Small Business Research Programs: SBIR and STTR

Changes from August 17, 2021 to October 21, 2022

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Small Business Research Programs:
~~August 17, 2021~~October 21, 2022
SBIR and STTR
Marcy E. Gallo
The Small Business Innovation Research (SBIR) program was established in 1982 by The Small Business Innovation Research (SBIR) program was established in 1982 by
Analyst in Science and Analyst in Science and
the Small Business Innovation Development Act (P.L. 97-219) to increase the the Small Business Innovation Development Act (P.L. 97-219) to increase the
Technology Policy Technology Policy
participation of small innovative companies in federally funded research and participation of small innovative companies in federally funded research and

development (R&D). The act requires federal agencies with extramural R&D budgets of development (R&D). The act requires federal agencies with extramural R&D budgets of
$100 million or more to set aside a portion of these funds to finance an agency-run SBIR $100 million or more to set aside a portion of these funds to finance an agency-run SBIR

program. As of 2021, 11 federal agencies operate SBIR programs. A complementary program, the Small Business program. As of 2021, 11 federal agencies operate SBIR programs. A complementary program, the Small Business
Technology Transfer (STTR) program, was created by the Small Business Research and Development Technology Transfer (STTR) program, was created by the Small Business Research and Development
Enhancement Act of 1992 (P.L. 102-564) to facilitate the commercialization of university and federal R&D by Enhancement Act of 1992 (P.L. 102-564) to facilitate the commercialization of university and federal R&D by
small companies. Agencies with extramural R&D budgets of $1 billion or more are required to set aside a portion small companies. Agencies with extramural R&D budgets of $1 billion or more are required to set aside a portion
of these funds to finance an agency-run STTR program. As of 2021, five federal agencies operate STTR of these funds to finance an agency-run STTR program. As of 2021, five federal agencies operate STTR
programs. programs.
Both the SBIR and STTR programs have three phases. Phase I funds feasibility-related R&D related to agency Both the SBIR and STTR programs have three phases. Phase I funds feasibility-related R&D related to agency
requirements. Phase II supports further R&D efforts initiated in Phase I that meet particular program needs and requirements. Phase II supports further R&D efforts initiated in Phase I that meet particular program needs and
exhibit potential for commercial application. Phase III is focused on commercialization of the results of Phase I exhibit potential for commercial application. Phase III is focused on commercialization of the results of Phase I
and Phase II grants; the SBIR and STTR programs do not provide funding in Phase III. and Phase II grants; the SBIR and STTR programs do not provide funding in Phase III.
The SBIR and STTR programs have been extended and reauthorized several times since their initial enactments. The SBIR and STTR programs have been extended and reauthorized several times since their initial enactments.
~~In 2016, the programs were extended through September 30, 2022, by the National Defense Authorization Act for~~
~~Fiscal Year 2017 (P.L. 114-328). In 2018, Congress extended the authority of existing pilot programs and created~~
~~new pilot programs associated with the SBIR and STTR programs, among other activities, as part of the John S.~~
~~McCain National Defense Authorization Act for Fiscal Year 2019 (P.L. 115-232). Among its provisions, the act~~
~~extended (through FY2022) the pilot programs authorizing the use of SBIR and STTR funds for (1)~~
~~administrative costs, outreach, and contract processing activities, and (2) technology development, testing,~~
~~evaluation, and commercialization assistance; required the Department of Defense (DOD) to create a pilot~~
~~program to accelerate the process for awarding SBIR and STTR awards; and required federal agencies with SBIR~~
~~and STTR programs to establish a Commercialization Assistance Pilot Program.~~
~~Through FY2018, the most recent year with published annual report data, federal agencies had made 171,680~~
~~awards totaling $51.0 billion under the SBIR and STTR programs. In FY2018, agencies awarded $2.8~~On September 30, 2022, the authority for the programs, including existing pilot programs, was extended through 2025 by the SBIR and STTR Extension Act of 2022 (P.L. 117-183). Among its provisions, P.L. 117-183 included efforts to address research security concerns and the potential for malign foreign influence; increased performance standards for participation in the programs by multiple award recipients; required the Department of Defense (DOD) to create an open innovation topic for each DOD component solicitation; and directed the U.S. Government Accountability Office to conduct a number of studies, including a comparison of open and conventional topics; an examination of multiple award recipients; an analysis of subcontracting by SBIR and STTR awardees; and a report on best practices and the implementation of due diligence programs, required by the law, to assess potential security risks. Through FY2019, the most recent year with published annual report data, federal agencies had made 178,731 awards totaling $54.6 billion under the SBIR and STTR programs. In FY2019, agencies awarded $3.3 billion in billion in
SBIR funding. DOD and the Department of Health and Human Services (HHS) accounted for more than three-SBIR funding. DOD and the Department of Health and Human Services (HHS) accounted for more than three-
fourths of SBIR funding in fourths of SBIR funding in ~~FY2018~~FY2019. While the majority of SBIR . While the majority of SBIR grants made in made in ~~FY2018~~FY2019 were Phase I awards were Phase I awards
(65%), more than three-fourths (78%) of SBIR (65%), more than three-fourths (78%) of SBIR funding went to Phase II awards. In went to Phase II awards. In ~~FY2018~~FY2019, agencies awarded , agencies awarded
$$~~382.4~~429.3 million in STTR funding. DOD and HHS accounted for more than three-fourths of STTR funding ( million in STTR funding. DOD and HHS accounted for more than three-fourths of STTR funding (8082%). %).
Like the SBIR program, most STTR grants (Like the SBIR program, most STTR grants (7273%) were for Phase I awards, while most funding (%) were for Phase I awards, while most funding (6869%) went to %) went to
Phase II awards. Phase II awards.
In exercising its oversight of the SBIR and STTR programs, Congress has expressed continuing interest in the In exercising its oversight of the SBIR and STTR programs, Congress has expressed continuing interest in the
amount of agency funding set aside for the programs, the effectiveness of efforts seeking to improve amount of agency funding set aside for the programs, the effectiveness of efforts seeking to improve
commercialization outcomes, the share of awards and funding received by women-owned and minority and commercialization outcomes, the share of awards and funding received by women-owned and minority and
disadvantaged firms, the geographic distribution of awards and funding, and the Small Business Administration’s disadvantaged firms, the geographic distribution of awards and funding, and the Small Business Administration’s
responsibilities under the programs, including agency coordination, policy guidance, and data collection. responsibilities under the programs, including agency coordination, policy guidance, and data collection.
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Overview1
Congress established the Small Business Innovation Research (SBIR) program in 1982 to expand Congress established the Small Business Innovation Research (SBIR) program in 1982 to expand
the role of small businesses in federal research and development (R&D). When establishing the the role of small businesses in federal research and development (R&D). When establishing the
program, Congress declared that technological innovation plays an important role in job creation, program, Congress declared that technological innovation plays an important role in job creation,
productivity improvements, and U.S. competitiveness; that small businesses are among the most productivity improvements, and U.S. competitiveness; that small businesses are among the most
cost-effective performers of R&D and particularly capable of bringing R&D results to market in cost-effective performers of R&D and particularly capable of bringing R&D results to market in
the form of new products; and that, despite the role of small businesses as “the principal source of the form of new products; and that, despite the role of small businesses as “the principal source of
significant innovations in the Nation,” the vast majority of federally funded R&D is performed by significant innovations in the Nation,” the vast majority of federally funded R&D is performed by
large businesses, universities, and federal laboratories.2 With this in mind, Congress established large businesses, universities, and federal laboratories.2 With this in mind, Congress established
the SBIR program to advance four objectives: the SBIR program to advance four objectives:
 to stimulate innovation,  to stimulate innovation,
 to use small businesses to meet federal R&D needs,  to use small businesses to meet federal R&D needs,
 to foster and encourage the participation of minority and disadvantaged persons in  to foster and encourage the participation of minority and disadvantaged persons in
technological innovation, and technological innovation, and
 to increase private sector commercialization of innovations derived from federally  to increase private sector commercialization of innovations derived from federally
funded R&D.3 funded R&D.3
In 1992, Congress established the Small Business Technology Transfer (STTR) program.4 Similar In 1992, Congress established the Small Business Technology Transfer (STTR) program.4 Similar
in design to the SBIR program, STTR was created to facilitate the commercialization of in design to the SBIR program, STTR was created to facilitate the commercialization of
university and federal R&D by small companies. university and federal R&D by small companies.
Execution of the SBIR and STTR programs is decentralized. Both the SBIR and STTR statutes Execution of the SBIR and STTR programs is decentralized. Both the SBIR and STTR statutes
require that federal agencies with extramural R&D budgets in excess of specified amounts set require that federal agencies with extramural R&D budgets in excess of specified amounts set
aside a percentage of such funds to conduct their own SBIR and STTR programs.5 Currently, 11 aside a percentage of such funds to conduct their own SBIR and STTR programs.5 Currently, 11
federal departments and agencies operate SBIR programs and 5 operate STTR programs. The federal departments and agencies operate SBIR programs and 5 operate STTR programs. The
Small Business Administration (SBA) helps to coordinate the SBIR and STTR programs, Small Business Administration (SBA) helps to coordinate the SBIR and STTR programs,
establishes overall policy guidance, reviews agencies’ progress, and reports annually to Congress establishes overall policy guidance, reviews agencies’ progress, and reports annually to Congress
on the operation of the programs. on the operation of the programs.
Through Through ~~FY2018~~FY2019, the most recent year with complete data, federal agencies had made , the most recent year with complete data, federal agencies had made ~~171,680~~178,731
SBIR and STTR awards to small businesses to develop and commercialize innovative SBIR and STTR awards to small businesses to develop and commercialize innovative
technologies. The total amount awarded was $technologies. The total amount awarded was $~~51.0~~54.6 billi billion. Figure 1 shows SBIR and STTR shows SBIR and STTR
funding for FY2000-funding for FY2000-~~FY2018~~FY2019. .

1 This report is an update to a report that was originally authored by John F. Sargent Jr. 1 This report is an update to a report that was originally authored by John F. Sargent Jr.
2 Small Business Innovation Development Act of 1982 (P.L. 97-219). For further discussion of the role of small 2 Small Business Innovation Development Act of 1982 (P.L. 97-219). For further discussion of the role of small
businesses in national economies see, Organisation for Economic Cooperation and Development, businesses in national economies see, Organisation for Economic Cooperation and Development, Small, Medium,
Strong. Trends in SME Performance and Business Conditions, OECD Publishing, Paris, May 15, 2017. , OECD Publishing, Paris, May 15, 2017.
3 Ibid. 3 Ibid.
4 Small Business Research and Development Enhancement Act of 1992 (P.L. 102-564). 4 Small Business Research and Development Enhancement Act of 1992 (P.L. 102-564).
5 The percentages identified in law which must be set aside for SBIR and STTR are minimums; agencies may set aside 5 The percentages identified in law which must be set aside for SBIR and STTR are minimums; agencies may set aside
more than these percentages. Federal R&D funding can be characterized as either more than these percentages. Federal R&D funding can be characterized as either extramural or or intramural depending depending
on the individuals and organizations performing the R&D. Extramural R&D is performed by organizations outside the on the individuals and organizations performing the R&D. Extramural R&D is performed by organizations outside the
federal sector that perform R&D with federal funds under contract, grant, or cooperative agreement, including federal sector that perform R&D with federal funds under contract, grant, or cooperative agreement, including
universities and colleges, industrial firms, federally funded research and development centers, state and local universities and colleges, industrial firms, federally funded research and development centers, state and local
governments, and foreign performers. Intramural R&D is performed by employees of a federal agency in or through governments, and foreign performers. Intramural R&D is performed by employees of a federal agency in or through
government-owned, government-operated facilities. government-owned, government-operated facilities.
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This report provides information on the legislative foundations, structure, operation, and current This report provides information on the legislative foundations, structure, operation, and current
and historical funding levels of the SBIR and STTR programs; provides highlights of external and historical funding levels of the SBIR and STTR programs; provides highlights of external
reviews of the programs; and identifies and discusses selected policy issues. reviews of the programs; and identifies and discusses selected policy issues.
Figure 1. SBIR and STTR Funding, FY2000-~~FY2018~~FY2019
Total of Phase I and Phase II Awards for SBIR and STTR programs Total of Phase I and Phase II Awards for SBIR and STTR programs

Sources: CRS analysis of data. Data for FY2000-FY2008 from SBA, CRS analysis of data. Data for FY2000-FY2008 from SBA, Small Business Innovation Research Program
(SBIR) Annual Report for each fiscal year; data for FY2009-FY2011 from SBA, for each fiscal year; data for FY2009-FY2011 from SBA, The Small Business Innovation Research
(SBIR) and Small Business Technology Transfer (STTR) Program Annual Report Fiscal Year 2009-2011; data for FY2012-; data for FY2012-
~~FY2018~~ FY2019 from SBA, from SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Programs
Annual Report for each fiscal year. Annual reports available at https://www.sbir.gov/annual-reports-files. for each fiscal year. Annual reports available at https://www.sbir.gov/annual-reports-files.
Note: Source tables are not consistently labeled from year to year. Source tables are not consistently labeled from year to year.
Data Sources and Limitations
This report uses the data reported to SBA and included in the required annual reports to Congress This report uses the data reported to SBA and included in the required annual reports to Congress
for the information and analysis presented below. The latest annual report data available to CRS for the information and analysis presented below. The latest annual report data available to CRS
is for is for ~~FY2018~~FY2019. While the SBA, through its SBIR.gov website, does makes available certain data . While the SBA, through its SBIR.gov website, does makes available certain data
on SBIR and STTR awards from the inception of the SBIR and STTR programs through the on SBIR and STTR awards from the inception of the SBIR and STTR programs through the
current fiscal year, the award database is considered “live data” and open for continuous revision current fiscal year, the award database is considered “live data” and open for continuous revision
throughout the year.6 Additionally, as of the date of this report, the award database for FY2021throughout the year.6 Additionally, as of the date of this report, the award database for FY2021 and FY2022 is is
incomplete (i.e., incomplete (i.e., ~~eight~~seven agencies have not posted data for agencies have not posted data for ~~FY2021~~FY2022). While the award database for ). While the award database for
~~FY2019 and~~ FY2020 is complete (i.e., each of the agencies with SBIR and STTR programs has FY2020 is complete (i.e., each of the agencies with SBIR and STTR programs has
posted its data), SBA does not independently review such data for quality or accuracy until the posted its data), SBA does not independently review such data for quality or accuracy until the
data is used as part of the required annual report. data is used as part of the required annual report. ~~According to SBA, “the review process does~~
~~identify places where data is inaccurate,” and “after the agencies and SBA work to ensure the data~~
~~is accurate it goes through a formal OMB [Office of Management and Budget] review.”7~~ As of the As of the
date of this report, SBA has not completed the date of this report, SBA has not completed the ~~FY2019~~FY2020 annual report, however, SBA has annual report, however, SBA has
indicated that “once the annual report is complete the number of changes to the award databaseindicated that “once the annual report is complete the number of changes to the award database are minimal.”7 (See “SBA Delays in Meeting Statutory Reporting Requirements” herein for related discussion.)

6 U.S. Small Business Administration (SBA), “Awards Information,” at https://www.sbir.gov/analytics-dashboard. 6 U.S. Small Business Administration (SBA), “Awards Information,” at https://www.sbir.gov/analytics-dashboard.
7 7 ~~Email correspondence between SBA and CRS, May 1, 2020~~Ibid. .
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~~are minimal.”8 (See “SBA Delays in Meeting Statutory Reporting Requirements” herein for~~
~~related discussion.)~~
Small Business Innovation Research
SBIR Overview
The Small Business Innovation Research (SBIR) program was established under the Small The Small Business Innovation Research (SBIR) program was established under the Small
Business Innovation Development Act of 1982 (P.L. 97-219) and has subsequently been Business Innovation Development Act of 1982 (P.L. 97-219) and has subsequently been
reauthorized or extended multiple times, most recently in 2016 when the program was extended reauthorized or extended multiple times, most recently in 2016 when the program was extended
through September 30, 2022.through September 30, 2022.98 Under the program, each federal agency with an extramural R&D Under the program, each federal agency with an extramural R&D
budget greater than $100 million is required to allocate a portion of that funding to conduct a budget greater than $100 million is required to allocate a portion of that funding to conduct a
multi-phase R&D grant program for small businesses. The objectives of the SBIR program multi-phase R&D grant program for small businesses. The objectives of the SBIR program
include stimulating technological innovation, increasing the use of the small business community include stimulating technological innovation, increasing the use of the small business community
to meet federal R&D needs, fostering and encouraging participation in innovation and to meet federal R&D needs, fostering and encouraging participation in innovation and
entrepreneurship by minorities and socially and economically disadvantaged individuals, and entrepreneurship by minorities and socially and economically disadvantaged individuals, and
expanding private sector commercialization of innovations resulting from federally funded R&D. expanding private sector commercialization of innovations resulting from federally funded R&D.
Currently, 11 federal agencies participate in the SBIR program: the Departments of Agriculture Currently, 11 federal agencies participate in the SBIR program: the Departments of Agriculture
(USDA), Commerce (DOC), Defense (DOD), Education (ED), Energy (DOE), Health and (USDA), Commerce (DOC), Defense (DOD), Education (ED), Energy (DOE), Health and
Human Services (HHS), Homeland Security (DHS), and Transportation (DOT); the Human Services (HHS), Homeland Security (DHS), and Transportation (DOT); the
Environmental Protection Agency (EPA); the National Aeronautics and Space Administration Environmental Protection Agency (EPA); the National Aeronautics and Space Administration
(NASA); and the National Science Foundation (NSF). (NASA); and the National Science Foundation (NSF).
Each participating agency operates its own SBIR program under the provisions of the law and Each participating agency operates its own SBIR program under the provisions of the law and
regulations, as well as with guidance issued by the U.S. Small Business Administration in its regulations, as well as with guidance issued by the U.S. Small Business Administration in its
Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR)
Program Policy Directive (referred to hereinafter as the (referred to hereinafter as the Policy Directive).).109 According to some According to some
analysts, this approach allows for general consistency across SBIR programs, while allowing each analysts, this approach allows for general consistency across SBIR programs, while allowing each
agency a substantial degree of control and flexibility in the execution of its program in alignment agency a substantial degree of control and flexibility in the execution of its program in alignment
with its overall mission and priorities.with its overall mission and priorities.1110 (See (See “Improving Technology Commercialization and
Trade-Offs Among Program Objectives” herein for related discussion.) herein for related discussion.)
In FY2017 and later years, federal agencies participating in the SBIR program are required to set In FY2017 and later years, federal agencies participating in the SBIR program are required to set
aside at least 3.2% of their extramural R&D funds for the SBIR program. In aside at least 3.2% of their extramural R&D funds for the SBIR program. In ~~FY2018~~FY2019, the , the
aggregate level of SBIR funding for all federal agencies was $aggregate level of SBIR funding for all federal agencies was $~~2.776~~3.290 billion ($1. billion ($1.~~610~~719 billion for the billion for the
10 participating civilian agencies and $1.10 participating civilian agencies and $1.~~166~~572 billion for DOD). The aggregate level of SBIR billion for DOD). The aggregate level of SBIR
funding for the civilian agencies ($1.funding for the civilian agencies ($1.~~610~~719 billion) accounted for approximately 3. billion) accounted for approximately 3.2527% of the % of the
participating agencies’ aggregate extramural R&D funding, as reported to SBA. Overall, the participating agencies’ aggregate extramural R&D funding, as reported to SBA. Overall, the
civilian agencies participating in the SBIR program obligated the required 3.2%; however, civilian agencies participating in the SBIR program obligated the required 3.2%; however,
individually, individually, 64 of the 10 civilian agencies failed to comply with the minimum spending of the 10 civilian agencies failed to comply with the minimum spending
requirement. Specifically, requirement. Specifically, ~~HHS,~~ NASA, USDA, NASA, USDA, ~~ED, DOT~~DOC, and EPA did not meet the SBIR , and EPA did not meet the SBIR
spending requirement in spending requirement in ~~FY2018.~~FY2019, as assessed by SBA.11 The percentage of SBIR funding set aside from The percentage of SBIR funding set aside from ~~DOD’s~~

8 8 ~~Ibid.~~
9 Section 1834 of the National Defense Authorization Act for Fiscal Year 2017 (P.L. 114-328). Section 1834 of the National Defense Authorization Act for Fiscal Year 2017 (P.L. 114-328).
109 The SBA directive is required under Section 9(j) of the Small Business Act (15 U.S.C. §638). SBA, The SBA directive is required under Section 9(j) of the Small Business Act (15 U.S.C. §638). SBA, Small Business
Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Program Policy Directive, May 2, 2019. , May 2, 2019.
1110 See, for example, U.S. Government Accountability Office (GAO), See, for example, U.S. Government Accountability Office (GAO), Small Business Research Programs: Agencies Are
Implementing New Fraud, Waste, and Abuse Requirements, GAO-13-70R, November 15, 2012, p. 1. , GAO-13-70R, November 15, 2012, p. 1.
11 SBA determines compliance based on agency provided data and by assessing the agency provided data relative to extramural R/R&D obligations submitted to the National Science Foundation’s Survey of Federal Funds for Research and Development. As a result, may appear compliant based on agency submitted data, but is categorized as “Did Not Comply” based on SBA’s assessment. SBA’s process for assessing compliance can be found in Section 7 of the Congressional Research Service 3 link to page 35~~Congressional Research Service~~

