Small Business Research Programs: SBIR and STTR
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Small Business Research Programs:
SBIR and STTR
Updated October 21, 2022
Congressional Research Service
https://crsreports.congress.gov
R43695
SUMMARY
Small Business Research Programs:
SBIR and STTR
R43695
October 21, 2022
Marcy E. Gallo
Analyst in Science and
The Small Business Innovation Research (SBIR) program was established in 1982 by
Technology Policy
the Small Business Innovation Development Act (P.L. 97-219) to increase the
participation of small innovative companies in federally funded research and
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
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
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
of these funds to finance an agency-run STTR program. As of 2021, five federal agencies operate STTR
programs.
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
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.
The SBIR and STTR programs have been extended and reauthorized several times since their initial enactments.
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
SBIR funding. DOD and the Department of Health and Human Services (HHS) accounted for more than threefourths of SBIR funding in FY2019. While the majority of SBIR grants made in FY2019 were Phase I awards
(65%), more than three-fourths (78%) of SBIR funding went to Phase II awards. In FY2019, agencies awarded
$429.3 million in STTR funding. DOD and HHS accounted for more than three-fourths of STTR funding (82%).
Like the SBIR program, most STTR grants (73%) were for Phase I awards, while most funding (69%) went to
Phase II awards.
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
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
responsibilities under the programs, including agency coordination, policy guidance, and data collection.
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Small Business Research Programs: SBIR and STTR
Contents
Overview ......................................................................................................................................... 1
Data Sources and Limitations .......................................................................................................... 2
Small Business Innovation Research............................................................................................... 3
SBIR Overview ......................................................................................................................... 3
SBIR Phases .............................................................................................................................. 4
Phase I ................................................................................................................................. 4
Phase II ............................................................................................................................... 4
Phase III .............................................................................................................................. 5
Technical Assistance ........................................................................................................... 5
SBIR Eligibility......................................................................................................................... 6
Recent and Historical SBIR Awards Data ................................................................................. 7
Small Business Technology Transfer ............................................................................................ 12
STTR Overview ...................................................................................................................... 12
STTR Phases ........................................................................................................................... 14
Phase I ............................................................................................................................... 14
Phase II ............................................................................................................................. 14
Phase III ............................................................................................................................ 15
Technical Assistance ......................................................................................................... 15
STTR Eligibility ...................................................................................................................... 15
Recent and Historical STTR Awards Data .............................................................................. 16
Issues for Consideration ................................................................................................................ 21
Research Security .................................................................................................................... 21
Eligibility of Venture Capital-Backed Small Businesses ........................................................ 22
Improving Technology Commercialization and Trade-Offs Among Program
Objectives ............................................................................................................................ 24
Tracking Commercialization ............................................................................................. 26
Multiple Award Recipients and Role in Commercialization ............................................. 28
Fostering Diversity in Technological Innovation .................................................................... 30
Agency Compliance with Mandatory Minimum Expenditures .............................................. 31
Calculation of Extramural Research Funding and Set-Aside ........................................... 32
Enactment of Appropriations After Start of Fiscal Year ................................................... 33
Agency Views of Requirement to “Expend” Funds.......................................................... 33
SBA Delays in Meeting Statutory Reporting Requirements ................................................... 34
Concerns About Fraud, Waste, and Abuse .............................................................................. 34
Other Issues ............................................................................................................................. 35
Figures
Figure 1. SBIR and STTR Funding, FY2000-FY2019 ................................................................... 2
Figure 2. SBIR Phase I and Phase II Funding, FY2000-FY2019.................................................... 7
Figure 3. SBIR Funding by Agency, FY2019 ................................................................................. 8
Figure 4. Agency Allocation of SBIR Funding Between Phase I and Phase II, FY2019 ................ 8
Figure 5. Share of Phase I and Phase II SBIR Funding, by Agency, FY2019 ................................. 9
Figure 6. SBIR Aggregate Funding Level and Awards by State, FY2015-2019 ........................... 10
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Figure 7. STTR Phase I and Phase II Funding, FY2000-FY2019 ................................................. 17
Figure 8. STTR Funding by Agency, FY2019............................................................................... 17
Figure 9. Agency Allocation of STTR Funding Between Phase I and Phase II, FY2019 ............. 18
Figure 10. Share of Phase I and Phase II STTR Funding, by Agency, FY2019 ............................ 18
Figure 11. STTR Aggregate Funding Level and Awards by State, FY2015-2019 ........................ 19
Tables
Table 1. Number and Amount of SBIR Awards by Agency, FY2019............................................ 10
Table 2. Number and Amount of SBIR Awards by Year, FY1983-FY2019 ................................... 11
Table 3. Number and Amount of STTR Awards by Agency, FY2019 ........................................... 19
Table 4. Number and Amount of STTR Awards by Year, FY1994-FY2019 ................................. 20
Contacts
Author Information........................................................................................................................ 36
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Small Business Research Programs: SBIR and STTR
Overview1
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
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
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
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
the SBIR program to advance four objectives:
to stimulate innovation,
to use small businesses to meet federal R&D needs,
to foster and encourage the participation of minority and disadvantaged persons in
technological innovation, and
to increase private sector commercialization of innovations derived from federally
funded R&D.3
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
university and federal R&D by small companies.
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
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
Small Business Administration (SBA) helps to coordinate the SBIR and STTR programs,
establishes overall policy guidance, reviews agencies’ progress, and reports annually to Congress
on the operation of the programs.
