Frequently Asked Questions about Conflicts of Commitment and Interest: SBIR and STTR Programs

BACKGROUND:  The federally funded Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs encourage domestic small business concerns (SBCs) to engage in research and development that has the potential for commercialization.  Through a competitive awards-based program, grants are made directly to the small business concern to support the financing of cutting edge technologies.  The program grants are structured in three phases:

• Phase I is to establish the technical merit, feasibility, and commercial potential of the proposed R&D efforts and to determine the quality of performance of the small business awardee prior to providing further federal support.  Support is limited to $150,000 and 6 months.
• Phase II is available to companies whose technology shows commercial promise during the Phase I study.  Funding is limited to $1,000,000 and 24 months of support.
• Phase III, which is not federally funded, the small business concern pursues commercialization based on its successful Phase I/II research and development activities.

Small businesses may collaborate with a research institution in Phase I and Phase II through the issuance of a subcontract between the two parties.

University Employees Serving as Principal Investigator on SBIR or STTR Grants

The principal investigator of a sponsored award is responsible for the design, scientific and technical conduct, administrative oversight, fiscal accountability, regulatory oversight, and reporting for a research, instructional, or public services project.  The SBIR and STTR grants require there be a principal investigator for the primary award (company) and a principal investigator for the sub-award (University or research institution).

Of particular concern is the potential conflict of interest that may occur during Phase I and II awards when the University employee is the owner of the small business.  In accordance with the University Policy on Conflict of Commitment and Interest, the University employee may not serve as both the small business principal investigator and the University principal investigator on the sub-award from the employee-owned company.

1. Employee serving as Principal Investigator of a Subaward to the University.
   An employee may serve as the principal investigator (PI) of a subaward to the University from the prime award to the small business, provided that the following conditions are met
   1. The University faculty member does not serve as the lead principal investigator, investigator, or consultant for the small business concern on the award from the sponsor;
   2. The sponsoring agency does not explicitly preclude the University faculty member from serving as an investigator under the University subcontract;
   3. The University faculty member does not hire a University of Illinois student he or she mentors to conduct work on behalf of the small business concern without the Conflict of Interest Committee designated representative confirming that the student is fully cognizant of the risks and the rewards of the arrangement;
   4. The University faculty member does not utilize University resources or any federal funds to benefit the small business in a manner inconsistent with the Universities non-profit status;
   5. The University faculty member alerts the Conflict of Interest Committee if the subcontract is modified and a protocol is submitted to the Institutional Review Board for approval;
   6. The employee provides the Office of Sponsored Programs with copies of invoices and progress reports submitted to the small business
2. Employee serving as Principal Investigator of the Prime Award to the Small Business
   A University employee may serve as the PI of an STTR grant or an SBIR grant submitted by a small business, provided that the following conditions are met.
   1. The relationship with the small business must be disclosed on the annual Report of Non-University Activities.
   2. In order to serve as the PI of an SBIR grant, the individual is required to be employed 51% by the small business, and would need to adjust his or her University appointment accordingly, with appropriate approvals.
   3. In cases where a University employee serves as the PI of the prime award to the small business, another University employee must be identified to serve as the PI of any subaward to the University.
   4. The PI of any subaward to the University may not be a student or subordinate of the PI of the prime award.
   5. Conflicts of interest must be managed in accordance with the University of Illinois Policy on Conflicts of Commitment and Interest, and the interest of students and other employees must be protected.

Printable version of the Guidelines

The University Policy on Conflict of Commitment and Interest acknowledges that external activities may enhance professional skills or constitute public service which is beneficial to both the University and the individual.

The FAQs are not intended to discourage activities with entrepreneurial entities. The University often collaborates with small businesses as the sub-contractor on grants funded through the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. Activities conducted under the SBIR and STTR awards are consistent with the research and entrepreneurial mission of the University.

The FAQs are intended to raise awareness of some potential conflicts of interest and conflicts of commitment that may arise from a University employee’s or student’s participation in the SBIR or STTR programs.

This guidance is intended to mitigate potential conflicts of commitment and interest and to help manage such conflicts when they occur.

For more information on the SBIR and STTR awards: You can learn more about these awards through the Office of Technology Management.