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DOD’s extramural R&D funds in extramural R&D funds in ~~FY2018~~FY2019 accounted for accounted for ~~2.38~~3.04% of DOD’s extramural R&D funding, as % of DOD’s extramural R&D funding, as
reported to SBA, reported to SBA, ~~well~~ below the required 3.2%.12 below the required 3.2%.12 ~~Overall, DOD did not meet the minimum~~
~~spending requirement for the SBIR program; however~~However, 4 of the 12 DOD components SBA , 4 of the 12 DOD components SBA
collects data from did comply with the spending requirement—collects data from did comply with the spending requirement—Navy, Defense Advanced Research Defense Advanced Research
Projects Agency (DARPA), Projects Agency (DARPA), ~~U.S. Special Operations Command (SOCOM),~~ Defense Threat Defense Threat
Reduction Agency (DTRA), and Defense Logistics Agency (DLA) (See Reduction Agency (DTRA), and Defense Logistics Agency (DLA) (See “Agency Compliance
with Mandatory Minimum Expenditures” herein for related discussion.) herein for related discussion.)
SBIR Phases
The SBIR program is a three-phase program. The purposes and parameters of each phase are The SBIR program is a three-phase program. The purposes and parameters of each phase are
discussed below. discussed below.
Phase I
In Phase I, an agency solicits contract proposals or grant applications to conduct feasibility- In Phase I, an agency solicits contract proposals or grant applications to conduct feasibility-
related experimental or theoretical research or research and development (R/R&D) related to related experimental or theoretical research or research and development (R/R&D) related to
agency requirements. The scope of the topic(s) in the solicitation may be broad or narrow, agency requirements. The scope of the topic(s) in the solicitation may be broad or narrow,
depending on the needs of the agency. Phase I grants are intended to determine “the scientific and depending on the needs of the agency. Phase I grants are intended to determine “the scientific and
technical merit and feasibility of ideas that appear to have commercial potential.”13 Generally, technical merit and feasibility of ideas that appear to have commercial potential.”13 Generally,
SBIR Phase I awards are not to exceed $150,000, adjusted for inflation, though the law provides SBIR Phase I awards are not to exceed $150,000, adjusted for inflation, though the law provides
agencies with the authority to issue awards that exceed this amount (the Phase I award guideline) agencies with the authority to issue awards that exceed this amount (the Phase I award guideline)
by as much as 50%.14 In addition, agencies may request a waiver from the SBA to exceed the by as much as 50%.14 In addition, agencies may request a waiver from the SBA to exceed the
award guideline by more than 50% for a specific topic.15 In general, the period of performance for award guideline by more than 50% for a specific topic.15 In general, the period of performance for
Phase I awards is up to six months, though agencies may allow for a longer performance period Phase I awards is up to six months, though agencies may allow for a longer performance period
for a particular project. for a particular project.
Phase II
Phase II grants are intended to further R/R&D efforts initiated in Phase I that meet particular Phase II grants are intended to further R/R&D efforts initiated in Phase I that meet particular
program needs and that exhibit potential for commercial application. In general, only Phase I program needs and that exhibit potential for commercial application. In general, only Phase I
grant recipients are eligible for Phase II grants. There are two exceptions to this guideline: (1) a grant recipients are eligible for Phase II grants. There are two exceptions to this guideline: (1) a
federal agency may issue an SBIR Phase II award to a Small Business Technology Transfer federal agency may issue an SBIR Phase II award to a Small Business Technology Transfer
(STTR) Phase I awardee to further develop the work performed under the STTR Phase I award;16 (STTR) Phase I awardee to further develop the work performed under the STTR Phase I award;16
and (2) through and (2) through ~~FY2022~~FY2025, the National Institutes of Health (NIH), DOD, and ED are authorized to , the National Institutes of Health (NIH), DOD, and ED are authorized to
make Phase II grants to small businesses that did not receive Phase I awards. Exercise of either of make Phase II grants to small businesses that did not receive Phase I awards. Exercise of either of
these exceptions requires a determination from the agency head that the small business has these exceptions requires a determination from the agency head that the small business has
demonstrated the scientific and technical merit and feasibility of the ideas and that the ideas demonstrated the scientific and technical merit and feasibility of the ideas and that the ideas
appear to have commercial potential.17 appear to have commercial potential.17

FY2019 annual report. 12 SBA, 12 SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Program Annual
Report for Fiscal Year ~~2018~~2019, pp. 34-44. , pp. 34-44.
13 15 U.S.C. §638. 13 15 U.S.C. §638.
14 Ibid. §638(j)(2)(D) and (aa)(1). According to SBA, as of November 14 Ibid. §638(j)(2)(D) and (aa)(1). According to SBA, as of November ~~2019~~2021, agencies may issue a Phase I award up to , agencies may issue a Phase I award up to
$$~~256,580~~275,766 without seeking a waiver from SBA. without seeking a waiver from SBA.
15 Ibid. §638(aa)(4). 15 Ibid. §638(aa)(4).
16 The STTR program is discussed in more detail later in this report. 16 The STTR program is discussed in more detail later in this report.
17 SBA, 17 SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Program Policy
Directive, May 2, 2019. , May 2, 2019.
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Phase II awards are to be based on the results achieved in Phase I (when applicable) and the Phase II awards are to be based on the results achieved in Phase I (when applicable) and the
scientific and technical merit and commercial potential of the project proposed in Phase II as scientific and technical merit and commercial potential of the project proposed in Phase II as
evidenced by: the small business concern’s record of successfully commercializing SBIR or other evidenced by: the small business concern’s record of successfully commercializing SBIR or other
research; the existence of second phase funding commitments from private sector or non-SBIR research; the existence of second phase funding commitments from private sector or non-SBIR
funding sources; the existence of third phase, follow-on commitments for the subject of the funding sources; the existence of third phase, follow-on commitments for the subject of the
research; and the presence of other indicators of the commercial potential of the idea.18 research; and the presence of other indicators of the commercial potential of the idea.18
The The Policy Directive generally limits SBIR Phase II awards to $1 million, adjusted for inflation, generally limits SBIR Phase II awards to $1 million, adjusted for inflation,
(the Phase II award guideline), though the directive provides agencies with the authority to issue (the Phase II award guideline), though the directive provides agencies with the authority to issue
an award that exceeds this amount by as much as 50%. As with Phase I grants, agencies may an award that exceeds this amount by as much as 50%. As with Phase I grants, agencies may
request a waiver from the SBA to exceed the Phase II award guideline by more than 50% for a request a waiver from the SBA to exceed the Phase II award guideline by more than 50% for a
specific topic.19 In general, the period of performance for Phase II awards is not to exceed two specific topic.19 In general, the period of performance for Phase II awards is not to exceed two
years, though agencies may allow for a longer performance period for a particular project. years, though agencies may allow for a longer performance period for a particular project.
Agencies may make a sequential Phase II award to continue the work of an initial Phase II award. Agencies may make a sequential Phase II award to continue the work of an initial Phase II award.
The amount of a sequential Phase II award is subject to the same Phase II award guideline and The amount of a sequential Phase II award is subject to the same Phase II award guideline and
agencies’ authority to exceed the guideline by up to 50%. Thus, agencies may award up to $3 agencies’ authority to exceed the guideline by up to 50%. Thus, agencies may award up to $3
million, adjusted for inflation, in Phase II awards for a particular project to a single recipient at million, adjusted for inflation, in Phase II awards for a particular project to a single recipient at
the agency’s discretion, and potentially more if the agency requests and receives a waiver from the agency’s discretion, and potentially more if the agency requests and receives a waiver from
the SBA. For sequential Phase II awards, some agencies require third party matching of the the SBA. For sequential Phase II awards, some agencies require third party matching of the
agency’s SBIR funds. agency’s SBIR funds.
Phase III
Phase III of the SBIR program is focused on the commercialization of results achieved with Phase III of the SBIR program is focused on the commercialization of results achieved with
Phase I and Phase II SBIR funding. The SBIR program Phase I and Phase II SBIR funding. The SBIR program does not provide funding in Phase III. provide funding in Phase III.
Phase III funding is expected, generally, to be generated in the private sector. However, some Phase III funding is expected, generally, to be generated in the private sector. However, some
agencies may use non-SBIR funds for Phase III funding to support additional R&D or contracts agencies may use non-SBIR funds for Phase III funding to support additional R&D or contracts
for products, processes, or services intended for use by the federal government. In addition, the for products, processes, or services intended for use by the federal government. In addition, the
law directs agencies and prime contractors “to the greatest extent practicable,” to facilitate the law directs agencies and prime contractors “to the greatest extent practicable,” to facilitate the
commercialization of SBIR and STTR projects through the use of Phase III awards, including commercialization of SBIR and STTR projects through the use of Phase III awards, including
sole source awards.20 sole source awards.20
Technical Assistance
In addition to funding provided in Phases I-III, the law also allows agencies to award SBIR Phase In addition to funding provided in Phases I-III, the law also allows agencies to award SBIR Phase
I recipients up to $6,500 per year, and Phase II award recipients up to $50,000 per project, for I recipients up to $6,500 per year, and Phase II award recipients up to $50,000 per project, for
technical and business assistance, in addition to the amount of the base award, or to provide such technical and business assistance, in addition to the amount of the base award, or to provide such
assistance through an agency-selected vendor.21 This funding is intended to provide SBIR assistance through an agency-selected vendor.21 This funding is intended to provide SBIR
recipients with services such as access to a network of scientists and engineers engaged in a wide recipients with services such as access to a network of scientists and engineers engaged in a wide
range of technologies; assistance with product sales, intellectual property protections, market range of technologies; assistance with product sales, intellectual property protections, market
research, market validation, and development of regulatory plans and manufacturing plans; or research, market validation, and development of regulatory plans and manufacturing plans; or
access to technical and business literature available through online databases. These services are access to technical and business literature available through online databases. These services are
provided to help SBIR awardees make better technical decisions, solve technical problems, provided to help SBIR awardees make better technical decisions, solve technical problems,

18 15 U.S.C. §638(e)(4)(b). 18 15 U.S.C. §638(e)(4)(b).
19 According to SBA, as of November 19 According to SBA, as of November ~~2019~~2021, agencies may issue a Phase II award up to $1,, agencies may issue a Phase II award up to $1,~~710,531~~838,436 without seeking a without seeking a
waiver from SBA. waiver from SBA.
20 15 U.S.C. §638(r)(4). 20 15 U.S.C. §638(r)(4).
21 Ibid. §638(q). 21 Ibid. §638(q).
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minimize technical risks, and develop and commercialize new commercial products and minimize technical risks, and develop and commercialize new commercial products and
processes.22 processes.22
SBIR Eligibility
A small business’s eligibility for the SBIR program is contingent on its location, number of A small business’s eligibility for the SBIR program is contingent on its location, number of
employees, ownership characteristics, and other factors. Eligibility to participate in the SBIR employees, ownership characteristics, and other factors. Eligibility to participate in the SBIR
program is limited to for-profit U.S. businesses with a location in the United States. Eligible program is limited to for-profit U.S. businesses with a location in the United States. Eligible
companies must have 500 or fewer employees, including employees of affiliates. The small companies must have 500 or fewer employees, including employees of affiliates. The small
business must be business must be
(1) more than 50% directly owned and controlled by one or more citizens or permanent (1) more than 50% directly owned and controlled by one or more citizens or permanent
resident aliens of the United States, other small business concerns (each of which is more resident aliens of the United States, other small business concerns (each of which is more
than 50% directly owned and controlled by individuals who are citizens or permanent than 50% directly owned and controlled by individuals who are citizens or permanent
resident aliens of the United States), an Indian tribe, Alaskan Native Corporation (ANC) or resident aliens of the United States), an Indian tribe, Alaskan Native Corporation (ANC) or
Native Hawaiian organization (NHO) (or a wholly owned business entity of such tribe, ANC Native Hawaiian organization (NHO) (or a wholly owned business entity of such tribe, ANC
or NHO), or any combination of these; or or NHO), or any combination of these; or
(2) more than 50% owned by multiple venture capital operating companies, hedge funds, (2) more than 50% owned by multiple venture capital operating companies, hedge funds,
private equity firms,23 or any combination of these, with no single such firm owning more private equity firms,23 or any combination of these, with no single such firm owning more
than 50% of the small business;24 or than 50% of the small business;24 or
(3) a joint venture in which each entity to the joint venture meets the requirements in (3) a joint venture in which each entity to the joint venture meets the requirements in
paragraphs (1) and (2) above.25 paragraphs (1) and (2) above.25
Agencies are restricted on how much of their SBIR funds they can make available for awards to Agencies are restricted on how much of their SBIR funds they can make available for awards to
small businesses that are more than 50% owned by venture capital operating companies, hedge small businesses that are more than 50% owned by venture capital operating companies, hedge
funds, or private equity firms. The NIH, DOE, and NSF may award no more than 25% of their funds, or private equity firms. The NIH, DOE, and NSF may award no more than 25% of their
SBIR funds to such small businesses; all other SBIR agency programs are limited to using 15% SBIR funds to such small businesses; all other SBIR agency programs are limited to using 15%
of their SBIR funds for such awards.26 of their SBIR funds for such awards.26
Small businesses that have received multiple prior SBIR/STTR awards must meet certain bench- Small businesses that have received multiple prior SBIR/STTR awards must meet certain bench-
mark requirements for progress toward commercialization to be eligible for a new Phase I award mark requirements for progress toward commercialization to be eligible for a new Phase I award
(see (see “Improving Technology Commercialization and Trade-Offs Among Program Objectives”
herein for related discussion). For both Phase I and Phase II, the principal investigator’s primary herein for related discussion). For both Phase I and Phase II, the principal investigator’s primary
employment must be with the small business applicant at the time of award and during the employment must be with the small business applicant at the time of award and during the
conduct of the proposed project.27 conduct of the proposed project.27

22 Ibid. §638(q)(1). 22 Ibid. §638(q)(1).
23 See 13 C.F.R. §121.702. 23 See 13 C.F.R. §121.702.
24 According to SBA, “The exception to this is if the VC is itself more than 50% directly owned and controlled by one 24 According to SBA, “The exception to this is if the VC is itself more than 50% directly owned and controlled by one
or more individuals who are citizens or permanent resident aliens of the United States. In such a case, that VC is or more individuals who are citizens or permanent resident aliens of the United States. In such a case, that VC is
allowed to have majority ownership and control of the awardee. In that case, the VC and the awardee, and all other allowed to have majority ownership and control of the awardee. In that case, the VC and the awardee, and all other
affiliates, must have a total of 500 employees or less.” Source: SBA, “Frequently Asked Questions: VC Participation,” affiliates, must have a total of 500 employees or less.” Source: SBA, “Frequently Asked Questions: VC Participation,”
accessed April 28, 2020, at http://sbir.gov/faq/vc-participation. accessed April 28, 2020, at http://sbir.gov/faq/vc-participation.
25 13 C.F.R. §121.702. 25 13 C.F.R. §121.702.
26 15 U.S.C. §638(dd). 26 15 U.S.C. §638(dd).
27 SBA, 27 SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Program Policy
Directive, May 2, 2019, p. 84. , May 2, 2019, p. 84.
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Generally, R/R&D work under an SBIR award must be performed in the United States, though Generally, R/R&D work under an SBIR award must be performed in the United States, though
agencies may allow a portion of the work to be performed or obtained outside of the United agencies may allow a portion of the work to be performed or obtained outside of the United
States under “rare and unique” circumstances.28 States under “rare and unique” circumstances.28
Recent and Historical SBIR Awards Data29
In In ~~FY2018~~FY2019, the most recent year for which the SBA has published annual report data on SBIR , the most recent year for which the SBA has published annual report data on SBIR
awards, agencies made awards for $awards, agencies made awards for $~~2.776~~3.290 billion, including billion, including ~~3,135~~4,002 Phase I awards totaling $ Phase I awards totaling $~~600.8~~701.5
million and million and ~~1,703~~2,135 Phase II awards totaling $2. Phase II awards totaling $2.~~142~~493 billion. The success rate30 was billion. The success rate30 was 1619% for Phase I % for Phase I
SBIR proposers and SBIR proposers and 5559% for Phase II proposers. % for Phase II proposers.
While more than half of SBIR awards made in While more than half of SBIR awards made in ~~FY2018~~FY2019 were Phase I awards (65%), more than were Phase I awards (65%), more than
three-fourths of SBIR funding went to Phase II awards (78%).31 Between FY2000 and three-fourths of SBIR funding went to Phase II awards (78%).31 Between FY2000 and ~~FY2018~~FY2019, ,
funding for Phase I remained relatively stable while Phase II funding generally increased. See funding for Phase I remained relatively stable while Phase II funding generally increased. See
Figure 2.
Figure 2. SBIR Phase I and Phase II Funding, FY2000-~~FY2018~~FY2019

Sources: CRS analysis of data. Data for FY2000-FY2008 from SBA, CRS analysis of data. Data for FY2000-FY2008 from SBA, Small Business Innovation Research Program
(SBIR) Annual Report for each fiscal year; data for FY2009-FY2011 from SBA, for each fiscal year; data for FY2009-FY2011 from SBA, The Small Business Innovation Research
(SBIR) and Small Business Technology Transfer (STTR) Program Annual Report Fiscal Year 2009-2011; data for FY2012-; data for FY2012-
~~FY2018~~FY2019 from SBA, from SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Programs
Annual Report for each fiscal year. Annual reports available at https://www.sbir.gov/annual-reports-files. for each fiscal year. Annual reports available at https://www.sbir.gov/annual-reports-files.
Note: Source tables are not consistently labeled from year to year. Source tables are not consistently labeled from year to year.
Two agencies accounted for more than three-fourths of total SBIR funding in Two agencies accounted for more than three-fourths of total SBIR funding in ~~FY2018~~FY2019: DOD : DOD
($1.($1.~~166~~533 billion, billion, 4248%) and HHS ($%) and HHS ($~~930.9~~988.0 million, million, 3431%). The next three highest SBIR funding %). The next three highest SBIR funding
agencies (DOE, NSF, and NASA) together accounted for almost agencies (DOE, NSF, and NASA) together accounted for almost 2219%. The remaining agencies %. The remaining agencies
accounted for accounted for ~~nearly 3%. See~~about 2%. See Figure 3.

28 Ibid., p. 85. 28 Ibid., p. 85.
29 See 29 See “Data Sources and Limitations” above. above.
30 The success rate is the number of successful proposals divided by total proposals submitted, expressed as a 30 The success rate is the number of successful proposals divided by total proposals submitted, expressed as a
percentage. percentage.
31 Phase II funding includes original and subsequent Phase II award funding, as well as modifications. 31 Phase II funding includes original and subsequent Phase II award funding, as well as modifications.
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Figure 3. SBIR Funding by Agency, ~~FY2018~~FY2019

Source: CRS analysis of data fromCRS analysis of data from SBA, SBA, Small Business Innovation Research (SBIR) and Small Business Technology
Transfer (STTR) Program Annual Report Fiscal Year ~~2018~~2019, Tables 2, 3, and , Tables 2, 3, and 86. .
The allocation of SBIR funding between Phase I and Phase II awards varies among agencies. The allocation of SBIR funding between Phase I and Phase II awards varies among agencies.
Agencies that allocated the largest share of their SBIR funding to Phase I awards in Agencies that allocated the largest share of their SBIR funding to Phase I awards in ~~FY2018~~FY2019 were were
EPA (EPA (4842%), %), ~~DOT (42~~USDA (40%), and %), and ~~ED (36~~NSF (38%). Agencies that allocated the largest share of their SBIR %). Agencies that allocated the largest share of their SBIR
funding to Phase II awards in funding to Phase II awards in ~~FY2018~~FY2019 were were ~~DOD (85%), DHS (78%), and NASA (78%)~~DOT (100%),32 DOC (88%), and DOD (85%). Figure
4 illustrates each SBIR agency’s distribution of FY2018 SBIR funding between phases. illustrates each SBIR agency’s distribution of FY2018 SBIR funding between phases.
Figure 4. Agency Allocation of SBIR Funding Between Phase I and Phase II, ~~FY2018~~FY2019

Source: CRS analysis of data fromCRS analysis of data from SBA, SBA, Small Business Innovation Research (SBIR) and Small Business Technology
Transfer (STTR) Program Annual Report Fiscal Year ~~2018~~2019, Tables 2, 3, and , Tables 2, 3, and 86. .
Agency shares of aggregate Phase I and Phase II SBIR funding are shown in Agency shares of aggregate Phase I and Phase II SBIR funding are shown in Figure 5. The The
agencies with the highest share of total Phase I funding in agencies with the highest share of total Phase I funding in ~~FY2018~~FY2019 were HHS ( were HHS (4340%), DOD %), DOD
~~(28~~ 32 According to SBA, all Phase I awards associated with DOT’s FY2019 solicitation were made at the beginning of FY2020. Congressional Research Service 8 link to page 14 Small Business Research Programs: SBIR and STTR (32%), and DOE and NSF both at 10%. The agencies with the highest share of total Phase II %), and DOE and NSF both at 10%. The agencies with the highest share of total Phase II
funding in funding in ~~FY2018~~FY2019 were DOD ( were DOD (4653%), HHS (%), HHS (3128%), and DOE (%), and DOE (~~9%).~~
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8%). Figure 5. Share of Phase I and Phase II SBIR Funding, by Agency, ~~FY2018~~FY2019

Source: CRS analysis of data fromCRS analysis of data from SBA, SBA, Small Business Innovation Research (SBIR) and Small Business Technology
Transfer (STTR) Program Annual Report Fiscal Year ~~2018~~2019, Tables 2, 3, and , Tables 2, 3, and 86. .
In In ~~FY2018~~FY2019, women-owned small businesses received , women-owned small businesses received ~~407~~456 Phase I awards ( Phase I awards (1311% of all Phase I % of all Phase I
SBIR awards) totaling $SBIR awards) totaling $7986.3 million (.3 million (1312% of total Phase I funding)% of total Phase I funding), and and ~~212~~214 Phase II SBIR Phase II SBIR
awards (awards (1210%) totaling $%) totaling $~~253.5~~289.3 million (12%). million (12%).3233 Socially and economically disadvantaged Socially and economically disadvantaged
businesses received businesses received ~~209~~315 Phase I awards ( Phase I awards (78% of all Phase I SBIR awards) totaling $% of all Phase I SBIR awards) totaling $~~38.9~~49.4 million million
((67% of total Phase I funding)% of total Phase I funding), and and 97120 Phase II SBIR awards (6%) totaling $ Phase II SBIR awards (6%) totaling $~~98.1~~117.0 million (5%). million (5%).3334
Companies in Historically Underutilized Business Zones (HUBZones) received Companies in Historically Underutilized Business Zones (HUBZones) received ~~106~~142 Phase I Phase I
awards (awards (34% of all Phase I awards) totaling $% of all Phase I awards) totaling $~~17.7~~23.6 million (3% of total Phase I funding) and million (3% of total Phase I funding) and 3864
Phase II awards (Phase II awards (23%) totaling $%) totaling $~~37.0~~55.7 million (2%). million (2%).3435
Figure 6 shows the aggregate funding level and number of SBIR awards by state for shows the aggregate funding level and number of SBIR awards by state for ~~FY2014-~~
~~FY2018~~FY2015-FY2019 (the latest five-year period for which annual report award data by state are available). (the latest five-year period for which annual report award data by state are available).
Although every stateAlthough every state~~, the District of Columbia, and Puerto Rico~~ and territory except American Samoa received awards during this received awards during this
period, SBIR funding was concentrated among certain states. The two states that received the period, SBIR funding was concentrated among certain states. The two states that received the
largest number and amount of SBIR awards during this period—California (5,largest number and amount of SBIR awards during this period—California (5,~~041~~274 awards totaling awards totaling
~~$2.539~~ $2.767 billion) and Massachusetts (2,billion) and Massachusetts (2,~~590~~692 awards totaling $1. awards totaling $1.~~386~~515 billion)—accounted for billion)—accounted for 3332% of % of
the total number of SBIR awards and 33% of the total funding for this period. the total number of SBIR awards and 33% of the total funding for this period.
The top ten states—California, Massachusetts, Virginia, Maryland, Colorado, New York, The top ten states—California, Massachusetts, Virginia, Maryland, Colorado, New York,
Pennsylvania, Texas, Ohio, and North Carolina—accounted for more than two-thirds of SBIR Pennsylvania, Texas, Ohio, and North Carolina—accounted for more than two-thirds of SBIR
awards and funding. This concentration is similar to overall federal R&D funding for awards and funding. This concentration is similar to overall federal R&D funding for ~~FY2018~~FY2019. .
Eight of the top ten states in SBIR funding are also among the top ten states in overall federal Eight of the top ten states in SBIR funding are also among the top ten states in overall federal
R&D funding in R&D funding in ~~FY2018~~FY2019 (which accounted for (which accounted for 5461% of total federal R&D funding).% of total federal R&D funding).3536 In contrast, In contrast,
the ten states with the fewest number of SBIR awards and lowest aggregate award amounts—the ten states with the fewest number of SBIR awards and lowest aggregate award amounts—
~~North Dakota, Alaska, Puerto Rico, Mississippi, South Dakota, Idaho, West Virginia, Wyoming,~~
~~Nebraska, and Maine—accounted for about 1% of awards and total funding during this period.~~

