SBIR/STTR Reauthorization Act Of 2011: NIH Implementation Of Key Changes (What to Expect and When)
The SBIR/STTR Reauthorization Act of 2011 and the recently released SBIR and STTR Policy Directives have brought about numerous changes to the programs many of which are quite complex. NIH is diligently working to implement these changes some of which are easily handled so implemented immediately. Others are more complex and will take time.
The following key change areas have been provided by the Small Business Administration (SBA). Each links to a description of each change and the implementation steps NIH is taking. The information will be regularly updated as NIH progresses so check back regularly. NIH is working with SBA on its implementation plan.
Key Changes (Provided by SBA)
Set-aside percentages are increased
For FY 2014, SBA has issued guidelines to the agencies that the set-aside share is increased to 2.8%, prior to the new Policy Directives being issued. The share will increase by 0.1 percentage point each fiscal year until it reaches 3.2% for fiscal year 2017. It will remain at that level after that. For STTR, the set-aside percent was increased to 0.35% for 2012 and 2013, and has increased to 0.4% for 2014 and 2015, and to 0.45% for 2016 and thereafter. Note that agencies may exceed these minimum percentages.
Effective immediately. The 2014 annual SBIR and STTR Omnibus grant solicitations, the 2014 annual SBIR contract solicitation and all future Funding Opportunity Announcements will reflect the new percentages.
The budgets for Fiscal Year 2014 awards are:
- $663M SBIR 2.8%
- $95M STTR 0.4%
STTR award sizes (guideline amounts) are increased to match SBIR amounts: $150,000 for Phase I and $1 million for Phase II. Awards may not exceed guideline amounts by more than 50% ($225,000 for Phase I and $1.5 million for Phase II). Agencies must report all awards exceeding the guideline amounts and must receive a special waiver from SBA to exceed the guideline amounts by more than 50%.
NIH has had the flexibility to make awards that exceeded the guidelines by up to 50% for those biomedical projects that warranted doing so. For those cases where exceeding the guideline by more than 50% is needed, NIH can request waivers from SBA.
SBA has pre-approved a topics list located in Appendix A of the Program Descriptions and Research Topics document for 2015 SBIR/STTR awards that allows budgets to exceed the hard caps as long as the project is included on the topics list. The topics list will need to be approved annually.
Applicants are required to follow the Award Budget instructions within each NIH SBIR/STTR solicitation.
Keeping the Congressional guidelines in mind, applicants should continue to request what is realistically needed to complete their proposed work.
Admin funding pilot
A new pilot program permitting agencies to use 3% of their SBIR funds for administration of SBIR and STTR programs. Each agency must submit their plan of work to SBA for approval by 10/1/2012. The funds should be used to provide added support rather than simply replace the non-SBIR funds formerly used, and the work should focus on material improvements in performance of the program on critical issues (e.g. streamlining the award process). While the funding comes from the SBIR budget only, it is to be used for administration of both programs.
NIH has received authority from SBA to conduct an administration fund pilot.
The amount of SBIR funds permitted to be used for technical assistance is raised from $4,000 to $5,000 per award per year. This is to be in addition to the award amount for both Phase I and Phase II. Awardees may contract this amount to a provider other than the vendor selected by the agency.
NIH will continue to offer its Niche Assessment Program for Phase I awardees and Commercialization Assistance Program for Phase II awardees and they will now be offered to its SBIR AND STTR awardees. Announcements for these programs will appear in the NIH Guide for Grants and Contracts. Visit the Guide Listserv website to sign up. (Additional information on NIH's assistance programs is available on the SBIR/STTR Technical Assistance site).
Applicants who wish to utilize their own technical assistance vendor can request up to $5,000 for assistance. See solicitations for details. Please note, if funds are requested to utilize your own technical assistance vendor and an award is made, the awardee is not eligible to apply for the NIH-provided technical assistance program for the phase of their award.