Through FY2019, the most recent year with complete data, federal agencies had made 178,731
SBIR and STTR awards to small businesses to develop and commercialize innovative
technologies. The total amount awarded was $54.6 billion. Figure 1 shows SBIR and STTR
funding for FY2000-FY2019.
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
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.
3 Ibid.
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
more than these percentages. Federal R&D funding can be characterized as either extramural or intramural depending
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
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
government-owned, government-operated facilities.
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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
reviews of the programs; and identifies and discusses selected policy issues.
Figure 1. SBIR and STTR Funding, FY2000-FY2019
Total of Phase I and Phase II Awards for SBIR and STTR programs
Sources: 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, The Small Business Innovation Research
(SBIR) and Small Business Technology Transfer (STTR) Program Annual Report Fiscal Year 2009-2011; data for FY2012FY2019 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.
Note: 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
for the information and analysis presented below. The latest annual report data available to CRS
is for FY2019. 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
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 FY2021
and FY2022 is incomplete (i.e., seven agencies have not posted data for FY2022). While the
award database for 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 data is used as part of the required annual report. As of the date of this report, SBA has not
completed the FY2020 annual report, however, SBA has indicated 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.
7 Ibid.
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Small Business Innovation Research
SBIR Overview
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
reauthorized or extended multiple times, most recently in 2016 when the program was extended
through September 30, 2022.8 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
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
to meet federal R&D needs, fostering and encouraging participation in innovation and
entrepreneurship by minorities and socially and economically disadvantaged individuals, and
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
(USDA), Commerce (DOC), Defense (DOD), Education (ED), Energy (DOE), Health and
Human Services (HHS), Homeland Security (DHS), and Transportation (DOT); the
Environmental Protection Agency (EPA); the National Aeronautics and Space Administration
(NASA); and the National Science Foundation (NSF).
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
Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR)
Program Policy Directive (referred to hereinafter as the Policy Directive).9 According to some
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
with its overall mission and priorities.10 (See “Improving Technology Commercialization and
Trade-Offs Among Program Objectives” herein for related discussion.)
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 FY2019, the
aggregate level of SBIR funding for all federal agencies was $3.290 billion ($1.719 billion for the
10 participating civilian agencies and $1.572 billion for DOD). The aggregate level of SBIR
funding for the civilian agencies ($1.719 billion) accounted for approximately 3.27% of 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,
individually, 4 of the 10 civilian agencies failed to comply with the minimum spending
requirement. Specifically, NASA, USDA, DOC, and EPA did not meet the SBIR spending
requirement in FY2019, as assessed by SBA.11 The percentage of SBIR funding set aside from
8 Section 1834 of the National Defense Authorization Act for Fiscal Year 2017 (P.L. 114-328).
9 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.
10 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.
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
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DOD’s extramural R&D funds in FY2019 accounted for 3.04% of DOD’s extramural R&D
funding, as reported to SBA, below the required 3.2%.12 However, 4 of the 12 DOD components
SBA collects data from did comply with the spending requirement—Navy, Defense Advanced
Research Projects Agency (DARPA), Defense Threat Reduction Agency (DTRA), and Defense
Logistics Agency (DLA) (See “Agency Compliance with Mandatory Minimum Expenditures”
herein for related discussion.)
SBIR Phases
The SBIR program is a three-phase program. 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 feasibilityrelated 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,
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,
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)
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
Phase I awards is up to six months, 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
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
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
and (2) through FY2025, 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
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
appear to have commercial potential.17
FY2019 annual report.
12 SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Program Annual
Report for Fiscal Year 2019, pp. 34-44.
13 15 U.S.C. §638.
14 Ibid. §638(j)(2)(D) and (aa)(1). According to SBA, as of November 2021, agencies may issue a Phase I award up to
$275,766 without seeking a waiver from SBA.
15 Ibid. §638(aa)(4).
16 The STTR program is discussed in more detail later in this report.
17 SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Program Policy
Directive, 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
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
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
research; and the presence of other indicators of the commercial potential of the idea.18
The Policy Directive 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
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
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.
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
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
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 SBIR funds.
Phase III
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 does not provide funding in Phase III.
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
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
commercialization of SBIR and STTR projects through the use of Phase III awards, including
sole source awards.20
Technical Assistance
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
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
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
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
provided to help SBIR awardees make better technical decisions, solve technical problems,
18 15 U.S.C. §638(e)(4)(b).
19 According to SBA, as of November 2021, agencies may issue a Phase II award up to $1,838,436 without seeking a
waiver from SBA.
20 15 U.S.C. §638(r)(4).
21 Ibid. §638(q).
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minimize technical risks, and develop and commercialize new commercial products and
processes.22
SBIR Eligibility
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
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
business must be
(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
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
Native Hawaiian organization (NHO) (or a wholly owned business entity of such tribe, ANC
or NHO), or any combination of these; or
(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
than 50% of the small business;24 or
(3) a joint venture in which each entity to the joint venture meets the requirements in
paragraphs (1) and (2) above.25
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
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%
of their SBIR funds for such awards.26
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 Phase I award
(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
employment must be with the small business applicant at the time of award and during the
conduct of the proposed project.27
22 Ibid. §638(q)(1).
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
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
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.
25 13 C.F.R. §121.702.
26 15 U.S.C. §638(dd).
27 SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Program Policy
Directive, 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
agencies may allow a portion of the work to be performed or obtained outside of the United
States under “rare and unique” circumstances.28
Recent and Historical SBIR Awards Data29
In FY2019, the most recent year for which the SBA has published annual report data on SBIR
awards, agencies made awards for $3.290 billion, including 4,002 Phase I awards totaling $701.5
million and 2,135 Phase II awards totaling $2.493 billion. The success rate30 was 19% for Phase I
SBIR proposers and 59% for Phase II proposers.
