Congress recently approved reauthorization of both the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. The law, known as the ‘‘SBIR and STTR Extension Act of 2022’’, was ratified by the House on September 29 and became law on October 3, 2022. While the big takeaway is that the SBIR and STTR programs will continue, this post will highlight a few additional restrictions that were put into place for these important programs. Included among these are some additional reporting and oversight for companies with a lot of awards and foreign influence over companies.
Here are some of the big takeaways from the new law.
There was some concern that Congress would not reauthorize funding, as some senators had expressed concerns about so called SBIR mills and other matters. Despite these concerns, both SBIR and the complementary STTR programs would see a three-year extension. Along with six related pilot programs, the two programs are extended through September 30, 2025.
This program in the past has funded research projects to the tune of about $3 billion a year for SBIR and $450 million for STTR. The DoD estimated that the programs meet the needs of approximately 1200 defense tasks. This reauthorization will allow federal federal funds to continue assisting a ton of small businesses in expanding their business and funding innovative new research.
Senator Rand Paul had stated: “According to SBA’s public data, 196 businesses received more than 100 awards each. Some businesses received more than 900 awards. Sounds like somebody has figured out the system here.” In response to this and other comments, the final legislation includes some programs to review and combat the problem of certain companies getting what is perceived to be an unfair number of awards.
One program is additional reporting by GAO, to examine number of awards progressing to Phase II and III, as well as number of awards going to “first-time applicants and first-time awardees”; non-traditional small businesses; and “the ratio, and an assessment, of the amount of funding allocated towards open topics as compared to conventional topics at each Federal agency that is required to establish an SBIR or STTR program and offers open topics.”
The law also increases performance standards for companies that receive many awards. For instance, for “a small business concern that received or receives more than 50 Phase I awards during a covered period, each minimum performance standard . . . shall be doubled for such covered period.” If the standards are not met, then the company is limited to 20 awards per year maximum. There are also increased standards for sales and investments during Phase II. For instance, for “a small business concern that received or receives more than 50 Phase II awards during a covered period, require an average of $250,000 of aggregate sales and investments per Phase II award received during such covered period.” These increased minimum performance standards must be in place by April 1, 2023.
There is another specific requirement regarding solicitation topics designed to decrease influence by companies:
A Federal agency required to establish an SBIR or STTR program shall implement a multi-level review and approval process within the Federal agency for solicitation topics to ensure adequate competition and that no private individual or entity is shaping the requirements for eligibility for the solicitation topic after the selection of the solicitation topic, except that the Federal agency may amend the requirements to clarify the solicitation topic.
In addition, GAO must conduct a study on multiple award winners for those companies that received more than 50 Phase II awards under the SBIR or STTR programs during a 10-year period, looking at things like “ability of the small business concerns to commercialize and meet the tenets of the SBIR and STTR programs.” A separate report will look at subcontracting for SBIR and STTR awardees, including subcontracting to large businesses.
Not to be confused with family ties, some had raised concerns that SBIR awards may be benefiting other countries. In response, the legislation requires all agencies to “establish and implement a due diligence program to assess security risks presented by small business concerns seeking a federally funded award.” This program would examine risks such as “cybersecurity practices, patent analysis, employee analysis, and foreign ownership of a small business concern.”
In addition, companies seeking awards will have to disclose ties to China and certain other countries of concern like Korea, Russia, and Iran. The areas of inquiry include disclosing as individuals “who are a party to any foreign talent recruitment program”; “joint venture or subsidiary of the small business concern that is based in, funded by, or has a foreign affiliation with any foreign country of concern”; “technology licensing or intellectual property sales”; and “pending contractual or financial obligation” involving those countries. An agency may deny award if it determines there are too strong of ties to a country of concern.
Good on Congress for reauthorizing this important program. SBIR and STTR companies would be wise to stay aware of these new requirements as they pursue these awards. We will see some additional guidance coming out from SBA to implement these additional requirements, so keep your eyes peeled for that.
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