Key Changes (Provided by SBA)
The biggest change in eligibility required by the reauthorization legislation will be allowing firms that are majority-owned by multiple venture capital operating companies (VCOCs), hedge funds and/or private equity firms to receive SBIR and STTR awards. SBA has published a proposed rule to amend SBIR/STTR size regulations (Federal Register Vol. 77, No. 94, May 15, 2012) to make this change and to make other modifications to the ownership requirements and affiliation rules. This proposed rule was open for public comment through July 16, 2012. The SBA has reviewed the comments and issued the final rule in early 2013.
On January 28th, 2013 SBA implemented the new size rule. See here http://sbir.gov/news/time-and-schedule-changes-sbir-size-rules. NIH SBIR/STTR solicitations issued after this date will have revised eligibility requirements and SBIR solicitations issued after this date will allow majority VC-owned SBCs to apply.
Majority VC-owned SBCs can now apply to the NIH SBIR Omnibus solicitation (SBIR only).
As of July 10, 2014, CDC will now accept SBIR applications from VC-owned SBCs in response to NEW SBIR solicitations issued going forward.
All applicants are now required to register with the Company Registry Database at www.sbir.gov at the time of application.
On January 28th, 2013 SBA launched the Company registry at SBIR.gov. See here http://www.sbir.gov/registration and here for details and FAQs http://sbir.gov/news/time-and-schedule-changes-sbir-size-rules. NIH solicitations issued after this date will require companies to register at SBA prior to submitting their application to. See solicitations issued after 1/28/2013 for instructions.
Applicants to the NIH SBIR and STTR Omnibus solicitations must register at the SBA Company registry.
Agencies have the option to allow STTR Phase I awardee to receive SBIR Phase II award and SBIR Phase I awardee to receive STTR Phase II award. Implementation is at agency discretion.
The SBIR/STTR switching mechanism is now implemented. Refer to NOT-OD-14-048 for more information.
- Phase I STTR Awardees may apply for NIH SBIR or STTR Phase II.
- Phase I SBIR Awardees may apply for NIH SBIR or STTR Phase II.
- Phase II STTR Awardees may apply for NIH SBIR or STTR Phase IIB.
- Phase II SBIR Awardees may apply for NIH SBIR or STTR Phase IIB.
Clarifies that a Phase I awardee may receive a Phase II award from an agency other than the one that awarded the related Phase I. Reporting to SBA by both agencies is required.
For many years, NIH has accepted Phase II applications from companies receiving a Phase I award from another agency. These have been and will continue to be done on a case-by-case basis and require the support of a technical program officer at the NIH Institute or Center to which the applicant is interested in applying. Contact NIH if you have questions.
Direct to Phase II pilot
For Fiscal Years 2012-2017, the NIH, DoD, and Department of Education may issue Phase II SBIR awards to firms to pursue Phase I solicitation topics without requiring the applicant to have received a Phase I award for related work. Implementation is at agency discretion.
NIH has implemented a Direct to Phase II solicitation, PAR-14-088. This authority permits small businesses to submit Direct-to-Phase-II SBIR applications to the Institutes and Centers that choose to participate, if the small business had performed the Phase I stage-type of research through other funding sources. Refer to NOT-OD-14-048 for more information.
Open Phase II competition
Beginning 10/1/2012, agencies must allow all Phase I awardees to apply for a follow-on Phase II award. Issuing Phase II awards via invitation only will not be permitted. Agencies will need to include information on the Phase II application process in all Phase I solicitations released on or after 10/1/2012 and notify their Phase I awardees of this change in practice.
This new provision is mostly directed to those agencies that use contracts as their award mechanism, i.e. , Department of Defense. NIH's SBIR and STTR grant opportunities have always permitted ALL Phase I awardees to apply for Phase II and will continue to do so.
Effective with the 2013 annual SBIR contract solicitation which was released in August 2012, all selected Phase I contractors will have the opportunity to apply for Phase II.
Second Phase II
Agencies may award a second, sequential, Phase II to continue a Phase II project.