While more than half of SBIR awards made in FY2019 were Phase I awards (65%), more than
three-fourths of SBIR funding went to Phase II awards (78%).31 Between FY2000 and FY2019,
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-FY2019
Sources: 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, The Small Business Innovation Research
(SBIR) and Small Business Technology Transfer (STTR) Program Annual Report Fiscal Year 2009-2011; data for FY2012FY2019 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.
Note: Source tables are not consistently labeled from year to year.
Two agencies accounted for more than three-fourths of total SBIR funding in FY2019: DOD
($1.533 billion, 48%) and HHS ($988.0 million, 31%). The next three highest SBIR funding
agencies (DOE, NSF, and NASA) together accounted for almost 19%. The remaining agencies
accounted for about 2%. See Figure 3.
28 Ibid., p. 85.
29 See “Data Sources and Limitations” above.
30 The success rate is the number of successful proposals divided by total proposals submitted, expressed as a
percentage.
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, FY2019
Source: CRS analysis of data from SBA, Small Business Innovation Research (SBIR) and Small Business Technology
Transfer (STTR) Program Annual Report Fiscal Year 2019, Tables 2, 3, and 6.
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 FY2019 were
EPA (42%), USDA (40%), and NSF (38%). Agencies that allocated the largest share of their
SBIR funding to Phase II awards in FY2019 were DOT (100%),32 DOC (88%), and DOD (85%).
Figure 4 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, FY2019
Source: CRS analysis of data from SBA, Small Business Innovation Research (SBIR) and Small Business Technology
Transfer (STTR) Program Annual Report Fiscal Year 2019, Tables 2, 3, and 6.
Agency shares of aggregate Phase I and Phase II SBIR funding are shown in Figure 5. The
agencies with the highest share of total Phase I funding in FY2019 were HHS (40%), DOD
32 According to SBA, all Phase I awards associated with DOT’s FY2019 solicitation were made at the beginning of
FY2020.
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(32%), and DOE and NSF both at 10%. The agencies with the highest share of total Phase II
funding in FY2019 were DOD (53%), HHS (28%), and DOE (8%).
Figure 5. Share of Phase I and Phase II SBIR Funding, by Agency, FY2019
Source: CRS analysis of data from SBA, Small Business Innovation Research (SBIR) and Small Business Technology
Transfer (STTR) Program Annual Report Fiscal Year 2019, Tables 2, 3, and 6.
In FY2019, women-owned small businesses received 456 Phase I awards (11% of all Phase I
SBIR awards) totaling $86.3 million (12% of total Phase I funding) and 214 Phase II SBIR
awards (10%) totaling $289.3 million (12%).33 Socially and economically disadvantaged
businesses received 315 Phase I awards (8% of all Phase I SBIR awards) totaling $49.4 million
(7% of total Phase I funding) and 120 Phase II SBIR awards (6%) totaling $117.0 million (5%).34
Companies in Historically Underutilized Business Zones (HUBZones) received 142 Phase I
awards (4% of all Phase I awards) totaling $23.6 million (3% of total Phase I funding) and 64
Phase II awards (3%) totaling $55.7 million (2%).35
Figure 6 shows the aggregate funding level and number of SBIR awards by state for FY2015FY2019 (the latest five-year period for which annual report award data by state are available).
Although every state and territory except American Samoa received awards during this 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 (5,274 awards totaling $2.767
billion) and Massachusetts (2,692 awards totaling $1.515 billion)—accounted for 32% of 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,
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 FY2019.
Eight of the top ten states in SBIR funding are also among the top ten states in overall federal
R&D funding in FY2019 (which accounted for 61% of total federal R&D funding).36 In contrast,
the ten states with the fewest number of SBIR awards and lowest aggregate award amounts—
American 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
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, Small Business Innovation Research Program Policy
Directive, May 2, 2019, p. 67.
34 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, Small Business Innovation Research (SBIR) and Small Business
Technology Transfer (STTR) Program Policy Directive, May 2, 2019, p. 66.
35 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?”
36 National Science Foundation, Federal Funds for Research and Development: Fiscal Years 2019-20, Table 129,
accessed October 4, 2022, at https://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 amount of federal R&D funding in FY2019 (six of
which are among the bottom ten states in SBIR funding) also accounted for less than 1% of total
federal R&D funding.37
Figure 6. SBIR Aggregate Funding Level and Awards by State, FY2015-2019
Source: CRS analysis of data from SBA, Small Business Innovation Research (SBIR) and Small Business Technology
Transfer (STTR) Programs Annual Report for each fiscal year (FY2015-FY2019), “SBIR/STTR Awards by U.S. State
and Territory” Table. Annual reports available at https://www.sbir.gov/annual-reports-files.
Table 1 provides information on overall agency SBIR obligations for FY2019, as well as the
number and aggregate amounts of Phase I and Phase II SBIR awards.
