBIR technical data (as defined in this 
section), ideas, designs, know-how, business, technical and research 
methods, other types of intangible business assets, and all types of 
intangible assets either proposed or generated by a small business 
concern as a result of its participation in the SBIR Program.
    Joint venture is an association of concerns with interests in any 
degree or proportion by way of contract, express or implied, consorting 
to engage in and carry out a single specific business venture for joint 
profit, for which purpose they combine their efforts, property, money, 
skill, or knowledge, but not on a continuing or permanent basis for 
conducting business generally. A joint venture is viewed as a business 
entity in determining power to control its management.
    Outcomes are the measure of long-term, eventual, program impact.
    Outputs are the measures of near-term program impact.
    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 to 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/project director is the one individual 
designated by the applicant to provide the scientific and technical 
direction to a project supported by the funding agreement.
    Professional Employer Organization is an organization that provides 
an integrated approach to the management and administration of the 
human resources and employer risk of its clients, by contractually 
assuming substantial employer rights, responsibilities, and risk, 
through the establishment and maintenance of an employer relationship 
with the workers assigned to its clients.
    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 broad and selected 
areas, as appropriate to the agency, and requests proposals from small 
business concerns in response to these needs and interests.
    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.
    Prototype is a model of something to be further developed, which 
includes designs, protocols, questionnaires, software, and devices.

[[Page 28783]]

    Research or research and development (R/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.
    SBIR Participants are business concerns that have received SBIR 
awards or that have submitted SBIR proposals/applications.
    SBIR Technical Data is defined as all data generated during the 
performance of an SBIR award.
    SBIR Technical Data Rights are the rights a small business concern 
obtains in data generated during the performance of any SBIR award that 
an awardee delivers to the Government during or upon completion of a 
Federally-funded project, and to which the government receives a 
license.
    Small business concern (SBC) means a concern that, on the date of 
award for both Phase I and Phase II funding agreements:
    (1) Is organized for profit, with a place of business located in 
the United States, which operates primarily within the United States, 
or which makes a significant contribution to the United States economy 
through the payment of taxes or use of American products, materials or 
labor;
    (2) Is in the legal form of an individual proprietorship, 
partnership, limited liability company, corporation, joint venture, 
association, trust or cooperative, except that where the form is a 
joint venture, there can be no more than 49 percent participation by 
foreign business entities in the joint venture;
    (3) Is at least 51 percent owned and controlled by one or more 
individuals who are citizens of, or permanent resident aliens in, the 
United States, except in the case of a joint venture, where each entity 
in the venture must be 51 percent owned and controlled by one or more 
individuals who are citizens of, or permanent resident aliens in the 
United States; and
    (4) Has, including its affiliates, not more than 500 employees. The 
term ``affiliates'' is defined in greater detail in 13 CFR 121.103. The 
term ``number of employees'' is defined in 13 CFR 121.106.
    Socially and economically disadvantaged small business concern is 
defined in 13 CFR Part 124-8(A) Business Development/Small 
Disadvantaged Business Status Determinations, Sec.  124.103 (Who is 
socially disadvantaged?) and Sec.  124.104 (Who is economically 
disadvantaged?).
    United States means the 50 states, the territories and possessions 
of the Federal Government, the Commonwealth of Puerto Rico, the 
District of Columbia, the Republic of the Marshall Islands, the 
Federated States of Micronesia, and the Republic of Palau.
    Women-owned small business concern means a small business concern 
that is at least 51 percent owned by one or more women, or in the case 
of any publicly owned business, at least 51 percent of the stock is 
owned by women, and women control the management and daily business 
operations.


Sec.  3403.3  Eligibility requirements.