32American Samoa, Marshall Islands, Alaska, North Dakota, Mississippi, Puerto Rico, Idaho, South 33 According to SBA, women-owned small businesses are small businesses that are “at least 51% owned by one or According to SBA, women-owned small businesses are small businesses that are “at least 51% owned by one or
more women, or in the case of any publicly owned business, at least 51% of the stock is owned by women, and women more women, or in the case of any publicly owned business, at least 51% of the stock is owned by women, and women
control the management and daily business operations;” SBA, control the management and daily business operations;” SBA, Small Business Innovation Research Program Policy
Directive, May 2, 2019, p. 67. , May 2, 2019, p. 67.
3334 According to SBA, socially and economically disadvantaged businesses must meet the eligibility requirements set According to SBA, socially and economically disadvantaged businesses must meet the eligibility requirements set
forth in 13 C.F.R. part 124, subpart B; SBA, forth in 13 C.F.R. part 124, subpart B; SBA, Small Business Innovation Research (SBIR) and Small Business
Technology Transfer (STTR) Program Policy Directive, May 2, 2019, p. 66. , May 2, 2019, p. 66.
3435 HUBZone small business concerns are defined by 15 USC §657a and set forth in 13 C.F.R. §126.200, “What HUBZone small business concerns are defined by 15 USC §657a and set forth in 13 C.F.R. §126.200, “What
Requirements Must a Concern Meet to Be Eligible as a Certified Hubzone Small Business Concern?” Requirements Must a Concern Meet to Be Eligible as a Certified Hubzone Small Business Concern?”
3536 National Science Foundation, National Science Foundation, Federal Funds for Research and Development: Fiscal Years ~~2018-19~~2019-20, Table 129, , Table 129,
accessed accessed ~~July 27, 2021~~October 4, 2022, at https://, at https://~~ncsesdata.nsf.gov/fedfunds/2018/html/ffs18-dt-tab129.html~~ncses.nsf.gov/pubs/nsf21329. .
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Dakota, Wyoming, and West Virginia—accounted for less than 1% of awards and total funding during this period. The ten states with the least The ten states with the least amount of federal R&D funding in federal R&D funding in ~~FY2018~~FY2019 (six of which are among the bottom (six of which are among the bottom
ten states in SBIR funding) also accounted for ten states in SBIR funding) also accounted for ~~about~~less than 1% of total federal R&D funding. 1% of total federal R&D funding.3637
Figure 6. SBIR Aggregate Funding Level and Awards by State, ~~FY2014-2018~~FY2015-2019

Source: CRS analysis of data from SBA, CRS analysis of data from SBA, Small Business Innovation Research (SBIR) and Small Business Technology
Transfer (STTR) Programs Annual Report for each fiscal year (for each fiscal year (~~FY2014-FY2018~~FY2015-FY2019), “SBIR/STTR Awards by U.S. State ), “SBIR/STTR Awards by U.S. State
and Territory” Table. Annual reports available at https://www.sbir.gov/annual-reports-files. and Territory” Table. Annual reports available at https://www.sbir.gov/annual-reports-files.
Table 1 provides information on overall agency SBIR obligations for provides information on overall agency SBIR obligations for ~~FY2018~~FY2019, as well as the , as well as the
number and aggregate amounts of Phase I and Phase II SBIR awards. number and aggregate amounts of Phase I and Phase II SBIR awards.
Table 1. Number and Amount of SBIR Awards by Agency, ~~FY2018~~FY2019
(in millions of dollars) (in millions of dollars)

Phase I
Phase II
Total
Awarded,
Phase I and
Number
Total
Number
Total
Department/Agency
Phase IIa,ba,b
of Awards
Awardedbb
of Awards
Awardedbb
Department of Agriculture Department of Agriculture
$ $~~28.5~~21.0
79 79
$ $~~7.8~~8.5
35
~~$20.7~~26 $12.5
Department of Commerce Department of Commerce
$ $~~15.0~~9.9
4212
$ $~~4.8~~1.2
28
~~$10.2~~24 $8.7
Department of Defense Department of Defense
$1, $1,~~145.6~~532.5
1, 1,~~105~~
~~$167.1~~
~~820~~
~~$978.5~~916 $223.2 1178 $1,309.3
Department of Education Department of Education
$ $~~8.4~~10.2 15 $3.0 8 $7.2
15
~~$3.0~~
6
~~$5.4~~
~~Department of Energy~~
~~$246.9~~
~~350~~
~~$57.4~~
~~174~~
~~$189.5~~
~~Dept. of Health and Human Services~~
~~$928.7~~
~~931~~
~~$259.0~~
~~370~~
~~$669.8~~

3637 Ibid. Ibid.
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Phase I
Phase II
Total
Awarded,
Phase I and
Number
Total
Number
Total
Department/Agency
Phase IIa,ba,b
of Awards
Awardedbb
of Awards
Awardedbb
Department of Department of Energy $262.2 363 $68.3 178 $194.0 Dept. of Health and Human Services $988.0 948 $283.3 426 $704.7 Department of Homeland Security $21.2 24 $3.6 19 $17.7~~Homeland Security~~
~~$16.8~~
25
~~$3.7~~
12
~~$13.1~~
Department of Department of ~~Transportation~~
~~$5.2~~
15
~~$2.2~~
9
~~$3.0~~Transportationc $11.1 0 $0.0 14 $11.1
Environmental Protection Agency Environmental Protection Agency
$ $35.5 .5
1723
$ $~~1.7~~2.3
59
$ $~~1.8~~3.2
Nat’l Aeronautics and Space Admin. Nat’l Aeronautics and Space Admin.
$ $~~165.8~~
~~301~~
~~$37.2~~
~~146~~
~~$128.6~~151.4 313 $38.7 141 $112.7
National Science Foundation National Science Foundation
$ $~~178.0~~
~~255~~
~~$57.1~~
98
~~$120.9~~181.2 309 $69.4 112 $111.7
Total, All Agenciesaa
$~~2,742.4~~
~~3,135~~
~~$600.8~~
~~1,703~~
~~$2,141.5~~3,194.2 4,002 $701.5 2,135 $2,492.7
Source: CRS analysis of data fromCRS analysis of data from SBA, SBA, Small Business Innovation Research (SBIR) and Small Business Technology
Transfer (STTR) Program Annual Report Fiscal Year ~~2018~~2019, Tables 2, 3, and , Tables 2, 3, and 86. .
Notes:
a. Components many not sum to totals due to rounding. a. Components many not sum to totals due to rounding.
b. Amounts include obligations for new awards in b. Amounts include obligations for new awards in ~~FY2018 and FY2018~~FY2019 and FY2019 obligations on prior year awards. c. All Phase I awards associated with DOT’s FY2019 solicitation were made at the beginning of FY2020. As a result, the number of awards and total obligations are reported as zero. The resulting awards and obligations wil be reported within the FY2020 report. ~~obligations on prior year awards.~~
Table 2 provides historical data on the number and amount of Phase I and Phase II SBIR awards provides historical data on the number and amount of Phase I and Phase II SBIR awards
from the program’s inception through from the program’s inception through ~~FY2018~~FY2019. .
Table 2. Number and Amount of SBIR Awards by Year, FY1983-~~FY2018~~FY2019
Total
Number of Awards
Amounts
Awarded
Fiscal Year
(in millions)
Phase I Phase II
Total
FY1983 FY1983
$44.5 $44.5
686 686
74 74
760 760
FY1984 FY1984
$108.4 $108.4
999 999
338 338
1,337 1,337
FY1985 FY1985
$199.1 $199.1
1,397 1,397
407 407
1,804 1,804
FY1986 FY1986
$297.9 $297.9
1,945 1,945
564 564
2,509 2,509
FY1987 FY1987
$350.5 $350.5
2,189 2,189
768 768
2,957 2,957
FY1988 FY1988
$389.1 $389.1
2,013 2,013
711 711
2,724 2,724
FY1989 FY1989
$431.9 $431.9
2,137 2,137
749 749
2,886 2,886
FY1990 FY1990
$459.9 $459.9
2,346 2,346
837 837
3,183 3,183
FY1991 FY1991
$463.7 $463.7
2,553 2,553
788 788
3,341 3,341
FY1992 FY1992
$499.1 $499.1
2,559 2,559
916 916
3,475 3,475
FY1993 FY1993
$644.7 $644.7
2,898 2,898
1,141 1,141
4,039 4,039
FY1994 FY1994
$694.0 $694.0
3,102 3,102
928 928
4,030 4,030
FY1995 FY1995
$834.1 $834.1
3,085 3,085
1,263 1,263
4,348 4,348
FY1996 FY1996
$874.7 $874.7
2,841 2,841
1,191 1,191
4,032 4,032
FY1997 FY1997
$1,066.8 $1,066.8
3,371 3,371
1,404 1,404
4,775 4,775
FY1998 FY1998
$1,066.7 $1,066.7
3,022 3,022
1,320 1,320
4,342 4,342
Congressional Research Service 11 Small Business Research Programs: SBIR and STTR FY1999 FY1999
$1,096.5 $1,096.5
3,334 3,334
1,256 1,256
4,590 4,590
FY2000 FY2000
$1,190.2 $1,190.2
3,166 3,166
1,330 1,330
4,496 4,496
FY2001 FY2001
$1,294.4 $1,294.4
3,215 3,215
1,533 1,533
4,748 4,748
FY2002 FY2002
$1,434.8 $1,434.8
4,243 4,243
1,577 1,577
5,820 5,820
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FY2003 FY2003
$1,670.1 $1,670.1
4,465 4,465
1,759 1,759
6,224 6,224
FY2004 FY2004
$1,867.4 $1,867.4
4,638 4,638
2,013 2,013
6,651 6,651
FY2005 FY2005
$1,865.9 $1,865.9
4,300 4,300
1,871 1,871
6,171 6,171
FY2006 FY2006
$1,883.2 $1,883.2
3,836 3,836
2,026 2,026
5,862 5,862
FY2007 FY2007
$1,644.8 $1,644.8
3,814 3,814
1,542 1,542
5,356 5,356
FY2008 FY2008
$1,783.7 $1,783.7
3,626 3,626
1,771 1,771
5,397 5,397
FY2009 FY2009
$1,965.1 $1,965.1
4,007 4,007
1,793 1,793
5,800 5,800
FY2010 FY2010
$2,011.1 $2,011.1
4,045 4,045
1,846 1,846
5,891 5,891
FY2011 FY2011
$2,221.7 $2,221.7
3,739 3,739
1,759 1,759
5,498 5,498
FY2012 FY2012
$1,955.6 $1,955.6
3,528 3,528
1,982 1,982
5,510 5,510
FY2013 FY2013
$2,075.7 $2,075.7
3,011 3,011
1,474 1,474
4,485 4,485
FY2014 FY2014
$2,238.3 $2,238.3
3,162 3,162
1,513 1,513
4,675 4,675
FY2015 FY2015
$2,188.7 $2,188.7
2,870 2,870
1,454 1,454
4,324 4,324
FY2016 FY2016
$2,279.7 $2,279.7
2,909 2,909
1,592 1,592
4,501 4,501
FY2017 FY2017
$2,571.6 $2,571.6
3,223 3,223
1,871 1,871
5,094 5,094
FY2018 FY2018
$2,742.4 $2,742.4
3,135 1 3,135 1
, ,
7 7
03 03

4 4
, ,
83 83
8 8
3,135 3,135
1,703 1,703
4,838 4,838
FY2019a $3,194.2 4,002 2,135 6,137 Sources: Data for FY1983-FY1989 from SBA, Data for FY1983-FY1989 from SBA, The Small Business Economy: A Report to the President, 2010, Table , 2010, Table
1.16, pp. 51-52; Data for FY1990-FY2008 from SBA, 1.16, pp. 51-52; Data for FY1990-FY2008 from SBA, Small Business Innovation Research Program (SBIR) Annual
Report for each fiscal year; data for FY2009-FY2011 from SBA, for each fiscal year; data for FY2009-FY2011 from SBA, The Small Business Innovation Research (SBIR) and
Small Business Technology Transfer (STTR) Program Annual Report Fiscal Year 2009-2011; data for FY2012-; data for FY2012-~~FY2018~~FY2019
from SBA, from SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Programs Annual
Report for each fiscal year. Annual reports available at https://www.sbir.gov/annual-reports-files. for each fiscal year. Annual reports available at https://www.sbir.gov/annual-reports-files.
Notes: Source tables are not consistently labeled from year to year. Source tables are not consistently labeled from year to year. a. All Phase I awards associated with DOT’s FY2019 solicitation were made at the beginning of FY2020. As a result, the number of awards and total obligations are reported as zero. The resulting awards and obligations wil be reported within the FY2020 report.
Small Business Technology Transfer
STTR Overview
The Small Business Technology Transfer program was created by the Small Business Research The Small Business Technology Transfer program was created by the Small Business Research
and Development Enhancement Act of 1992 (P.L. 102-564) and has been reauthorized several and Development Enhancement Act of 1992 (P.L. 102-564) and has been reauthorized several
times, most recently in 2016 when the program was extended through September 30, 2022.times, most recently in 2016 when the program was extended through September 30, 2022.3738
Modeled largely after the SBIR program, the STTR program seeks to facilitate the Modeled largely after the SBIR program, the STTR program seeks to facilitate the
commercialization of university and federal R&D by small companies. Under the program, each commercialization of university and federal R&D by small companies. Under the program, each
federal agency with an extramural R&D budget of $1 billion or more is required to allocate a federal agency with an extramural R&D budget of $1 billion or more is required to allocate a
portion of its R&D funding to conduct a multi-phase R&D grant program for small businesses. portion of its R&D funding to conduct a multi-phase R&D grant program for small businesses.
The STTR program provides funding for research proposals that are developed and executed The STTR program provides funding for research proposals that are developed and executed
~~cooperatively between a small firm and a scientist in an eligible research institution38 and that are~~
~~aligned with the mission requirements of the federal funding agency.~~

3738 Section 1834 of the National Defense Authorization Act for Fiscal Year 2017 (P.L. 114-328). Section 1834 of the National Defense Authorization Act for Fiscal Year 2017 (P.L. 114-328).
~~38 According to the SBA, an eligible “research institution” is defined, for purposes of the STTR, as~~
~~One that has a place of business located in the United States, which operates primarily within the~~
~~United States or which makes a significant contribution to the U.S. economy through payment of~~
~~taxes or use of American products, materials or labor, and is: (1) A non-profit institution as defined~~
~~in section 4(3) of the Stevenson-Wydler Technology Innovation Act of 1980 (that is, an~~
~~organization that is owned and operated exclusively for scientific or educational purposes, no part~~
~~of the net earnings of which inures to the benefit of any private shareholder or individual); or (2) A~~
~~Congressional Research Service~~

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Congressional Research Service 12 link to page 28 link to page 28 Small Business Research Programs: SBIR and STTR cooperatively between a small firm and a scientist in an eligible research institution39 and that are aligned with the mission requirements of the federal funding agency. Currently, five agencies participate in the STTR program: DOD, DOE, HHS, NASA, and NSF. In Currently, five agencies participate in the STTR program: DOD, DOE, HHS, NASA, and NSF. In
FY2016 and later years, federal agencies participating in the STTR program are required to set FY2016 and later years, federal agencies participating in the STTR program are required to set
aside at least 0.45% in funding for the program. In aside at least 0.45% in funding for the program. In ~~FY2018~~FY2019, total STTR award funding among all , total STTR award funding among all
~~STTR-~~participating federal agencies was $participating federal agencies was $~~382.4~~429.3 million ($ million ($~~207.0~~221.6 million for the four participating million for the four participating
civilian agencies and $civilian agencies and $~~175.4~~207.6 million for DOD). The aggregate level of STTR funding for the million for DOD). The aggregate level of STTR funding for the
civilian agencies accounted for 0.44% of the participating agencies’ aggregate extramural R&D civilian agencies accounted for 0.44% of the participating agencies’ aggregate extramural R&D
funding, as reported to SBA. Specifically, HHS and NASA complied with the minimum spending funding, as reported to SBA. Specifically, HHS and NASA complied with the minimum spending
requirement of 0.45%, while the DOE and NSF failed to comply. The percentage of STTR requirement of 0.45%, while the DOE and NSF failed to comply. The percentage of STTR
funding set aside from DOD’s extramural R&D funds was 0.funding set aside from DOD’s extramural R&D funds was 0.3640%, as reported to SBA, also below %, as reported to SBA, also below
minimum spending requirement. However, minimum spending requirement. However, 34 of the 12 DOD components SBA collects data from of the 12 DOD components SBA collects data from
did comply with the spending requirement—did comply with the spending requirement—~~SOCOM, DTRA~~Navy, DARPA, SOCOM, and DLA. , and DLA.
The SBA emphasizes three principal differences between the STTR and SBIR programs: The SBA emphasizes three principal differences between the STTR and SBIR programs:
 Under STTR, the small business and its partnering research institution must  Under STTR, the small business and its partnering research institution must
establish an intellectual property agreement detailing the allocation of intellectual establish an intellectual property agreement detailing the allocation of intellectual
property rights and rights to carry out follow-on research, development, or property rights and rights to carry out follow-on research, development, or
commercialization activities. commercialization activities.
 Under STTR, the small business partner must perform at least 40% of the R&D,  Under STTR, the small business partner must perform at least 40% of the R&D,
and the research institution partner must perform at least 30% of the R&D. and the research institution partner must perform at least 30% of the R&D.
 The STTR program does not require the principal investigator to be primarily  The STTR program does not require the principal investigator to be primarily
employed by the small business, a requirement of the SBIR program. employed by the small business, a requirement of the SBIR program.3940
As with the SBIR program, each participating agency operates its own STTR program under the As with the SBIR program, each participating agency operates its own STTR program under the
provisions of the law and regulations, as well as with guidance issued by the SBA in its provisions of the law and regulations, as well as with guidance issued by the SBA in its Policy
Directive. According to some analysts, this approach allows for general consistency across STTR . According to some analysts, this approach allows for general consistency across STTR
programs, while allowing each agency a substantial degree of control and flexibility in the programs, while allowing each agency a substantial degree of control and flexibility in the
execution of its program in alignment with its overall mission and priorities.execution of its program in alignment with its overall mission and priorities.4041 (See (See “Improving
Technology Commercialization and Trade-Offs Among Program Objectives” herein for related herein for related
discussion.) discussion.)
~~STTR Phases~~
~~Like the SBIR program, the STTR program has three phases. The purposes and parameters of~~
~~each phase are discussed below.~~

39 According to the SBA, an eligible “research institution” is defined, for purposes of the STTR, as One that has a place of business located in the United States, which operates primarily within the United States or which makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials or labor, and is: (1) A non-profit institution as defined in section 4(3) of the Stevenson-Wydler Technology Innovation Act of 1980 (that is, an organization that is owned and operated exclusively for scientific or educational purposes, no part of the net earnings of which inures to the benefit of any private shareholder or individual); or (2) A Federally-funded R/R&D center (FFRDC) as identified by the National Science Foundation (NSF) Federally-funded R/R&D center (FFRDC) as identified by the National Science Foundation (NSF)
in accordance with the Federal Acquisition Regulation issued in accordance with section 35(c)(1) in accordance with the Federal Acquisition Regulation issued in accordance with section 35(c)(1)
of the Office of Federal Procurement Policy Act (or any successor regulation). A non-profit of the Office of Federal Procurement Policy Act (or any successor regulation). A non-profit
institution can include hospitals and military educational institutions, if they meet the definition institution can include hospitals and military educational institutions, if they meet the definition
above. above.
Source: SBA, Source: SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Program
Policy Directive, May 2, 2019, p. 61. , May 2, 2019, p. 61.
3940 SBA, SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Program Policy
Directive, May 2, 2019, pp. 83-84, 100-101, 107-109. , May 2, 2019, pp. 83-84, 100-101, 107-109.
4041 See, for example, GAO, See, for example, GAO, Small Business Research Programs: Agencies Are Implementing New Fraud, Waste, and
Abuse Requirements, GAO-13-70R, November 15, 2012, p. 1. , GAO-13-70R, November 15, 2012, p. 1.
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link to page 8 link to page 8 Small Business Research Programs: SBIR and STTR