Table 1. Number and Amount of SBIR Awards by Agency, FY2019
(in millions of dollars)
Phase I
Phase II
Total
Awarded,
Phase I and
Phase IIa,b
Number
of Awards
Total
Awardedb
Number
of Awards
Total
Awardedb
Department of Agriculture
$21.0
79
$8.5
26
$12.5
Department of Commerce
$9.9
12
$1.2
24
$8.7
Department of Defense
$1,532.5
1,916
$223.2
1178
$1,309.3
Department of Education
$10.2
15
$3.0
8
$7.2
Department/Agency
37 Ibid.
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Phase I
Total
Awarded,
Phase I and
Phase IIa,b
Number
of Awards
Department of Energy
$262.2
Dept. of Health and Human Services
$988.0
Department of Homeland Security
$21.2
Department of Transportationc
Environmental Protection Agency
Phase II
Total
Awardedb
Number
of Awards
Total
Awardedb
363
$68.3
178
$194.0
948
$283.3
426
$704.7
24
$3.6
19
$17.7
$11.1
0
$0.0
14
$11.1
$5.5
23
$2.3
9
$3.2
Nat’l Aeronautics and Space Admin.
$151.4
313
$38.7
141
$112.7
National Science Foundation
$181.2
309
$69.4
112
$111.7
$3,194.2
4,002
$701.5
2,135
$2,492.7
Department/Agency
Total, All Agenciesa
Source: CRS analysis of data from SBA, Small Business Innovation Research (SBIR) and Small Business Technology
Transfer (STTR) Program Annual Report Fiscal Year 2019, Tables 2, 3, and 6.
Notes:
a. Components many not sum to totals due to rounding.
b. Amounts include obligations for new awards in 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 will be reported within the FY2020 report.
Table 2 provides historical data on the number and amount of Phase I and Phase II SBIR awards
from the program’s inception through FY2019.
Table 2. Number and Amount of SBIR Awards by Year, FY1983-FY2019
Total
Amounts
Awarded
(in millions)
Phase I
FY1983
$44.5
686
74
760
FY1984
$108.4
999
338
1,337
FY1985
$199.1
1,397
407
1,804
FY1986
$297.9
1,945
564
2,509
FY1987
$350.5
2,189
768
2,957
FY1988
$389.1
2,013
711
2,724
FY1989
$431.9
2,137
749
2,886
FY1990
$459.9
2,346
837
3,183
FY1991
$463.7
2,553
788
3,341
FY1992
$499.1
2,559
916
3,475
FY1993
$644.7
2,898
1,141
4,039
FY1994
$694.0
3,102
928
4,030
FY1995
$834.1
3,085
1,263
4,348
FY1996
$874.7
2,841
1,191
4,032
FY1997
$1,066.8
3,371
1,404
4,775
FY1998
$1,066.7
3,022
1,320
4,342
Fiscal Year
Congressional Research Service
Number of Awards
Phase II
Total
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Small Business Research Programs: SBIR and STTR
FY1999
$1,096.5
3,334
1,256
4,590
FY2000
$1,190.2
3,166
1,330
4,496
FY2001
$1,294.4
3,215
1,533
4,748
FY2002
$1,434.8
4,243
1,577
5,820
FY2003
$1,670.1
4,465
1,759
6,224
FY2004
$1,867.4
4,638
2,013
6,651
FY2005
$1,865.9
4,300
1,871
6,171
FY2006
$1,883.2
3,836
2,026
5,862
FY2007
$1,644.8
3,814
1,542
5,356
FY2008
$1,783.7
3,626
1,771
5,397
FY2009
$1,965.1
4,007
1,793
5,800
FY2010
$2,011.1
4,045
1,846
5,891
FY2011
$2,221.7
3,739
1,759
5,498
FY2012
$1,955.6
3,528
1,982
5,510
FY2013
$2,075.7
3,011
1,474
4,485
FY2014
$2,238.3
3,162
1,513
4,675
FY2015
$2,188.7
2,870
1,454
4,324
FY2016
$2,279.7
2,909
1,592
4,501
FY2017
$2,571.6
3,223
1,871
5,094
FY2018
$2,742.4
FY2019a
$3,194.2
3,135
3,135
4,002
1,703
1,703
2,135
4,838
4,838
6,137
Sources: Data for FY1983-FY1989 from SBA, The Small Business Economy: A Report to the President, 2010, Table
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, The Small Business Innovation Research (SBIR) and
Small Business Technology Transfer (STTR) Program Annual Report Fiscal Year 2009-2011; data for FY2012-FY2019
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.
Notes: 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 will 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
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, 2022.38
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
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.
The STTR program provides funding for research proposals that are developed and executed
38 Section 1834 of the National Defense Authorization Act for Fiscal Year 2017 (P.L. 114-328).
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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
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 FY2019, total STTR award funding among all
participating federal agencies was $429.3 million ($221.6 million for the four participating
civilian agencies and $207.6 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
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
funding set aside from DOD’s extramural R&D funds was 0.40%, as reported to SBA, also below
minimum spending requirement. However, 4 of the 12 DOD components SBA collects data from
did comply with the spending requirement—Navy, DARPA, SOCOM, and DLA.
The SBA emphasizes three principal differences between the STTR and SBIR programs:
Under STTR, the small business and its partnering research institution must
establish an intellectual property agreement detailing the allocation of intellectual
property rights and rights to carry out follow-on research, development, or
commercialization activities.
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.
The STTR program does not require the principal investigator to be primarily
employed by the small business, a requirement of the SBIR program.40
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 Policy
Directive. 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
execution of its program in alignment with its overall mission and priorities.41 (See “Improving
Technology Commercialization and Trade-Offs Among Program Objectives” herein for related
discussion.)
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)
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
institution can include hospitals and military educational institutions, if they meet the definition
above.
Source: SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Program
Policy Directive, May 2, 2019, p. 61.
40 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.
41 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.
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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 feasibilityrelated 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,
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
business] with a relatively small agency investment before consideration of further Federal
support in Phase II.”42 Generally, STTR Phase I awards are limited to the same award guideline
amount as SBIR Phase I awards (see “SBIR Phases” above). Similar to SBIR Phase I awards,
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
specific topic.43 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.
