Editorial · May 10, 2015
SBIR grants small manufacturers: how they work
SBIR grants small manufacturers federal money to test a new idea, in two main steps. SBIR stands for Small Business Innovation Research. Phase I pays for a short feasibility study and normally tops out at $150,000 over six months. Phase II continues the Phase I research and normally tops out at $1 million over two years. Eleven agencies run the program. Each posts its own topics. To start, find a topic that fits what your plant already does well.
What the program is
Any federal agency that spends more than $100 million a year on research outside its own government-run labs must take part. Intelligence agencies are the exception. The Small Business Administration (SBA) gives the agencies a rulebook, called the policy directive. It says each agency must set aside a minimum share of that research budget for small firms. For fiscal year 2015 the law sets the minimum at 2.9 percent. It rises in later years.
Eleven agencies take part, SBIR.gov says. They include the Department of Defense (DoD), the Department of Energy, NASA and the National Science Foundation (NSF). Each runs its own program inside the rules Congress set. The money does not always come as a grant. Each agency picks the form, and the directive allows a contract, a grant or a cooperative agreement.
Congress last renewed the program in the National Defense Authorization Act for Fiscal Year 2012. The president signed it on December 31, 2011. The law keeps SBIR running until September 30, nearly two and a half years from now.
Who can apply
SBIR.gov lists three tests that a firm must meet when a Phase I or Phase II award is made. The firm must be organized for profit and have a place of business in the United States. As a rule, it must be more than 50 percent owned and controlled by U.S. citizens or permanent residents, or by a for-profit business that meets the same test. And it can have no more than 500 employees, counting affiliates.
Three more rules matter. The principal investigator, who leads the technical work, must spend more than half of their time working for your firm. Your firm must also do at least two-thirds of the Phase I research and at least half of the Phase II research. The work must be done in the United States. Each rule has rare exceptions, which the agency must approve in writing. The directive also requires you to register in SBA's Company Registry at SBIR.gov.
Phases I, II and III
Phase I tests the idea's merit and feasibility. It also shows the agency how well your firm performs before any Phase II support. An agency may fund several different answers to the same problem, the directive says. The guideline is $150,000 and six months.
Phase II continues the work. SBIR.gov says only firms with a Phase I award are eligible, though the directive allows two exceptions. The Phase II guideline is $1 million and two years.
Funding rests on Phase I results and on the merit and commercial potential of the Phase II project. The directive says evidence of that potential can include Phase II funding commitments from private or other non-SBIR sources and follow-on Phase III commitments. Our editors suggest lining up a likely buyer while Phase I is still running.
Agencies may award up to 50 percent above either dollar amount. So Phase I can reach $225,000 and Phase II $1.5 million. SBA may let an agency go higher for a specific topic. Neither phase requires you to share the project cost, and cost sharing cannot count in scoring. But agencies may require matching funds for certain special awards. Agencies must also build a reasonable fee or profit into the award, unless law limits it.
Phase III is usually the move to market, and SBIR money does not pay for it. The money comes from non-federal sources or from non-SBIR federal funds. The directive says Phase III work can include products and production. As far as practical, agencies, their contractor-run facilities, federally funded research centers and prime contractors must give that work to the firm that developed the technology. They may do so without competition.
How to find the right agency topic
The directive says agencies must give priority in SBIR to manufacturing-related research and development. The law, each agency's mission and the program's purpose limit how far that goes.
Search SBIR.gov first. It lists open solicitations, the agencies' calls for proposals. You can search them by term and by agency, and each one holds its topics. For DoD topics, SBIR.gov points you to dodsbir.net, where a keyword search can cover topic titles, descriptions and keywords.
Read each topic as a problem statement. The directive says a topic must describe the need in enough detail to guide your answer, but it cannot dictate the solution.
Get help and watch the dates
Ask before you write. During a DoD solicitation's pre-release period you may ask topic authors technical questions directly. Once the solicitation opens, that contact is not allowed. You may then send written questions through SITIS, DoD's topic question system. It keeps both sides anonymous and posts every question and answer until the solicitation closes.
Manufacturers have another source of help. The directive lists Manufacturing Extension Partnership centers among the helpers a firm can name in a Phase II commercialization plan. The National Institute of Standards and Technology (NIST) describes the partnership as help for smaller American factories and mid-sized ones. The partnership has a nationwide network of centers.
DoD issues three SBIR solicitations a year. Its posted schedule lists the 2015.2 solicitation with pre-release starting April 24, proposals accepted from May 26 and a June 24 close.
Expect a wait. The National Institutes of Health and NSF have up to a year after the close to say whether your proposal was recommended. All other agencies must say within 90 days. SBA can extend either limit by up to 90 days.