Tuesday, May 15, 2012


The Small Business Administration (SBA) has issued a proposed rule governing the size and eligibility for the Small Business Innovation Research SBIR and Small Business Technology Transfer (STTR) Programs.  The proposed rule implements the National Defense Authorization Act (NDAA) for 2012.  The rule addresses ownership, control and affiliation for SBIR and STTR firms.  Comments are due on or before July 16, 2012.

The SBIR program was first enacted in l982.  The statutory purpose of the program is to stimulate technological innovation by strengthening the role of innovative small business concerns in federally funded research and development.  In 1992, Congress enacted the Small Business Technology Transfer Act (STTR) initially establishing the program as a pilot program requiring certain agencies to enter into funding agreements with small business that engage in collaborative relationships with research institutions.  The purpose of the STTR program is to stimulate the interchange of ideas and technologies.  In 2001, Congress made the program permanent.

Late last year, the NDAA extended both programs through September 30, 2017.

Currently, SBA’s size regulations do not permit business concerns majority owned by multiple venture operating companies, hedge funds or private equity firms to participate in the program.  So, Congress has permitted SBA to address ownership, control and affiliation for businesses that are owned by venture capital, private equity and hedge fund firms.  So SBA has proposed that an SBIR and STTR applicant must be more than 50% owned and controlled by U.S. citizens, permanent resident aliens, or domestic business concerns or majority owned by multiple domestic venture capital, hedge funds or private equity firms.

Under the proposed rule, when determining eligibility, in addition to meeting the small business size and affiliation existing rules, the SBIR or STTR applicant would have to consider the following:

1.       Is it more than 50% owned by a single domestic business concern that is a venture capital, hedge fund or private equity firm?  If yes, it is not eligible.

2.       Is it more than 50% owned by one or more U.S. citizens, permanent resident aliens or domestic business concerns?  If yes, it is eligible unless #1 above applies.

3.       Is it more than 50% owned by multiple domestic business concerns that are venture capital, hedge fund or private equity firms?  If yes, then it is eligible unless #1 above applies.

SBA has reviewed the 500 employee size standard and it is not proposing any changes.  This is the current size standard for all research and development NAICS codes including SBIR and STTR.

SBA also addresses affiliation in the proposed rule and has decided to determine eligibility at the time a concern submits an application and at the time of award.  The new rule will appear as amendments to 13 CFR 121.  See 77 Fed. Reg. 28520 (May 15, 2012).


1 comment:

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