Foreign Ties: SBA Publishes Notice of SBIR and STTR Program Policy Directives Update

The Small Business Administration recently published a notice of an amendment to the Policy Directives for the Small Business Innovation Research (SBIR) Program and the Small Business Technology Transfer (STTR) Program on April 3, 2023. The intent of the amendment is to incorporate a template that federal agencies may use to request information from SBIR and STTR applicants that the applicants are statutorily required to disclose. The revisions will be effective May 3, 2023, unless the SBA receives significant adverse comments prior to the effective date. Not sure what the SBIR and STTR Programs are? I’ve provided a very brief overview below. Curious about the required disclosures? Read on to find out! 

Mile High View of SBIR and STTR  

SBIR and STTR share a mission, which is “to engage small business concerns to support scientific excellence and technological innovation through the investment of Federal research funds in critical American priorities to build a strong national economy.” Clear as mud, right? Thankfully, the goals clarify things a bit. The goals of SBIR and STTR are: 

  1. Stimulate technological innovation; 
  1. Meet federal research and development needs; 
  1. Foster and encourage participation in innovation and entrepreneurship by women and socially or economically disadvantaged persons; 
  1. Increase private-sector commercialization of innovations derived from Federal research and development funding; and 
  1. Foster technology transfer through cooperative research and development between small businesses and research institutions. 

SBIR awards are made small businesses located in the United states, while STTR awards are made to small businesses partnering with nonprofit colleges, universities, and research organizations, or federally funded research and development centers. Since the focus here is on the changes to the SBIR and STTR regulations and not on the programs themselves, I won’t go into further detail. But if you are interested in learning more, SBA has a wealth of helpful information. 

Back to the Amendments 

Beginning in September 2022, all applicants for the SBIR or STTR Programs were required to disclose information about the applicants’ investments and foreign ties. Federal agencies were required to gather this information as part of its due diligence to assess security risks as required by the SBIR and STTR Extension Act of 2022.   

The agencies knew that the requirement was there, but there was a problem because there was no direction on how the agencies were meant to gather that information. Without a uniform way to acquire the information, SBA determined it would be more difficult to assess security risks posed by applicants. In response to that problem, the SBA set out to amend the SBIR and STTR Policy Directives to create a template to provide a uniform method of collecting the required information. The Notice includes details of a template that will be added to SBIR and STTR Policy Directives as Appendix III, which will provide agencies with a uniform method of assessing risky applicants based on foreign ties and investments.

Appendix III includes definitions for covered individual, foreign affiliation, foreign country of concern, malign foreign talent recruitment program, and federally funded award. For example, the federal government is mainly concerned with what they call “foreign countries of concern,” which is defined as “the People’s Republic of China, the Democratic People’s Republic of Korea, the Russian Federation, the Islamic Republic of Iran, or any other country determined to be a country of concern by the Secretary of State.” And, because SBIR and STTR awards are federally funded, it is good to know what a federally funded award is defined as. “Federally funded award” is defined as “a Phase I, Phase II …, or Phase III SBIR or STTR award made using a funding agreement.”

Appendix III also includes 8 questions that are aimed to determine whether an owner or covered individual of the applicant has a relationship with a foreign country or foreign country of concern, whether an applicant is party to a malign foreign talent recruitment program, and the nature of investments held by owners, officers, and covered individuals of the applicant. An example here is whether, during the previous 5-year period, the applicant or awardee had any technology licensing or intellectual property sales or transfers to a foreign country of concern.

As mentioned briefly in the intro, there is a 30-day waiting period prior to these changes taking effect. If no “significant adverse comments” are received, the revisions to the Policy Directive will take effect on May 3, 2023. The Notice defined “significant adverse comments” as “comments that provide strong justification why the clarifying amendments to the Policy Directive should not be adopted as written or should be changed further.”   

Applicants for SBIR and STTR would do well to pay close attention to these new requirements, as they could affect future proposals. The US government, as in other areas, is looking closely at how foreign countries work with US small businesses.

To view the Notice in its entirety, visit: Small Business Innovation Research Program and Small Business Technology Transfer Program Policy Directive, 88 Fed. Reg. 19704 (Apr. 3, 2023). 

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