Phase II
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
grant recipients are eligible for Phase II grants.44 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 II. The Policy Directive 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
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.45 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. 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
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
single recipient at the agency’s discretion, and potentially more if the agency requests and
42 SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Program Policy
Directive, May 2, 2019, p. 68.
43 According to SBA, as of November 2021, agencies may issue a Phase I award up to $275,766 without seeking a
waiver from SBA.
44 “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
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
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.
45 According to SBA, as of November 2021, agencies may issue a Phase II award up to $1,838,436 without seeking a
waiver from SBA.
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receives a waiver from the SBA. For sequential Phase II awards, some agencies require thirdparty 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,
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
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,
including sole source awards.46
Technical Assistance
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
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
scientists and engineers engaged in a wide range of technologies; assistance with product sales,
intellectual property protections, market 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 provided to help STTR awardees make better
technical decisions, solve technical problems, minimize technical risks, and develop and
commercialize new commercial products and processes.47
STTR Eligibility
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
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
or fewer employees, including employees of affiliates.
The small business must be
(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
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
Native Hawaiian Organization (NHO), a wholly owned business entity of such tribe, ANC, or
NHO, or any combination of these; or
(2) a joint venture in which each entity to the joint venture meets the requirements in
paragraph (1) above.48
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,
46 15 U.S.C. §638(r)(4).
47 Ibid. §638(q)(1).
48 13 C.F.R. §121.702.
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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
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
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.49
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
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
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
or obtained outside of the United States under “rare and unique” circumstances.50
The partnering research institution must be located in the United States, and be either a nonprofit
college or university, a domestic nonprofit research organization,51 or a federally funded research
and development center (FFRDC).52
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,
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.53
Recent and Historical STTR Awards Data54
In FY2019, the most recent year for which the SBA has published annual report data on STTR
awards, agencies made awards for $423.3 million, including 670 Phase I STTR awards totaling
$132.3 million and 244 Phase II STTR awards totaling $291.1 million. The success rate was 23%
for Phase I STTR proposers and 73% for Phase II proposers. While 73% of STTR grants made in
FY2019 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 FY2000-2019. In FY2004, the minimum
percentage that participating agencies were required to set aside for the STTR program doubled
49 SBIR/STTR website, “Frequently Asked Questions—VC Participation,” accessed April 27, 2020, at http://sbir.gov/
faq/vc-participation.
50 SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Program Policy
Directive, May 2, 2019, p. 85.
51 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
or individual.”
52 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
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
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
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
Federally Funded R&D Centers,” accessed April 27, 2020, at http://www.nsf.gov/statistics/ffrdclist/.
53 SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Program Policy
Directive, May 2, 2019, pp. 83-84.
54 See “Data Sources and Limitations,” above.
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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).
Between FY2012 and FY2019 total funding for STTR increased by 85%. Aggregate funding for
Phase I increased by 87% while aggregate funding for Phase II increased by 85% over the same
time period.
Figure 7. STTR Phase I and Phase II Funding, FY2000-FY2019
Sources: 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, The Small Business Innovation
Research (SBIR) and Small Business Technology Transfer (STTR) Program Annual Report Fiscal Year 2009-2011; data for
FY2012-FY2019 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.
Notes: Source tables are not consistently labeled from year to year.
Like SBIR funding, STTR funding was highly concentrated during this period. Two agencies—
DOD ($207.6 million, 49%) and HHS ($144.5 million, 34%)—accounted for more than fourfifths of STTR funding in FY2019. DOE accounted for 8%, NASA for 5%, and NSF for 4%. See
Figure 8.
Figure 8. STTR Funding by Agency, FY2019
Source: CRS analysis of data from SBA, Small Business Innovation Research (SBIR) and Small Business Technology
Transfer (STTR) Program Annual Report Fiscal Year 2019. Tables 8 and 10.
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The allocation of STTR funding to Phase I and Phase II awards varies among agencies. NSF
allocated the largest share (64%) of its STTR funding to Phase I awards in FY2019; DOD
allocated the largest share (78%) of its funding to Phase II awards. See Figure 9.
Figure 9. Agency Allocation of STTR Funding Between Phase I and Phase II, FY2019
Source: CRS analysis of data from SBA, Small Business Innovation Research (SBIR) and Small Business Technology
Transfer (STTR) Program Annual Report Fiscal Year 2019, Tables 8 and 10.
The agencies with the highest share of total Phase I funding in FY2019 were HHS (44%) and
DOD (35%). The agencies with the highest share of total Phase II funding in FY2019 were also
DOD (55%) and HHS (28%). See Figure 10.
Figure 10. Share of Phase I and Phase II STTR Funding, by Agency, FY2019
Source: CRS analysis of data from SBA, Small Business Innovation Research (SBIR) and Small Business Technology
Transfer (STTR) Program Annual Report Fiscal Year 2019, Tables 8 and 10.
Notes: Amounts many not sum to 100% due to rounding.
In FY2019, women-owned small businesses received 84 Phase I STTR awards (13% of all Phase
I STTR awards) totaling $16.9 million (13% of total Phase I funding) and 26 Phase II STTR
awards (11%) totaling $34.2 million (12%). Socially and economically disadvantaged businesses
received 55 Phase I awards (8% of all Phase I STTR awards) totaling $9.2 million (7% of total
Phase I funding) and 13 Phase II awards (5%) totaling $10.8 million (4%). Companies in
Historically Underutilized Business Zones (HUBZones) received 19 Phase I awards (3% of all
Phase I awards) totaling $3.9 million (3% of total Phase I funding) and 10 Phase II awards (4%)
totaling $9.5 million (3%).
