Developing Your Cost Proposal

This article is the third in our three-part “How to Write a USAID Proposal” blog series. 

The cost proposal is a critical component of your application for any USAID funding opportunity. USAID needs to know how you would plan to spend the award funds to ensure that the cost approach is reasonable and realistic to achieve the desired development outcome. Creating a cost proposal might sound intimidating, but it doesn’t have to be! 

While we are covering this as a separate blog, it is actually deeply interwoven with the technical proposal section covered in “Writing Your USAID Proposal.” Your budget needs to be informed by the technical proposal—and it also needs to inform and shape the technical proposal. This means that the development of your budget needs to occur in tandem with the writing of the technical narrative and various components—and that steady communication must be maintained among all proposal team members.

Your cost proposal will have three components: a summary budget, a detailed budget, and a budget narrative. You can reference the USAID training modules on “Preparing Budgets for USAID Acquisition Solicitations” and “Preparing Budgets for USAID Assistance Awards.”

Below are some key steps to remember when creating your cost proposal.

1. Define your budget categories.

Before you dive into the details of costs associated with your proposal, it’s a good idea to define the major categories of those costs. The graphic below shows some common categories for project costs, including salaries and wages, equipment and supplies, travel and transportation, etc.

2. Connect with the technical team.

Many of the details of the budget will flow from the technical proposal that your organization offers, so the team members developing the budget need to have a full understanding of the solution being described and the resources required for successful implementation. Go through each of the categories you’ve outlined with the technical team to get their input on the resources that will be needed. 

3. Begin “costing.”

Costing involves doing research to understand the resources needed for each component of the project, where those resources can be procured, and how much they are expected to cost. In this phase, you might consult staff on other similar projects, and you might also do desk research on projected costs. You should also connect with your organization’s human resources, procurement, and finance departments when preparing your estimates. If you are responding to a proposal for work in another country, consider contacting someone who is on the ground to collect quotes for any items whose cost you aren’t sure about.

4. Fill in your detailed budget.

The detailed budget provides a breakdown of costs within each category. Here is a basic budget template (Excel), with summary and detail tabs that you can fill in. Information uncovered during costing will be used to populate your detailed budget. New partners will need to determine how to budget their indirect costs. Because most new partners will not have a negotiated indirect cost rate agreement (NICRA), they may choose to allocate these costs as “direct costs” or they may propose a rate, such as the 10-percent de minimis rate in the case of assistance awards. (Note: subcontractors under prime contracts cannot use the 10-percent de minimus rate for indirect costs.) Find additional information about budgeting indirect costs in USAID’s training module on “Preparing Budgets for USAID Acquisition Solicitations” (contracts) or “Preparing Budgets for USAID Assistance Awards” (grants).

5. Create a budget summary. 

Your budget summary presents costs by the major line item categories you defined at the beginning of the process. Your budget summary should provide USAID with a high-level overview of the cost of your technical solution. Ensure that the numbers on your budget summary align with those on your detailed budget.

6. Write your budget narrative.

The budget narrative describes the “how” and the “why” of your cost proposal. In this section, you will explain how you arrived at the estimates provided in your detailed budget. You will also justify your reasoning on the costs described, as well as any assumptions behind those estimates. This example shows a sample format for the budget narrative. 

7. Circulate for feedback and risk analysis.

Just like with the technical proposal, you should make sure that your cost proposal has been fully reviewed by the proposal team, as well as any other experts who may have input. Program managers of similar initiatives can validate costs and note areas to gain efficiencies in your cost proposal. Confirm cost realism and check that costs are not double-charged across projects. Always make sure the numbers in your budget summary, detailed budget, and budget narrative match. Have an expert perform a risk analysis of the budget and its impact on your organization’s existing programming and footprint, so that your leadership is fully aware of the budgetary implications and risks of the new project.  

8. Submit your full proposal before the deadline.

Once your cost proposal is complete, it should be copyedited to ensure there are no spelling, grammar, or punctuation errors. Then you will be ready to submit your full proposal package. Don’t wait until the last moment to submit your proposal, and be mindful of the time zone of the proposal deadline. It’s important to remember that emails can sometimes be delayed, and USAID does not accept late submissions. Always submit your materials at least several hours early, and then congratulate yourselves on a well-run process! 

After your proposal is submitted, watch for a response from USAID. If your proposal is successful, congratulations! If not, make sure you request feedback from the USAID solicitation point of contact about your proposal so that you can improve your chances next time.  

This three-part blog series provided general guidance on the proposal writing process. For more information on writing USAID proposals, check out the resources provided in the WorkwithUSAID.gov Resource Library.