NIH has been offering this opportunity for several years. You may recognize it as a “Phase IIB” award or a “competing renewal.”
Commercialization standards for Phase I applicants
Phase I to Phase II Transition Rate: Beginning 1/1/2013, Phase I applicants that have won prior SBIR/STTR Phase I awards, must meet agency-specific standards for progress towards Phase II. Proposed benchmark rates will be published in the Federal Register for comment on 10/1/2012.
Phase I to Phase II Transition Rate Benchmark
In accordance with guidance from the SBA, the HHS, including NIH, SBIR/STTR Program is implementing the Phase I to Phase II Transition Rate benchmark required by the SBIR/STTR Reauthorization Act of 2011. This Transition Rate requirement applies to SBIR and STTR Phase I applicants that have received more than 20 Phase I awards over the past 5 fiscal years, excluding the most recently-completed fiscal year. For these companies, the benchmark establishes a minimum number of Phase II awards the company must have received for a given number of Phase I awards received during the 5-year time period in order to be eligible to receive a new Phase I award. This requirement does not apply to companies that have received 20 or fewer Phase I awards over the 5 year period.
Companies that apply for a Phase I award and do not meet or exceed the benchmark rate will not be eligible for a Phase I award for a period of one year from the date of the application submission. The Transition Rate is calculated as the total number of SBIR and STTR Phase II awards a company received during the past 5 fiscal years divided by the total number of SBIR and STTR Phase I awards it received during the past 5 fiscal years excluding the most recently-completed year. The benchmark minimum Transition Rate is 0.25.
For more information, refer to the FAQs on the Phase I to Phase II transition rate.
SBA calculates individual company Phase I to Phase II Transition Rates daily using SBIR and STTR award information across all federal agencies. For those companies that have received more than 20 Phase I awards over the past 5 years, SBA posts the company transition rates on the Company Registry at www.SBIR.gov. Information on the Phase I to Phase II Transition Rate requirement is available at www.SBIR.gov.
Applicants that may have received more than 20 Phase I awards across all federal SBIR/STTR agencies over the past 5 years should, prior to proposal preparation, verify that their company's Transition Rate on the Company Registry at www.SBIR.gov meets or exceeds the minimum benchmark rate of 0.25. Stay tuned.
Phase II to Phase III Commercialization Rate: Effective 10/1/2013, Phase I applicants that have previously won SBIR/STTR Phase II awards, will be required to meet agency-specific standard rates of commercialization success from those Phase II awards. Proposed benchmarks will be published in the Federal Register for comment on 7/1/2013.
In accordance with guidance from the SBA, the HHS, including NIH, SBIR/STTR Programs are implementing the Phase II to Phase III Commercialization Rate benchmark for Phase I applicants, as required by the SBIR/STTR Reauthorization Act of 2011. The Commercialization Rate Benchmark was published in a Federal Register notice on August 8, 2013 (78 FR 48537).
This requirement applies to companies that have received more than 15 Phase II awards from all agencies over the past 10 years, excluding the two most recently-completed Fiscal Years. Companies that meet this criterion must show an average of at least $100,000 in revenues and/or investments per Phase II award or at least 0.15 (15%) patents per Phase II award resulting from these awards. This requirement does not apply to companies that have received 15 or fewer Phase II awards over the 10 year period, excluding the two most recently-completed Fiscal Years.
Company commercialization record
Once the necessary data systems are in place, all applicants will be required, as part of the application process, to provide information on the commercialization of their prior SBIR/STTR awards. The anticipated date for this to be operational is 10/1/2014.
Stay tuned. SBA's commercialization database is expected to be operational October 1, 2014.
Key Changes (Provided by SBA)
The Reauthorization Act requires changes aimed at reducing gaps in time between close of the solicitation and notification of award. Agencies are to implement these measures as soon as is practicable. In addition, the Policy Directives include new reporting requirements for the participating agencies to develop data needed to monitor and analyze these time lags.
