You Just Got Your NIH Phase I Award: What’s Next?

By Barbara Serafin, Chief Operations & Compliance Officer, BW&CO

A plain-English guide for new NIH SBIR and STTR Phase I awardees.

Who's Behind This Guide

I'm a compliance and submission specialist. My work lives in the parts of federal funding that most scientists would rather not handle: the registrations, the budgets, the reporting, and the quiet rules that determine whether an award functions the way it should.

Across more than 150 NIH SBIR and STTR engagements, I've seen what tends to happen after the award notice arrives. The difficulties are rarely scientific; they are almost always administrative. A registration lapses and freezes a drawdown. The books won't hold up to an audit. A reporting deadline passes that no one had tracked. None of it is difficult once you understand where the risks sit, and this guide is the concise version of what I wish every new awardee had in hand on day one.

First, congratulations. Winning a Phase I is a significant milestone.

A Phase I award, however, is not a lump sum deposited to your account. The funds are released through a federal payment system and must be drawn and spent under specific rules, and your compliance obligations begin on the award date, not the day you return to the lab. How you draw the funds, what you may spend them on, and what you must report (and when) are all manageable, and all too rarely explained. Below is the sequence I'd recommend.

Your First 30-60 Days: A Quick Checklist

Your Notice of Award (NoA) is the binding document for everything below. Read it closely: it states your budget, your reporting schedule, your indirect cost rate, and any award-specific terms or restrictions. Where this guide and your NoA disagree, the NoA wins.

• Read your Notice of Award in full. Find it in eRA Commons under Status. Note the project period, the approved budget by category, your reporting due dates, and any special terms of award.

• Confirm your federal registrations are still active. Your SAM.gov registration must be renewed every year, and a lapse will block your ability to draw funds. Confirm SAM.gov, eRA Commons, and your SBA Company Registry entry are all current.

• Get set up to receive funds. NIH pays through the HHS Payment Management System (PMS) on an advance-payment basis - you may draw funds before you have spent them, but only as you need them. Keep each draw to no more than three business days before you will disburse the cash. Make sure your organization is enrolled and the right person has access.

• Confirm who does what. Identify your Authorized Official / Signing Official, your PI, and whoever will handle drawdowns and reporting. Where you can, these should not all be the same person (more on that below).

• Save your PO and GMS contacts. Your Program Officer (scientific and programmatic questions) and your Grants Management Specialist (business, financial, and compliance questions) are named on your NoA. Add both to your contacts now; they are your first call before any change.

• Set up accounting to track the award separately. You need to show costs by award and by category, and to separate direct from indirect costs. A clean system now saves a painful cleanup later.

• Calendar every due date. Progress reports, financial reports, and invention reporting all have deadlines. Put them on a shared calendar the day you read your NoA.

• Calendar the 120-day closeout deadline. Your final reports are due within 120 days of the end of the project period. Note it at the outset so closeout is not a last-minute scramble.

Getting Paid - and Staying Compliant

NIH funds Phase I awards on an advance-payment basis through the HHS Payment Management System: you may draw funds before you have spent them. The constraint is timing. Federal cash-management rules expect you to draw only as the need arises - as a rule of thumb, no more than three business days before you actually disburse the funds - so that federal cash does not sit in your account. Drawing too early, or in larger amounts than you need, creates a cash-management problem and is exactly the kind of issue that surfaces in a review. A few habits keep this clean:

Spend only on allowable costs. For for-profit SBIR and STTR awardees, NIH applies the cost principles in FAR Subpart 31.2 - incorporated through Chapter 18 of the NIH Grants Policy Statement - rather than 2 CFR Part 200, to determine what you may charge to the award. Costs must be reasonable, allocable to the project, and consistently treated. Some everyday expenses, such as alcohol, lobbying, most entertainment, and bad-debt write-offs, are simply not allowable.

Document effort, not just dollars. One of the audit findings I see most often with small awardees is weak support for salary charges. If you charge a person's time to the award, you need records showing the effort actually went to the project. Set up timekeeping on day one, including for founders who pay themselves.

Understand your indirect (F&A) costs. Your award includes an indirect cost rate to cover overhead you cannot tie to a single project. The rate and basis are stated in your NoA - use that figure. If you do not yet have a negotiated rate, NIH has historically allowed small businesses to use up to 40 percent without one; the institutes are now handling this differently, however, so confirm what applies to your award with your Grants Management Specialist (GMS) before you build an internal budget.

Keep your paperwork. Keep receipts, payroll records, your accounting ledger, and your NoA together and backed up. Federal rules generally require you to retain records for three years from the date you submit the Federal Financial Report (FFR) that covers those costs, and your NoA can require longer.

Common Traps for Small SBIR/STTR Teams

A few issues come up again and again with small, lean teams. None are hard to avoid once you see them coming.

One person wearing every hat. When the founder is also the CEO, the PI, and the person who signs off on spending, you lose the separation of duties that keeps federal money defensible. You do not need a big team, but the person who approves an expense should not be the only one who requested and recorded it. Build in a second set of eyes, even a part-time bookkeeper, early.

