SBA Handbook for SBIR Proposal Preparation
1. Using the SBIR Program to Further Business Development
A. What Is SBIR?
Small Business Innovation Research (SBIR) programs fund research and development efforts of a high risk nature that may have excellent commercial potential.
The Small Business Innovation Development Act of 1982 (P.L. 102-567), and 1992 (P.L. 102-564), presents an exceptional opportunity for any innovator who is capable of conducting high-quality research and development (R&D). The purposes of the Act are to 1) stimulate technological innovation; 2) use small business to meet federal R&D needs; 3) encourage the participation by disadvantaged and minority persons in technological innovation; and 4) increase private sector commercialization derived from federal R&D.
Under the Small Business Innovation Development Act, each agency with an extramural R&D budget in excess of $100 million must establish an SBIR program. The following agencies are currently participating in the SBIR Program:
Department of Agriculture
Department of Commerce
Department of Defense
Department of Education
Department of Energy
Department of Health and Human Services
(including the National Institutes of Health)Department of Transportation
Environmental Protection Agency
National Aeronautics and Space Administration
National Science Foundation
Nuclear Regulatory Commission
Through its SBIR program, each agency will develop topics and release solicitations describing those topics. Proposals are submitted to the agency where they are reviewed and evaluated on a competitive basis. Each agency makes its own awards using contracts, grants, or cooperative agreements.
Under the law the SBIR program is a three-phase process.
Phase I is based on proposals solicited by participating agencies. These solicitations contain topics on which small firms are invited to submit proposals. The proposals describe the results the firm intends to attain, the approach the firm will take, and how it will prove the feasibility of its approach.
Phase I awards can be made up to $100,000 for approximately a six-month effort. The purpose of Phase I is to show: 1) that the proposing firm can do high quality R&D; 2) that the proposed effort is technically feasible; and 3) that sufficient progress had been made to justify a much larger agency investment in Phase II. Phase I enables the agency to address these questions with relatively small agency investment, thereby increasing the efficiency with which federal R&D dollars in Phase II are utilized.
Those projects which complete Phase I can compete for Phase II funding to further develop the proposed idea. Phase II is the principal R&D effort, with a duration which normally does not exceed two years. Awards for Phase II are for $750,000 or less.
Awards for Phase II are based upon the results of Phase I and the scientific and technical merit of the Phase II proposal. The object is to continue the R&D initiated under Phase I. However, the government is not obligated to fund any specific Phase II proposal. In order to fairly handle the problem of choosing between proposals of approximately equal merit, where the funds available to agencies do not permit funding all proposals, the Small Business Innovation Development Act mandates that commitments for follow-on funding from non-federal sources be given special consideration.
Formally, SBIR programs have a third phase. Where appropriate, Phase III is conducted by the small business (including joint ventures or R&D partnerships) to pursue commercial applications of the R&D conducted in Phases I and 11. Non-federal funds, including those obtained through exercising the follow-on funding commitment, support Phase III. Phase III may also be supported by non-SBIR funded R&D or production contracts with a federal agency for products or processes intended for use by the United States Government.
Small U.S. businesses are eligible to participate in the SBIR program if they are for profit and have 500 or fewer employees. This includes sole proprietorships, partnerships, joint ventures, associations or cooperatives. Nonprofit organizations are not eligible.
The primary employment of the principal investigator must be with the small business. He or she must spend more than one- half of his or her time employed by the small business at the time of award and during the conduct of the effort.
During Phase I, a minimum of two-thirds of the research and/or analytical effort must be performed by the proposing firm. The rest may be used for consultants or subcontractors. During Phase II, at least one-half must be performed by the proposing firm.