Stay tuned. By statute, NIH is mandated to use a two-tiered peer review process which requires a scientific and technical review (peer review) and then by an Institute or Center's Advisory Board. NIH is exploring ways in which to streamline its processes so the time from submission to award is reduced.
Key Changes (Provided by SBA)
Central data system
An improved program-wide data system will be developed to facilitate administrative reporting and program evaluation. The system will enable applicants and agencies to provide the required information into the Tech-Net database (www.SBIR.gov). Tech-Net will consist of the following databases: (1) Solicitations Database of all solicitations and topic information from the agencies; (2) Company Registry housing company information on all SBIR applicants including specific information on SBC applicants that are majority-owned by multiple VCOCs, hedge funds and/or private equity firms; (3) Application Information Database of information on each SBIR application; (4) Award Information Database of information on each SBIR awardee; (5) Commercialization Database of SBCs that have received prior SBIR awards; (6) Annual Report Database used to generate the Annual Report that SBA submits to Congress; and (7) Other Reports Database containing information required by statute but not stored in other databases. These databases will be designed to minimize the reporting burden on small business.
Stay tuned. As SBA completes each of the many databases, NIH will notify applicants and awardees regarding how and when to use each.
Key Changes (Provided by SBA)
Awardee firms must certify they are meeting program requirements not only at the time of award, but also at points during the lifecycle of the award. Lifecycle certification was recommended by a working group of Inspector Generals. This does not alter the policy that awardees may complete their SBIR/STTR award even if they no longer meet the definition of an SBC.
NIH has implemented this provision by requiring two SBIR/STTR program-specific certifications.
NIH now requires all SBIR applicants to complete an SBIR Funding Agreement Certification for new or renewal grants prior to award of a new award (grant or contract) or a competing renewal award (grant or contract). Likewise, all STTR applicants are required to complete an STTR Funding Agreement Certification for all new and competing renewal STTR grants.
NIH also will also require that all recipients of new or continuing SBIR and STTR awards complete a “Life Cycle Certification” once certain milestones are reached during the project period. Grant awardees are not required to submit this certification directly to NIH, but must instead complete a certification and maintain it on file in accordance with the records retention policy in Section 8.4.2 of the NIH Grants Policy Statement.
Refer to NOT-OD-13-116 for more information about both certifications.
Agencies must: include on their website, and in each solicitation, a telephone hotline number or web-based method for reporting fraud, waste and abuse; include on the agency's website successful prosecutions of fraud, waste and abuse in the SBIR Program; designate at least one individual to serve as liaison for the SBIR/STTR Program to the Office of Inspector General (OIG) and the agency's Suspension and Debarment Official (SDO); and maintain procedures to enforce accountability (e.g. , creating templates for referrals to the OIG or SDO).
Effective immediately. All NIH Funding Opportunity Announcements will include information about how to report fraud. NIH has also updated its website with the required information.
Key Changes (Provided by SBA)
Commercialization Readiness Programs
DoD Commercialization Readiness Pilot is made permanent and includes the STTR program; Commercialization Readiness Pilot programs for civilian agencies are authorized allowing agencies to use up to 10% of SBIR/STTR funds to support commercialization and Phase III efforts.
Stay tuned. NIH is developing a Commercialization Readiness Program.
Phase III preference
Agencies directed to support SBIR/STTR awardees in their efforts to commercialize SBIR/STTR work through, among other things, Phase III sole-source contracts.
NIH is not typically the purchaser of products developed with SBIR and STTR funds. This is most commonly done by the Department of Defense. In those rare cases where NIH might purchase, NIH will support Phase III sole-source contracts.
For more information regarding SBA's implementation plan, read Sean Greene's (Associate Administrator for Investment and the Special Advisor for Innovation at SBA) blog which includes links to the recently released Policy Directives, a synopsis of key changes, and FAQs.
Matthew E. Portnoy, Ph.D.
NIH SBIR/STTR Program Coordinator
Office of Extramural Programs, NIH