Figure 11 shows the aggregate funding level and number of STTR awards by state for FY2015FY2019 (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
and amount of STTR awards during this period—California (603 awards totaling $276.7 million),
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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
for this period. The top ten states—California, Massachusetts, Texas, Virginia, New York,
Maryland, Ohio, Pennsylvania, Colorado, and North Carolina—accounted for 61% of awards and
62% of funding. In contrast, the ten states and territories 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
1% of awards and total funding during this period.
Figure 11. STTR Aggregate Funding Level and Awards by State, FY2015-2019
Source: CRS analysis of data from SBA, Small Business Innovation Research (SBIR) and Small Business Technology
Transfer (STTR) Programs Annual Report for each fiscal year (FY2015-FY2019), “SBIR/STTR Awards by U.S. State
and Territory” Table. Annual reports available at https://www.sbir.gov/annual-reports-files.
Table 3 provides information on overall agency STTR obligations for FY2019, as well as the
number and aggregate amounts of Phase I and Phase II awards.
Table 3. Number and Amount of STTR Awards by Agency, FY2019
(in millions of dollars)
Phase I
Phase II
Total
Amount
Awarded,
Phase I and
Phase IIa,b
Number of
Awards
Total
Amount
Awardedb
Number
of Awards
Total
Amount
Awardedb
Department of Defense
$207.6
304
$46.5
139
$161.1
Department of Energy
$34.9
55
$10.3
24
$24.6
Department/Agency
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Phase I
Department/Agency
Dept. of Health and Human
Services
Nat’l Aeronautics and Space Admin.
Total
Amount
Awarded,
Phase I and
Phase IIa,b
Number of
Awards
Total
Amount
Awardedb
Number
of Awards
Total
Amount
Awardedb
$139.5
211
$57.8
55
$81.7
$22.9
48
$5.9
22
$17.0
National Science Foundation
Total, All Agenciesa
Phase II
$18.3
52
$11.7
4
$6.7
$423.3
670
$132.3
244
$291.1
Source: CRS analysis of data from SBA, Small Business Innovation Research (SBIR) and Small Business Technology
Transfer (STTR) Program Annual Report Fiscal Year 2019, Tables 8 and 10.
Notes:
a. Components many not sum to totals due to rounding.
b. Amounts include obligations for new awards in FY2019 and FY2019 obligations on prior year awards.
Table 4 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 FY2019.
Table 4. Number and Amount of STTR Awards by Year, FY1994-FY2019
Fiscal Year
Total
Amounts
Awarded
(in millions)
Number of Awards
Phase I
Phase II
Total
FY1994
$18.9
198
—
198
FY1995
$33.7
238
22
260
FY1996
$64.5
238
88
326
FY1997
$69.0
260
89
349
FY1998
$64.8
208
109
317
FY1999
$64.8
251
78
329
FY2000
$69.8
233
95
328
FY2001
$77.5
224
113
337
FY2002
$91.8
356
114
470
FY2003
$91.8
397
111
508
FY2004
$190.0
674
195
869
FY2005
$220.3
611
221
832
FY2006
$226.2
644
234
878
FY2007
$242.9
634
213
847
FY2008
$239.6
483
251
734
FY2009
$269.6
588
242
830
FY2010
$279.3
625
256
881
FY2011
$251.2
482
238
720
FY2012
$228.2
492
168
660
FY2013
$250.4
476
193
669
FY2014
$228.0
492
213
705
FY2015
$289.9
553
173
726
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FY2016
$308.3
595
200
795
FY2017
$365.3
613
234
847
FY2018
$381.7
568
224
792
FY2019
$423.3
670
244
914
Sources: 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)
and Small Business Technology Transfer (STTR) Program Annual Report Fiscal Year 2009-2011; data for FY2012FY2019 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-reportsfiles.
Note: 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.
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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
around a regulation that required at least 51% ownership by an individual or individuals to be
eligible for participation in the programs.57 Some experts argued that participation by small 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
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
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
sector investment is feasible.
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
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
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.
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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
induce additional venture capital, hedge fund, or private equity firm funding of
small business innovations;
substantially contribute to the mission of the federal agency;
demonstrate a need for public research; and
otherwise fulfill the capital needs of small business concerns for additional
financing for SBIR projects.58
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
companies, hedge funds, and private equity firms to participate in the SBIR program. 59 In 2021,
GAO released its most recent report examining federal agencies’ use of the authority.60 GAO
found that four agencies—NIH, ED, DOE’s Advanced Research Projects Agency-Energy (ARPAE), 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
the FY2019 and FY2020 period under review.61 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
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
deploy the strongest innovations, fills potential gaps in private sector investment, or are interested
in ideas regardless of the source.”62 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
following reasons:
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;
the agency believed that small firms majority-owned by venture capital
companies, hedge funds, and private equity firms were not in need of SBIR
funds;
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
firms focus on later stage R&D;
given limited funding, the agency had an adequate number of qualified SBIR
applicants without expansion of the program to small firms majority-owned by
venture capital companies, hedge funds, and private equity firms; and
the agency desired more information on the use of the authority by other
agencies.63
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,
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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
authority.64 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
the agency’s plans.”65
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
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
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. 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
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
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
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 million in FY1999 (i.e., DOD,
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
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.
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
federal agencies, in fulfilling their procurement needs, are making sufficient effort to use small businesses that have
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
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
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/.