STTR Phases Like the SBIR program, the STTR program has three phases. The purposes and parameters of each phase are discussed below. Phase I
In Phase I, an agency solicits contract proposals or grant applications to conduct feasibility- In Phase I, an agency solicits contract proposals or grant applications to conduct feasibility-
related experimental or theoretical research or research and development (R/R&D) related to related experimental or theoretical research or research and development (R/R&D) related to
agency requirements. The scope of the topic(s) in the solicitation may be broad or narrow, agency requirements. The scope of the topic(s) in the solicitation may be broad or narrow,
depending on the needs of the agency. Phase I grants are intended to determine “the scientific and depending on the needs of the agency. Phase I grants are intended to determine “the scientific and
technical merit and feasibility of the proposed effort and the quality of performance of the [small technical merit and feasibility of the proposed effort and the quality of performance of the [small
business] with a relatively small agency investment before consideration of further Federal business] with a relatively small agency investment before consideration of further Federal
support in Phase II.”support in Phase II.”4142 Generally, STTR Phase I awards are limited to the same award guideline Generally, STTR Phase I awards are limited to the same award guideline
amount as SBIR Phase I awards (see amount as SBIR Phase I awards (see “SBIR Phases” above). Similar to SBIR Phase I awards, above). Similar to SBIR Phase I awards,
agencies may issue STTR Phase I awards that exceed the guideline amount by as much as 50% agencies may issue STTR Phase I awards that exceed the guideline amount by as much as 50%
and may request a waiver from the SBA to exceed the award guideline by more than 50% for a and may request a waiver from the SBA to exceed the award guideline by more than 50% for a
specific topic.specific topic.4243 In general, the period of performance for Phase I awards is not to exceed one In general, the period of performance for Phase I awards is not to exceed one
year, though agencies may allow for a longer performance period for a particular project. year, though agencies may allow for a longer performance period for a particular project.
Phase II
Phase II grants are intended to further R/R&D efforts initiated in Phase I that meet particular Phase II grants are intended to further R/R&D efforts initiated in Phase I that meet particular
program needs and that exhibit potential for commercial application. In general, only Phase I program needs and that exhibit potential for commercial application. In general, only Phase I
grant recipients are eligible for Phase II grants.grant recipients are eligible for Phase II grants.4344 Awards are to be based on the results achieved in Awards are to be based on the results achieved in
Phase I and the scientific and technical merit and commercial potential of the project proposed in Phase I and the scientific and technical merit and commercial potential of the project proposed in
Phase II. The Phase II. The Policy Directive generally limits STTR Phase II awards to $1 million, adjusted for generally limits STTR Phase II awards to $1 million, adjusted for
inflation (the Phase II award guideline). As with Phase I grants, agencies may issue awards that inflation (the Phase II award guideline). As with Phase I grants, agencies may issue awards that
exceed this guideline by as much as 50% and may request a waiver from the SBA to exceed the exceed this guideline by as much as 50% and may request a waiver from the SBA to exceed the
guideline by more than 50% for a specific topic.guideline by more than 50% for a specific topic.4445 In general, the period of performance for Phase In general, the period of performance for Phase
II awards is not to exceed two years, though agencies may allow for a longer performance period II awards is not to exceed two years, though agencies may allow for a longer performance period
for a particular project. Agencies may make a sequential Phase II award to continue the work of for a particular project. Agencies may make a sequential Phase II award to continue the work of
an initial Phase II award. This sequential Phase II award is also subject to the Phase II award an initial Phase II award. This sequential Phase II award is also subject to the Phase II award
guideline amount and agencies’ authority to exceed the guideline by up to 50%. Thus, agencies guideline amount and agencies’ authority to exceed the guideline by up to 50%. Thus, agencies
may award up to $3 million, adjusted for inflation, in Phase II awards for a particular project to a may award up to $3 million, adjusted for inflation, in Phase II awards for a particular project to a
single recipient at the agency’s discretion, and potentially more if the agency requests and single recipient at the agency’s discretion, and potentially more if the agency requests and
~~receives a waiver from the SBA. For sequential Phase II awards, some agencies require third-~~
~~party matching of the agency’s STTR funds.~~
~~Phase III~~
~~Phase III of the STTR program is focused on the commercialization of the results achieved~~
~~through Phase I and Phase II STTR funding. The STTR program does not provide funding in~~

4142 SBA, SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Program Policy
Directive, May 2, 2019, p. 68. , May 2, 2019, p. 68.
4243 According to SBA, as of November According to SBA, as of November ~~2019~~2021, agencies may issue a Phase I award up to $, agencies may issue a Phase I award up to $~~256,580~~275,766 without seeking a without seeking a
waiver from SBA.waiver from SBA.
43 44 “A federal agency may, however, issue an STTR Phase II award to an SBIR Phase I awardee to further develop the “A federal agency may, however, issue an STTR Phase II award to an SBIR Phase I awardee to further develop the
work performed under the SBIR Phase I award…. An agency must base its decision upon the results of work performed work performed under the SBIR Phase I award…. An agency must base its decision upon the results of work performed
under the Phase I award and the scientific and technical merit and commercial potential of the Phase II proposal. The under the Phase I award and the scientific and technical merit and commercial potential of the Phase II proposal. The
Phase I Awardee must meet the eligibility and program requirements of the Phase II program from which it will receive Phase I Awardee must meet the eligibility and program requirements of the Phase II program from which it will receive
the award in order to receive the Phase II award.” Source: SBA, the award in order to receive the Phase II award.” Source: SBA, Small Business Innovation Research (SBIR) and Small
Business Technology Transfer (STTR) Program Policy Directive, May 2, 2019, p. 69. May 2, 2019, p. 69.
4445 According to SBA, as of November According to SBA, as of November ~~2019~~2021, agencies may issue a Phase II award up to $1,, agencies may issue a Phase II award up to $1,~~710,531~~838,436 without seeking a without seeking a
waiver from SBA. waiver from SBA.
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Small Business Research Programs: SBIR and STTR

receives a waiver from the SBA. For sequential Phase II awards, some agencies require third-party matching of the agency’s STTR funds. Phase III Phase III of the STTR program is focused on the commercialization of the results achieved through Phase I and Phase II STTR funding. The STTR program does not provide funding in Phase III. Phase III funding is expected, generally, to be generated in the private sector. However, Phase III. Phase III funding is expected, generally, to be generated in the private sector. However,
some agencies may use non-STTR funds for Phase III funding to support additional R&D or some agencies may use non-STTR funds for Phase III funding to support additional R&D or
contracts for products, processes, or services intended for use by the federal government. In contracts for products, processes, or services intended for use by the federal government. In
addition, the law directs agencies and prime contractors “to the greatest extent practicable,” to addition, the law directs agencies and prime contractors “to the greatest extent practicable,” to
facilitate the commercialization of SBIR and STTR projects through the use of Phase III awards, facilitate the commercialization of SBIR and STTR projects through the use of Phase III awards,
including sole source awards.including sole source awards.4546
Technical Assistance
The law also allows agencies to award STTR Phase I recipients up to $6,500 per year, and Phase The law also allows agencies to award STTR Phase I recipients up to $6,500 per year, and Phase
II award recipients up to $50,000 per project, for technical and business assistance, in addition to II award recipients up to $50,000 per project, for technical and business assistance, in addition to
the amount of the base award, or to provide such assistance through an agency-selected vendor. the amount of the base award, or to provide such assistance through an agency-selected vendor.
This funding is intended to provide STTR recipients with services such as access to a network of This funding is intended to provide STTR recipients with services such as access to a network of
scientists and engineers engaged in a wide range of technologies; assistance with product sales, scientists and engineers engaged in a wide range of technologies; assistance with product sales,
intellectual property protections, market research, market validation, and development of intellectual property protections, market research, market validation, and development of
regulatory plans and manufacturing plans; or access to technical and business literature available regulatory plans and manufacturing plans; or access to technical and business literature available
through online databases. These services are provided to help STTR awardees make better through online databases. These services are provided to help STTR awardees make better
technical decisions, solve technical problems, minimize technical risks, and develop and technical decisions, solve technical problems, minimize technical risks, and develop and
commercialize new commercial products and processes.commercialize new commercial products and processes.4647
STTR Eligibility
A small business’ eligibility for the STTR program is contingent on its location, number of A small business’ eligibility for the STTR program is contingent on its location, number of
employees, ownership characteristics, and other factors. The partnering research institution must employees, ownership characteristics, and other factors. The partnering research institution must
meet eligibility qualifications as well. Eligibility to participate in the STTR program is limited to meet eligibility qualifications as well. Eligibility to participate in the STTR program is limited to
for-profit U.S. businesses with a location in the United States. Eligible companies must have 500 for-profit U.S. businesses with a location in the United States. Eligible companies must have 500
or fewer employees, including employees of affiliates. or fewer employees, including employees of affiliates.
The small business must be The small business must be
(1) more than 50% directly owned and controlled by one or more citizens or permanent (1) more than 50% directly owned and controlled by one or more citizens or permanent
resident aliens of the United States, other small business concerns (each of which is more resident aliens of the United States, other small business concerns (each of which is more
than 50% directly owned and controlled by individuals who are citizens or permanent than 50% directly owned and controlled by individuals who are citizens or permanent
resident aliens of the United States), an Indian tribe, Alaskan Native Corporation (ANC), or resident aliens of the United States), an Indian tribe, Alaskan Native Corporation (ANC), or
Native Hawaiian Organization (NHO), a wholly owned business entity of such tribe, ANC, or Native Hawaiian Organization (NHO), a wholly owned business entity of such tribe, ANC, or
NHO, or any combination of these; or NHO, or any combination of these; or
(2) a joint venture in which each entity to the joint venture meets the requirements in (2) a joint venture in which each entity to the joint venture meets the requirements in
paragraph (1) above.paragraph (1) above.4748
Unlike the SBIR program, the STTR program does not have authority to make awards to small Unlike the SBIR program, the STTR program does not have authority to make awards to small
businesses that are more than 50% owned by multiple venture capital (VC) operating companies, businesses that are more than 50% owned by multiple venture capital (VC) operating companies,
46 15 U.S.C. §638(r)(4). 47 Ibid. §638(q)(1). 48 13 C.F.R. §121.702. Congressional Research Service 15 link to page 21 link to page 6 Small Business Research Programs: SBIR and STTR hedge funds, private equity firms, or any combination of these. However, as with SBIR, the hedge funds, private equity firms, or any combination of these. However, as with SBIR, the
STTR program may make awards to companies that are majority-venture capital backed if the VC STTR program may make awards to companies that are majority-venture capital backed if the VC
firm is itself more than 50% directly owned and controlled by one or more individuals who are firm is itself more than 50% directly owned and controlled by one or more individuals who are
citizens or permanent resident aliens of the United States. In such a case, that VC is allowed to citizens or permanent resident aliens of the United States. In such a case, that VC is allowed to

~~45 15 U.S.C. §638(r)(4).~~
~~46 Ibid. §638(q)(1).~~
~~47 13 C.F.R. §121.702.~~
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have majority ownership and control of the awardee; however, the VC and the awardee, and all have majority ownership and control of the awardee; however, the VC and the awardee, and all
other affiliates, must have a total of 500 employees or less.other affiliates, must have a total of 500 employees or less.4849
In addition, small businesses that have received multiple prior SBIR/STTR awards must meet In addition, small businesses that have received multiple prior SBIR/STTR awards must meet
certain benchmark requirements for progress toward commercialization to be eligible for a new certain benchmark requirements for progress toward commercialization to be eligible for a new
Phase I award. For both Phase I and Phase II, the principal investigator’s primary employment Phase I award. For both Phase I and Phase II, the principal investigator’s primary employment
must be with either the small business or the partnering research institution at the time of award must be with either the small business or the partnering research institution at the time of award
and during the conduct of the proposed project. Generally, R/R&D work under the STTR must be and during the conduct of the proposed project. Generally, R/R&D work under the STTR must be
performed in the United States, though agencies may allow a portion of the work to be performed performed in the United States, though agencies may allow a portion of the work to be performed
or obtained outside of the United States under “rare and unique” circumstances.or obtained outside of the United States under “rare and unique” circumstances.4950
The partnering research institution must be located in the United States, and be either a nonprofit The partnering research institution must be located in the United States, and be either a nonprofit
college or university, a domestic nonprofit research organization,college or university, a domestic nonprofit research organization,5051 or a federally funded research or a federally funded research
and development center (FFRDC).and development center (FFRDC).5152
For both Phase I and Phase II, not less than 40% of the R/R&D work must be performed by the For both Phase I and Phase II, not less than 40% of the R/R&D work must be performed by the
small business, and not less than 30% of the R/R&D work must be performed by the single, small business, and not less than 30% of the R/R&D work must be performed by the single,
partnering research institution. Agencies may choose whether to determine these percentages partnering research institution. Agencies may choose whether to determine these percentages
using either contract dollars or labor hours, but must explain this in the solicitation.using either contract dollars or labor hours, but must explain this in the solicitation.5253
Recent and Historical STTR Awards ~~Data53~~
~~In FY2018~~Data54 In FY2019, the most recent year for which the SBA has published annual report data on STTR , the most recent year for which the SBA has published annual report data on STTR
awards, agencies made awards for $awards, agencies made awards for $~~381.7~~423.3 million, including million, including ~~568~~670 Phase I STTR awards totaling Phase I STTR awards totaling
$$~~121.6~~132.3 million and million and ~~224~~244 Phase II STTR awards totaling $ Phase II STTR awards totaling $~~260~~291.1 million. The success rate was .1 million. The success rate was 1923% %
for Phase I STTR proposers and for Phase I STTR proposers and 4773% for Phase II proposers. While % for Phase II proposers. While 7273% of STTR grants made in % of STTR grants made in
~~FY2018~~FY2019 were for Phase I awards, more than 68% of STTR funding went to Phase II awards. were for Phase I awards, more than 68% of STTR funding went to Phase II awards.
Figure 7 shows Phase I and Phase II STTR funding for FY2000-shows Phase I and Phase II STTR funding for FY2000-~~2018~~2019. In FY2004, the minimum . In FY2004, the minimum
percentage that participating agencies were required to set aside for the STTR program doubled percentage that participating agencies were required to set aside for the STTR program doubled
~~from 0.15% to 0.30%. The STTR set-aside remained at 0.30% through FY2011. In the first year~~
~~the set-aside doubled (FY2004), total funding for STTR approximately doubled. However, from~~
~~FY2004 to FY2011, Phase I aggregate funding fell by about 25% while Phase II aggregate~~
~~funding increased by about 74%. From FY2012 to FY2016 the STTR set-aside increased in steps~~

48 49 SBIR/STTR website, “Frequently Asked Questions—VC Participation,” accessed April 27, 2020, at http://sbir.gov/ SBIR/STTR website, “Frequently Asked Questions—VC Participation,” accessed April 27, 2020, at http://sbir.gov/
faq/vc-participation. faq/vc-participation.
4950 SBA, SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Program Policy
Directive, May 2, 2019, p. 85. , May 2, 2019, p. 85.
5051 As defined in 15 U.S.C. §3703(3) a nonprofit institution is “an organization owned and operated exclusively for As defined in 15 U.S.C. §3703(3) a nonprofit institution is “an organization owned and operated exclusively for
scientific or educational purposes, no part of the net earnings of which inures to the benefit of any private shareholder scientific or educational purposes, no part of the net earnings of which inures to the benefit of any private shareholder
or individual.” or individual.”
5152 Chapter 35 of the Federal Acquisition Regulation provides the following explanation and purposes of FFRDCs: Chapter 35 of the Federal Acquisition Regulation provides the following explanation and purposes of FFRDCs:
An FFRDC meets some special long-term research or development need which cannot be met as An FFRDC meets some special long-term research or development need which cannot be met as
effectively by existing in-house or contractor resources. FFRDC’s enable agencies to use private effectively by existing in-house or contractor resources. FFRDC’s enable agencies to use private
sector resources to accomplish tasks that are integral to the mission and operation of the sponsoring sector resources to accomplish tasks that are integral to the mission and operation of the sponsoring
agency.... FFRDC’s are operated, managed, and/or administered by either a university or agency.... FFRDC’s are operated, managed, and/or administered by either a university or
consortium of universities, other not-for-profit or nonprofit organization, or an industrial firm, as an consortium of universities, other not-for-profit or nonprofit organization, or an industrial firm, as an
autonomous organization or as an identifiable separate operating unit of a parent organization. autonomous organization or as an identifiable separate operating unit of a parent organization.
A list of FFRDCs is maintained by the National Science Foundation (NSF). See NSF, “Master Government List of A list of FFRDCs is maintained by the National Science Foundation (NSF). See NSF, “Master Government List of
Federally Funded R&D Centers,” accessed April 27, 2020, at http://www.nsf.gov/statistics/ffrdclist/. Federally Funded R&D Centers,” accessed April 27, 2020, at http://www.nsf.gov/statistics/ffrdclist/.
5253 SBA, SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Program Policy
Directive, May 2, 2019, pp. 83-84. , May 2, 2019, pp. 83-84.
5354 See See “Data Sources and Limitations,” above. ” above.
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from 0. from 0.15% to 0.30%. The STTR set-aside remained at 0.30% through FY2011. In the first year the set-aside doubled (FY2004), total funding for STTR approximately doubled. However, from FY2004 to FY2011, Phase I aggregate funding fell by about 25% while Phase II aggregate funding increased by about 74%. From FY2012 to FY2016 the STTR set-aside increased in steps from 0.30% to 0.45% (to 0.35% in FY2012, to 0.40% in FY2014, and to 0.45% in FY2016). 30% to 0.45% (to 0.35% in FY2012, to 0.40% in FY2014, and to 0.45% in FY2016).
Between FY2012 and Between FY2012 and ~~FY2018~~FY2019 total funding for STTR increased by total funding for STTR increased by 6785%. Aggregate funding for %. Aggregate funding for
Phase I increased by Phase I increased by 7287% while aggregate funding for Phase II increased by % while aggregate funding for Phase II increased by 6585% over the same % over the same
time period. time period.
Figure 7. STTR Phase I and Phase II Funding, FY2000-~~FY2018~~FY2019

Sources: CRS analysis of data. Data for FY2000-FY2008 from SBA, CRS analysis of data. Data for FY2000-FY2008 from SBA, Small Business Technology Transfer Program
(STTR) Annual Report for each fiscal year; data for FY2009-FY2011 from SBA, for each fiscal year; data for FY2009-FY2011 from SBA, The Small Business Innovation
Research (SBIR) and Small Business Technology Transfer (STTR) Program Annual Report Fiscal Year 2009-2011; data for ; data for
FY2012-FY2012-~~FY2018~~FY2019 from SBA, from SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR)
Programs Annual Report for each fiscal year. Annual reports available at https://www.sbir.gov/annual-reports-files. for each fiscal year. Annual reports available at https://www.sbir.gov/annual-reports-files.
Notes: Source tables are not consistently labeled from year to year. Source tables are not consistently labeled from year to year.
Like SBIR funding, STTR funding was highly concentrated during this period. Two agencies— Like SBIR funding, STTR funding was highly concentrated during this period. Two agencies—
DOD ($DOD ($~~175.4~~207.6 million, million, 4649%) and HHS ($%) and HHS ($~~131.8~~144.5 million, 34%)—accounted for million, 34%)—accounted for more than four-fifths of STTR four-fifths of STTR
funding in funding in ~~FY2018~~FY2019. DOE accounted for 8%, NASA for . DOE accounted for 8%, NASA for 65%, and NSF for %, and NSF for 54%. See%. See Figure 8.
Figure 8. STTR Funding by Agency, ~~FY2018~~FY2019

Source: CRS analysis of data fromCRS analysis of data from SBA, SBA, Small Business Innovation Research (SBIR) and Small Business Technology
Transfer (STTR) Program Annual Report Fiscal Year ~~2018~~,2019. Tables Tables 128 and and ~~16.~~
10. Congressional Research Service 17 link to page 22 link to page 22 link to page 23 Small Business Research Programs: SBIR and STTR The allocation of STTR funding to Phase I and Phase II awards varies among agencies. The allocation of STTR funding to Phase I and Phase II awards varies among agencies. ~~HHS~~NSF
allocated the largest share (allocated the largest share (5164%) of its STTR funding to Phase I awards in %) of its STTR funding to Phase I awards in ~~FY2018~~FY2019; DOD ; DOD
allocated the largest share (allocated the largest share (8278%) of its funding to Phase II awards. Se%) of its funding to Phase II awards. See Figure 9.
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Figure 9. Agency Allocation of STTR Funding Between Phase I and Phase II, ~~FY2018~~FY2019

Source: CRS analysis of data fromCRS analysis of data from SBA, SBA, Small Business Innovation Research (SBIR) and Small Business Technology
Transfer (STTR) Program Annual Report Fiscal Year ~~2018~~2019, Tables , Tables 128 and and 1610. .
The agencies with the highest share of total Phase I funding in The agencies with the highest share of total Phase I funding in ~~FY2018~~FY2019 were HHS ( were HHS (5544%) and %) and
DOD (DOD (2635%). The agencies with the highest share of total Phase II funding in %). The agencies with the highest share of total Phase II funding in ~~FY2018~~FY2019 were also were also
DOD (55%) and HHS (DOD (55%) and HHS (2528%). See%). See Figure 10.
Figure 10. Share of Phase I and Phase II STTR Funding, by Agency, ~~FY2018~~FY2019

Source: CRS analysis of data fromCRS analysis of data from SBA, SBA, Small Business Innovation Research (SBIR) and Small Business Technology
Transfer (STTR) Program Annual Report Fiscal Year ~~2018~~2019, Tables , Tables 128 and and 1610. .
Notes: Amounts many not sum to 100% due to rounding. Amounts many not sum to 100% due to rounding.
In In ~~FY2018~~FY2019, women-owned small businesses received , women-owned small businesses received 7584 Phase I STTR awards (13% of all Phase Phase I STTR awards (13% of all Phase
I STTR awards) totaling $I STTR awards) totaling $~~14.7~~16.9 million ( million (1213% of total Phase I funding)% of total Phase I funding), and and 3426 Phase II STTR Phase II STTR
awards (awards (1511%) totaling $%) totaling $~~37.4~~34.2 million ( million (1412%). Socially and economically disadvantaged businesses %). Socially and economically disadvantaged businesses
received received 4255 Phase I awards ( Phase I awards (78% of all Phase I STTR awards) totaling $% of all Phase I STTR awards) totaling $~~6.9~~9.2 million ( million (67% of total % of total
Phase I funding)Phase I funding), and and 2113 Phase II awards ( Phase II awards (95%) totaling $%) totaling $~~11.2~~10.8 million (4%). Companies in million (4%). Companies in
Historically Underutilized Business Zones (HUBZones) received Historically Underutilized Business Zones (HUBZones) received 3219 Phase I awards ( Phase I awards (63% of all % of all
Phase I awards) totaling $Phase I awards) totaling $~~6.4~~3.9 million ( million (53% of total Phase I funding) and % of total Phase I funding) and 1210 Phase II awards ( Phase II awards (54%) %)
totaling $totaling $~~10.1~~9.5 million ( million (43%). %).
Figure 11 shows the aggregate funding level and number of STTR awards by state for shows the aggregate funding level and number of STTR awards by state for ~~FY2014-~~
~~FY2018~~FY2015-FY2019 (the latest five-year period for which annual report award data by state are available). (the latest five-year period for which annual report award data by state are available).
STTR funding was concentrated in certain states. The three states that received the largest number STTR funding was concentrated in certain states. The three states that received the largest number
and amount of STTR awards during this period—California (and amount of STTR awards during this period—California (~~621~~603 awards totaling $ awards totaling $~~268.6 million),~~
~~Massachusetts (350 awards totaling $160.2 million), and Virginia (223 awards totaling $90.1~~
~~million)—accounted for 32~~276.7 million), Congressional Research Service 18 link to page 23 Small Business Research Programs: SBIR and STTR Massachusetts (380 awards totaling $179.4 million), and Texas (238 awards totaling $97.1 million)—accounted for 30% of the total number of STTR awards and 31% of the total funding % of the total number of STTR awards and 31% of the total funding
for this period. The top ten states—California, Massachusettsfor this period. The top ten states—California, Massachusetts, Texas, Virginia, New York, , Virginia, New York, ~~Texas,~~
Maryland, Ohio, Pennsylvania, Maryland, Ohio, Pennsylvania, ~~North Carolina, and Colorado~~Colorado, and North Carolina—accounted for —accounted for 6261% of awards and % of awards and
62% of funding. In contrast, the ten statesfunding. In contrast, the ten states and territories with the fewest awards and lowest with the fewest awards and lowest aggregate award amounts—Marshall Islands, American Samoa, North Dakota, West Virginia, Mississippi, Maine, Wyoming, Puerto Rico, Idaho, and South Dakota—accounted for less than ~~aggregate award amounts—~~
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~~Mississippi, South Dakota, Maine, Puerto Rico, Idaho, West Virginia, North Dakota, Alaska,~~
~~Vermont, and Wyoming—accounted for about~~ 1% of awards and total funding during this period. 1% of awards and total funding during this period.
Figure 11. STTR Aggregate Funding Level and Awards by State, ~~FY2014-2018~~FY2015-2019

