When Fervent Dedication and Administrative Details Collide: What Every Scientist Should Know About SBIR Program Rules

 

When Fervent Dedication and Administrative Details Collide:

What Every Scientist Should Know About SBIR Program Rules

 

If, like me, you’ve led a professional life dedicated to scientific research, at the intersection of academia and entrepreneurship, you probably have never contemplated the possibility of being branded a white-collar criminal and charged with wire fraud.

 

Though the charges were later dismissed, the experience of being investigated and accused by federal authorities taught me some vital lessons about the pitfalls of the Small Business Innovation Research (SBIR) award program. There are lessons that every potential awardee should bear in mind if they seek funding through the SBIR award program.

 

My Individual Circumstances

 

In my instance, what happened can be distilled into the following key details:

 

·       From 2005 to 2013, I wore two professional hats: I was employed at the University of California, San Diego (UCSD) where I formed and lead a research group in high-performance computing, while also serving as CEO for a company that I helped found, SciberQuest, with the knowledge and permission of both institutions and of federal agency program managers.

 

·       During that time, I applied for and was awarded multiple SBIR and non-SBIR grants through SciberQuest in connection with agencies such as NASA, the Department of Defense and the U.S. Air Force, as a principal investigator (PI). My work for every agency with which I had a contract was very collaborative and produced highly valued research.

 

·       Were the program managers at those agencies pleased with the work performed by SciberQuest? I can say, unequivocally, yes. The agencies highlighted our work to the public, and we were recognized by the research community through awards of excellence and writeups in scientific journals. Moreover, on periodic contractor performance assessment reports, the agencies themselves consistently rated our performance as exceptional in all evaluated categories.

 

·       Here is where we ran into our issues: When SBIR grants are awarded, the PI on the application must commit to working 20 hours or more per week at the recipient company of the SBIR grant – in my case, SciberQuest. Although I satisfied this requirement, and program managers were well aware of my dual affiliation, my employment with an outside organization, UCSD, was interpreted as a violation of the rules after the fact by the respective inspectors general offices of NASA and NSF.

 

·       The issue was related to the interpretation of the 20 hours a week requirement. The two inspector-general investigators took the position that full time means 40 hours a week and thus interpreted the 20-hours-per-week requirement to mean that it disallows working at another institution for more than 20 hours a week. This interpretation varied widely not only between government agencies, but sometimes between different individuals in the same agency.

 

·       I found the charges against SciberQuest confusing, and it took a while to come to terms with it. This requirement was put in place to ensure that the PIs spent sufficient time on the contract to make it a success. Not only was I spending much more than the required 20 hours a week at SciberQuest, but the agencies gave us high marks on our performance on the contracts.

 

·       All that I was focused on with each SBIR grant application was whether I could deliver on the project at hand. I am proud to say that this was very much the case every time.

 

 

Unfortunately, my lack of focus on the administrative details in favor of the science led to  charges against SciberQuest and me, as its CEO, with wire fraud.

 

At the time, I couldn’t believe that this was happening, because I was providing high-quality work. Again, to me, it was the science that mattered, not the fact that I was working up to 120 hours a week spread out over seven days a week to deliver the results.

 

I won’t go through all the damage the charges did, but suffice it to say that I was shocked, frightened and embarrassed.

 

 

Key Take-Aways for Would-Be SBIR Grant Applicants

 

Based on my experiences, I would strongly urge all would-be SBIR grant applicants to pay close attention to the following key administrative details in the application process and beyond:

 

·       Focus on how you characterize key project personnel and pay attention to subcontractor restrictions. SBIR programs have rules about where the PI is employed and which key personnel will be working on the project, as well as restrictions on the amount of work that can be done by subcontractors. 

 

·       Ensure you are clearly documenting and/or tracking any non-SBIR research you are performing and be able to immediately and clearly verify  that you are not charging government agencies for extra or duplicative work. As any credible scientist would do, we built upon the research we did through our SBIR grants with knowledge and insights developed in other non-SBIR projects, but we did not charge the government for any extra work. Indeed, we went so far as to incur over $100,000 in additional expenses from our own company funds to avoid any such perceptions. This did not stop inspector-general investigators who reviewed our situation from incorrectly asserting that we charged the government for duplicative work. With the benefit of hindsight, I should have been even more detailed from the outset in documenting precisely how the new work was distinct from and built upon previous work.

 

·       Dot every i and cross every t when it comes to timekeeping systems and records, no matter how trivial the details might seem to you. It’s not uncommon for scientists to disdain the mundane back-office functions that consume precious research time. But you do so at your own risk. SBIR grant proposals often include representations about a company’s accounting and timekeeping systems, and progress reports often must include certifications of compliance with the terms of the grant. Even if it takes up more time than you want, put in the extra effort to ensure you are being disciplined with timekeeping and other back-office functions, down to the most minute detail – and make sure everybody working with you on the project is also doing so.

 

Moving Onwards

 

In the end, SciberQuest pleaded guilty to the fraud charges and agreed to forfeit $180,000. As it would be for any company plunged into this kind of predicament, this was the clearest course of action in order to move forward.

 

As the CEO, I was granted a deferred prosecution – an agreement between me and federal prosecutors in which I would admit to the underlying facts of the case, and the charges would be dropped after three years if I complied with the conditions set forth in the agreement.

 

Three years passed, and the charges were dismissed. But make no mistake about it, the hard lessons will never be lost.

 

While I’m pleased that this matter is behind me – I want my experience to be a cautionary tale. For every scientist out there who is seeking or may seek  SBIR grants, beware that there are traps for the unwary.    Fervently observe seemingly routine or mundane administrative details and requirements  or you may unwittingly find yourself in  an uncommonly  complex and unexpected crisis.