    (a) Eligibility of organization. (1) To receive SBIR funds, each 
awardee of a SBIR Phase I or Phase II must qualify as a small business 
concern.
    (2) For Phase I, a minimum of two-thirds of the research or 
analytical effort, as measured by the budget, must be performed by the 
awardee. Occasionally, deviations from this requirement may occur, and 
must be approved in writing by the ADO after consultation with the 
agency SBIR National Program Leader.
    (3) For Phase II, a minimum of one-half of the research or 
analytical effort, as measured by the budget, must be performed by the 
awardee. Occasionally, deviations from this requirement may occur, and 
must be approved in writing by the ADO after consultation with the 
agency SBIR National Program Leader.
    (4) For both Phase I and Phase II, the primary employment of the 
principal investigator must be with the SBC at the time of award and 
during the conduct of the proposed project. Primary employment means 
that more than one-half of the principal investigator's time is spent 
in the employ of the SBC. This precludes full-time employment with 
another organization. Occasionally, deviations from this requirement 
may occur, and must be approved in writing by the ADO after 
consultation with the agency SBIR National Program Leader. Further, an 
SBC may replace the principal investigator on an SBIR Phase I or Phase 
II award, subject to approval in writing by the ADO after consultation 
with the SBIR National Program Leader. For purposes of the SBIR 
Program, personnel obtained through a Professional Employer 
Organization or other similar personnel leasing company must be 
considered employees of the awardee. This is consistent with SBA's size 
regulations, 13 CFR 121.106-Small Business Size Regulations.
    (5) For both Phase I and Phase II, the R/R&D must be performed in 
the United States. However, based on a rare and unique circumstance, 
ADO approval may be granted to perform a particular portion of the 
research or research and development work outside of the United States, 
for example, if a supply of material or other item or project 
requirement is not available in the United States. The ADO, after 
consultation with the agency SBIR National Program Leader, must approve 
each such specific condition in writing.
    (b) [Reserved]

Subpart B--Program Description


Sec.  3403.4  Three-phase program.

    The Small Business Innovation Research Grants Program is carried 
out in three separate phases described in this section. The first two 
phases are designed to assist USDA in meeting its research or research 
and development objectives and will be supported with SBIR Program 
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. Phase I involves a solicitation of grant applications 
(hereinafter referred to as proposals) to conduct feasibility-related 
experimental research and development related to described agency 
requirements. These requirements, as defined by agency topics contained 
in the solicitation, may be general or narrow in scope, depending on 
USDA needs. The object of this phase is to determine the scientific and 
technical merit and feasibility of the proposed effort and the quality 
of performance of the small business concern with a relatively small 
agency investment before consideration of further Federal support in 
Phase II. The project period normally should not exceed six months, 
however a longer period, where appropriate for a particular project, 
may be granted.

[[Page 28784]]

    (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 SBIR 
awardees in Phase I are eligible to participate in Phase II. This 
includes those awardees identified via a ``novated'' or ``successor in 
interest'' or similarly-revised funding agreement, or those that have 
reorganized with the same key staff, regardless of whether they have 
been assigned a different tax identification number. 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 normally apply for 
support no later than the second fiscal year funding cycle.
    (c) Phase III refers to work that derives from, extends, or 
logically concludes effort(s) performed under prior SBIR funding 
agreements, but is funded by sources other than the SBIR Program. Phase 
III work is typically oriented towards commercialization of SBIR 
research or technology. This portion of a project is 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 the follow-on capital for a specified amount 
of funds to be made available to the small business concern for future 
development of their effort upon achieving certain mutually agreed upon 
technical objectives.

Subpart C--Preparation of Proposals


Sec.  3403.5  Program solicitation.

    (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. This 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. A notice of solicitation, and 
the entire contents of the program solicitation will be published, at a 
minimum, on the agency's Web site.
    (b) Phase II. For each fiscal year in which funds are made 
available for this purpose, the Department will send correspondence 
requesting Phase II proposals from the Phase I grantees eligible to 
apply for Phase II funding in that fiscal year. The correspondence will 
contain information sufficient to enable eligible applicants to prepare 
grant proposals.


Sec.  3403.6  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., 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 as defined in the 
solicitation. 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. USDA will not 
consider funding duplicate (essentially equivalent work) proposals. In 
addition, essentially equivalent work funded by another entity will be 
returned to the applicant without review.