Source: CRS analysis of data from SBA, CRS analysis of data from SBA, Small Business Innovation Research (SBIR) and Small Business Technology
Transfer (STTR) Programs Annual Report for each fiscal year (for each fiscal year (~~FY2014-FY2018~~FY2015-FY2019), “SBIR/STTR Awards by U.S. State ), “SBIR/STTR Awards by U.S. State
and Territory” Table. Annual reports available at https://www.sbir.gov/annual-reports-files. and Territory” Table. Annual reports available at https://www.sbir.gov/annual-reports-files.
Table 3 provides information on overall agency STTR obligations for provides information on overall agency STTR obligations for ~~FY2018~~FY2019, as well as the , as well as the
number and aggregate amounts of Phase I and Phase II awards. number and aggregate amounts of Phase I and Phase II awards.
Table 3. Number and Amount of STTR Awards by Agency, ~~FY2018~~FY2019
(in millions of dollars) (in millions of dollars)

Phase I
Phase II
Total
Amount
Awarded,
Total
Total
Phase I and
Number of
Amount
Number
Amount
Department/Agency
Phase IIa,ba,b
Awards
Awardedbb
of Awards
Awardedbb
Department of Defense Department of Defense
$ $~~175.4~~
~~192~~
~~$31.6~~
~~133~~
~~$143.8~~207.6 304 $46.5 139 $161.1
Department of Energy Department of Energy
$ $~~31.6~~
58
~~$9.4~~
20
~~$22.2~~
~~Dept. of Health and Human~~
~~$131.8~~
~~237~~
~~$66.8~~
37
~~$65.0~~
~~Services~~
~~Nat’l Aeronautics and Space Admin.~~
~~$24.2~~
44
~~$5.5~~
24
~~$18.7~~
~~National Science Foundation~~
~~$18.6~~
37
~~$8.3~~
10
~~$10.3~~
Total, All Agenciesa
~~$381.7~~
~~568~~
~~$121.6~~
~~224~~
~~$260.1~~
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34.9 55 $10.3 24 $24.6 Congressional Research Service 19 link to page 24 Small Business Research Programs: SBIR and STTR Phase I Phase II Total Amount Awarded, Total Total Phase I and Number of Amount Number Amount Department/Agency Phase IIa,b Awards Awardedb of Awards Awardedb Dept. of Health and Human $139.5 211 $57.8 55 $81.7 Services Nat’l Aeronautics and Space Admin. $22.9 48 $5.9 22 $17.0 National Science Foundation $18.3 52 $11.7 4 $6.7 Total, All Agenciesa $423.3 670 $132.3 244 $291.1 Source: CRS analysis of data fromCRS analysis of data from SBA, SBA, Small Business Innovation Research (SBIR) and Small Business Technology
Transfer (STTR) Program Annual Report Fiscal Year ~~2018~~2019, Tables , Tables 128 and and 1610. .
Notes:
a. Components many not sum to totals due to rounding. a. Components many not sum to totals due to rounding.
b. Amounts include obligations for new awards in b. Amounts include obligations for new awards in ~~FY2018 and FY2018~~FY2019 and FY2019 obligations on prior year awards. obligations on prior year awards.
Table 4 provides historical information on the number of Phase I and Phase II STTR awards and provides historical information on the number of Phase I and Phase II STTR awards and
total annual STTR funding from the program’s inception through total annual STTR funding from the program’s inception through ~~FY2018~~FY2019. .
Table 4. Number and Amount of STTR Awards by Year, FY1994-~~FY2018~~FY2019
Total
Number of Awards
Amounts
Awarded
Fiscal Year
(in millions)
Phase I
Phase II
Total
FY1994 FY1994
$18.9 $18.9
198 198
— —
198 198
FY1995 FY1995
$33.7 $33.7
238 238
22 22
260 260
FY1996 FY1996
$64.5 $64.5
238 238
88 88
326 326
FY1997 FY1997
$69.0 $69.0
260 260
89 89
349 349
FY1998 FY1998
$64.8 $64.8
208 208
109 109
317 317
FY1999 FY1999
$64.8 $64.8
251 251
78 78
329 329
FY2000 FY2000
$69.8 $69.8
233 233
95 95
328 328
FY2001 FY2001
$77.5 $77.5
224 224
113 113
337 337
FY2002 FY2002
$91.8 $91.8
356 356
114 114
470 470
FY2003 FY2003
$91.8 $91.8
397 397
111 111
508 508
FY2004 FY2004
$190.0 $190.0
674 674
195 195
869 869
FY2005 FY2005
$220.3 $220.3
611 611
221 221
832 832
FY2006 FY2006
$226.2 $226.2
644 644
234 234
878 878
FY2007 FY2007
$242.9 $242.9
634 634
213 213
847 847
FY2008 FY2008
$239.6 $239.6
483 483
251 251
734 734
FY2009 FY2009
$269.6 $269.6
588 588
242 242
830 830
FY2010 FY2010
$279.3 $279.3
625 625
256 256
881 881
FY2011 FY2011
$251.2 $251.2
482 482
238 238
720 720
FY2012 FY2012
$228.2 $228.2
492 492
168 168
660 660
FY2013 FY2013
$250.4 $250.4
476 476
193 193
669 669
FY2014 FY2014
$228.0 $228.0
492 492
213 213
705 705
FY2015 FY2015
$289.9 $289.9
553 553
173 173
726 726 Congressional Research Service 20 Small Business Research Programs: SBIR and STTR
FY2016 FY2016
$308.3 $308.3
595 595
200 200
795 795
FY2017 FY2017
$365.3 $365.3
613 613
234 234
847 847
FY2018 FY2018
$381.7 $381.7
568 568
224 224
792 792
FY2019 $423.3 670 244 914 Sources: Data for FY1994-FY2008 from SBA, Small Business Technology Transfer Program (STTR) Annual Data for FY1994-FY2008 from SBA, Small Business Technology Transfer Program (STTR) Annual
Report for each fiscal year; data for FY2009-FY2011 from SBA, The Small Business Innovation Research (SBIR) Report for each fiscal year; data for FY2009-FY2011 from SBA, The Small Business Innovation Research (SBIR)
and Small Business Technology Transfer (STTR) Program Annual Report Fiscal Year 2009-2011; data for FY2012-and Small Business Technology Transfer (STTR) Program Annual Report Fiscal Year 2009-2011; data for FY2012-
~~FY2018~~FY2019 from SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) from SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR)
Programs Annual Report for each fiscal year. Annual reports available at https://www.sbir.gov/annual-reports-Programs Annual Report for each fiscal year. Annual reports available at https://www.sbir.gov/annual-reports-
files. files.
Note: Source tables are not consistently labeled from year to year. Source tables are not consistently labeled from year to year.
Issues for Consideration Since establishing the SBIR and STTR programs, Congress has sought to better understand and address challenges to the programs’ effectiveness. The following section provides an overview of selected ongoing issues that Congress may consider. Research Security Many in Congress are concerned about the security of the U.S. R&D enterprise. Such concerns extend to federally funded R&D performed by small businesses, including through the SBIR and STTR programs. U.S. law enforcement and counterintelligence agencies have highlighted the efforts of foreign countries, including the People’s Republic of China, Russia, and Iran, to acquire U.S. research and technology through both licit and illicit means, including R&D considered important for economic competitiveness.55 Such means include the use of espionage, intellectual property theft, direct and indirect investment and financial subsidies, corporate acquisitions, forced technology transfer, and talent recruitment to gain access to U.S. R&D outputs. In general, research security policies that address small businesses have focused on increasing disclosure requirements to identify potential conflicts of interest and conflicts of commitment associated with those performing federally funded R&D.56 The SBIR and STTR Extension Act of 2022 (P.L. 117-183) requires each federal agency participating in the SBIR and STTR programs to develop and implement a due diligence program to assess the potential security risks of small businesses seeking an award. Small businesses applying for an SBIR or STTR award are required to disclose, among other things, whether the small business has any contractual or financial obligations with an entity in a foreign country of concern (e.g., China); has an owner or covered individual—an individual who contributes substantially to the scientific development or execution of the proposed R&D project—who participates in a talent recruitment program associated with a foreign country of concern; or has entered into any technology licensing agreements with an entity in foreign country of concern. Per P.L. 117-183, federal agencies participating in the SBIR and STTR programs are prohibited from making awards to small businesses that have an owner or covered individual who is 55 See for example, National Counterintelligence and Security Center, Protecting Critical and Emerging U.S. Technologies from Foreign Threats, October 2021, https://www.dni.gov/files/NCSC/documents/SafeguardingOurFuture/FINAL_NCSC_Emerging%20Technologies_Factsheet_10_22_2021.pdf. 56 See for example, National Science and Technology Council, Guidance for Implementing Presidential National Security Memorandum 33 (NPSM-33) on National Security Strategy for Government-Supported Research and Development, Executive Office of the President, January 2022, https://www.whitehouse.gov/wp-content/uploads/2022/01/010422-NSPM-33-Implementation-Guidance.pdf. Congressional Research Service 21~~Congressional Research Service~~

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~~Issues for Consideration~~
~~Since establishing the SBIR and STTR programs, Congress has sought to better understand and~~
~~address challenges to the programs’ effectiveness. The following section provides an overview of~~
~~selected ongoing issues that Congress may consider.~~
participating in a talent recruitment program associated with a foreign country of concern; has an affiliation with a research institution in a foreign country of concern; or has a business entity located in a foreign country of concern; and whose disclosed relationships and commitments present concerns about conflicts of interest or pose a risk to national security, among other factors. P.L. 117-183 also provides federal agencies participating in the SBIR and STTR programs with the authority to recover program funds if a small business has made a material misstatement in its application for an award or if the federal agency determines that a change in ownership or structure of the small business poses a national security risk. In addition, the law requires DOD, DOE, HHS, and NSF to submit a report to Congress assessing the potential for adversarial military and foreign influences in the agencies’ SBIR and STTR programs. Small businesses applying for awards under the SBIR and STTR programs will also be subject to additional government-wide and agency-specific research security provisions and requirements. For example, Section 223 of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021 (P.L. 116-283) requires the disclosure of the source of all current and pending research support received by, or expected to be received by covered individuals listed on an application for a federal R&D award. In addition, Section 10634 of the CHIPS and Science Act (P.L. 117-167) requires that covered individuals receive research security training within one year of applying for a federal R&D award and Section 10114 requires DOE’s Office of Science “to develop and maintain tools and processes to manage and mitigate research security risks” and to deploy a risk-based approach to evaluating and awarding R&D activities. Congress might consider how any potential overlap and/or differences in research security policies and requirements will be mitigated or coordinated to limit the potential reporting burden on small businesses. While P.L. 117-183 requires GAO to conduct a study on the best practices and due diligence programs required under the law, Congress might consider an examination of all research security policies small businesses are required to compile with and how the effectiveness of such policies is determined. Eligibility of Venture Capital-Backed Small Businesses
Much of the debate over the reauthorization of the SBIR and STTR programs in 2011 revolved Much of the debate over the reauthorization of the SBIR and STTR programs in 2011 revolved
around a regulation that required at least 51% ownership by an individual or individuals to be around a regulation that required at least 51% ownership by an individual or individuals to be
eligible for participation in the programs.eligible for participation in the programs.5457 Some experts argued that participation by small firms Some experts argued that participation by small firms
that are majority-owned by venture capital companies, hedge funds, and private equity firms that are majority-owned by venture capital companies, hedge funds, and private equity firms
should be permitted. Proponents of this change maintained that, particularly in the biotechnology should be permitted. Proponents of this change maintained that, particularly in the biotechnology
sector, the most innovative companies were not able to use the SBIR program because they did sector, the most innovative companies were not able to use the SBIR program because they did
not meet these ownership criteria. Opponents of altering the eligibility requirements argued that not meet these ownership criteria. Opponents of altering the eligibility requirements argued that
the program is designed to provide financial assistance where venture capital is not available. the program is designed to provide financial assistance where venture capital is not available.
They asserted that the program’s objective is to bring new concepts to the point where private They asserted that the program’s objective is to bring new concepts to the point where private
sector investment is feasible. sector investment is feasible.
The SBIR/STTR Reauthorization Act of 2011 (enacted as Division E of the National Defense The SBIR/STTR Reauthorization Act of 2011 (enacted as Division E of the National Defense
Authorization Act for Fiscal Year 2012, P.L. 112-81) authorized NIH, DOE, and NSF to award up Authorization Act for Fiscal Year 2012, P.L. 112-81) authorized NIH, DOE, and NSF to award up
to 25% of their SBIR funds to small firms that are majority-owned by venture capital (VC) to 25% of their SBIR funds to small firms that are majority-owned by venture capital (VC)
companies, hedge funds, or private equity firms. The law also authorized all other SBIR companies, hedge funds, or private equity firms. The law also authorized all other SBIR
participating agencies to award up to 15% of their SBIR funds to such small firms. Prior to the participating agencies to award up to 15% of their SBIR funds to such small firms. Prior to the
57 In 2003, an SBA administrative judge ruled that the term “individuals” means only natural persons and does not include venture capital funds, pension funds, and corporate entities for purposes of an SBIR award, see National Research Council, Venture Funding and the NIH SBIR Program, Washington, DC, 2009, Appendix F, “SBA Administrative Ruling on Appeal of Cognetix, Inc,,” p. 95. Congressional Research Service 22 Small Business Research Programs: SBIR and STTR use of this authority, an agency must submit a written determination to SBA and Congress that use of this authority, an agency must submit a written determination to SBA and Congress that
explains how including such firms in the SBIR program will explains how including such firms in the SBIR program will
 induce additional venture capital, hedge fund, or private equity firm funding of  induce additional venture capital, hedge fund, or private equity firm funding of
small business innovations; small business innovations;
 substantially contribute to the mission of the federal agency;  substantially contribute to the mission of the federal agency;
 demonstrate a need for public research; and  demonstrate a need for public research; and
 otherwise fulfill the capital needs of small business concerns for additional  otherwise fulfill the capital needs of small business concerns for additional
financing for SBIR projects. financing for SBIR projects.5558
P.L. 112-81 also required the U.S. Government Accountability Office (GAO) to conduct a study P.L. 112-81 also required the U.S. Government Accountability Office (GAO) to conduct a study
every three years on the impact of allowing small firms majority-owned by venture capital every three years on the impact of allowing small firms majority-owned by venture capital
companies, hedge funds, and private equity firms to participate in the SBIR program.companies, hedge funds, and private equity firms to participate in the SBIR program.5659 In 2021, In 2021,
GAO released its most recent report examining federal agencies’ use of the authority.GAO released its most recent report examining federal agencies’ use of the authority.5760 GAO GAO
found that four agencies—NIH, ED, DOE’s Advanced Research Projects Agency-Energy (ARPA-found that four agencies—NIH, ED, DOE’s Advanced Research Projects Agency-Energy (ARPA-
E), and DOD—submitted written determinations to SBA for the use of the authority between E), and DOD—submitted written determinations to SBA for the use of the authority between
FY2015 and FY2020; only NIH, ED, and DOD actually made awards using the authority during FY2015 and FY2020; only NIH, ED, and DOD actually made awards using the authority during

~~54 In 2003, an SBA administrative judge ruled that the term “individuals” means only natural persons and does not~~
~~include venture capital funds, pension funds, and corporate entities for purposes of an SBIR award, see National~~
~~Research Council, Venture Funding and the NIH SBIR Program, Washington, DC, 2009, Appendix F, “SBA~~
~~Administrative Ruling on Appeal of Cognetix, Inc,,” p. 95.~~
~~55 15 U.S.C. §638(dd).~~
~~56 Ibid. §638a.~~
~~57 GAO, Small Business Innovation Research: Three Agencies Made Awards to Businesses Majority-Owned by~~
~~Investment Companies and Funds, GAO-21-223R, January 29, 2021, https://www.gao.gov/assets/gao-21-223r.pdf.~~
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~~the FY2019 and FY2020 period under review.58~~the FY2019 and FY2020 period under review.61 According to GAO, NIH—the only agency to use According to GAO, NIH—the only agency to use
the authority with any regularity—made 43 awards totaling over $30.5 million, ED made one the authority with any regularity—made 43 awards totaling over $30.5 million, ED made one
award for $899,072, and DOD made one award for $149,900. GAO indicated that agencies use award for $899,072, and DOD made one award for $149,900. GAO indicated that agencies use
the authority provided by P.L. 112-81 for a variety of reasons, including “they believe that it helps the authority provided by P.L. 112-81 for a variety of reasons, including “they believe that it helps
deploy the strongest innovations, fills potential gaps in private sector investment, or are interested deploy the strongest innovations, fills potential gaps in private sector investment, or are interested
in ideas regardless of the source.”in ideas regardless of the source.”5962 In contrast, as previously reported by GAO, federal agencies In contrast, as previously reported by GAO, federal agencies
with SBIR programs that decided not to use the authority provided for by P.L. 112-81 cite the with SBIR programs that decided not to use the authority provided for by P.L. 112-81 cite the
following reasons: following reasons:
 the level of interest by small firms majority-owned by venture capital companies,  the level of interest by small firms majority-owned by venture capital companies,
hedge funds, and private equity firms was unknown or anticipated to be small; hedge funds, and private equity firms was unknown or anticipated to be small;
 the agency believed that small firms majority-owned by venture capital  the agency believed that small firms majority-owned by venture capital
companies, hedge funds, and private equity firms were not in need of SBIR companies, hedge funds, and private equity firms were not in need of SBIR
funds; funds;
 the agency’s SBIR program was focused on early-stage research and small firms  the agency’s SBIR program was focused on early-stage research and small firms
majority-owned by venture capital companies, hedge funds, and private equity majority-owned by venture capital companies, hedge funds, and private equity
firms focus on later stage R&D; firms focus on later stage R&D;
 given limited funding, the agency had an adequate number of qualified SBIR  given limited funding, the agency had an adequate number of qualified SBIR
applicants without expansion of the program to small firms majority-owned by applicants without expansion of the program to small firms majority-owned by
venture capital companies, hedge funds, and private equity firms; and venture capital companies, hedge funds, and private equity firms; and
 the agency desired more information on the use of the authority by other  the agency desired more information on the use of the authority by other
agencies. agencies.6063 58 15 U.S.C. §638(dd). 59 Ibid. §638a. 60 GAO, Small Business Innovation Research: Three Agencies Made Awards to Businesses Majority-Owned by Investment Companies and Funds, GAO-21-223R, January 29, 2021, https://www.gao.gov/assets/gao-21-223r.pdf. 61 Ibid. 62 Ibid., p. 9. 63 GAO, Small Business Innovation Research: Few Agencies Made Awards to Small Businesses Majority-Owned by Multiple Venture Capital Operating Companies, Hedge Funds, or Private Equity Firms, GAO-19-205R, December 21, Congressional Research Service 23 Small Business Research Programs: SBIR and STTR
Additionally, GAO found that some federal agencies viewed the required written determination as Additionally, GAO found that some federal agencies viewed the required written determination as
“potentially stringent,” necessitating rigorous analysis and evidence to support the use of the “potentially stringent,” necessitating rigorous analysis and evidence to support the use of the
authority.authority.6164 However, according to GAO, SBA officials do not approve or deny a written However, according to GAO, SBA officials do not approve or deny a written
determination and instead view it as “a notification letter, serving to inform SBA and Congress of determination and instead view it as “a notification letter, serving to inform SBA and Congress of
the agency’s plans.”the agency’s plans.”6265
The National Defense Authorization Act for Fiscal Year 2020 (P.L. 116-92) included a provision The National Defense Authorization Act for Fiscal Year 2020 (P.L. 116-92) included a provision
establishing a pilot program under DOD’s SBIR program that would allow DOD to allocate up to establishing a pilot program under DOD’s SBIR program that would allow DOD to allocate up to
10% of its SBIR funding in a given fiscal year to small firms majority-owned by venture capital 10% of its SBIR funding in a given fiscal year to small firms majority-owned by venture capital
companies, hedge funds, and private equity firms without making a written determination to SBA companies, hedge funds, and private equity firms without making a written determination to SBA
or Congress. P.L. 116-92, however, limits the pilot program to entirely domestic majority-owned or Congress. P.L. 116-92, however, limits the pilot program to entirely domestic majority-owned
small firms or those that meet certain requirements related to foreign ownership.small firms or those that meet certain requirements related to foreign ownership.

~~58 Ibid.~~
~~59 Ibid., p. 9.~~
~~60 GAO, Small Business Innovation Research: Few Agencies Made Awards to Small Businesses Majority-Owned by~~
~~Multiple Venture Capital Operating Companies, Hedge Funds, or Private Equity Firms, GAO-19-205R, December 21,~~
~~2018, at https://www.gao.gov/products/GAO-19-205R.~~
~~61 GAO, Small Business Innovation Research: Change in Program Eligibility Has Had Little Impact, GAO-15-68,~~
~~November 20, 2014, pp. 16-18.~~
~~62 Ibid., p. 16.~~
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The authority for the pilot program expired on September 30, 2022. Congressionally Mandated Studies by National Academies of Sciences,
Engineering, and Medicine
Over 20 years, the National Academies of Sciences, Engineering, and Medicine has issued 19 consensus studies Over 20 years, the National Academies of Sciences, Engineering, and Medicine has issued 19 consensus studies
assessing the SBIR and STTR programs of the five largest agencies with such programs—DOD, NIH, DOE, NSF, assessing the SBIR and STTR programs of the five largest agencies with such programs—DOD, NIH, DOE, NSF,
and NASA—in addition to examining the overall effectiveness of the SBIR and STTR programs. Additionally, the and NASA—in addition to examining the overall effectiveness of the SBIR and STTR programs. Additionally, the
National Academies has issued three reports summarizing the proceedings of symposia and workshops focused on National Academies has issued three reports summarizing the proceedings of symposia and workshops focused on
the goals of the SBIR and STTR program to encourage the participation of minority and disadvantaged persons in the goals of the SBIR and STTR program to encourage the participation of minority and disadvantaged persons in
technological innovation and to foster the commercialization of federally funded R&D. technological innovation and to foster the commercialization of federally funded R&D.
P.L. 106-554 mandated that federal agencies with an SBIR program budget over $50 mil ion in FY1999 (i.e., DOD, P.L. 106-554 mandated that federal agencies with an SBIR program budget over $50 mil ion in FY1999 (i.e., DOD,
NIH, DOE, NSF, and NASA) enter into a cooperative agreement with the National Academies to NIH, DOE, NSF, and NASA) enter into a cooperative agreement with the National Academies to
 
conduct a comprehensive study of how the agency’s SBIR program has stimulated technological innovation conduct a comprehensive study of how the agency’s SBIR program has stimulated technological innovation
and used small businesses to meet federal R&D needs; and and used small businesses to meet federal R&D needs; and
 
make recommendations, as appropriate, with respect to improvements to an agency’s SBIR program. make recommendations, as appropriate, with respect to improvements to an agency’s SBIR program.
The study was directed to include a review of the quality of research being conducted under the program, an The study was directed to include a review of the quality of research being conducted under the program, an
evaluation of the economic and noneconomic benefits achieved by the SBIR program, and an analysis of whether evaluation of the economic and noneconomic benefits achieved by the SBIR program, and an analysis of whether
federal agencies, in fulfil ing their procurement needs, are making sufficient effort to use small businesses that have federal agencies, in fulfil ing their procurement needs, are making sufficient effort to use small businesses that have
completed a Phase II award, among other areas. completed a Phase II award, among other areas.
 
