Mastering Pre-Award Costs: Strategies for Effective Budget Planning

Taylor Paiz | December 21, 2023

Federal grant requirements, restrictions, and procedures can be confusing and difficult to plan for, especially if you are submitting a grant application for the first time. This insight will help prepare you to navigate tricky budget requirements and develop a strong financing plan for your project.

What are pre-award costs?

Pre-award costs are any costs associated with your project that are incurred prior to the effective date of a signed grant agreement. When creating the project schedule, you may be working within a tight timeline, and your company may be planning to kick off the project before grant award announcements are made.

When applying for a grant, the project timeline and budget are among the first items you’ll need to nail down. The project timeline drives financing decisions and impacts several components of the application process. If the project start date is prior to the date you expect to sign a grant agreement, you may need to factor in pre-award costs when planning your project budget.

Before determining the project's start date, consider the stipulations of the funding program and the expected timing of awards.

- What is the period of performance allotted for the grant program (or, what is the timeframe the grant administration expects you to complete the project in)? Many programs are capped at 24 or 36 months.
- When are pre-selection negotiations expected to begin and how much time is allotted for the negotiation phase? This phase often takes around 6-8 months, though it sometimes takes longer than expected.
- When will the agreement be signed and the award (or funding) distributed? If the date is not specified, the grant agreement and award distribution can be expected at the end of the negotiation period. It’s a good idea to factor in an additional month or two to account for unexpected delays.

What impact do pre-award costs have on your project and company?

The most important thing to remember is that any costs incurred prior to the start date of a signed grant agreement are incurred at the applicant’s risk. Typically, applicants may seek approval and reimbursement for costs incurred between the award selection date and the contract start date (essentially any costs incurred during the negotiation phase); however, there is no guarantee that those costs will be approved. Organizations and project managers should factor this into spending projections and plan to absorb any pre-award costs, if needed. Applicants must obtain written approval from their contracting officer for pre-award costs.

Any project costs incurred prior to an award selection date are usually not eligible for reimbursement requests. The applicant is solely responsible for those costs.

Another key point to remember is that all pre-award costs must still qualify as eligible or allowable project costs under the grant program (more information on eligible costs will be included in the Funding Opportunity Announcement).