Exploring SBIR Government Contracts

The Small Business Innovation Research (SBIR) program is a highly competitive government program that provides research and development funding to small businesses. The contracts awarded through the program are designed to incentivize small businesses to pursue technological innovation and to participate in Federal Research/Research and Development (R/R&D). Interested in learning more about SBIR government contracts? We’ll cover program basics and requirements below.

Understanding SBIR Government Contracts

SBIR government contracts allow qualified small businesses to participate in federal research and development with the potential to profit from commercialization. The SBIR has four stated goals:

To stimulate technological innovation
To use small businesses to meet federal R&D requirements
To foster and encourage socially and economically disadvantaged small businesses to participate in innovation and entrepreneurship
To increase private-sector commercialization of technological innovations derived through federal R&D funding

Who Is Eligible?

To be eligible to bid on SBIR government contracts, a potential awardee must meet several requirements. First, awardees must be considered a Small Business Concern (SBC) by the Small Business Administration (SBA). The SBA defines a “business concern” as a small business with the following characteristics:

An independently operated small business entity in the United States organized for profit
Not considered dominant in its field of operations
Not above the relevant small business size standards for the procurement action or contract in question
In the legal form of an individual proprietorship, partnership, limited liability company (LLC), corporation, association, trust, cooperative, or joint venture (joint ventures can have no more than 49 percent participation by foreign business entities)

Size standards, set forth by the SBA, are assigned by North American Industry Classification System (NAICS) codes, which classify businesses based on the industry they operate in and the service or product they provide. Generally speaking, though, most businesses will qualify as a small business if they are either:

A manufacturing company with 500 or fewer employees
A non-manufacturing company with less than $7.5 million in annual receipts

The best way to determine if your business meets SBA size requirements is to use the SBA’s Size Standards Tool.

Three-Phase Structure

SBIR contracts are typically structured in three phases:

Phase I: Small businesses receive funding for feasibility studies and preliminary research. These awards are relatively small (generally between $50,000-$250,000) and serve as proof of concept.
Phase II: If the Phase I project is successful, small businesses can apply for Phase II funding to further develop and demonstrate their technology or innovation. These awards are larger (usually $750,000 for two years) and are meant to support more advanced R&D efforts.
Phase III: When appropriate or relevant, Phase III allows the small business to pursue commercialization objectives that may result from their R/R&D efforts that occurred during Phase I and II. Unlike the first two phases, Phase III funding does not come from the SBIR program.

Participating Agencies

Any federal agency with an annual extramural R&D budget over $100 million must allocate a percentage of that budget to SBIR contracts. Currently, this includes 11 federal agencies:

Department of Agriculture
Department of Commerce – National Institute of Standards and Technology
Department of Commerce – National Oceanic and Atmospheric Administration
Department of Defense
Department of Education
Department of Energy
Department of Health and Human Services
Department of Homeland Security
Department of Transportation
Environmental Protection Agency
National Aeronautics and Space Administration
National Science Foundation

These agencies publish solicitations for proposals — unsolicited proposals are not accepted for SBIR government contracts. Proposals to agency-specific solicitations are evaluated on technical merit, feasibility, and the potential for commercialization.

Audits and Oversight

The federal agency that issues the Program Solicitation in question is the agency that will resolve any contract or grant disputes. The SBA acts as the director of program policy for all participation agencies and is responsible for program oversight.

SBIR government contracts aren’t the only option for small businesses who hope to do business with the government. Federal contracting can be a smart and lucrative way for small businesses to expand their customer base. If you have more questions about how to find and win federal contracts, GovCon can help.

For over 20 years, GovCon has helped hundreds of clients navigate the complex world of DCAA compliance, streamline their operations, pass audits, and win federal contracts. We use our real-world experience to simplify your process, reduce the cost of compliance, and improve accuracy. We’d love to show you how GovCon can streamline the government contracting process for you. Contact us any time.

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