P.L. 112-81extended the mandate and required DOD, NIH, DOE, NSF, and NASA to enter into a P.L. 112-81extended the mandate and required DOD, NIH, DOE, NSF, and NASA to enter into a
cooperative agreement with the National Academies for an assessment of their SBIR program every four cooperative agreement with the National Academies for an assessment of their SBIR program every four
years. Additionally, P.L. 112-81 directed the National Academies to conduct a comprehensive study of how years. Additionally, P.L. 112-81 directed the National Academies to conduct a comprehensive study of how
the STTR program has stimulated technological innovation and technology transfer. the STTR program has stimulated technological innovation and technology transfer.
 
National Academies’ reports on the SBIR and STTR programs are available at https://www.nap.edu/. National Academies’ reports on the SBIR and STTR programs are available at https://www.nap.edu/.
Improving Technology Commercialization and Trade-Offs Among
Program Objectives
A statutory goal of the SBIR and STTR programs is to foster the development and A statutory goal of the SBIR and STTR programs is to foster the development and
commercialization of new technologies. Success in achieving this goal can take different forms. commercialization of new technologies. Success in achieving this goal can take different forms.
For example, a technology could meet an agency need and be procured by that agency (e.g., a For example, a technology could meet an agency need and be procured by that agency (e.g., a
specialized component or material for a NASA spacecraft), or a technology could fill a need in specialized component or material for a NASA spacecraft), or a technology could fill a need in
the commercial marketplace (e.g., a biological process for producing enzymes and specialty the commercial marketplace (e.g., a biological process for producing enzymes and specialty
chemicals, including fragrances) or both. Over the years, Congress has included a number of chemicals, including fragrances) or both. Over the years, Congress has included a number of
2018, at https://www.gao.gov/products/GAO-19-205R. 64 GAO, Small Business Innovation Research: Change in Program Eligibility Has Had Little Impact, GAO-15-68, November 20, 2014, pp. 16-18. 65 Ibid., p. 16. Congressional Research Service 24 Small Business Research Programs: SBIR and STTR provisions focused on improving commercialization. For example, P.L. 112-81 made DOD’s provisions focused on improving commercialization. For example, P.L. 112-81 made DOD’s
commercialization pilot program permanent (renaming it the Commercialization Readiness commercialization pilot program permanent (renaming it the Commercialization Readiness
Program) and P.L. 115-232 required all other agencies participating in the SBIR and STTR Program) and P.L. 115-232 required all other agencies participating in the SBIR and STTR
programs to establish a Commercialization Assistance Pilot Programprograms to establish a Commercialization Assistance Pilot Program ~~(the authority for the pilot~~
~~program expires on September 30, 2022)~~. Activities under DOD’s Commercialization Readiness . Activities under DOD’s Commercialization Readiness
Program increase connectivity between SBIR and STTR awardees, prime contractors, and DOD Program increase connectivity between SBIR and STTR awardees, prime contractors, and DOD
acquisition officials while the Commercialization Assistance Pilot programs of other agencies acquisition officials while the Commercialization Assistance Pilot programs of other agencies
provide subsequent Phase II awards to select firms. provide subsequent Phase II awards to select firms.
Some analysts have cautioned against placing too much emphasis on commercialization for Some analysts have cautioned against placing too much emphasis on commercialization for
evaluating the success of the SBIR and STTR programs. These analysts argue that evaluating the success of the SBIR and STTR programs. These analysts argue that
commercialization is only one of the four overarching SBIR/STTR program goals, so too strong commercialization is only one of the four overarching SBIR/STTR program goals, so too strong
of a focus on this one goal might diminish the emphasis on the others.of a focus on this one goal might diminish the emphasis on the others.6366 A report by the National A report by the National
Academies underscored how the SBIR/STTR program goals of stimulating innovation, meeting Academies underscored how the SBIR/STTR program goals of stimulating innovation, meeting

~~63 Testimony of David H. Finifter, Professor of Economics, Emeritus, Research Professor of Public Policy, The College~~
~~of William and Mary, in U.S. Congress, House Committee on Small Business,~~ ~~Oversight of the Small Business~~
~~Innovation Research and Small Business Technology Transfer Programs, hearings, 113th Cong., 2nd sess., May 21,~~
~~2014.~~
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federal research needs, increasing commercialization, and fostering diversity in innovation and federal research needs, increasing commercialization, and fostering diversity in innovation and
entrepreneurship “appear to be in conflict”: entrepreneurship “appear to be in conflict”:
A well-known challenge of innovation processes, however, is the gap between research A well-known challenge of innovation processes, however, is the gap between research
and commercialization. Individuals skilled at research tend to have much lower capability and commercialization. Individuals skilled at research tend to have much lower capability
for translating their research into products and then commercializing them, and vice for translating their research into products and then commercializing them, and vice
versa…. Many expressions of the program’s goals emphasize commercialization, which versa…. Many expressions of the program’s goals emphasize commercialization, which
could lead to a funding prioritization of projects that promise short-term commercialization could lead to a funding prioritization of projects that promise short-term commercialization
potential over those with potential for longer-term innovation potential…. Essentially the potential over those with potential for longer-term innovation potential…. Essentially the
program asks that agencies and awardees solve research problems, solve program asks that agencies and awardees solve research problems, solve
commercialization problems, and diversify participation at the same time as a means to commercialization problems, and diversify participation at the same time as a means to
address the overall societal mission of their agencies.address the overall societal mission of their agencies.6467
Given SBIR/STTR agencies’ wide range of missions—from general missions, such as advancing Given SBIR/STTR agencies’ wide range of missions—from general missions, such as advancing
fields of science, to more specific missions, such as providing for the national defense—some fields of science, to more specific missions, such as providing for the national defense—some
analysts have recommended that Congress continue to provide flexibility to agencies in the analysts have recommended that Congress continue to provide flexibility to agencies in the
operation of their programs.operation of their programs.6568 Other analysts have suggested that agencies should reorient their Other analysts have suggested that agencies should reorient their
SBIR and STTR programs “to focus more sharply on one of the program’s objectives: SBIR and STTR programs “to focus more sharply on one of the program’s objectives:
commercializing innovations derived from federal R&D.”commercializing innovations derived from federal R&D.”6669 Such proponents and others have Such proponents and others have
offered a number of recommendations for increasing the commercialization success of agency offered a number of recommendations for increasing the commercialization success of agency
SBIR and STTR programs, including (1) requiring agencies to increase the weight of a project’s SBIR and STTR programs, including (1) requiring agencies to increase the weight of a project’s
commercialization potential in funding decisions; (2) increasing the recruitment of peer reviewers commercialization potential in funding decisions; (2) increasing the recruitment of peer reviewers
with product and business development expertise; (3) allowing firms to use technical and with product and business development expertise; (3) allowing firms to use technical and
business assistance funds to hire in-house marketing and business expertise instead of requiring business assistance funds to hire in-house marketing and business expertise instead of requiring
assistance be provided by third party vendors; (4) centralizing management of an agency’s SBIR assistance be provided by third party vendors; (4) centralizing management of an agency’s SBIR
~~and STTR programs; and (5) increasing topic flexibility in solicitations (i.e., ensuring that~~
~~agencies include a broad or “other” category in solicitations).67~~
~~Congress might consider statutory changes that alter or clarify the priority of commercialization~~
~~relative to the other goals of the SBIR and STTR programs (i.e., stimulating innovation, meeting~~
~~federal R&D needs, and fostering diversity). Based on recent academic studies, if Congress is~~
~~concerned with driving economic growth through the SBIR and STTR programs (as opposed to~~
~~supporting small businesses generally) it might consider changes that place more emphasis on~~
~~indicators of likely success such as firm age and growth potential as part of the application~~
~~process.~~

64 66 Testimony of David H. Finifter, Professor of Economics, Emeritus, Research Professor of Public Policy, The College of William and Mary, in U.S. Congress, House Committee on Small Business, Oversight of the Small Business Innovation Research and Small Business Technology Transfer Programs, hearings, 113th Cong., 2nd sess., May 21, 2014. 67 National Academies of Sciences, Engineering, and Medicine, National Academies of Sciences, Engineering, and Medicine, Review of the SBIR and STTR Programs at the
Department of Energy, The National Academies Press, Washington, DC, 2020, pp. 19-20. , The National Academies Press, Washington, DC, 2020, pp. 19-20.
6568 Testimony of David H. Finifter, Professor of Economics, Emeritus, Research Professor of Public Policy, The College Testimony of David H. Finifter, Professor of Economics, Emeritus, Research Professor of Public Policy, The College
of William and Mary, in U.S. Congress, House Committee on Small Business, of William and Mary, in U.S. Congress, House Committee on Small Business, Oversight of the Small Business
Innovation Research and Small Business Technology Transfer Programs, hearings, 113th Cong., 2nd sess., May 21, , hearings, 113th Cong., 2nd sess., May 21,
2014. 2014.
6669 Robert Rozansky, Robert Rozansky, Becoming America’s Seed Fund: Why NSF’s SBIR Program Should Be a Model for the Rest of
Government, Information Technology and Innovation Foundation, September 26, 2019, p. 2. , Information Technology and Innovation Foundation, September 26, 2019, p. 2.
~~67 Ibid.; National Academies of Sciences, Engineering, and Medicine,~~ ~~Review of the SBIR and STTR Programs at the~~
~~Department of Energy, The National Academies Press, Washington, DC, 2020; and National Cancer Advisory Board~~
Ad Hoc Working Group on SBIR/STTR, National Cancer Advisory Board Ad Hoc Working Group Report of the
National Cancer Institute Small Business Innovation Research Program, February 5, 2019, at
~~https://deainfo.nci.nih.gov/advisory/ncab/workgroup/SBIRSTTR/FinalReport05Feb2019.pdf.~~
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Congressional Research Service 25 Small Business Research Programs: SBIR and STTR and STTR programs; and (5) encouraging or requiring the engagement of intermediary organizations in supporting the development of startups.70 P.L. 117-183 requires each DOD component to include a broad, open topic as part of its solicitation for the SBIR and STTR programs. Open topics are believed to provide flexibility—allowing a federal agency to consider a potential solution to an unidentified need or gap in the marketplace. GAO is required to assess the use of open topics across federal agencies participating in the programs and if their use affects the number of first-time applicants or awardees in the programs, the number of non-traditional small businesses participating in the programs, the timeliness of reviewing applications, and if their use results in improved commercialization outcomes. Congress might consider statutory changes that alter or clarify the priority of commercialization relative to the other goals of the SBIR and STTR programs (i.e., stimulating innovation, meeting federal R&D needs, and fostering diversity). Based on recent academic studies, if Congress is concerned with driving economic growth through the SBIR and STTR programs (as opposed to supporting small businesses generally) it might consider changes that place more emphasis on indicators of likely success such as firm age and growth potential as part of the application process.
Tracking Commercialization
Data collection has been and remains an issue for the SBIR and STTR programs according to Data collection has been and remains an issue for the SBIR and STTR programs according to
several reports. Federal agencies with SBIR and STTR programs are required to submit a variety several reports. Federal agencies with SBIR and STTR programs are required to submit a variety
of data to SBA related to each small business that applies for or receives a Phase I or Phase II of data to SBA related to each small business that applies for or receives a Phase I or Phase II
award. SBA is required to collect this data and maintain it in a database for use in evaluating the award. SBA is required to collect this data and maintain it in a database for use in evaluating the
programs. Two data elements are relevant to assessing the transition of a Phase II award to Phase programs. Two data elements are relevant to assessing the transition of a Phase II award to Phase
III (i.e., commercialization).III (i.e., commercialization).6871 At the end of each Phase II award, the recipient is required to At the end of each Phase II award, the recipient is required to
report the following: (1) data on revenue from the sale of new products or services resulting from report the following: (1) data on revenue from the sale of new products or services resulting from
R&D under the award; and (2) data on investments from any source other than the SBIR and R&D under the award; and (2) data on investments from any source other than the SBIR and
STTR programs to further the R&D conducted under the award.STTR programs to further the R&D conducted under the award.6972 Additionally, recipients are Additionally, recipients are
asked to voluntarily update the database annually for a period of five years after completion of the asked to voluntarily update the database annually for a period of five years after completion of the
Phase II award.Phase II award.7073 Furthermore, when a small business applies for a new Phase II award, the small Furthermore, when a small business applies for a new Phase II award, the small
business is required to update the database for any prior Phase II awards. According to the SBA, business is required to update the database for any prior Phase II awards. According to the SBA,
they have a web-based portal where small businesses can submit relevant Phase III data to the they have a web-based portal where small businesses can submit relevant Phase III data to the
database; however, “because SBA cannot require companies to provide this information to the database; however, “because SBA cannot require companies to provide this information to the
~~site, this data has limited use in providing meaningful information regarding commercialization~~
~~success of Phase II awards.”71~~
~~The most common metric for assessing whether a Phase II award has been commercialized or~~
~~transitioned to Phase III is the sale of products, processes, or services resulting from the award.72~~
~~In general, participating federal agencies appear to view any sales as an indication that a Phase II~~
~~award has been successfully commercialized. However, the National Academies has raised~~
~~questions on what constitutes commercial success as indicated by sales:~~
~~What is the appropriate benchmark for sales? Is it any sales whatsoever, sufficient sales to~~
~~cover the costs of awards, sales that lead to breaking even on a project, or sales that reflect~~
~~a commercial level of success and viability? The latter at least would likely be different for~~
~~each project in each company.73~~
~~In 2016, the National Academies stated the following regarding the need for new data sources to~~
~~assess the SBIR and STTR programs:~~
~~Congress often seeks evidence about the effectiveness of programs or indeed about whether~~
~~they work at all. This interest has in the past helped to drive the development of tools such~~

68 70 Ibid.; National Academies of Sciences, Engineering, and Medicine, Review of the SBIR and STTR Programs at the Department of Energy, The National Academies Press, Washington, DC, 2020; National Cancer Advisory Board Ad Hoc Working Group on SBIR/STTR, National Cancer Advisory Board Ad Hoc Working Group Report of the National Cancer Institute Small Business Innovation Research Program, February 5, 2019, at https://deainfo.nci.nih.gov/advisory/ncab/workgroup/SBIRSTTR/FinalReport05Feb2019.pdf; and National Advisory Council on Innovation and Entrepreneurship, March 4, 2016, at https://eda.gov/files/oie/nacie/meetings/20160303-SBIR-STTR-Recommendations-NACIE.pdf. 71 As described by the As described by the Policy Directive, Phase III refers to work that derives from, extends, or completes an effort made , Phase III refers to work that derives from, extends, or completes an effort made
under prior SBIR and STTR funding agreements, but is funded by sources other than the SBIR and STTR programs. under prior SBIR and STTR funding agreements, but is funded by sources other than the SBIR and STTR programs.
Phase III includes the following: (1) the commercial application of SBIR and STTR funded R&D that is financed by Phase III includes the following: (1) the commercial application of SBIR and STTR funded R&D that is financed by
nonfederal sources of capital; (2) SBIR- and STTR-derived products or services intended for use by the federal nonfederal sources of capital; (2) SBIR- and STTR-derived products or services intended for use by the federal
government, but funded by non-SBIR/STTR sources of federal funding; and (3) the continuation of R&D that has been government, but funded by non-SBIR/STTR sources of federal funding; and (3) the continuation of R&D that has been
competitively selected using peer review, funded by non-SBIR/STTR sources of federal funding. competitively selected using peer review, funded by non-SBIR/STTR sources of federal funding.
6972 15 U.S.C. §638(k)(2)(B). 15 U.S.C. §638(k)(2)(B).
7073 Ibid. §638(k)(3). Congressional Research Service 26 Small Business Research Programs: SBIR and STTR site, this data has limited use in providing meaningful information regarding commercialization success of Phase II awards.”74 The most common metric for assessing whether a Phase II award has been commercialized or transitioned to Phase III is the sale of products, processes, or services resulting from the award.75 In general, participating federal agencies appear to view any sales as an indication that a Phase II award has been successfully commercialized. However, the National Academies has raised questions on what constitutes commercial success as indicated by sales: What is the appropriate benchmark for sales? Is it any sales whatsoever, sufficient sales to cover the costs of awards, sales that lead to breaking even on a project, or sales that reflect a commercial level of success and viability? The latter at least would likely be different for each project in each company.76 In 2016, the National Academies stated the following regarding the need for new data sources to assess the SBIR and STTR programs: Congress often seeks evidence about the effectiveness of programs or indeed about whether they work at all. This interest has in the past helped to drive the development of tools such ~~Ibid. §638(k)(3).~~
~~71 Email from SBA to CRS, March 12, 2019.~~
~~72 There is some variability in the definition of sales among the studies examined. For example, the National~~
~~Academies studies define sales to include the sale of products, processes, or services resulting from a SBIR/STTR~~
~~award, in addition to revenue associated with the licensing of a technology resulting from a SBIR/STTR award.~~
~~However, studies performed on behalf of DOD define sales to include the sale of new products or services, follow-on~~
~~R&D contracts, royalties from the licensing of technologies developed under Phase II awards, sales by licensees of~~
~~Phase II technologies, and sales by spin-out companies commercializing Phase II technologies.~~
~~73 National Academies of Sciences, Engineering, and Medicine, SBIR at the Department of Defense, The National~~
~~Academies Press, Washington, DC, 2014, pp. 58-59.~~
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as the Company Commercialization Record database at DOD. However, in the long term as the Company Commercialization Record database at DOD. However, in the long term
the importance of tracking lies in its use to support program management. By carefully the importance of tracking lies in its use to support program management. By carefully
analyzing outcomes and associated program variables, program managers should be able analyzing outcomes and associated program variables, program managers should be able
to manage more successfully. We have seen significant limitations to all of the available to manage more successfully. We have seen significant limitations to all of the available
data sources.data sources.7477
Additionally, the National Academies noted that one of the primary means of collecting Additionally, the National Academies noted that one of the primary means of collecting
information—surveying firms that received SBIR and STTR awards—“involve[s] multiple information—surveying firms that received SBIR and STTR awards—“involve[s] multiple
sources of potential bias that can skew results in different directions.”sources of potential bias that can skew results in different directions.”7578 These potential biases These potential biases
include the following: (1) successful and more recently funded firms are more likely to respond; include the following: (1) successful and more recently funded firms are more likely to respond;
(2) success is self-reported; (3) failed firms are difficult to contact; (4) not all successful projects (2) success is self-reported; (3) failed firms are difficult to contact; (4) not all successful projects
are captured; (5) some firms are unwilling to fully acknowledge the SBIR and STTR contribution are captured; (5) some firms are unwilling to fully acknowledge the SBIR and STTR contribution
to project success; and (6) a lag time in commercialization.to project success; and (6) a lag time in commercialization.7679 Regarding lag time, the National Regarding lag time, the National
Academies added Academies added
Not only do outcomes lag awards by a number of years, but Not only do outcomes lag awards by a number of years, but ~~also~~ also the lag itself is highly the lag itself is highly
variable. Some companies have sales within 6 months of award conclusion; others take variable. Some companies have sales within 6 months of award conclusion; others take
decades. In addition, often the biggest impacts take many years to peak even after products decades. In addition, often the biggest impacts take many years to peak even after products
have reached markets.have reached markets.7780 74 Email from SBA to CRS, March 12, 2019. 75 There is some variability in the definition of sales among the studies examined. For example, the National Academies studies define sales to include the sale of products, processes, or services resulting from a SBIR/STTR award, in addition to revenue associated with the licensing of a technology resulting from a SBIR/STTR award. However, studies performed on behalf of DOD define sales to include the sale of new products or services, follow-on R&D contracts, royalties from the licensing of technologies developed under Phase II awards, sales by licensees of Phase II technologies, and sales by spin-out companies commercializing Phase II technologies. 76 National Academies of Sciences, Engineering, and Medicine, SBIR at the Department of Defense, The National Academies Press, Washington, DC, 2014, pp. 58-59. 77 National Academies of Sciences, Engineering, and Medicine, SBIR/STTR at the Department of Energy, The National Academies Press, Washington, DC, 2016, p. 231. 78 Ibid., p. 233. 79 Ibid., pp. 233-234. 80 Ibid., pp. 226-227. Congressional Research Service 27 Small Business Research Programs: SBIR and STTR
With these caveats about data collection, the National Academies and others have found that With these caveats about data collection, the National Academies and others have found that
about half of SBIR and STTR awards at DOD, NIH, DOE, NSF, and NASA are commercialized about half of SBIR and STTR awards at DOD, NIH, DOE, NSF, and NASA are commercialized
as measured by the generation of any sales. For example: as measured by the generation of any sales. For example:
 A 2019 study of DOD’s SBIR and STTR programs found that 58% of recipients  A 2019 study of DOD’s SBIR and STTR programs found that 58% of recipients
of DOD Phase II SBIR/STTR awards made between FY1995 and FY2012 had of DOD Phase II SBIR/STTR awards made between FY1995 and FY2012 had
been successfully commercialized by 2018. The study surveyed more than 4,400 been successfully commercialized by 2018. The study surveyed more than 4,400
companies that had received nearly 17,000 awards. The small businesses companies that had received nearly 17,000 awards. The small businesses
surveyed reported $121 billion in total combined sales.surveyed reported $121 billion in total combined sales.7881
 In 2018, the National Cancer Institute (NCI), an institute of the National  In 2018, the National Cancer Institute (NCI), an institute of the National
Institutes of Health, released a study examining outcomes associated with all Institutes of Health, released a study examining outcomes associated with all
Phase II SBIR/STTR awards made by the NCI between FY1998 and FY2010. Of Phase II SBIR/STTR awards made by the NCI between FY1998 and FY2010. Of
the 648 awards examined, 53% were commercialized as measured by the the 648 awards examined, 53% were commercialized as measured by the
generation of any sales. The small businesses surveyed reported combined total generation of any sales. The small businesses surveyed reported combined total
sales of $9.1 billion.sales of $9.1 billion.7982
 A 2016 report by the National Academies assessed outcomes associated with  A 2016 report by the National Academies assessed outcomes associated with
DOE Phase II SBIR/STTR awards made between FY2001 and FY2010. DOE Phase II SBIR/STTR awards made between FY2001 and FY2010.
According to the report, 49% of the 269 Phase II awards examined generated According to the report, 49% of the 269 Phase II awards examined generated
revenue from the sale of products or services associated with the SBIR/STTR revenue from the sale of products or services associated with the SBIR/STTR

