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SBIR Reauthorization in 2009 - The Issues

(Updated with the new Bills)
 

The SBIR reauthorization issues, along with current provisions and annotation of what the 2009 Senate (S.1233) and House (H.R.2965) bills are proposing, are as follows:

 

  • Should the SBIR and STTR Allocation Base be increased?

The current Allocation Base (agency R&D budget allocation percentage) is 2.5% for SBIR and 0.3% for STTR. 

The Senate bill proposes increasing the SBIR program allocation from 2.5% to 3.5%, spread out over ten years, and increasing the STTR program allocation from.0.3% to 0.6% spread out over six years.  The House bill proposes not changing the Allocation Base.

The issues are (a) whether the base should be increased, (b) how much it should be increased, and (c) over what time period and at what rate the increases should take effect.

 

  • Should the Award Caps for Phase I and Phase II be increased?

The current guidelines specify caps of $100,000 for Phase I and $750,000 for Phase II for both SBIR and STTR. Awards at lesser levels may be made. Agencies may make awards in excess of these amounts but must provide a justification for each such case in their annual report to the SBA. 

The Senate bill recommends increasing the award guidelines for SBIR and STTR awards to $150,000 for Phase I and to $1 million for Phase II.  The House bill recommended increasing the caps to $250,000 for Phase I and $2 million for Phase II. 

The issues are (a) should the caps be increased, (b) to what level should they be increased, and (c) whether (or under what conditions) awards in excess of the caps would be permitted. 

 

  • Should Phase I be permitted to be bypassed?

The current guidelines specify that the process of project funding include both a Phase I (demonstration of feasibility) and a Phase II (proof of concept) with Phase I to be successfully completed before Phase II can be awarded.  Some agencies allow Fast-Track proposals to be submitted, where both phases are proposed together, but Phase II's award is dependent upon successful completion of Phase I milestones.

The House bill specifies that Phase I could be effectively bypassed with Phase II being awarded simultaneously with Phase I in "appropriate cases".  The Senate bill does not make this recommendation. 

The issue is whether, and/or under what conditions Phase I can be bypassed.

  • Should the award eligibility requirements be changed to permit majority ownership by other than individuals?

This is a very complex and complicated issue and, certainly, the most contentious.  Current SBIR and STTR award eligibility rules specify that the small business ownership must be in majority by individuals, not entities.  

The Senate bill provides that small businesses that were majority owned and controlled by multiple (with a rather complex definition of what that means) venture capital firms would be eligible for up to 18 percent of the SBIR funds at NIH and up to 8 percent of the funds at the other agencies.  The House bill defines the situation differently, and does not limit the percentage of funds that would be available for such awards.

The issues are (a) whether eligibility should be extended to majority ownership by entities, (b) whether only certain types of entities should be eligible, (c) whether multiple entities are considered differently than single entities, (d) whether certain agencies should have different eligibility rules than others, and (e) whether all or part of the agency’s SBIR or STTR Allocation Base would be subject to changed eligibility rules.

An ancillary and related issue is whether the size standard for a small business should be changed for SBIR and STTR eligibility.  Current provisions set a size limit of 500 employees.  Neither the Senate nor the House bill addresses this aspect of eligibility.

 

  • Should money be allocated for Phase III Commercialization support?

Current provisions of the SBIR legislation do not require agencies to provide funds to support Phase III commercialization.  Several of the agencies have independently provided such funds, but the nature and level of such support varies significantly.  The intent is to help companies develop and commercialize their technologies into products and solutions for use by both the agencies which funded the projects and for dual-use by the private sector.  

Both the Senate and House bills provide for some levels of commercialization support.  Both also include some special provisions for priority to certain industries and technologies.

The issues include (a) whether such support will be required, (b) the level of funding to be allocated, (c) the nature of such support (actual agency funding vs. arranging partnerships), and (d) whether specific technologies and/or industries shall be given priority for awards.

 

The remaining issues are relatively less important and are much less contentious.  Both Senate and House bills provide support for these, other than the provision for administrative support which is not addressed in the House bill.  Provisions should be included in any reauthorization legislation to deal with all of these areas.

 

  • Should the Federal and State Technology (FAST) and Rural Outreach projects be extended?
  • Should the Office of Technology at the SBA be strengthened so that it has the authority and resources to carry out its duty to oversee the SBIR and STTR programs across the government?
  • Should the data collection and reporting requirements for the SBIR and STTR programs be improved and streamlined?
  • Should the agencies be permitted to use part of their Allocation Base for administering the Programs?

 

And, finally,

 

  • How long should the SBIR and STTR Programs be extended before reauthorization would be required?

 

 
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