I used to work for a company doing SBIR work. We finished a contract underbudget returned the surplus money and got audited because of it.
I don't know all of the accounting details, but SBIR has some leeway (because its supposed to be research) but it's not perfect. However, you are allowed to use surplus money to fund development of things which are related to what you actually put in the proposal/contract. So if you have a $100k contract, and meeting the requirements only required on the $75k, you should and do spend the rest of the $25k on extra features. But you have to spend all the money.
I think the real thing about SBIR money, is that three people get phase 1 money and only one or two will get phase 2 money so you really have to deliver in order to get selected. Then if you get the phase 2, there basically isn't phase 3 money, so you better get to a product that is ready to be sold. Finally if can't show on paper a return on investment (e.g. nonSBIR funding or revenue from sales/acquisition) they cut you off from the SBIR spigot. So the incentives align with getting work done.
I worked at company in SBIR phase 2 and one quirk I found strange was that the money could be used for R&D not things deemed “production”. Endless 3D prints were ok, random software features were ok, tooling for injection molding was not. It wasn’t a particularly onerous requirement, but I think reinforced the tendencies of our former academic founders to spend a lot of time on research and none on development.
Part of it is figuring out how to classify "production" as R&D. Well we need to test a prototype and in order to that we need it made as the same was as production due to structure property process relationships.
Or manufacturing defects is going to be a huge source of bad thing so we need to do some research into the manufacturing process.
I don't know all of the accounting details, but SBIR has some leeway (because its supposed to be research) but it's not perfect. However, you are allowed to use surplus money to fund development of things which are related to what you actually put in the proposal/contract. So if you have a $100k contract, and meeting the requirements only required on the $75k, you should and do spend the rest of the $25k on extra features. But you have to spend all the money.
I think the real thing about SBIR money, is that three people get phase 1 money and only one or two will get phase 2 money so you really have to deliver in order to get selected. Then if you get the phase 2, there basically isn't phase 3 money, so you better get to a product that is ready to be sold. Finally if can't show on paper a return on investment (e.g. nonSBIR funding or revenue from sales/acquisition) they cut you off from the SBIR spigot. So the incentives align with getting work done.