SBA Clarifies that SBIR and STTR Programs Will Allow Successor-In-Interest Transfers of Awards

SBA recently issued a technical amendment to its SBIR and STTR Programs Policy Directive to clarify that successor-in-interest entities are, in fact, eligible to receive phase III awards. The amendment will take effect on October 1 of this year.

SBA’s Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs are competitive, award-based programs that provide federal research and research and development (R/R&D) funding to encourage small businesses to engage in scientific and technological innovation.

In accordance with the Small Business Act (the Act), the SBA issues policy directives for the SBIR and STTR programs. These directives outline the manner in which participating federal agencies must generally conduct their programs. Agencies have the discretion to tailor their programs to meet their needs within the bounds of the Act and SBA’s policy directives.

The SBIR and STTR programs both follow a three-phase process for the government to solicit proposals and award funding agreements for R/R&D. Section 6(a) of the Policy Directive covers the general eligibility of entities to receive SBIR/STTR awards. And paragraph (5) of that section specifically addresses the “eligibility of entities that have received a novated award, a similarly-revised award, or are successor-in-interest entities.”

But SBA recently determined that section 6(a)(5) requires clarification. So it revised the language through a technical amendment to be published in the Federal Register on October 1. Through its amendment, “SBA is clarifying this paragraph in order to confirm the Agency’s long-standing interpretation that permits successor-in-interest entities to receive phase III SBIR/STTR awards.”

SBA explained the policy behind its long-standing interpretation and corresponding amendment as follows:

The SBIR/STTR programs are intended to economically assist SBCs performing R/R&D work by creating an advantage for those firms to receive Government funding at the early often riskiest stage, from an investment perspective, through commercialization. This intention may be hindered if the SBC’s rights and interests in SBIR/STTR data cannot be assigned through a merger or sale with another business concern, along with the attendant incentives for non-competitive phase III awards. Such a policy interpretation would create inefficiencies in the marketplace and discourage valuations and transactions among businesses that may otherwise allow for greater investment in new ideas and products.

As such, Section 6(a)(5) will now state:

Novated/Successor in Interested/Revised Funding Agreements. An SBIR/STTR Awardee may include, and SBIR/STTR work may be performed by, those identified via a “novated” or “successor in interest” or similarly-revised Funding Agreement. For example, a phase III Awardee may have either received a prior Phase I or Phase II award or been novated a Phase I or Phase II award (or received a revised Phase I or Phase II award if a grant or cooperative grant) or be a successor-in-interest entity.

This amendment may not have any dramatic effects on the way SBA conducts its Phase III awards, as it is merely codifying SBA’s long-standing interpretations. But regardless, it will add certainty and clarification to SBA’s SBIR and STTR Programs. If you have questions about how this amendment may affect your eligibility to receive a Phase III award, give us a call at Koprince Law.

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