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Government Contracts Monitor

SBA Proposes Changes to SBIR and STTR Policy Directives

April 18, 2016

By: Hopewell Darneille

The Small Business Administration (SBA) recently issued proposed amendments to its Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) program Policy Directives. Specifically, the Notice of Proposed Amendments describes plans to combine the two directives into one document, clarify the data rights and Phase III preference afforded to SBIR and STTR small business awardees, and add definitions relating to data rights, among other changes.

SBA proposes to combine the SBIR and STTR policy directives into one a single directive because the two programs have similar purposes and use essentially the same process. The SBIR program aims to stimulate innovation in the US economy by engaging innovative small business concerns (SBCs) in Federally-funded research and research and development (R/R&D). Similarly, the purpose of the STTR program is to foster partnerships of ideas and technologies between innovative SBCs and research institutions through Federally-funded R/R&D. Federal agency awards to SBCs pursuant to the SBIR program and awards to SBCs for cooperative R/R&D efforts with research institutions pursuant to the STTR program both assist the small business and research communities by commercializing innovative technologies.

As the Notice goes on to explain, both programs use a phased process, uniform throughout the Federal Government, to solicit proposals and award funding agreements for R/R&D to meet stated agency needs or missions. To stimulate and foster scientific and technological innovation, including increasing commercialization of Federal R/R&D, the program follows a competitive process of three phases: Phase I, Phase II, and Phase III. The SBIR and STTR Policy Directives outline how agencies must generally conduct their programs, but each agency is allowed to tailor the programs to meet the agency’s needs, as long as the general principles of the program set forth in the Act and directives are followed.

This Notice of Proposed Amendments follows up on SBA’s November 7, 2014 advance notice of policy directive amendments and request for comments (77 FR 66342), which outlined and requested feedback on certain issues concerning data rights and Phase III awards. The more than thirty comments SBA received in response were generally in agreement that the sections of the directives relating to data rights and Phase III awards need further clarification. In addition to addressing a number of other issues, the Notice proposes changes relating to both data rights and Phase III awards.

Data Rights. SBA proposes to add several terms and definitions that relate to SBIR and STTR data rights. Such rights are intended to provide an incentive for small businesses to engage in government-funded innovative research and to support its potential commercialization by giving value to the work performed. The policy directives currently explain that the SBC owns the data generated under the award, and that the Government has an obligation to protect the data from disclosure for at least four years. However, SBA recognizes that agencies with procurement and acquisition programs can face an apparent conflict between the longer term economic development goals of the programs (which depend on the ability of the participating small business to realize the commercial benefits from its new technology) and the shorter term procurement interests of the agency (that focus on acquiring the technology from the SBC at a reasonable cost and controlling its development and application).

To address this potential tension, SBA proposes to clarify the current directive language and add several new terms relating to data rights, including: Computer Database, Computer Programs, Computer Software, Computer Software Documentation, Data, Form Fit and Function Data, SBIR/STTR Technical Data Rights, Operations Maintenance Installation or Training (OMIT) Data, Prototype, SBIR/STTR Computer Software Rights, SBIR/STTR Data, SBIR/ STTR Data Rights, SBIR/STTR Protection Period, SBIR/STTR Technical Data Rights, Technical Data, and Unlimited Rights. SBA has based these definitions, to the extent practicable, on definitions used in the Federal Acquisition Regulations (FAR) and the Defense Federal Acquisition Regulations Supplement (DFARS). Among other things, the proposed new definitions will clarify the data rights afforded the SBC and the Federal government during the statutory SBIR/ STTR protection period, and after the protection period has expired.

The SBA’s proposed new approach to data rights is based on those in the FAR and DFARS, which outline distinct rights the Government generally receives when acquiring goods and services: Unlimited rights, limited rights and specifically negotiated rights (FAR) or government purpose rights (DFARS). In general, the SBA proposes that the agencies get the equivalent of Limited or Restricted Rights in Technical Data and Computer Software during the protection period and the equivalent of Unlimited Rights (instead of Government Purpose Rights) when the period ends. SBA also proposes that the minimum length of the SBIR/STTR Protection Period be increased from 4 years to 12 years and to remove the provision that allows a subsequent SBIR/STTR award to extend the protection period of a related, prior SBIR/STTR award.

Phase III Awards. Despite the current policy requirement that an agency wishing to pursue further any work that was performed under an SBIR or STTR award must, to the greatest extent practicable, work with the SBIR or STTR awardee that performed the earlier work SBA continues to hear complaints that agencies are not meeting this requirement. To address this problem, SBA proposes to amend the directive language to explain that if the requirement is or includes Phase III work, or if the agency is later informed that it is or includes Phase III work, the agency must document that the requirement is Phase III and then evaluate the practicability (to the greatest extent) of pursuing the required work with the SBIR or STTR awardee that conducted the prior SBIR or STTR work. This would mean that the agency must first consider whether it can issue a sole source award to the Phase I or Phase II awardee. Awarding the Phase III work to the SBIR or STTR firm on a sole source basis would not be practicable if, for example, the firm is no longer in business or cannot perform the work itself or with subcontractors. SBA proposes that the decision by the agency that it is not practicable to issue a sole award to the SBIR/STTR Awardee must be documented in the contract file and a copy of that decision, including the rationale, provided to SBA.

In addition, SBA proposes that if the agency determines that it cannot issue a sole source award for the Phase III, then it must consider whether there are other ways to provide the preference to the SBIR/STTR Awardee such as, for example, including a brand-name requirement for the SBIR/STTR Awardee’s deliverable within its solicitation when appropriate or including an evaluation factor for prime contractors or evaluation points for prime contractors that utilize SBIR/ STTR Awardees. Unless the agency finds that it is not practicable to pursue the Phase III work with the SBIR or STTR Awardee, the agency must provide a preference and must always consider issuing a sole source award first and foremost when providing this preference.

Submission of Comments. Although the policy directives are intended for use by the participating agencies, SBA believes that public input on the proposed provisions from all parties involved in the program is invaluable. Therefore, SBA is soliciting public comments on these proposed amendments. Interested parties must submit their comments, identified by RIN: 3245–AG64, on or before June 6, 2016 through the Federal eRulemaking Portal: http:// www.regulations.gov or via mail, hand Delivery, or courier to: Edsel Brown, Assistant Director, Office of Innovation, U.S. Small Business Administration, 409 Third Street SW., Washington, DC 20416.


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