~~74 National Academies of Sciences, Engineering, and Medicine, SBIR/STTR at the Department of Energy, The National~~
~~Academies Press, Washington, DC, 2016, p. 231.~~
~~75 Ibid., p. 233.~~
~~76 Ibid., pp. 233-234.~~
~~77 Ibid., pp. 226-227.~~
~~78 Department of Defense, National Economic Impacts from the DOD SBIR/STTR Programs 1995-2018, October,~~
~~2019.~~
~~79 National Cancer Institute, National Economic Impacts from the National Cancer Institute SBIR/STTR Program, U.S.~~
~~Department of Health and Human Services, National Institutes of Health, Bethesda, MD, 2018.~~
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award. Additionally, 78% of the 269 Phase II awards attracted additional award. Additionally, 78% of the 269 Phase II awards attracted additional
investment.investment.8083
Multiple Award Recipients and Role in Commercialization
Another topic that has received attention from Congress and others is the role of multiple award Another topic that has received attention from Congress and others is the role of multiple award
recipients (i.e., small firms that receive multiple SBIR and STTR awards) in the SBIR and STTR recipients (i.e., small firms that receive multiple SBIR and STTR awards) in the SBIR and STTR
programs. Some experts express concern that such firms depend on the SBIR and STTR programs. Some experts express concern that such firms depend on the SBIR and STTR
programs for a disproportionate share of their revenue, that they may not seek revenue outside of programs for a disproportionate share of their revenue, that they may not seek revenue outside of
the programs, and that they have a poor track record of commercialization. According to the the programs, and that they have a poor track record of commercialization. According to the
National Academies, studies examining the commercialization record of multiple award National Academies, studies examining the commercialization record of multiple award
recipients “present conflicting evidence” and do not assess the performance of these firms in recipients “present conflicting evidence” and do not assess the performance of these firms in
“important non-commercial outcomes such as procurement and basic research.”“important non-commercial outcomes such as procurement and basic research.”8184 Further, the Further, the
National Academies stated National Academies stated
Firms that win multiple awards may differ from one another in several important ways. For Firms that win multiple awards may differ from one another in several important ways. For
instance, a frequent winner that is struggling to commercialize due to the non-incremental instance, a frequent winner that is struggling to commercialize due to the non-incremental
nature of its technology is quite different from one that acquires frequent grants as part of nature of its technology is quite different from one that acquires frequent grants as part of
its business model. Second, firms may establish long SBIR/STTR track records as part of its business model. Second, firms may establish long SBIR/STTR track records as part of
a mutually symbiotic relationship with the funding agency, especially in cases in which a mutually symbiotic relationship with the funding agency, especially in cases in which
SBIR/STTR winners are uniquely equipped to meet specific procurement needs. These SBIR/STTR winners are uniquely equipped to meet specific procurement needs. These
firms develop deep relationships with their funders over years of SBIR/STTR activity firms develop deep relationships with their funders over years of SBIR/STTR activity
within a single agency. This vertical accumulation of awards within a single agency may within a single agency. This vertical accumulation of awards within a single agency may
81 Department of Defense, National Economic Impacts from the DOD SBIR/STTR Programs 1995-2018, October, 2019. 82 National Cancer Institute, National Economic Impacts from the National Cancer Institute SBIR/STTR Program, U.S. Department of Health and Human Services, National Institutes of Health, Bethesda, MD, 2018. 83 National Academies of Sciences, Engineering, and Medicine, SBIR/STTR and the Department of Energy, The National Academies Press, Washington, DC, 2016. 84 National Academies of Sciences, Engineering, and Medicine, Review of the SBIR and STTR Programs at the Department of Energy, The National Academies Press, Washington, DC, 2020, pp. 44-45. Congressional Research Service 28 Small Business Research Programs: SBIR and STTR lead firms to help expand agency capacities well beyond what a typical SBIR/STTR lead firms to help expand agency capacities well beyond what a typical SBIR/STTR
awardee can accomplish. On the other hand, more horizontally oriented firms may be awardee can accomplish. On the other hand, more horizontally oriented firms may be
searching for awards across multiple agencies to match their own specific technologies or searching for awards across multiple agencies to match their own specific technologies or
to take advantage of an established familiarity with the application process.to take advantage of an established familiarity with the application process.8285
For some who view the SBIR and STTR programs primarily as a means to stimulate economic For some who view the SBIR and STTR programs primarily as a means to stimulate economic
growth, multiple award recipients should not be the focus of the programs. Instead, such growth, multiple award recipients should not be the focus of the programs. Instead, such
advocates argue that the SBIR and STTR programs should be focused on growth-oriented small advocates argue that the SBIR and STTR programs should be focused on growth-oriented small
firms, which typically are younger firms or start-ups.firms, which typically are younger firms or start-ups.8386 According to the National Academies According to the National Academies
While the While the barriers and transactions costs facing small businesses are well understood as barriers and transactions costs facing small businesses are well understood as
justifications for government intervention, it has become clear that younger small justifications for government intervention, it has become clear that younger small
businesses are the dominant drivers of traditional metrics of economic growth businesses are the dominant drivers of traditional metrics of economic growth
(Haltiwanger, Jarmin, and Miranda, 2013). Firm age, therefore, is an important moderating (Haltiwanger, Jarmin, and Miranda, 2013). Firm age, therefore, is an important moderating
variable in assessments of any program that aims to support small firms.variable in assessments of any program that aims to support small firms.8487
In 2011, Congress responded to concerns over multiple award recipients by requiring each federal In 2011, Congress responded to concerns over multiple award recipients by requiring each federal
agency with an SBIR or STTR program to establish a system for measuring the success of a small agency with an SBIR or STTR program to establish a system for measuring the success of a small
business in commercializing its SBIR/STTR-funded research.business in commercializing its SBIR/STTR-funded research.8588 To address the requirement, SBA, in conjunction with federal agencies, created a Phase I to Phase II transition rate and a commercialization benchmark for the purpose of determining eligibility for additional SBIR and STTR awards.89 According to SBA, the Phase I to Phase II transition rate applies “only to SBIR and STTR Phase I applicants that have received more than 20 (21 or more) Phase I awards over the past 5 fiscal years, excluding the most recent year.”90 To be eligible to apply for a new Phase I award, such small businesses must have an average of one Phase II awards for every four Phase I awards received during five-year time period. ~~To address the requirement, SBA,~~

~~80 National Academies of Sciences, Engineering, and Medicine, SBIR/STTR and the Department of Energy, The~~
~~National Academies Press, Washington, DC, 2016.~~
~~81 National Academies of Sciences, Engineering, and Medicine,~~ ~~Review of the SBIR and STTR Programs at the~~
~~Department of Energy, The National Academies Press, Washington, DC, 2020, pp. 44-45.~~
~~82 Ibid.~~
~~83 Robert Rozansky,~~ ~~Becoming America’s Seed Fund: Why NSF’s SBIR Program Should Be a Model for the Rest of~~
~~Government, Information Technology and Innovation Foundation, September 26, 2019.~~
~~84 National Academies of Sciences, Engineering, and Medicine, SBIR/STTR and the Department of Energy, The~~
~~National Academies Press, Washington, DC, 2016, pp. 34-35.~~
~~85 15 U.S.C. §638(qq).~~
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~~in conjunction with federal agencies, created a commercialization benchmark for the purpose of~~
~~determining eligibility for additional SBIR and STTR awards.86~~ According to SBA, the According to SBA, the
commercialization benchmark applies to SBIR and STTR Phase I applicants that have received commercialization benchmark applies to SBIR and STTR Phase I applicants that have received
16 or more Phase II awards over the past 10 fiscal years, excluding the last two fiscal years. To be 16 or more Phase II awards over the past 10 fiscal years, excluding the last two fiscal years. To be
eligible for a new Phase I award, such small businesses are required to have achieved a minimum eligible for a new Phase I award, such small businesses are required to have achieved a minimum
level of commercialization activity resulting from work performed under their past Phase II level of commercialization activity resulting from work performed under their past Phase II
awards. Specifically, the small business “must have received, to date, an average of at least awards. Specifically, the small business “must have received, to date, an average of at least
$100,000 of sales and/or investments per Phase II award received, or have received a number of $100,000 of sales and/or investments per Phase II award received, or have received a number of
patents resulting from the SBIR work equal to or greater than 15% of the number of Phase II patents resulting from the SBIR work equal to or greater than 15% of the number of Phase II
awards received [by the company] during the period.”awards received [by the company] during the period.”8791 However, according to GAO, “SBA and However, according to GAO, “SBA and
the participating agencies have assessed small businesses against the Commercialization the participating agencies have assessed small businesses against the Commercialization
Benchmark only once, in 2014, because of challenges in collecting and verifying the accuracy of Benchmark only once, in 2014, because of challenges in collecting and verifying the accuracy of
data.”data.”8892 GAO recommended that SBA work with participating agencies 85 Ibid. 86 Robert Rozansky, Becoming America’s Seed Fund: Why NSF’s SBIR Program Should Be a Model for the Rest of Government, Information Technology and Innovation Foundation, September 26, 2019. 87 National Academies of Sciences, Engineering, and Medicine, SBIR/STTR and the Department of Energy, The National Academies Press, Washington, DC, 2016, pp. 34-35. 88 15 U.S.C. §638(qq). 89 SBA, “Small Business Innovation Research and Small Business Technology Transfer Programs Commercialization Benchmark,” 78 Federal Register 48537-48538, August 8, 2013, and “Performance Benchmark Requirements” at https://www.sbir.gov/performance-benchmarks. 90 Ibid. 91 Ibid. 92 GAO, Small Business Research Programs: Agencies Need to Take Steps to Assess Progress Toward Congressional Research Service 29 Small Business Research Programs: SBIR and STTR ~~GAO recommended that SBA work with participating agencies~~ to (1) to improve the to (1) to improve the
reliability of its SBIR and STTR award data; and (2) implement the Commercialization reliability of its SBIR and STTR award data; and (2) implement the Commercialization
Benchmark or, if that is not feasible, revise the benchmark so that it can be implemented.Benchmark or, if that is not feasible, revise the benchmark so that it can be implemented.89
93 According to the SBIR and STTR program website, “As of April of 2021, SBA is enforcing the According to the SBIR and STTR program website, “As of April of 2021, SBA is enforcing the
Commercialization Benchmark and is compiling a list of companies that will be deemed Commercialization Benchmark and is compiling a list of companies that will be deemed
ineligible to submit a proposal for a new Phase I (or Direct-to-Phase II) award due to failure to ineligible to submit a proposal for a new Phase I (or Direct-to-Phase II) award due to failure to
meet the Commercialization Benchmark requirement.”meet the Commercialization Benchmark requirement.”9094 It remains unclear, however, if concerns It remains unclear, however, if concerns
~~about the reliability and quality of SBIR and STTR award data has been resolved.~~
about the reliability and quality of SBIR and STTR award data has been resolved. In 2022, as part of P.L. 117-183, Congress required the implementation of increased performance standards for “experienced firms.” Specifically, a small business that has received more than 50 Phase I awards over the past five fiscal years, excluding the most recent year, must meet a Phase I to Phase II transition rate that is double the current rate (i.e., the small business must have an average of at least two Phase II awards for every four Phase I awards received during the covered period). Under P.L. 117-183, a small business that has received 50 or more Phase II awards over the past 10 fiscal years, excluding the last two fiscal years, must reach a Commercialization Benchmark of an average of $250,000 of sales and/or investments per Phase II award received during the covered period. A small business that has received more than 100 Phase II awards must have an average of $450,000 in sales and/or investments per Phase II award received during the covered period. This represents a 150% and 350% increase in the current Commercialization Benchmark, respectively. Small businesses subject to the higher Commercialization Benchmark are required to provide SBA with supporting documentation that can be used to verify aggregate sales claimed. If a small business does not meet the increased Phase I to Phase II transition rate or the increased Commercialization Benchmark, then the small business is limited to 20 new Phase I and Direct-to-Phase II awards at each federal agency participating in the SBIR and STTR programs in the following year. It remains, unclear, however, to what degree the increased performance standards will limit the participation of multiple award recipients in the programs. In addition, SBA, at the request of a senior official from a participating federal agency, has the authority to issue a waiver for a topic that is considered “critical to the mission of the Federal agency or relates to national security.” The increased performance standards will expire on September 30, 2025. Fostering Diversity in Technological Innovation
Another statutory goal of the SBIR and STTR program is to foster and encourage the Another statutory goal of the SBIR and STTR program is to foster and encourage the
participation of minority and disadvantaged persons in technological innovation. Assessments of participation of minority and disadvantaged persons in technological innovation. Assessments of
agency SBIR and STTR programs by the National Academies and others have consistently found agency SBIR and STTR programs by the National Academies and others have consistently found
that federal agencies are not effectively increasing the number of women-owned or minority-that federal agencies are not effectively increasing the number of women-owned or minority-
owned small businesses applying for the SBIR or STTR programs and that women-owned or owned small businesses applying for the SBIR or STTR programs and that women-owned or
minority-owned small businesses that have applied, in general, have been less successful in the minority-owned small businesses that have applied, in general, have been less successful in the
application process.application process.9195 Some Members of Congress have also been concerned about the Some Members of Congress have also been concerned about the
geographic diversity of small businesses participating in the programs (i.e., ten states received the geographic diversity of small businesses participating in the programs (i.e., ten states received the
majority of SBIR and STTR awards and funding). Congressional efforts have focused primarily majority of SBIR and STTR awards and funding). Congressional efforts have focused primarily
on increasing outreach efforts associated with the SBIR and STTR programs. For example, the on increasing outreach efforts associated with the SBIR and STTR programs. For example, the
~~Federal and State Technology (FAST) Partnership Program provides outreach, financial support,~~
~~and technical assistance to small businesses with a “particular emphasis on helping women,~~

~~86 SBA, “Small Business Innovation Research and Small Business Technology Transfer Programs Commercialization~~
~~Benchmark,” 78 Federal Register 48537-48538, August 8, 2013, and “Performance Benchmark Requirements for~~
~~Phase I,” at https://www.sbir.gov/performance-benchmarks.~~
~~87 Ibid.~~
~~88 GAO,~~ ~~Small Business Research Programs: Agencies Need to Take Steps to Assess Progress Toward~~
Commercializing Technologies, GAO-18-207, January 31, 2018, p. 7. , GAO-18-207, January 31, 2018, p. 7.
8993 Ibid, p. 15. Ibid, p. 15.
9094 SBA, “Performance Benchmark Requirements for Phase I,” https://www.sbir.gov/performance-benchmarks. SBA, “Performance Benchmark Requirements for Phase I,” https://www.sbir.gov/performance-benchmarks.
9195 For example, see National Academies of Sciences, Engineering, and Medicine, For example, see National Academies of Sciences, Engineering, and Medicine, SBIR at the National Science
Foundation, The National Academies Press, Washington, DC, 2015, p. 37 and National Academies of Sciences, , The National Academies Press, Washington, DC, 2015, p. 37 and National Academies of Sciences,
Engineering, and Medicine, Engineering, and Medicine, SBIR at NASA, The National Academies Press, Washington, DC, 2016, p. 126. , The National Academies Press, Washington, DC, 2016, p. 126.
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Federal and State Technology (FAST) Partnership Program provides outreach, financial support, and technical assistance to small businesses with a “particular emphasis on helping women, socially/economically disadvantaged individuals, and applicants from underrepresented or rural socially/economically disadvantaged individuals, and applicants from underrepresented or rural
areas compete in the SBIR and STTR programs.”areas compete in the SBIR and STTR programs.”9296
In 2013, the National Academies hosted a workshop to examine the diversity and inclusion In 2013, the National Academies hosted a workshop to examine the diversity and inclusion
challenges associated with the SBIR and STTR programs. Individuals participating in the challenges associated with the SBIR and STTR programs. Individuals participating in the
workshop offered a number of suggestions which fell into three broad categories—expanding the workshop offered a number of suggestions which fell into three broad categories—expanding the
pool of applicants, eliminating barriers in award applications and selection, and providing greater pool of applicants, eliminating barriers in award applications and selection, and providing greater
education and support for entrepreneurship training and commercialization efforts.education and support for entrepreneurship training and commercialization efforts.9397 Examples of Examples of
the suggestions offered include the following: the suggestions offered include the following:
 Improve outreach through existing programs and partnerships that serve  Improve outreach through existing programs and partnerships that serve
disadvantaged populations. disadvantaged populations.
 Use the funds from the administrative pilot program for enhancing program  Use the funds from the administrative pilot program for enhancing program
management, improving outreach, and reducing barriers to completing management, improving outreach, and reducing barriers to completing
applications. applications.
 Focus on the increasing the pipeline of talented women and minorities to advance  Focus on the increasing the pipeline of talented women and minorities to advance
program diversity. program diversity.
 Institute a federal “phase zero” program similar to programs in Florida, Vermont,  Institute a federal “phase zero” program similar to programs in Florida, Vermont,
and other states that award applicants funds to hire consultants to help prepare and other states that award applicants funds to hire consultants to help prepare
stronger proposals, including technology development and commercialization stronger proposals, including technology development and commercialization
strategies. strategies.
 Require a one-page commercialization plan for Phase I applications except for  Require a one-page commercialization plan for Phase I applications except for
applications focused on basic research. applications focused on basic research.9498
Agency Compliance with Mandatory Minimum Expenditures
Federal agencies participating in the SBIR and STTR programs are required to expend at least a Federal agencies participating in the SBIR and STTR programs are required to expend at least a
statutorily defined minimum percentage of their extramural research funding annually. While statutorily defined minimum percentage of their extramural research funding annually. While
agency compliance has improved over the years, some issues remain. agency compliance has improved over the years, some issues remain.
In a September 2013 report, GAO found that 8 of the 11 agencies participating in the SBIR In a September 2013 report, GAO found that 8 of the 11 agencies participating in the SBIR
program and 4 of the 5 agencies participating in the STTR program failed to consistently comply program and 4 of the 5 agencies participating in the STTR program failed to consistently comply
with spending requirements for FY2006-FY2011.with spending requirements for FY2006-FY2011.9599 In June 2014, GAO reported that three In June 2014, GAO reported that three
agencies failed to comply with the SBIR requirement and three failed to comply with the STTR agencies failed to comply with the SBIR requirement and three failed to comply with the STTR
requirement in FY2012.requirement in FY2012.96100 In May 2017, GAO found that 2 of the 11 SBIR agencies and 1 of the In May 2017, GAO found that 2 of the 11 SBIR agencies and 1 of the 5 5
STTR agencies failed to meet their spending requirements for FY2015 or their compliance could STTR agencies failed to meet their spending requirements for FY2015 or their compliance could
not be determined.not be determined.97101 And in its FY2018 annual report SBA reported that the majority of And in its FY2018 annual report SBA reported that the majority of ~~federal~~

9296 For more information see, SBA, “About Federal and State Technology (FAST) Partnership Program,” at For more information see, SBA, “About Federal and State Technology (FAST) Partnership Program,” at
https://www.sbir.gov/about-fast. https://www.sbir.gov/about-fast.
9397 National Academies of Sciences, Engineering, and Medicine, National Academies of Sciences, Engineering, and Medicine, Innovation, Diversity, and the SBIR/STTR Programs:
Summary of a Workshop, The National Academies Press, Washington, DC, 2015, pp. 9-13. , The National Academies Press, Washington, DC, 2015, pp. 9-13.
9498 Ibid. Ibid.
9599 GAO, GAO, Small Business Research Programs: Actions Needed to Improve Compliance with Spending and Reporting
Requirements, GAO-13-421, September 9, 2013. , GAO-13-421, September 9, 2013.
96100 GAO, GAO, Small Business Research Programs: More Guidance Needed to Comply with Spending and Reporting
Requirements, GAO-14-431, summary page, June 2014. , GAO-14-431, summary page, June 2014.
97101 GAO, GAO, Small Business Research Programs: Most Agencies Met Spending Requirements, but DOD and EPA Need to
~~Improve Data Reporting, GAO-17-453, May 31, 2017, pp. 11-13.~~
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federal agencies participating in the SBIR program and the STTR program either failed to comply with agencies participating in the SBIR program and the STTR program either failed to comply with
the mandatory minimum expenditure levels or compliance could not be determined.the mandatory minimum expenditure levels or compliance could not be determined.98102
Among the factors affecting agencies’ failure to comply with the mandatory minimum Among the factors affecting agencies’ failure to comply with the mandatory minimum
expenditure levels are challenges in calculating the amount to be set aside; the enactment of expenditure levels are challenges in calculating the amount to be set aside; the enactment of
appropriations after the start of the fiscal year; and differing agency interpretations of the appropriations after the start of the fiscal year; and differing agency interpretations of the
statutory requirement for “expended.” statutory requirement for “expended.”
Calculation of Extramural Research Funding and Set-Aside
The SBIR and STTR set-asides are based on an agency’s extramural budget for research or The SBIR and STTR set-asides are based on an agency’s extramural budget for research or
research and development.research and development.99103 The calculation of the amount of this budget can be complex for The calculation of the amount of this budget can be complex for
some agencies. For example, several agencies support extramural R/R&D funding through some agencies. For example, several agencies support extramural R/R&D funding through
multiple subunits.multiple subunits.~~100~~104 In addition, agency extramural R/R&D funding can come from more than In addition, agency extramural R/R&D funding can come from more than
one appropriations account, and such accounts can include activities and programs that are not one appropriations account, and such accounts can include activities and programs that are not
extramural R/R&D.extramural R/R&D.~~101~~105 Accordingly, each agency must determine its extramural R/R&D budgets Accordingly, each agency must determine its extramural R/R&D budgets
using a methodology that identifies extramural R/R&D funding as well as what is to be excluded using a methodology that identifies extramural R/R&D funding as well as what is to be excluded
from this amount.from this amount.~~102~~106
Given the complexity of this challenge, Congress required each agency to report its methodology Given the complexity of this challenge, Congress required each agency to report its methodology
to SBA annually within four months of enactment of its appropriation.to SBA annually within four months of enactment of its appropriation.~~103~~107 The The Policy Directive
states states
If the minimum amount was not met, the agency must provide the reasons why and an If the minimum amount was not met, the agency must provide the reasons why and an
explanation of how the agency plans to meet the requirement in the future. Agencies may explanation of how the agency plans to meet the requirement in the future. Agencies may
provide an explanation of the specific budgeting process their agency uses to allocate funds provide an explanation of the specific budgeting process their agency uses to allocate funds
for the SBIR/STTR programs and describe any issues they may see with the compliance for the SBIR/STTR programs and describe any issues they may see with the compliance
determination procedure. Agencies may also indicate obligations made in the reporting determination procedure. Agencies may also indicate obligations made in the reporting
year using prior fiscal years of appropriation within available funding obligation periods.year using prior fiscal years of appropriation within available funding obligation periods.~~104~~108
According to GAO, over the years, many agencies have submitted these reports to SBA too late According to GAO, over the years, many agencies have submitted these reports to SBA too late
for SBA to provide timely feedback to the agencies after reviewing their methodologies and for SBA to provide timely feedback to the agencies after reviewing their methodologies and
exclusions. For example, in 2017 GAO found that 5 of the 11 agencies participating in the SBIR exclusions. For example, in 2017 GAO found that 5 of the 11 agencies participating in the SBIR
and STTR programs submitted their required methodology reports on time.and STTR programs submitted their required methodology reports on time.~~105~~109 Additionally, in Additionally, in