Improving Technology Commercialization and Trade-Offs Among
Program Objectives
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.
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
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
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.
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provisions focused on improving commercialization. For example, P.L. 112-81 made DOD’s
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
programs to establish a Commercialization Assistance Pilot Program. Activities under DOD’s
Commercialization Readiness Program increase connectivity between SBIR and STTR awardees,
prime contractors, and DOD acquisition officials while the Commercialization Assistance Pilot
programs of other agencies provide subsequent Phase II awards to select firms.
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
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.66 A report by the National
Academies underscored how the SBIR/STTR program goals of stimulating innovation, meeting
federal research needs, increasing commercialization, and fostering diversity in innovation and
entrepreneurship “appear to be in conflict”:
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
for translating their research into products and then commercializing them, and vice
versa…. Many expressions of the program’s goals emphasize commercialization, which
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
program asks that agencies and awardees solve research problems, solve
commercialization problems, and diversify participation at the same time as a means to
address the overall societal mission of their agencies. 67
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
analysts have recommended that Congress continue to provide flexibility to agencies in the
operation of their programs.68 Other analysts have suggested that agencies should reorient their
SBIR and STTR programs “to focus more sharply on one of the program’s objectives:
commercializing innovations derived from federal R&D.”69 Such proponents and others have
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
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
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
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, Review of the SBIR and STTR Programs at the
Department of Energy, The National Academies Press, Washington, DC, 2020, pp. 19-20.
68 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.
69 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.
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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
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
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
III (i.e., commercialization).71 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
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.72 Additionally, recipients are
asked to voluntarily update the database annually for a period of five years after completion of the
Phase II award.73 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,
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
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-STTRRecommendations-NACIE.pdf.
71 As described by the Policy Directive, 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.
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
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.
72 15 U.S.C. §638(k)(2)(B).
73 Ibid. §638(k)(3).
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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
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
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
data sources.77
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
sources of potential bias that can skew results in different directions.”78 These potential biases
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
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.79 Regarding lag time, the National
Academies added
Not only do outcomes lag awards by a number of years, but also the lag itself is highly
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
have reached markets.80
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.
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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
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
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
companies that had received nearly 17,000 awards. The small businesses
surveyed reported $121 billion in total combined sales.81
In 2018, the National Cancer Institute (NCI), an institute of the National
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
the 648 awards examined, 53% were commercialized as measured by the
generation of any sales. The small businesses surveyed reported combined total
sales of $9.1 billion.82
A 2016 report by the National Academies assessed outcomes associated with
DOE Phase II SBIR/STTR awards made between FY2001 and FY2010.
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
award. Additionally, 78% of the 269 Phase II awards attracted additional
investment.83
Multiple Award Recipients and Role in Commercialization
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
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
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
recipients “present conflicting evidence” and do not assess the performance of these firms in
“important non-commercial outcomes such as procurement and basic research.”84 Further, the
National Academies stated
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
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
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
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
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.
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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
searching for awards across multiple agencies to match their own specific technologies or
to take advantage of an established familiarity with the application process.85
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
advocates argue that the SBIR and STTR programs should be focused on growth-oriented small
firms, which typically are younger firms or start-ups.86 According to the National Academies
While the barriers and transactions costs facing small businesses are well understood as
justifications for government intervention, it has become clear that younger small
businesses are the dominant drivers of traditional metrics of economic growth
(Haltiwanger, Jarmin, and Miranda, 2013). Firm age, therefore, is an important moderating
variable in assessments of any program that aims to support small firms. 87
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
business in commercializing its SBIR/STTR-funded research.88 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.
According to SBA, the 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 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 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 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.”91 However,
according to GAO, “SBA and 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 data.”92 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
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to (1) to improve the 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.93 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 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.”94 It remains unclear, however, if
concerns 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
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
that federal agencies are not effectively increasing the number of women-owned or minorityowned 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
application process.95 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
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
Commercializing Technologies, GAO-18-207, January 31, 2018, p. 7.
93 Ibid, p. 15.
94 SBA, “Performance Benchmark Requirements for Phase I,” https://www.sbir.gov/performance-benchmarks.
95 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,
Engineering, and Medicine, SBIR at NASA, 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
areas compete in the SBIR and STTR programs.”96
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
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
education and support for entrepreneurship training and commercialization efforts.97 Examples of
the suggestions offered include the following:
Improve outreach through existing programs and partnerships that serve
disadvantaged populations.
Use the funds from the administrative pilot program for enhancing program
management, improving outreach, and reducing barriers to completing
applications.
Focus on the increasing the pipeline of talented women and minorities to advance
program diversity.
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
stronger proposals, including technology development and commercialization
strategies.
Require a one-page commercialization plan for Phase I applications except for
applications focused on basic research.98
Agency Compliance with Mandatory Minimum Expenditures
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
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
program and 4 of the 5 agencies participating in the STTR program failed to consistently comply
with spending requirements for FY2006-FY2011.99 In June 2014, GAO reported that three
agencies failed to comply with the SBIR requirement and three failed to comply with the STTR
requirement in FY2012.100 In May 2017, GAO found that 2 of the 11 SBIR agencies and 1 of the
5 STTR agencies failed to meet their spending requirements for FY2015 or their compliance
could not be determined.101 And in its FY2018 annual report SBA reported that the majority of
96 For more information see, SBA, “About Federal and State Technology (FAST) Partnership Program,” at
https://www.sbir.gov/about-fast.
97 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.
98 Ibid.
99 GAO, Small Business Research Programs: Actions Needed to Improve Compliance with Spending and Reporting
Requirements, GAO-13-421, September 9, 2013.