The work-split rules are not a suggestion. For an SBIR Phase I, your small business must perform at least two-thirds of the work. For an STTR, your company must do at least 40 percent and your research-institution partner at least 30 percent. These thresholds are measured and enforced. If a subcontractor or partner creeps past their share, you can put the award at risk.

Human-subjects and animal work take longer than you think. If your project involves human subjects, you will likely need training for key personnel, a Federalwide Assurance (FWA), and Institutional Review Board (IRB) approval before you can spend a dollar on that work; companies without a university partner usually use a commercial IRB. If your project involves vertebrate animals, you will need an OLAW Animal Welfare Assurance and Institutional Animal Care and Use Committee (IACUC) approval of your protocol. And if any portion of the work meets the definition of a clinical trial, you will need to register it on ClinicalTrials.gov. Start these approvals immediately, because they gate the spending rather than follow it.

Do not quietly change an approved arrangement. Some post-award changes are yours to make, but others require NIH's prior written approval - among them a change in scope or objectives, a change in or replacement of the PI, a reduction of the PI's effort by 25 percent or more, the addition of a foreign component, and transferring a substantial portion of the work to a third party. Making one of these without checking can create a compliance problem, even when the change seems minor or saves money. When in doubt, ask your grants management specialist before you act.

Keep your foreign-disclosure filing current - this is new for 2026. NIH now requires SBIR and STTR recipients to submit a foreign disclosure form and keep it up to date throughout the award. Updates are due with each annual, interim, and final RPPR, and within 30 days of any change to ownership, covered individuals, or foreign relationships, submitted through the Additional Materials tool in eRA Commons. The requirement applies to active awards, not only new applications, and a material misstatement or an unreported, risk-posing change can lead to termination or repayment. Treat it as an ongoing obligation.

For SBIR, your PI must be primarily employed by the small business. On an SBIR award, your Principal Investigator's primary employment - more than half of their time - must be with the company for the duration of the project, so a founder-PI cannot simultaneously hold a full-time position elsewhere, such as a full-time faculty appointment. STTR differs: there, the PI may be primarily employed by either the small business or the research institution. Confirm this before the award begins, because it is an eligibility requirement rather than a formality.

A Note for STTR Awardees

If your award is an STTR rather than an SBIR, three differences matter from the start:

• You are required to have a formal partnership with a research institution - a U.S. university, nonprofit research institution, or FFRDC. This is not optional for STTR, and a federal laboratory cannot serve as the research partner.

• The work split is 40/30: your company performs at least 40 percent and the research institution at least 30 percent.

• You need a written intellectual property agreement between your company and the partner that spells out how rights and data are allocated. Put this in place early; it is far harder to negotiate after a dispute than before one.

Money First-Time Awardees Leave on the Table

Several sources of funding and support are built into the SBIR/STTR programs, and first-time awardees routinely overlook them.

• The fee (your profit). SBIR and STTR allow a fee of up to 7 percent of total costs in your budget. It functions as profit: it is yours to use at your discretion, and it does not have to be justified with receipts. If you did not include it, you left money behind - build it in next time.

• TABA (Technical and Business Assistance). In addition to your award, NIH will fund outside expert help with intellectual property, market research, regulatory strategy, and reimbursement planning - up to $6,500 in Phase I and up to $50,000 in Phase II. It generally must be requested in the application, so plan for it early.

• I-Corps. NIH offers an entrepreneurial training program that sends teams out to test their commercial assumptions with real customers. It is provided at no cost to selected awardees and directly strengthens the commercialization case your Phase II application will be evaluated on.

Start Positioning for Phase II Now

Phase I is a proof point, not the finish line. The teams that move cleanly into Phase II start preparing while Phase I is still running.

• Keep your data organized and your milestones documented. Your Phase II application, and your reviewers, will want clear evidence that you met your Phase I aims.

• Build your commercialization story as you go. NIH weighs whether there is a real path to market, so capture customer conversations and partnership discussions as they happen and fold them into your Commercialization Plan, which is where reviewers assess your path to market. (NIH is also moving away from open-ended letters of support toward short letters of collaboration, so do not rely on a stack of support letters to carry the argument.)

• Know your timeline. Phase II generally follows Phase I, and the application and review cycle takes months. Work backward from when you will need funding so there is no gap between phases.

• Close Phase I properly. The final progress report, final financial report, and final invention reporting each have deadlines. A clean closeout protects your eligibility and your reputation for the next award.

How BW&CO Can Help

BW&CO helps small biotech, defense, and deep-tech companies turn a federal award into funded, compliant research - without building a grants department to do it. We support awardees with post-award setup, budget and drawdown management, compliance and reporting, and getting Phase II-ready, so founders can stay focused on the science.

If you just received a Phase I award and want a second set of eyes on your setup, we are glad to help. Book a free 20-minute call for a conversation about where you are and what comes next.