98Improve Data Reporting, GAO-17-453, May 31, 2017, pp. 11-13. 102 SBA, SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Programs
Annual Report for Fiscal Year 2018, pp. 32-45. , pp. 32-45.
99103 “Extramural budget” is defined as “the sum of the total obligations for R/R&D minus amounts obligated for R/R&D “Extramural budget” is defined as “the sum of the total obligations for R/R&D minus amounts obligated for R/R&D
activities by employees of a federal agency in or through government-owned, government-operated facilities. Seeactivities by employees of a federal agency in or through government-owned, government-operated facilities. See
Policy Directive, p. 58. p. 58.
~~100~~104 For example, the Department of Energy extramural R/R&D budget includes funding in the Office of Science, Office For example, the Department of Energy extramural R/R&D budget includes funding in the Office of Science, Office
of Nuclear Energy, Office of Electricity Delivery and Energy Reliability, Office of Energy Efficiency and Renewable of Nuclear Energy, Office of Electricity Delivery and Energy Reliability, Office of Energy Efficiency and Renewable
Energy, Office of Environmental Management, Office of Fossil Energy, National Nuclear Security Administration, and Energy, Office of Environmental Management, Office of Fossil Energy, National Nuclear Security Administration, and
Advanced Research Projects Agency—Energy. Advanced Research Projects Agency—Energy.
~~101~~105 For example, more than one National Science Foundation account has extramural R&D funding as well as funding For example, more than one National Science Foundation account has extramural R&D funding as well as funding
that is not R&D. that is not R&D.
~~102~~106 Agencies are required to exclude, for example, subunits in the intelligence community from their extramural R&D Agencies are required to exclude, for example, subunits in the intelligence community from their extramural R&D
budget. budget.
~~103~~107 15 U.S.C. §638(i)(2). 15 U.S.C. §638(i)(2).
~~104~~108 SBA, SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Program Policy
Directive, May 2, 2019, pp. 141-142. , May 2, 2019, pp. 141-142.
~~105~~109 GAO, GAO, Small Business Research Programs: Most Agencies Met Spending Requirements, but DOD and EPA Need to
~~Improve Data Reporting, GAO-17-453, May 31, 2017, p. 17.~~
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2019, SBA reported that DOD had not provided SBA with the total R/R&D extramural funds the 2019, SBA reported that DOD had not provided SBA with the total R/R&D extramural funds the
agency obligated in FY2017 and that some DOD components had not submitted the required agency obligated in FY2017 and that some DOD components had not submitted the required
reporting methodology.reporting methodology.~~106~~110
Another factor affecting the calculation of SBIR funding is that, in practice, agencies generally Another factor affecting the calculation of SBIR funding is that, in practice, agencies generally
calculate their SBIR set-asides based on their extramural R/R&D calculate their SBIR set-asides based on their extramural R/R&D budgets and not on their and not on their
extramural R/R&D extramural R/R&D obligations as required by statute as required by statute.~~107~~111 An agency’s extramural R/R&D budget An agency’s extramural R/R&D budget
reflects its spending plans for a fiscal year, whereas an agency’s extramural R/R&D obligations reflects its spending plans for a fiscal year, whereas an agency’s extramural R/R&D obligations
reflect the amount of funds an agency actually reflect the amount of funds an agency actually ~~obligates108~~obligates112 to spending in a fiscal year; a final to spending in a fiscal year; a final
obligation figure for extramural R/R&D may not be calculable until the end (or very close to the obligation figure for extramural R/R&D may not be calculable until the end (or very close to the
end) of a fiscal year. Thus, an agency’s extramural R/R&D obligations (and the minimum SBIR end) of a fiscal year. Thus, an agency’s extramural R/R&D obligations (and the minimum SBIR
set-aside amount) may be higher or lower than the level the agency anticipated in its extramural set-aside amount) may be higher or lower than the level the agency anticipated in its extramural
R/R&D budget. R/R&D budget.
Enactment of Appropriations ~~after~~After Start of Fiscal Year
Enactment of appropriations after the start of a fiscal year may also affect the ability of agencies Enactment of appropriations after the start of a fiscal year may also affect the ability of agencies
to expend SBIR/STTR funds at the required level in that fiscal year. For example, if an agency to expend SBIR/STTR funds at the required level in that fiscal year. For example, if an agency
plans its expenditures around a level specified in a continuing resolution but then receives a plans its expenditures around a level specified in a continuing resolution but then receives a
higher final appropriations, then expenditure of the additional amount to be set aside for higher final appropriations, then expenditure of the additional amount to be set aside for
SBIR/STTR in that fiscal year may be difficult. SBIR/STTR in that fiscal year may be difficult.
Agency Views of Requirement to “Expend” Funds
Some agencies participating in the SBIR and STTR programs receive multiyear appropriations Some agencies participating in the SBIR and STTR programs receive multiyear appropriations
that allow funds to be carried over from one year to the next. Some program managers at such that allow funds to be carried over from one year to the next. Some program managers at such
agencies have indicated that they “may choose to spend their SBIR funds over multiple fiscal agencies have indicated that they “may choose to spend their SBIR funds over multiple fiscal
years to help spend the funds properly and efficiently.” Others have indicated that they “might not years to help spend the funds properly and efficiently.” Others have indicated that they “might not
spend enough to meet the spending requirement in the current fiscal year, although the carried-spend enough to meet the spending requirement in the current fiscal year, although the carried-
over funds may help the agency meet or exceed the spending requirement in the following over funds may help the agency meet or exceed the spending requirement in the following
year.”year.”~~109~~113
Congress might consider statutory changes that alter or clarify how agencies are to determine the Congress might consider statutory changes that alter or clarify how agencies are to determine the
amount to be set aside each year for SBIR and STTR, and whether those amounts must be spent amount to be set aside each year for SBIR and STTR, and whether those amounts must be spent
~~in the same fiscal year; obligated, in whole or in part, for expenditure over multiple fiscal years;~~
~~or expended without restriction to any given period.~~

~~106~~ Improve Data Reporting, GAO-17-453, May 31, 2017, p. 17. 110 SBA, SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Programs
Annual Report for Fiscal Year 2017, p. 24. , p. 24.
~~107~~111 15 U.S.C. §638(e). 15 U.S.C. §638(e).
~~108~~112 GAO defines GAO defines obligation as as
A definite commitment that creates a legal liability of the government for the payment of goods and A definite commitment that creates a legal liability of the government for the payment of goods and
services ordered or received, or a legal duty on the part of the United States that could mature into a services ordered or received, or a legal duty on the part of the United States that could mature into a
legal liability by virtue of actions on the part of the other party beyond the control of the United legal liability by virtue of actions on the part of the other party beyond the control of the United
States. Payment may be made immediately or in the future. An agency incurs an obligation, for States. Payment may be made immediately or in the future. An agency incurs an obligation, for
example, when it places an order, signs a contract, awards a grant, purchases a service, or takes example, when it places an order, signs a contract, awards a grant, purchases a service, or takes
other actions that require the government to make payments to the public or from one government other actions that require the government to make payments to the public or from one government
account to another. account to another.
Source: GAO, Source: GAO, A Glossary of Terms Used in the Federal Budget Process, GAO-05-734SP, September 2005, p. 70. , GAO-05-734SP, September 2005, p. 70.
~~109~~113 GAO, GAO, Small Business Research Programs: Most Agencies Met Spending Requirements, but DOD and EPA Need to
Improve Data Reporting, GAO-17-453, May 31, 2017, pp. 15-17. , GAO-17-453, May 31, 2017, pp. 15-17.
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in the same fiscal year; obligated, in whole or in part, for expenditure over multiple fiscal years; or expended without restriction to any given period. SBA Delays in Meeting Statutory Reporting Requirements
The Small Business Act has required the SBA to report annually to Congress on the SBIR and The Small Business Act has required the SBA to report annually to Congress on the SBIR and
STTR programs since the inception of these programs. SBA compliance with this requirement has STTR programs since the inception of these programs. SBA compliance with this requirement has
been an ongoing issue. According to GAO, SBA issued its FY2012 report to Congress in been an ongoing issue. According to GAO, SBA issued its FY2012 report to Congress in
November 2014 and its FY2013 report in March 2016.November 2014 and its FY2013 report in March 2016.~~110~~114 The annual reports for FY2016 and The annual reports for FY2016 and
FY2017 were submitted in 2019 and the FY2018 report was submitted in 2021. As of the date of FY2017 were submitted in 2019 and the FY2018 report was submitted in 2021. As of the date of
this report, the SBA had not yet delivered its FY2019 report. Failure to produce these reports on a this report, the SBA had not yet delivered its FY2019 report. Failure to produce these reports on a
timely basis may impede Congress’s exercise of its oversight responsibilities. timely basis may impede Congress’s exercise of its oversight responsibilities.
Among the issues that may affect the timeliness of SBA reporting are SBIR/STTR agencies’ Among the issues that may affect the timeliness of SBA reporting are SBIR/STTR agencies’
delays in providing data to the SBA and adequate staffing levels at SBA devoted to producing the delays in providing data to the SBA and adequate staffing levels at SBA devoted to producing the
report.report.~~111~~115 For example, in the FY2017 SBIR/STTR annual report SBA stated For example, in the FY2017 SBIR/STTR annual report SBA stated
SBA received the DOD’s last FY17 Annual Report data upload on December 19, 2018, SBA received the DOD’s last FY17 Annual Report data upload on December 19, 2018,
which is over nine months late. As such, this limited the amount of time available to analyze which is over nine months late. As such, this limited the amount of time available to analyze
and validate the DOD data. It should be noted, the other 10 Participating Agencies and validate the DOD data. It should be noted, the other 10 Participating Agencies
submitted the Annual Report information (including the methodology report) to SBA in a submitted the Annual Report information (including the methodology report) to SBA in a
timely fashion.timely fashion.~~112~~116
Concerns About Fraud, Waste, and Abuse
Identification and elimination of fraud, waste, and abuse in the SBIR and STTR programs have Identification and elimination of fraud, waste, and abuse in the SBIR and STTR programs have
been abiding concerns of Congress. In 2011, Congress sought to address such concerns by been abiding concerns of Congress. In 2011, Congress sought to address such concerns by
directing SBA to amend its directing SBA to amend its Policy Directive to include measures to prevent fraud, waste, and to include measures to prevent fraud, waste, and
abuse.abuse.~~113~~117 The The Policy Directive requires federal agencies with SBIR or STTR programs to requires federal agencies with SBIR or STTR programs to
implement the following minimum requirements: implement the following minimum requirements:
 Require certifications from awardees at the time of award, after the award period,  Require certifications from awardees at the time of award, after the award period,
and during the award funding lifecycle. and during the award funding lifecycle.
 Include on the agency’s SBIR and STTR program webpage, and in program  Include on the agency’s SBIR and STTR program webpage, and in program
solicitations, information explaining how an individual can report fraud, waste, solicitations, information explaining how an individual can report fraud, waste,
and abuse. and abuse.
 Designate at least one individual in the agency to serve as the liaison between the  Designate at least one individual in the agency to serve as the liaison between the
SBIR and STTR program, the agency’s Office of Inspector General (OIG), and SBIR and STTR program, the agency’s Office of Inspector General (OIG), and
the agency’s Suspension and Debarment Official (SDO) and ensure that inquiries the agency’s Suspension and Debarment Official (SDO) and ensure that inquiries
regarding fraud, waste, and abuse are referred to the OIG and, if applicable, the regarding fraud, waste, and abuse are referred to the OIG and, if applicable, the
SDO. SDO.
 Include on the agency’s SBIR and STTR program web page information  Include on the agency’s SBIR and STTR program web page information
concerning successful prosecutions of fraud, waste, and abuse in the programs. concerning successful prosecutions of fraud, waste, and abuse in the programs.
~~ Establish a written policy requiring all personnel involved with the SBIR and~~
~~STTR programs to notify the OIG if they suspect fraud, waste, and abuse and~~
~~ensure this policy is communicated to all SBIR and STTR personnel.~~

~~110~~114 Ibid., p. 20. Ibid., p. 20.
~~111~~115 Per the Per the Policy Directive, agencies participating in the SBIR and STTR programs are required to submit their data to , agencies participating in the SBIR and STTR programs are required to submit their data to
SBA by March 15 each year for the previous fiscal year (for example, data for FY2019 was due to SBA by March 15, SBA by March 15 each year for the previous fiscal year (for example, data for FY2019 was due to SBA by March 15,
2020). 2020).
~~112~~116 SBA, SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Programs
Annual Report for Fiscal Year 2017, p. 35. , p. 35.
~~113~~117 15 U.S.C. §638b. 15 U.S.C. §638b.
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  Establish a written policy requiring all personnel involved with the SBIR and STTR programs to notify the OIG if they suspect fraud, waste, and abuse and ensure this policy is communicated to all SBIR and STTR personnel.  Create or maintain an adequate system to enforce accountability through Create or maintain an adequate system to enforce accountability through
suspension and debarment, fraud referrals, or other efforts to deter wrongdoing suspension and debarment, fraud referrals, or other efforts to deter wrongdoing
and promote integrity. and promote integrity.
 Ensure compliance with the eligibility requirements of the programs and the  Ensure compliance with the eligibility requirements of the programs and the
terms of SBIR and STTR funding agreements. terms of SBIR and STTR funding agreements.
 Work with the agency’s OIG with regard to its efforts to establish fraud detection  Work with the agency’s OIG with regard to its efforts to establish fraud detection
indicators, coordinate the sharing of information between federal agencies, and indicators, coordinate the sharing of information between federal agencies, and
improve education and training to SBIR and STTR program officials, applicants, improve education and training to SBIR and STTR program officials, applicants,
and awardees. and awardees.
 Develop policies and procedures to avoid funding essentially equivalent or  Develop policies and procedures to avoid funding essentially equivalent or
duplicative work already funded by the same or another agency. duplicative work already funded by the same or another agency.
 Consider enhanced reporting requirements associated with SBIR and STTR  Consider enhanced reporting requirements associated with SBIR and STTR
funding agreements. funding agreements.~~114~~118
Additionally, Congress required GAO to publish a report every four years on agency efforts to Additionally, Congress required GAO to publish a report every four years on agency efforts to
combat fraud, waste, and abuse. In June 2021, the most recent GAO report found combat fraud, waste, and abuse. In June 2021, the most recent GAO report found
The 11 agencies participating in the Small Business Innovation Research (SBIR) and Small The 11 agencies participating in the Small Business Innovation Research (SBIR) and Small
Business Technology Transfer (STTR) programs largely implemented the Small Business Business Technology Transfer (STTR) programs largely implemented the Small Business
Administration’s (SBA) 10 minimum requirements for preventing fraud, waste, and abuse Administration’s (SBA) 10 minimum requirements for preventing fraud, waste, and abuse
in the programs. Most agencies fully implemented at least eight of the 10 requirements and in the programs. Most agencies fully implemented at least eight of the 10 requirements and
partially implemented the others; one agency, NASA, fully implemented all 10…. Multiple partially implemented the others; one agency, NASA, fully implemented all 10…. Multiple
agencies did not fully implement certain requirements, such as ones to collect eligibility agencies did not fully implement certain requirements, such as ones to collect eligibility
certifications and to have a process for tracking referrals to Offices of Inspector General certifications and to have a process for tracking referrals to Offices of Inspector General
(OIG). Agency officials gave various reasons for partially implementing requirements, (OIG). Agency officials gave various reasons for partially implementing requirements,
such as their belief that they had met a requirement’s intent through other actions. such as their belief that they had met a requirement’s intent through other actions.
However, because agencies did not fully implement all 10 requirements, they may face However, because agencies did not fully implement all 10 requirements, they may face
difficulties. For example, by not collecting program eligibility certifications, agencies may difficulties. For example, by not collecting program eligibility certifications, agencies may
find it complicated to hold individuals and businesses accountable if they misrepresent find it complicated to hold individuals and businesses accountable if they misrepresent
their eligibility for SBIR and STTR awards.their eligibility for SBIR and STTR awards.~~115~~119
A 2019 report by the Department of Health and Human Services’ OIG found that “meeting the A 2019 report by the Department of Health and Human Services’ OIG found that “meeting the
minimum requirements [contained in the policy directive] does not fulfill OIG’s outstanding minimum requirements [contained in the policy directive] does not fulfill OIG’s outstanding
recommendations, nor does it appear that it sufficiently prevents fraud, waste, and abuse in the recommendations, nor does it appear that it sufficiently prevents fraud, waste, and abuse in the
SBIR program.”SBIR program.”~~116~~120
Other Issues
Congress may explore a number of other issues that have been raised by various stakeholders or Congress may explore a number of other issues that have been raised by various stakeholders or
examined by GAO as it continues oversight examined by GAO as it continues oversight ~~and examines the possible reauthorization of the~~
~~SBIR and STTR programs in 2022. For example, some have advocated for an increase in the~~
~~maximum size of awards, especially awards associated with the research and development of~~

~~114~~of the programs. For example, some have advocated 118 SBA, SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Program Policy
Directive, May 2, 2019, pp. 126-128. , May 2, 2019, pp. 126-128.
~~115~~119 GAO, GAO, Small Business Innovation Research: Agencies Need to Fully Implement Requirements for Managing Fraud,
Waste, and Abuse, GAO-21-413, June 30, 2021. , GAO-21-413, June 30, 2021.
~~116~~120 U.S. Department of Health and Human Services Office of Inspector General, U.S. Department of Health and Human Services Office of Inspector General, Recommendation Followup:
Vulnerabilities Continue to Exist in the HHS Small Business Innovation Research Program, OEI-04-18-00230, March , OEI-04-18-00230, March
2019. 2019.
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for an increase in the maximum size of awards, especially awards associated with the research and development of biotechnology.121~~biotechnology.117~~ Others have expressed concern over a perceived lack of resources devoted to Others have expressed concern over a perceived lack of resources devoted to
SBA oversight and administration of the programs.SBA oversight and administration of the programs.~~118~~ 122 Another potential issue is timeliness. In Another potential issue is timeliness. In
~~September 2020~~October 2022, GAO issued a report examining the timelines associated with the review and , GAO issued a report examining the timelines associated with the review and
issuance of awards by federal agencies issuance of awards by federal agencies ~~in FY2019~~from FY2016 through FY2021. According to GAO, “although participating agencies’ SBIR/STTR award timeliness generally has improved since FY 2016, some agencies have not consistently met required and recommended time frames for notifying awardees and issuing awards.” GAO found that DOD issued 65% of its awards on time from FY 2016 through FY 2021 compared with 85% from civilian agencies.123 In addition, according to NASEM, The NIH SBIR/STTR process, from application to funding, averages about 9 months, although a number of applications take much longer than that to make it through the review, selection, and funding steps in the process…. While these time frames are within the statutory requirements of 12 months to notification and 15 months until issuance [for NIH and NSF], they are much longer than those of most other agencies…. NIH’s lengthier time frames are out of alignment with the needs of newer small businesses focused on innovation that lack the resources of more established firms.124 Congress may want to consider NASEM’s recommendations to require the NIH director to conduct a pilot program to streamline and accelerate the review and selection process at NIH and to exempt NIH SBIR/STTR awards from the legislatively required peer review criteria for NIH R&D grants and contracts.125 Author Information Marcy E. Gallo Analyst in Science and Technology Policy 121~~. According to GAO, more than three-quarters~~
~~of the agencies with SBIR and STTR programs issued such awards within the required~~
~~timeframes; however, GAO did not evaluate the time between Phase I and subsequent Phase II~~
~~awards, which some have raised as important for increasing the potential for~~
~~commercialization.119~~

~~Author Information~~

~~Marcy E. Gallo~~

~~Analyst in Science and Technology Policy~~

~~Disclaimer~~
~~This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan~~
~~shared staff to congressional committees and Members of Congress. It operates solely at the behest of and~~
~~under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other~~
~~than public understanding of information that has been provided by CRS to Members of Congress in~~
~~connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not~~
~~subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in~~
~~its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or~~
~~material from a third party, you may need to obtain the permission of the copyright holder if you wish to~~
~~copy or otherwise use copyrighted material.~~

~~117~~ For example, see National Cancer Advisory Board Ad Hoc Working Group on SBIR/STTR, For example, see National Cancer Advisory Board Ad Hoc Working Group on SBIR/STTR, National Cancer
Advisory Board Ad Hoc Working Group Report of the National Cancer Institute Small Business Innovation Research
Program, February 5, 2019. February 5, 2019.
~~118~~122 For example, see Testimony of Jere Glover, Executive director of the Small Business Technology Council, Senate For example, see Testimony of Jere Glover, Executive director of the Small Business Technology Council, Senate
Committee on Small Business and Entrepreneurship, Committee on Small Business and Entrepreneurship, Reauthorization of the SBA’s Innovation Programs, hearing, 116th , hearing, 116th
Cong., 1st sess., May 15, 2019. Cong., 1st sess., May 15, 2019.
~~119~~123 U.S. Government Accountability Office, U.S. Government Accountability Office, Small Business Research Programs: ~~Many Agencies Took Longer to Issue~~
~~Small Business Awards Than Recommended, GAO-19-620, September 26, 2019~~Reporting on Award Timeliness Could Be Enhanced, GAO-23-105591, October 12, 2022, at https://www.gao.gov/products/, at https://www.gao.gov/products/
~~GAO-19-620.~~
~~Congressional Research Service~~
~~R43695 · VERSION 6 · UPDATED~~
34gao-23-105591. 124 National Academies of Sciences, Engineering, and Medicine, Assessment of the SBIR and STTR Programs at the National Institutes of Health, The National Academies Press, Washington, DC, 2022, p. 77. 125 Ibid., pp. 90-91. Congressional Research Service 36 Small Business Research Programs: SBIR and STTR Disclaimer This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you wish to copy or otherwise use copyrighted material. Congressional Research Service R43695 · VERSION 7 · UPDATED 37