Why SBIR and STTR exist
Through the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, small businesses receive non-dilutive federal funding to develop their technology and a path toward commercialization 1.
STTR adds a partner. Its cooperative research and development is conducted jointly by a small business and a research institution, with not less than 40 percent of the work performed by the small business and not less than 30 percent by the research institution 2. If your company has a university or laboratory collaborator, STTR may fit; if you work alone, look at SBIR.
Three phases
Phase I determines, insofar as possible, the scientific and technical merit and feasibility of ideas that appear to have commercial potential 3. Phase II further develops proposals that meet particular program needs 4.
Phase III is different in kind. It covers work that derives from, extends or completes efforts made under prior SBIR funding agreements 5, and for products or services intended for use by the government it is funded by follow-on non-SBIR federal funding awards 6. In other words, the money for Phase III comes from outside the SBIR program.
Why Phase III status is valuable
Phase III is where SBIR becomes a business. The statute says that, to the greatest extent practicable, federal agencies and federal prime contractors shall 7 issue, without further justification, Phase III awards relating to the technology, including sole source awards, to the SBIR and STTR award recipients that developed it 8.
SBA's policy directive adds two points that matter as you grow. There is no limit on the number, duration, type or dollar value of Phase III awards made to a business 9, and the small business size limits for Phase I and Phase II do not apply to Phase III awards 10. A company that grows past its size standard can still receive Phase III awards for its technology 10.
Protect the data
In DoD contracts, the government obtains SBIR/STTR data rights in technical data and computer software developed or generated under a phase I, II or III SBIR/STTR contract or subcontract and marked with the SBIR/STTR data rights marking 11. When the protection period expires, the government has government purpose rights in that data 12.
SBIR firms also count toward other transactions. One condition for a prototype other transaction is met when all significant non-government participants are small businesses, including small businesses participating in the program described in section 9 of the Small Business Act, or nontraditional defense contractors 13. That program section is the SBIR and STTR statute, so an SBIR firm can be a strong partner for a prototype team.
Worked example. Contractor J wins a Phase I and then a Phase II from a military research laboratory for a sensor-fusion algorithm, marking every software delivery. Two years later a program office wants the algorithm in a fielded system. Because the work derives from Contractor J's Phase II, the program office issues a sole source Phase III contract funded from its own budget, even though Contractor J has since grown past its size standard.
Track an SBIR or STTR pursuit →
Indented paragraphs are invented worked examples. Tool links open Bids2Bank and need a free account.
Next lesson: After award: DCMA, DCAA and the contracting officer