LegiStorm

Summary:

The Small Business Innovation Research (SBIR) program was established in 1982 by the Small Business Innovation Development Act (P.L. 97-219) to increase the participation of small innovative companies in federally funded 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 2014, 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 2014, five federal agencies operate STTR programs. Both the SBIR and STTR programs have three phases. Phase I funds feasibility-related research and development (R&D) related to agency requirements. Phase II supports further R&D efforts initiated in Phase I that meet particular program needs and that exhibit potential for commercial application. Phase III is focused on commercialization of the results of Phase I and Phase II grants, however 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. Most recently, the programs were reauthorized through September 30, 2017 under the SBIR/STTR Reauthorization Act of 2011 which was enacted as Division E of the National Defense Authorization Act for Fiscal Year 2012 (P.L. 112-81). Among its provisions, the act incrementally increases the set-aside for the SBIR effort to 3.2% by FY2017 and beyond; incrementally expands the set-aside for the STTR activity to 0.45% in FY2016 and beyond; increases the amount of Phase I and Phase II awards; allows recipients of a Phase I award from one federal agency to apply for a Phase II award from another agency to pursue the original work; allows the National Institutes of Health, the Department of Energy, and the National Science Foundation to award up to 25% of SBIR funds to small businesses that are majority-owned by venture capital companies, hedge funds, or private equity firms, and allows other agencies to award up to 15% of SBIR funds to such firms; creates commercialization pilot programs; and expands oversight activities, among other things. Through FY2011, federal agencies had made more than 133,000 awards totaling $33.7 billion under the SBIR and STTR programs. In FY2011, agencies awarded $2.224 billion in SBIR funding. The Department of Defense (DOD) and Department of Health and Human Services (HHS) accounted for more than three-fourths of SBIR funding in FY2011. While more than two-thirds of SBIR grants made in FY2011 were Phase I awards, more than three-fourths of SBIR funding went to Phase II awards. In FY2011, agencies awarded $251.2 million in STTR funding. DOD and HHS accounted for nearly four-fifths of STTR funding. Like the SBIR program, most STTR grants (76%) were for Phase I awards, while most funding (76%) went to Phase II awards. In exercising its oversight authorities for the SBIR and STTR programs, Congress has placed a strong emphasis on monitoring the implementation and effects of changes made by the 2011 reauthorization act. In particular, Congress has expressed continuing interest in the participation of majority-owned venture capital firms in the SBIR program, the effectiveness of efforts seeking to improve commercialization outcomes, the share of awards and funding received by women-owned and minority and disadvantaged firms, and the SBA's agency coordination, policy guidance, data collection, and dissemination responsibilities.