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From Science Fair to Science Fare, Part 2: Establishing a Revenue Stream

Earlier this month, Next Wave's Career Development Center for Postdocs and Junior Faculty presented Part 1 of From Science Fair to Science Fare, in which Mike McClure, of the National Institute of Environmental Health Sciences, compared a university laboratory to a store in a shopping mall. The overhead on your grants, he said, is equivalent to the rent for your laboratory space. Management will favor you, McClure noted, "as long as your enterprise offers the mall--the university or medical center--a better draw than a competitor [does]." Some may find this formulation cynical, but it is, at a minimum, an effective way of focusing your attention on some of the nonscientific challenges you face in your science career.

Like any entrepreneurial endeavor, your laboratory must raise start-up money and establish and maintain a sound, sustainable revenue stream. In Part 2 of "From Science Fair to Science Fare," McClure tells you how to do that. McClure focuses on the NIH and the biomedical sciences, but many of the ideas he presents apply equally to other areas of science.

Part 2: Establishing a Revenue Stream

A Budget for the Long Haul

There are ups and downs in research funding, just as there are in stock markets. The goal of budgeting is to use your budgeting tools to blunt the amplitude and frequency of the inevitable perturbations in the stock market of research funding.

At the National Institutes of Health (NIH), which my institute is part of, we talk a lot about our budget "base." We're always worried about the erosion of that base. It's like the private foundations worrying about the erosion of their endowment, which is mostly in stocks. Your goal should be to build up and protect your own budget base.

Getting started is hard enough, but maintaining is the really hard part. Once you have a budget, you have people working for you, and they don't want to lose their jobs. And you've started on projects that you're eager to finish, so losing your funding would be a disaster. Your start-up package provides you with maybe 2 years worth of money, and during those years, you need to eagerly seek your first "base" grant.

That grant comes along, let's hope, before your start-up funds are spent. Ideally, there's a bit of overlap with your start-up funds, for your protection and that of the people who work in your laboratory. After you've got your first "base" grant, you get a couple of special-purpose and seed grants. Then, you can start to relax a little bit, but not too much. It's soon time to start thinking about your next base grant.

Ideally, you want this and all subsequent base grants to overlap. That gives you maximum protection, because in many research settings, you can exchange funds between grants if they're connected. You can borrow from one source to pay for something on another project. The basic strategy is to overlap base grants and season the mix with special-purpose grants and seed money.

Doing Your Homework

Different funding sources have different requirements and allowances. I know that seems obvious, but when 30,000 to 40,000 NIH grants come across the desk, one can easily spot those that are written in the formats of other funding sources, such as the National Science Foundation (NSF). These don't do well.

Read and learn about budget categories and the allowances they will give you. You can't ask for what the funders won't give or for more than they will pay. And you can't ask in a way that's not permissible for that organization and the program to which you're applying. Avoid suffering--do your homework.

Research institutions have their own requirements, and these may come into conflict with the policies of funding organizations. Some sponsors, for example, do not provide facilities and administration (F&A)--overhead. And some institutions will not apply for, or accept, grants that don't pay F&A.

Some grants do not provide salaries; others have caps on salaries. Some grants do not provide equipment. There's a whole liturgy of ins and outs involved in constructing budgets, and these need to be followed meticulously. Again, do your homework!

It's Your Science But Your Institution's Money

It's your scientific vision, but your institution's sponsored research office (SRO) provides the fiscal vision. The SRO holds fiscal responsibility for your grant funds, and it has procedures in place to assure that the ability to comply with NIH requirements. The SRO will likely have experience working with NIH and is probably much more familiar with its policies than you are.

Your aim is to achieve a meeting of minds with your SRO. For this to occur, your scientific vision must be translated into the practical, everyday language of the accountants. This requires a lot of hard work and a lot of homework. Consider what follows to be a sort of cheat sheet. This is just a starting point, though; there's much more to learn.

Modular Grants

Modular grants were designed to get peer reviewers to focus on the science and stop being accountants. Before they came along, grants were designed as best-effort "contracts." This meant you had to itemize all your paperclips and pencils. And for years, these phenomenally complex budgets were a major preoccupation of study-section reviewers, who might say something like: "This guy's asking for two secretaries; I have only a half-time secretary. Cut him."

We had one study section that had what was called the "bleep" budget. These reviewers automatically went through every application and reduced the secretaries requested to 10% and no more; they took out all major equipment from the first year; and they reduced travel to two trips. I've been in study-section meetings where I've heard arguments for more than an hour about whether to leave in two postdocs or reduce the number to one.

Modular grants are designed to get away from that. You put in a budget that you consider realistic, in accordance with the rules. Is the science any good? If it is, the money follows.