The University Policy on Conflict of Commitment and Interest states that:

It may be beneficial to university students or employees to be involved in the outside professional activities of an academic staff member. However, such involvement must be disclosed by the academic staff member and must be approved in writing by the Unit Executive Officer (UEO) in advance. The UEO shall implement mechanisms to prevent the exploitation of others and any unreasonable interference with others’ university duties and responsibilities. This may include providing independent advisory oversight by faculty members not involved in the particular outside activity for students as they engage in course, thesis, or research work. Care must also be taken when an academic staff member could be prejudiced in judging other staff in issues of rank, compensation, and tenure as a result of mutual involvement in outside activities. The UEO may need to implement appropriate monitoring mechanisms.
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The educational experience of the university’s students and postdoctoral fellows should not be diminished or impeded in any way; neither they nor other academic staff members should be diverted from their primary educational objectives.
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Students and staff involved in these outside professional activities shall be made fully aware of the circumstances, university policy regarding these activities, and the management mechanisms implemented by the academic staff member and the UEO.
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Sanctions are warranted for failure to report potential conflicts or to abide by a management plan. The university has the right to impose sanctions consistent with the rights of academic staff members under the university Statutes and other applicable policies and practices. Severity of sanctions depends on the extent of the violations of the Policy. Inadvertent, unintentional, and minor breaches require lesser sanctions, whereas knowing, deliberate, and major violations demand the severest sanctions.

As a UIC employee, if you wish to serve as the PI for the business applicant or become an employee of the business, then you must adhere to University Policy on Conflict of Commitment and Interest for academic staff including faculty, postdoctoral scholars, and academic professionals and the Policy and Rules for Civil Service Staff.

• Academic staff must follow the University Policy on Conflict of Commitment and Interest.   Academic staff must seek prior review and approval for the non-University activities from your Unit Executive Officer (UEO).   Review and approval is documented using Pre-Approval Request form in UIC Research COI. Additional details follow in the subsequent questions.
• Civil Service staff must follow the Policy and Rules for Civil Service Staff.  Guidelines on obtaining approval are available under Rule 16.01.  Civil service employees are required to report in writing any potential conflict of interest to the unit head for approval before engaging in any activity that is or may appear to be inconsistent with the employee’s duties and obligations to the University.  The non-university activities of civil service staff are monitored by the campus Assistant Vice President for Human Resources.

Guidance provided by these FAQs is not intended to replace the advice and requirements set by the UIC Human Resources Office.  The UIC Human Resources Office should be consulted with any questions about the non-University activities of civil service staff.

Although you may have written University approval to engage in activities with the business, you must not devote any of your University working time nor use University resources, such as office space, supplies, equipment, phone, faxes, copiers, websites, etc. to conduct company business.

Example: If you will work with the company to develop the company’s proposal for the SBIR or STTR application, you must do so outside of your University responsibilities and with the approval of the unit head.  You must not use your University time or effort to develop the company’s funding proposal.  You must not use any University resources to write the company’s funding proposal.

When the SBIR or STTR grant is awarded: 

If you become an employee of the company, then you may be required by the terms of the grant to commit a percentage of your effort to company activities.  As a result, you may be required to reduce or sever your University appointment or take a leave of absence to reduce or eliminate the conflict of commitment or interest as well as to comply with time and effort reporting.

If the company will sub-contract with the University, then you will require additional conflict management prior to the execution of the sub-award to the University.  Some potential scenarios are outlined in the questions below.

SBIR and STTR funding mechanisms involve a primary grant to the small business concern and a sub-contract to the university. Thus there are two PIs; one is PI for the company; one is PI for the university. The University advises that the same individual may not serve as PI on both. For example, if you will serve as the company PI, then you may serve as a co-investigator on the University research, but you may not serve as the PI on the University research.

If you will be an investigator on both the primary award to the company and the sub-award to the University, then you must disclose and manage the conflict of interest.  The COI Office advises that the tasks conducted at the company and at the University should be clearly distinguishable from each other.  Any University employees compensated through the sub-contract to the University should not receive compensation for the same task from the company.  You should also check with the Office of Sponsored Programs (OSP) to determine whether an Investigator that owns the company may be paid by the University from the sub-contract. The conflict of interest must be managed prior to the University’s execution of the University sub-award.

You must disclose and manage the conflict by completing the following forms, which are available on UIC Research COI:

• Pre-Approval Request:  If you are a University employee that will be involved with the company, you are required to obtain approval by the UEO prior to engaging in the Outside Activities.  Civil Service staff should refer to FAQ #2 on how to document the disclosure and management for conflicts of interest.
• Disclosure Profile: Academic staff are required to update their Disclosure Profile annually (typically between mid-August to early October). You must disclose Outside Activities that occurred over the last academic year and include those that continue to occur during the current academic year. When submitting a funding proposal for the sub-contract or an Institutional Review Board (IRB) application, if you are a University investigator or key research personnel, then you must disclose any significant financial interests related to the study, including the relationship with the small business applicant (primary award).
• Management Plan: If your company will license or option intellectual property (IP) owned by the University, such that the agreement allows your company to use the University IP in company research or for commercialization, you must have a Management Plan.

As a postdoctoral scholar (postdoc), you are an employee of the University, and considered a member of the academic staff.    If you are asked to serve as PI for a small business applicant, then you would be required to comply with the employee requirements referenced in the preceding questions (Q2 and Q3).  If you are on a J-1 or H-1B visa, you must talk with the UIC Office of International Services (OIS) to discuss whether the employment would be allowable under the visa and/or what impact the employment would have on your visa.