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. Applicants must submit basic proposal 
identification information on the first page of the proposals. 
Applicants must also certify on the first page of the proposals that 
they meet the definition of a small business concern as stated in the 
solicitation, and must certify as to whether or not they qualify as 
socially and economically disadvantaged small business concerns, or 
women-owned small business concerns.
    (2) Project summary. 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 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.
    (vii) References. For each reference cited in the proposal provide 
the complete name for each author, the date of publication, the full 
title of the article, name of the journal, etc.
    (4) 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.
    (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) Outside services. Involvement of university or other 
consultants in the planning and research stages of the project as 
consultants or through subcontracting arrangements is permitted and may 
be particularly helpful to small business concerns that have not 
previously received Federal research awards. If such involvement is 
intended, it should be described in detail.
    (7) Satisfying the public interest. Specify how the proposed 
research will satisfy one or more of the following objectives:
    (i) Develops sustainable agriculture production systems;
    (ii) Protects natural resources and the environment;

[[Page 28785]]

    (iii) Creates a safe, nutritious and affordable food supply;
    (iv) Develops value-added food and non-food products from 
agricultural materials;
    (v) Enhances global competitiveness; and
    (vi) Enhances economic opportunity and quality of life, especially 
for people in rural areas.
    (8) Potential post applications. Briefly describe the 
commercialization potential of the proposed research. Indicate whether 
and by what means there appears to be a potential for the Federal 
Government to use the proposed research. Include a brief description of 
the proposing company (e.g., date founded, number of employees) and its 
field of interest. What are the major competitive products in this 
field, and what advantages will the proposed research have over 
existing technology (in application, performance, technique, efficiency 
or cost)?
    (9)(i) Similar Proposals or Awards. WARNING--While it is 
permissible with proposal notification to submit identical proposals 
containing a significant amount of essentially equivalent work for 
consideration under numerous Federal program solicitations, it is 
unlawful to enter into funding agreements requiring essentially 
equivalent work. If there is any question concerning this, it must be 
disclosed to the soliciting agency or agencies before award. If an 
applicant elects to submit identical proposals or proposals containing 
a significant amount of essentially equivalent work under other Federal 
program solicitations, a statement must be included in each such 
proposal indicating:
    (A) Name and address of the agency(ies) to which the proposal was 
submitted, or will be submitted, or from which an award is expected or 
has been received.
    (B) Date of actual or anticipated proposal submission or date of 
award, as appropriate.
    (C) Title of proposal or award, identifying number assigned to the 
solicitation or proposal by the agency involved, and the date the 
proposal(s) was submitted or the award was received.
    (D) Applicable research topic area for each proposal submitted or 
award received.
    (E) Titles of research projects.
    (F) Name and title of principal investigator for each proposal 
submitted or award received.
    (ii) USDA will not make awards that duplicate research funded (or 
to be funded) by other Federal agencies.
    (10) Cost breakdown on proposal budget. Complete a budget form for 
the phase under which you are currently applying. (An applicant for 
Phase I funding should not submit both Phase I and Phase II budgets.) A 
budget narrative with supporting detail for each budget category must 
be included.
    (11) Special Considerations. If the proposed research will include 
laboratory animals or human subjects at risk, the applicant may be 
required to have the research plan reviewed and approved by an 
Institutional Animal Care and Use Committee (IACUC) or Institutional 
Review Board (IRB) prior to commencing actual substantive work. If such 
approval is required, USDA may not release funds for the award until 
proper documentation is submitted and accepted by USDA. It is suggested 
that applicants contact local universities, colleges, or nonprofit 
research organizations which have established reviewing mechanisms to 
have this service performed.
    (12) Proprietary information. (i) If proprietary information is 
provided by an applicant in a proposal which 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. This 
information must be clearly marked by the applicant with the term 
``confidential proprietary information'' and the following legend must 
appear on the title page of the proposal: ``These data shall not be 
disclosed outside the Government and shall not be duplicated, used, or 
disclosed in whole or in part for any purpose other than evaluation of 
this proposal. If a funding agreement is awarded to this applicant as a 
result of or in connection with the submission of these data, the 
Government shall have the right to duplicate, use, or disclose the data 
to the extent provided in the funding agreement and pursuant to 
applicable law. This restriction does not limit the Government's right 
to use information contained in the data if it is obtained from another 
source without restriction. The data subject to this restriction are 
contained on pages----of this proposal.''
    (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 applicant. However, USDA will retain for three years 
one 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 through the 
Freedom of Information Act, except for designated 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.
    (13) Rights in data developed under SBIR funding agreement. The 
legend (or statements) in the SBIR datarights clause included in the 
SBIR award must be affixed to any submissions of technical data. Where 
such legend is affixed, rights in technical data, including software 
developed under the terms of any funding agreement resulting from a 
proposal submitted in response to the program solicitation shall remain 
with the grantee. The Government may not use, modify, reproduce, 
release, perform, display, or disclose technical data or computer 
software marked with this legend for 4 years. After expiration of the 
4-year period, the Government has a royalty-free license to use, and to 
authorize others to use on its behalf, these data for Government 
purposes, and is relieved of all disclosure prohibitions and assumes no 
liability for unauthorized use of these data by third parties, except 
that any such data that is also protected and referenced under a 
subsequent SBIR award shall remain protected through the protection of 
that subsequent SBIR award.
    (14) Patents and Inventions. Allocation of rights to inventions 
shall be in accordance with 35 U.S.C. 202-206 and the Department of 
Commerce implementing regulations entitled ``Rights to Inventions Made 
by Nonprofit Organizations and Small Business Firms under government 
Grants, Contracts and Cooperative Agreements'' at 37 CFR Part 401. 
These regulations provide that small businesses normally may retain the 
principal worldwide patent rights to any