100 GAO, Small Business Research Programs: More Guidance Needed to Comply with Spending and Reporting
Requirements, GAO-14-431, summary page, June 2014.
101 GAO, Small Business Research Programs: Most Agencies Met Spending Requirements, but DOD and EPA Need to
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federal 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.102
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
appropriations after the start of the fiscal year; and differing agency interpretations of the
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
research and development.103 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
multiple subunits.104 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
extramural R/R&D.105 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
from this amount.106
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.107 The Policy Directive
states
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
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
determination procedure. Agencies may also indicate obligations made in the reporting
year using prior fiscal years of appropriation within available funding obligation periods.108
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
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.109 Additionally, in
Improve Data Reporting, GAO-17-453, May 31, 2017, pp. 11-13.
102 SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Programs
Annual Report for Fiscal Year 2018, pp. 32-45.
103 “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. See
Policy Directive, p. 58.
104 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
Energy, Office of Environmental Management, Office of Fossil Energy, National Nuclear Security Administration, and
Advanced Research Projects Agency—Energy.
105 For example, more than one National Science Foundation account has extramural R&D funding as well as funding
that is not R&D.
106 Agencies are required to exclude, for example, subunits in the intelligence community from their extramural R&D
budget.
107 15 U.S.C. §638(i)(2).
108 SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Program Policy
Directive, May 2, 2019, pp. 141-142.
109 GAO, Small Business Research Programs: Most Agencies Met Spending Requirements, but DOD and EPA Need to
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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
reporting methodology.110
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 budgets and not on their
extramural R/R&D obligations as required by statute.111 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
reflect the amount of funds an agency actually obligates112 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
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
R/R&D budget.
Enactment of Appropriations After Start of Fiscal Year
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
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
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
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
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 carriedover funds may help the agency meet or exceed the spending requirement in the following
year.”113
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
Improve Data Reporting, GAO-17-453, May 31, 2017, p. 17.
110 SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Programs
Annual Report for Fiscal Year 2017, p. 24.
111 15 U.S.C. §638(e).
112 GAO defines obligation as
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
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
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
account to another.
Source: GAO, A Glossary of Terms Used in the Federal Budget Process, GAO-05-734SP, September 2005, p. 70.
113 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.
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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
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
November 2014 and its FY2013 report in March 2016.114 The annual reports for FY2016 and
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
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’
delays in providing data to the SBA and adequate staffing levels at SBA devoted to producing the
report.115 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,
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
submitted the Annual Report information (including the methodology report) to SBA in a
timely fashion.116
Concerns About Fraud, Waste, and Abuse
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
directing SBA to amend its Policy Directive to include measures to prevent fraud, waste, and
abuse.117 The Policy Directive requires federal agencies with SBIR or STTR programs to
implement the following minimum requirements:
Require certifications from awardees at the time of award, after the award period,
and during the award funding lifecycle.
Include on the agency’s SBIR and STTR program webpage, and in program
solicitations, information explaining how an individual can report fraud, waste,
and abuse.
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
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
SDO.
Include on the agency’s SBIR and STTR program web page information
concerning successful prosecutions of fraud, waste, and abuse in the programs.
114 Ibid., p. 20.
115 Per the Policy Directive, 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,
2020).
116 SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Programs
Annual Report for Fiscal Year 2017, p. 35.
117 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
suspension and debarment, fraud referrals, or other efforts to deter wrongdoing
and promote integrity.
Ensure compliance with the eligibility requirements of the programs and the
terms of SBIR and STTR funding agreements.
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
improve education and training to SBIR and STTR program officials, applicants,
and awardees.
Develop policies and procedures to avoid funding essentially equivalent or
duplicative work already funded by the same or another agency.
Consider enhanced reporting requirements associated with SBIR and STTR
funding agreements.118
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
The 11 agencies participating in the Small Business Innovation Research (SBIR) and Small
Business Technology Transfer (STTR) programs largely implemented the Small Business
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
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
certifications and to have a process for tracking referrals to Offices of Inspector General
(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.
However, because agencies did not fully implement all 10 requirements, they may face
difficulties. For example, by not collecting program eligibility certifications, agencies may
find it complicated to hold individuals and businesses accountable if they misrepresent
their eligibility for SBIR and STTR awards.119
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
recommendations, nor does it appear that it sufficiently prevents fraud, waste, and abuse in the
SBIR program.”120
Other Issues
Congress may explore a number of other issues that have been raised by various stakeholders or
examined by GAO as it continues oversight of the programs. For example, some have advocated
118 SBA, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Program Policy
Directive, May 2, 2019, pp. 126-128.
119 GAO, Small Business Innovation Research: Agencies Need to Fully Implement Requirements for Managing Fraud,
Waste, and Abuse, GAO-21-413, June 30, 2021.
120 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
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 Others have expressed concern over a perceived lack of
resources devoted to SBA oversight and administration of the programs.122
Another potential issue is timeliness. In October 2022, GAO issued a report examining the
timelines associated with the review and issuance of awards by federal agencies 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 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.
122 For example, see Testimony of Jere Glover, Executive director of the Small Business Technology Council, Senate
Committee on Small Business and Entrepreneurship, Reauthorization of the SBA’s Innovation Programs, hearing, 116th
Cong., 1st sess., May 15, 2019.
123 U.S. Government Accountability Office, Small Business Research Programs: Reporting on Award
Timeliness Could Be Enhanced, GAO-23-105591, October 12, 2022, at https://www.gao.gov/products/gao-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.
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Congressional Research Service
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This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.