It is generally recognized that an employment opportunity with a small business applicant may be beneficial to a postdoc’s career.  If the SBIR or STTR grant is awarded, you may be required to reduce or sever your University appointment to become an employee of the small business.  You should be aware of potential risks or consequences which may include:

• Severance of University appointment.
• Severance of University employment and benefits.
• Disruption of academic career path.
• Your former position at the University is not held and there is no guarantee of return to the University.

The COI Office advises that the postdocs be informed in writing by the faculty sponsor of the potential risks and consequences prior to accepting employment with the small business.  The UEO should receive a copy of the letter and the department should retain a copy of the letter in the postdoc’s file.  A template letter is available under the section for Forms section.

• When activities involve working on the application for the primary award to the company…
  University employees must not use University resources (e.g., employee time or effort, nor resources, including computers or equipment) to write an STTR or SBIR application on behalf of the company (the primary applicant of the grant).  The University Policy on Conflict of Commitment and Interest explicitly prohibits the use of University resources.  The writing of a SBIR or STTR grant application is considered to be a company activity and must be conducted using company resources, personnel, time, and effort.
• When activities involve working on the application for company’s proposed sub-contract to the University…University employees may collaborate on the writing of the sub-contract proposal, if the University will be a sub-contract on the primary award to the company.  Any University employee with a significant financial interest (SFI) in the company must disclose the SFI with the company via UIC Research COI and any funding proposals or Institutional Review Board applications. As part of the management of conflict of interest with the small business entity, if you are a University employee with the conflict of interest, then you must disclose the financial conflict of interest to other University employees or students involved in the writing of the sub-contract proposal or activities conducted under the sub-contract agreement.  The disclosure must notify the employees or students in writing of:
  • the conflicted employee’s relationship with the Company;
  • the University of Illinois Policy on Conflicts of Commitment and Interest; and
  • the conflict management mechanisms to protect them:
    • Employees (e.g., employees may contact the COI Office if they encounter any impediments to their professional advancement at the university or other university-related difficulties as a result of their involvement with the company sponsored research)
    • Students (e.g., for each student involved in company sponsored research, the department will ensure that the student has a Student Advisory Committee (SAC) or alternative protective mechanism such as a non-conflicted departmental point of contact).

  A template letter to disclosure of Outside Activities to University Personnel and Students is available in UIC Research COI. The letter should be modified as appropriate.  The UEO monitors the disclosure. A copy of the letter must be provided to the UEO and uploaded to your Disclosure Profile in UIC Research COI.

As a student, if you are asked by a University employee to become involved in business in which the University employee has a financial interest, you should discuss the proposed business activity with the department head and student advisor/director for your unit. While the department head is not required to sign a form to approve your outside professional activities, the department head is required to approve the University employee’s business activity which will involve you. The department head may also assess the need for independent advisory oversight by non-conflicted faculty members as you engage in course, thesis, or research work. You will be informed about who you may contact should you experience any interference with your academic performance or advancement. You should also consider and verify whether outside employment will affect scholarship/fellowship/assistantship support you may be receiving.

Yes.  Please refer to the Graduate College Policy on Conflicts of Interest in the Admissions Process.

Possibly.  Please follow-up with the Office of Graduate Medical Education.

“University resources may not be used for non-university activities without permission from the university.  Use is prohibited unless explicitly approved [by the University].”

This principle is embedded in the general rules and statutes that govern the University.  To document permission, a written agreement with the University requires the signature of the University’s chief financial officer.

SBIR and STTR subawards for sponsored research that will be conducted at the University are processed through the Office of Sponsored Programs (OSP).  The sponsored research agreement governs the use of University resources covered under the agreement.

Although the company may conduct research at the University under an approved sponsored research agreement in which UIC is a subaward recipient from the company; the company may not use University facilities for the conduct of the company’s business or activities on the primary award or any other company-related activities (e.g., employee benefits, payroll, facilities, equipment, etc).

Small businesses may choose to occupy space in an officially designated Technology Park or Incubator Laboratory Facility. Work conducted at the Technology Park or Incubator Laboratory Facility is not considered to be University activity or use of University resources. Companies that occupy space in these facilities must have a written agreement with the University to compensate the University at the fair market value.

Yes.  The Office of Technology Management is a part of the Office of Vice President for Economic Development and Innovation and has staff that can refer you to appropriate non-University entities to assist with the post-award management of the STTR or SBIR grant.  Please contact the Director of OTM Chicago, Suseelan Pookote:

Office of Technology Management

1853 West Polk Street, Suite 446, Chicago, IL 60612
(312) 996-7018
E-Mail: spookote@otm.uic.edu
URL: http://otm.uic.edu/

For questions on these FAQs, please contact COI@uic.edu.