[[Page 28786]]

invention developed with USDA support. USDA receives a royalty-free 
license for Federal Government use, reserves the right to require the 
patentee to license others in certain circumstances, and requires that 
anyone exclusively licensed to sell the invention in the United States 
must normally manufacture it domestically. To the extent authorized by 
35 U.S.C. 205, USDA will not make public any information disclosing a 
USDA-supported invention for a four-year period. SBIR awardees must 
report inventions to the awarding agency within two months of the 
inventor's report to the awardee. The reporting of inventions shall be 
made through submission to Interagency Edison as specified in the terms 
and conditions of the grant.
    (15) 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 responsibility of the applicant. 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.
    (16) Documentation of commercialization record of firms with 
multiple phase II awards. A small business concern submitting a 
proposal for a Phase I award that has received more than 15 Phase II 
SBIR awards during the preceding five fiscal years must document the 
extent to which it was able to secure Phase III funding to develop 
concepts resulting from previous Phase II SBIR awards.
    (b) [Reserved]


Sec.  3403.8  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 program 
solicitation as necessary. See Sec.  3403.9.
    (1) Proposal cover sheet. Follow instructions found in Sec.  
3403.7(a)(1).
    (2) Project summary. Follow instructions found at Sec.  
3403.7(a)(2).
    (3) Phase I results. The proposal should contain an extensive 
section that lists 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 and information contained 
in Sec.  3403.7(a)(3)-(9) and Sec.  3403.7(a)(11)-(14) 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. A budget narrative, with supporting budget 
detail for each budget category must be included.
    (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) and report any changes in management or principals.
    (7) Commercialization Plan. A succinct commercialization plan must 
be included in each SBIR Phase II proposal moving toward 
commercialization. Elements of a commercialization plan may include the 
following:
    (i) Company information. Focused objectives/core competencies; 
size; specialization area(s); products with significant sales; and 
history of previous Federal and non-Federal funding, regulatory 
experience, and subsequent commercialization.
    (ii) Customer and competition. Clear description of key technology 
objectives, current competition, and advantages compared to competing 
products or services; description of hurdles to acceptance of the 
innovation.
    (iii) Market. Milestone, target dates, analyses of market size, and 
estimated market share after first year sales and after five years; 
explanation of plan to obtain market share.
    (iv) Intellectual property. Patent status, technology lead, trade 
secrets or other demonstration of a plan to achieve sufficient 
protection to realize the commercialization state and attain at least a 
temporary competitive advantage.
    (v) Financing. Plans for securing necessary funding in Phase III.
    (vi) Assistance and mentoring. Plans for securing needed technical 
or business assistance through mentoring, partnering, or through 
arrangements with state assistance programs, Small Business Development 
Centers, Federally-funded research laboratories, manufacturing 
extension Partnership Centers, or other assistance providers.
    (8) Data Collection. Each Phase II applicant will be required to 
provide information to the Tech-Net Database System (https://
technet.sba.gov) per OMB No. 3245-03356. The following are examples of 
the data to be entered by applicants into Tech-Net:
    (i) Any business concern or subsidiary established for the 
commercial application of a product or service for which an SBIR award 
is made;
    (ii) Revenue from the sale of new products or services resulting 
from the research conducted under each Phase II award;
    (iii) Additional investment from any source, other than Phase I or 
Phase II awards, to further the research and development conducted 
under each Phase II award; and
    (iv) Updates to information in the Tech-Net database for any prior 
Phase II award received by the small business concern.
    (b) [Reserved]