How do they work? A modular grant is funded in modules of $25,000. You build consecutive, contiguous models for each year of requested funding. Within a particular year, you build up the number of modules that you project you'll need.

Modular grants are very useful for new investigators starting out; this approach gives a scale and scope that's useful for a start-up activity. These grants are reviewed with far more favor and allow the committees to avoid being hypercritical.

Not all NIH grants are modular. Any grant that has a direct cost exceeding $250,000 in any year does not qualify as a modular grant. In addition, if your grant exceeds $500,000 in any one year, you are required under NIH policy to contact someone at the NIH--a program officer in the institute that most likely will have your grant. You must discuss the proposal with that individual, who will send you a letter if the arrangement is acceptable. That includes renewals: competitive renewals must also contact NIH and get a letter.

What happens if you get confused? The NIH sends your application back. Your grant proposal won't be reviewed, and you'll lose a year of time in trying to build your career. So, if you're confused, you should call a program officer at the NIH. They're real people. If you dial their phone numbers, they will answer the phone and talk with you. And they can cut through a lot of red tape very quickly.

Domestic Subcontracts and Foreign Collaborations

In both modular and nonmodular grants, you can have a subcontract--another site you're collaborating with that will get some of the money you're requesting. The subcontract is entirely buried within your grant, which means that both the direct costs and the F&A for the subcontract get turned into direct costs of your grant. You're now paying two F&As, and one of them is transmuted into a direct cost, so you get less bang for the buck. The key is to have your university negotiate the subcontract F&A rate with the other institution. This requires planning.

Some NIH institutes will allow you to request an extra $25,000 module as direct costs to compensate for subcontract F&A. Other institutes will not. You need to be very aware of the difference and know where the money is going--once again, homework.

Foreign sites can apply for NIH grants. They face additional requirements in review, additional program requirements, and additional secondary review by the national council, but it can be done. Foreign subcontracts, on the other hand, face fewer hurdles. If you are working with a foreign collaborator, it is far more successful to do so by a subcontract in your domestic parent grant. That approach is far more likely to work than is trying to have the foreign site put in an application with you as the collaborator.

Major Equipment: When and How, and Who Owns It?

In NIH circles, new investigators are known for requesting major equipment. This is often a mistake. Reviewers will figure out whether a requested piece of equipment is going to be used more or less exclusively for the project under consideration, or if the applicant is trying to "sneak one through." For example, if your project will need 180 sections on an electron microscope (EM), it would be a little silly to try requesting funds on the grant to buy an EM.

However, if your project justifies an equipment purchase, your department may be able to come up with some funds for cost sharing, and you might need to ask for only 15% or 20% of the cost. That's often seen as a bargain by reviewers and NIH program staff.

Never ask for major equipment in the last year of a grant; it has no chance of getting through. You're wasting time, and this item can drag down your score. Hold it over, and put it on the renewal request.

So who owns the equipment you get from an NIH grant?

Universities--they hold title to it. Right? No. It's only when your grant period ends that title "vests" with the university.

Why is that important to know? Say you get a job offer for a tenured position at BigSchool U. as a full professor. You've got these five centrifuges that you just bought, you're in the second year of your grant, and you want to move that grant. Your university might try to say, "we're keeping the centrifuges." NIH will take the other view; if the equipment will support your new position, then the equipment should be moved with the project.

This, however, doesn't operate for renewals. After 5 years, the university owns the equipment and can do whatever it wants with it.

Animal Costs

It takes particular, careful arrangements and particular, careful budgeting when you're working with animal models, especially primate models. An unrealistic budget is a major weakness of many grants that come through, and the animal budget is a place where this is common. This can dampen the confidence and enthusiasm of reviewers.

Do you need to work with sheep? Exotic animals? Does your university have facilities for keeping them? Some animals take up a lot of space. If you're working with large or exotic animal models, you need to take this into account in your budget. These expenses are allowable at NIH. If your institution doesn't have the facilities, you'll need to set them up.

Budgeting for a Research Lab

You don't just say, "Drop it on me, guys." You must take it in steps. You crawl before you walk. You walk before you run. You grow in steps. You have to focus on getting your first credible project funded by a major source, because that makes all the difference in the world. You get that first major project, and you have a base. To that, you can add a second base project for stability. You can now factor in training and career-development programs, which are longer term, more manpower-intensive efforts.

You're actually developing careers. You're moving toward developing a more complex business with more complex products. But you have to take first things first.

Michael McClure is chief of the Organs and Systems Toxicology Branch of the Division of Extramural Research and Training at the National Institute of Environmental Health Sciences (NIEHS).

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