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The Small Business Innovation Development Act of 1982 established Small Business Innovation Research (SBIR) programs within the major federal research and development (R&D) agencies. The program is designed to increase the participation of small, high technology firms in the federal R&D endeavor.
SBIR has four purposes: meet federal R&D needs; stimulate technological innovation; increase commercialization (e.g., sales) of innovations based on federal R&D; and encourage participation in innovation by small businesses owned by disadvantaged individuals and women.
Congressional support for the initiative was predicated upon the belief that while technology-based companies under 500 employees tended to be highly innovative, and innovation is essential to the economic well-being of the United States, these businesses were underrepresented in government R&D activities. Agency SBIR programs guarantee this sector a portion of the government’s R&D budget to compensate for what was viewed as a preference for contracting with large firms.
Government agencies with R&D budgets of $100 million or more are required to set aside a portion of these funds to finance the SBIR activity. A set percentage of that agency’s applicable extramural research and development budget — originally at 1.25%, now at 2.5% — is to be used to support mission-related work in small companies. Through FY2009, over 112,500 awards had been made totaling more than $26.9 billion.
The objectives of the SBIR program include stimulation of technological innovation in the small business sector, increased use of this community to meet the government’s R&D needs, additional involvement of minority and disadvantaged individuals in the process, and expanded commercialization of the results of federally funded R&D. To achieve this, agency SBIR efforts involve a three-phase activity. Until 2010, first phase awards of up to $100,000 for six months were provided to evaluate a concept’s scientific or technical merit and feasibility. As of March 30, 2010, the Small Business Administration (SBA) issued a Policy Directive that increased the amount of Phase I awards to $150,000. The project must be of interest to and coincide with the mission of the supporting organization.
Projects that demonstrate potential after the initial endeavor may compete for Phase II awards of originally up to $750,000, now up to $1 million per the above Policy Directive, and lasting one to two years. Phase II awards are for the performance of the principal R&D by the small firm. Phase III funding, directed at the commercialization of the product or process, is expected to be generated in the private sector. Federal dollars may be used if the government perceives that the final technology or technique will meet public needs. Pub. L. No. 102-564 directed agencies to weigh commercial potential as an additional factor in evaluating SBIR proposals.
Eleven departments currently have SBIR programs including the Departments of Agriculture, Commerce, Defense (DOD), Education, Energy, Health and Human Services, Homeland Security, and Transportation; the Environmental Protection Agency; the National Aeronautics and Space Administration (NASA); and the National Science Foundation (NSF). Each agency’s SBIR activity reflects that organization’s management style. Individual departments select R&D interests, administer program operations, and control financial support. Funding can be disbursed in the form of contracts, grants, or cooperative agreements. Separate agency solicitations are issued at established times.
The Small Business Administration was responsible for establishing the broad policy and guidelines under which individual departments operate SBIR programs. The agency monitors and reports to Congress on the conduct of the separate departmental activities. Criteria for eligibility in the SBIR program include companies that are independently owned and operated; not dominant in the field of research proposed; for profit; the employer of 500 or less people; the primary employer of the principal investigator; and at least 51% owned by one or more U.S. citizens or lawfully admitted permanent resident aliens. A rule change, effective January 3, 2005, permits subsidiaries of SBIR-eligible companies to participate as long as the parent company meets all SBIR requirements.
Reauthorized several times over the years, the SBIR program was scheduled to terminate on September 30, 2008. To date, the program has not been specifically reauthorized, but instead temporarily extended by several bills, including Pub. L. No. 110-235, which extended the activity through March 20, 2009. Pub. L. No. 111-10 provided an additional extension through July 31, 2009; Pub. L. No. 111-43 through September 30, 2009; and Pub. L. No. 111-66 through October 31, 2009. Pub. L. No. 111-89 once again extended the program through April 30, 2010; Pub. L. No. 111-214 through September 30, 2010; and Pub. L. No. 111-251 through January 31, 2011. Pub. L. No. 112-1 provides an additional extension through May 31, 2011.
Several bills have been introduced in the 112th Congress that would reauthorize and make changes to the SBIR program (and the Small Business Technology Transfer Research (STTR) Program) including H.R. 447, H.R. 448 (introduced January 26, 2011), H.R. 449, S. 493 (reported March 9, 2011, from the Senate Committee on Small Business and Entrepreneurship), and H.R. 1425 (introduced April 7, 2011).
- ↑ Pub. L. No. 97-219, reauthorized until September 30, 2000 by the Small Business Research and Development Enhancement Act (Pub. L. No. 102-564), and reauthorized again until September 30, 2008 by the Small Business Reauthorization Act of 2000 (Pub. L. No. 106-554).