Subpart D--Submission and Evaluation of proposals


Sec.  3403.9  Submission of proposals.

    The SBIR program solicitation for Phase I proposals and the 
correspondence requesting Phase II proposals will provide the deadline 
date for submitting proposals, and instructions for submitting the 
proposal to CSREES for funding consideration.


Sec.  3403.10  Proposal review.

    (a) The receipt of all proposals will be acknowledged.
    (b) All Phase I and II proposals will be evaluated and judged on a 
competitive basis. Proposals will be initially screened to determine 
responsiveness. Proposals passing this initial screening will be 
technically evaluated by scientists to determine the most promising 
technical and scientific approaches. Each proposal will be judged on 
its own merit. USDA is under no obligation to fund any proposal or any 
specific number of proposals in a given topic. It also may elect to 
fund several or none of the proposed approaches to the same topic or 
subtopic.
    (c) Phase I and II proposal evaluation criteria will be published 
in the ``Method of Selection and Evaluation Criteria'' section of the 
program solicitation.
    (d) 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

[[Page 28787]]

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 nonprofit 
research organizations. If possible, USDA intends that peer review 
groups shall be balanced with minority and female representation and 
with an equitable age distribution.
    (e) 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 proposals should be self-contained 
and written with the care and thoroughness accorded papers for 
publication.
    (f) Final decisions will be made by USDA based upon the rating 
assigned by reviewers and consideration of other factors, including the 
commercial potential of the application, duplication of research, any 
critical USDA requirements, and budget limitation. In the event that 
two or more proposals are of approximately equal merit, the existence 
of a cooperative research and development agreement (CRADA) with a USDA 
laboratory will be an important consideration. The existence of a 
follow-on funding commitment for continued development in Phase III 
will also be an important consideration. The value of any commitment 
will depend upon the degree of financial commitment made by investors, 
with the maximum value resulting from a signed agreement with 
reasonable terms for an amount at least equal to 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 purposes, the 
Authorized Departmental Officer 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 program 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 funds are granted in accordance with the approved 
application and budget, the regulations of this part, the terms and 
conditions of award, the Federal Acquisition Regulations (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 may include the following:
    (1) Legal name and address of performing organization or 
institution;
    (2) Title of project;
    (3) Name and institution of PD's chosen to direct and control 
approved activities;
    (4) Identifying grant number assigned by the Department;
    (5) Project period, specifying the amount of time the Department 
intends to support the project;
    (6) Total amount of Departmental financial assistance approved for 
the project period;
    (7) Legal authority(ies) under which the grant is awarded;
    (8) Appropriate Catalog of Federal Domestic Assistance (CFDA) 
number;
    (9) Applicable award terms and conditions;
    (10) Approved budget plan for categorizing allocable project funds 
to accomplish the stated purpose of the grant award; and
    (11) Other information or provisions deemed necessary by CSREES to 
carry out its respective granting activities or to accomplish the 
purpose of a particular grant.
    (b) [Reserved]


Sec.  3403.14  Use of funds; changes.

    (a) Delegation of fiscal responsibility. Unless the terms and 
conditions of the grant state otherwise, 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) Changes in Project Plans. (1) The permissible changes by the 
grantee, Project Director, or other key project personnel in the 
approved project grant shall be limited to changes in methodology, 
techniques, or other similar aspects of the project to expedite 
achievement of the project's approved goals. If the grantee or the 
Project Director (PDs) is uncertain as to whether a change complies 
with this provision, the question must be referred to the Authorized 
Departmental Officer (ADO) for a final determination. The signatory of 
the award document is the ADO, not the program contact.
    (2) Changes in approved goals or objectives shall be requested by 
the grantee and, in consultation with the CSREES SBIR National Program 
Leader, 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, in consultation with the CSREES SBIR National Program 
Leader, 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, in consultation with the CSREES SBIR National Program Leader, 
approved in writing by the ADO prior to effecting such transfers, 
unless prescribed otherwise in the terms and conditions of the grant.
    (c) Changes in Project Period. The project period may be extended 
by CSREES without additional financial support, for such additional 
period(s) as the ADO determines may be necessary to complete or fulfill 
the purposes of an approved project provided Federal funds remain. Any 
extension of time shall be conditioned upon prior request by the 
grantee and approval in writing by the ADO unless otherwise noted in 
the award terms and conditions. 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 normally be delayed by no more than 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.
    (d) Changes in approved budget. Changes in an approved budget must 
be requested by the grantee and approved

[[Page 28788]]

in writing by the ADO prior to instituting such changes if the revision 
will involve transfers or expenditures of amounts requiring prior 
approval as set forth in the applicable Federal cost principles, 
Departmental regulations, or grant award.
    (e) Use of Change of Name and Novation Agreement (1) Occasionally, 
after an award has been made the name of the Awardee may change. CSREES 
requires execution of a ``Change of Name Agreement'' in such instance. 
The specific circumstances of each situation will determine which kind 
of agreement should be executed. This decision will be determined by 
the ADO.
    (i) A Change of Name Agreement is a legal instrument executed by 
the Awardee and the Government that recognizes a change of the legal 
name of the Awardee without disturbing the original rights and 
obligations of the parties. If only a change of the Awardee's name is 
involved and the Government's and Awardee's rights and obligations 
remain unaffected, the parties should execute an agreement to reflect 
the name change.
    (ii) In order to execute the actual Change of Name Agreement with 
USDA, the Awardee is required to submit the following information:
    (A) The document effecting the name change, authenticated by a 
proper official of the State having jurisdiction;
    (B) The opinion of the Grantee's legal counsel stating that the 
change of name was properly effected under applicable law and showing 
the effective date;
    (C) A list of all affected awards between the Grantee and CSREES.
    (iii) When CSREES is notified that a change of name has taken 
place, the ADO will request the aforementioned information from the 
Grantee. Upon receipt and review of this information, parties will 
properly execute a Change of Name Agreement and the appropriate changes 
will be made to the Agency's records.
    (iv) The following suggested format for an agreement may be adapted 
for specific cases:

Change of Name Agreement

    THE ABC CORPORATION (Grantee), a corporation duly organized and 
existing under the laws of ------------------------(insert State), and 
the COOPERATIVE STATE RESEARCH, EDUCATION, AND EXTENSION SERVICE, USDA 
(Government) enter into this Agreement as of------------------(insert 
date when the change of name became effective under applicable State 
law).
    (a) THE PARTIES AGREE TO THE FOLLOWING FACTS:
    1. The Government, represented by the ADO, has entered into certain 
awards with XYZ CORPORATION, namely ------------(insert award number or 
delete ``namely'' and insert ``as shown in the attached list marked 
`Exhibit A' and incorporated in this Agreement by reference.'') The 
term ``the awards,'' as used in this Agreement, means the above awards 
and all other awards, including all modifications, made by the 
Government and the Grantee before the effective date of this Agreement 
(whether or not performance and payment have been completed and 
releases executed if the Government or the Grantee has any remaining 
rights, duties, or obligations under these awards.)
    2. The XYZ CORPORATION, by an amendment to its certificate of 
incorporation, dated --------------------, 20----, has changed its 
corporate name to ABC CORPORATION.
    3. This amendment accomplishes a change of corporate name only and 
all rights and obligations of the Government and of the Grantee under 
the awards are unaffected by this change.
    4. Documentary evidence of this change of corporate name has been 
filed with the Government.
    (b) IN CONSIDERATION OF THESE FACTS, THE PARTIES AGREE THAT:
    1. The awards covered by this Agreement are amended by substituting 
the name ``ABC CORPORATION'' for the name ``XYZ CORPORATION'' wherever 
it appears in the awards; and
    2. Each party has executed this Agreement as of the day and year 
first above written.

COOPERATIVE STATE RESEARCH, EDUCATION, AND EXTENSION SERVICE, USDA
BY:--------------------------------------------------------------------
TITLE:-----------------------------------------------------------------

ABC CORPORATION
BY:--------------------------------------------------------------------
TITLE:-----------------------------------------------------------------

CERTIFICATE
    I, ----------------, certify that I am the Secretary of ABC 
CORPORATION, that------------------------ , who signed this Agreement 
for this corporation, was then------------------------of this 
corporation; and that this Agreement was duly signed for and on behalf 
of this corporation by authority of its governing body and within the 
scope of its corporation powers.
WITNESS MY HAND, and the seal of this corporation, this------------day 
of ------------------------, 20----.-----------------------------------
BY:--------------------------------------------------------------------
(CORPORATE SEAL)
    (2) From time to time the legal entity performing the research 
under the award may have to be changed. In such instances, USDA will 
ensure that all parties properly execute a Novation Agreement 
(Successor in Interest Agreement).
    (i) A Novation Agreement is a legal instrument executed by the 
Grantee (transferor), the successor in interest (transferee), and the 
Government by which, among other things, the transferor guarantees 
performance of the award, the transferee assumes all obligations under 
the award, and the Government recognizes the transfer of the award and 
related assets. This occurs when the third party's interest in the 
award arises out of the transfer of all the Grantee's assets or the 
entire portion of the assets involved in performing the award. Examples 
include, but are not limited to: the sale of these assets with a 
provision for assuming liabilities; the transfer of these assets 
incident to a merger or corporate consolidation; and the incorporation 
of a proprietorship or partnership, or the formation of a partnership.
    (ii) When a Grantee asks the Government to recognize a successor in 
interest, the responsible ADO shall obtain the following from the 
Grantee:
    (A) an authenticated copy of the instrument effecting the transfer 
of assets; e.g., bill of sale, certificate of merger, contract, deed, 
agreement, or court decree;
    (B) a list of all affected awards;
    (C) a certified copy of each resolution of the corporate parties' 
boards of directors authorizing the transfer of assets;
    (D) a certified copy of the minutes of each corporate party's 
stockholder meeting necessary to approve the transfer of assets;
    (E) the opinion of legal counsel for the transferor and transferee 
stating that the transfer was properly effected under applicable law 
and the effective date of transfer;
    (F) an authenticated copy of the transferee's certificate and 
articles of incorporation, if a corporation was formed for the purpose 
of receiving the assets involved in performing the Government award;
    (G) evidence of transferee's capability to perform the award; and
    (H) balance sheets of the transferor and transferee as of the dates 
immediately before and after the transfer of assets, certified for 
accuracy by independent accountants.
    (iii) The ADO will review the Agency's financial records concerning 
the correct cash-on-hand balances held

[[Page 28789]]

by the transferor to ensure that they are properly accounted for in the 
transfer process. If recognizing a successor in interest to a 
Government award is consistent with the Government's interest, the ADO 
will prepare a Novation Agreement for execution by all three parties. 
The agreement will provide that:
    (A) The transferee assumes all the transferor's obligations under 
the award(s);
    (B) The trans