SBA's SBIR Policy Directive Changes - January 8, 2014

Unofficial Presentation by SBIR Insider - www.zyn.com/sbir

4. Competitively Phased Structure of the Program
Section (4)(a)(3)

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(3) Agency benchmarks for progress towards commercialization. AgenciesEach agency must determine whether an applicant for a Phase I award that has metwon multiple prior SBIR awards meets the agency's benchmark requirements for progress towards commercialization. For Phase I eligibility purposes, agencies will establish a threshold for the application of these benchmarks where they arecommercialization before making a new Phase I award to that applicant. For the applied only to Phase I applicants that have received more than 20 Phase I awards over the prior 5, 10, or 15 fiscal years (excluding the most recently completed fiscal year) or has received more than 15 Phase II awards over that period (excluding the most recently completed two fiscal years). Agencies must base these benchmarks on the SBC's SBIRpurpose of this requirement, applicants are assessed using their prior Phase I and Phase II SBIR and STTR awards across all SBIR agencies.

 

    (i) Agencies must apply two benchmark rates addressing an applicant's progress towards commercialization--the Phase I-Phasecommercialization—the Phase II Transition Rate Benchmark and the Commercialization Rate Benchmark.

 

        (A) The Phase I-Phase II Transition Rate benchmark sets the minimum required number of Phase II awards the applicant must have received for a given number of Phase I awards during a specified period. (B) The Commercialization Rate benchmark sets the minimum Phase III commercialization results a Phase I applicantII Transition Rate Benchmark sets the minimum required number of Phase II awards the applicant must have received for a given number of Phase I awards received during the specified period. This Transition Rate Benchmark applies only to Phase I applicants that have received more than 20 Phase I awards must have realized from its prior Phase II awards.

 

    (ii) An applicant that does not meet either of these benchmarks at the time it submits its application to the agency is not eligible for that particular SBIR Phase I award and any other new SBIR Phase I awards (and any Phase II awards issued pursuant to paragraph (b)(1)(ii) below) of that agency for a period of one year from the date of the proposal or application submission. The agency must provide written notification of its determination and the one year restriction on Phase I awards to the applicant and to SBA. See section 9(b) for further information about how an agency establishes these benchmarks. (iii) Establishing the Phase I-Phase II Transition Rate. Beginning October 1, 2012, each agency must establish an SBA-approved Phase I-Phase II Transition Rate benchmark. The agency must report any subsequent change in the benchmark rate to SBA for approval.

 

        (A) The benchmark will establish the number of Phase II awards a small business concern must have received for a given number of Phase I awards over the prior 5, 10 or 15 fiscal years, excluding the most recently completed fiscal year. For example, if a SBC submits its application on January 2012, the agency may require that the SBC have received at least one Phase II award for every 10 Phase I awards it received during fiscal years 2001 through 2010. (B) Agencies must set the benchmark as appropriate for their programs and industry sectors. When setting this benchmark, agencies should consider that Phase I is designed and intended to explore high- risk, early-stage research and, as a result, a significant share of phase I awards will not result in a Phase II award.

 

    (iv) Establishing the Commercialization Rate. Beginning October 1, 2013, each agency must establish an SBA-approved Commercialization Rate benchmark that establishes the level of Phase III commercialization results a SBC must have received from work it performed under prior Phase II awards, over the prior 5, 10 or 15over the time period used by the agency for the benchmark determination. (B) The agency Commercialization Rate Benchmark sets the minimum Phase III commercialization results that a Phase I applicant must have realized from its prior Phase II awards in order to be eligible to receive a new Phase I award from that agency. This benchmark requirement applies only to Phase I applicants that have received more than 15 Phase II awards over the time period used by the agency for the benchmark determination.

 

    (ii) Consequence. If an awardee fails to meet either of the benchmarks, that awardee is not eligible for an SBIR Phase I award (and any Phase II award issued pursuant to paragraph (b)(1)(ii) below) for a period of one year from the time of the determination.

 

    (iii) Timing of the determination and consequence period. The SBIR awardee Phase II transition rates and commercialization rates are calculated using the data in SBA's TechNet database. For the purpose of these benchmark requirements, awardee firms are assessed once a year, on June 1st, using their prior SBIR and STTR awards across all agencies. SBA makes this tabulation of awardee transition rates and commercialization rates available to the agencies. Each SBIR agency uses this tabulation to determine which companies do not meet that agency's benchmark rates and are therefore ineligible to receive new Phase 1 awards from that agency during the one-year period beginning on June 1st and ending on May 31st. SBA notifies these ineligible firms of the determination and the one year restriction on Phase I awards. Agencies must notify SBA of any applications denied because of the failure to meet the benchmarks.

 

    (iv) Phase II Transition Rate Benchmark. Each agency must establish an SBA-approved Phase II Transition Rate Benchmark and applicable time period. The benchmark rates and time periods are posted at www.sbir.gov. Agencies must seek approval for any subsequent changes from SBA.

 

        (A) The agency Phase II Transition Rate Benchmark establishes the number of Phase II awards a small businessconcern must have received for a given number of Phase I awards received over the past 5, 10 or 15 fiscal years, excluding the most recently completed fiscal year. Each agency selects both the rate to be applied and the length of time that the agency will use to evaluate whether a small business concern has met the Transition Rate Benchmark. The period over which Phase I awards are counted excludes the most recently completed fiscal year. The time period over which Phase II awards are counted includes the most recently completed fiscal year and excludes the first year of the time period evaluated for Phase I awards.

 

            Example: On August 1, 2014, an SBC submits an application to an agency using a Transition Rate Benchmark of 0.25 and a 5-year time period. The June 1, 2014 TechNet Company Registry tabulation shows that the SBC received 24 Phase I awards during FY08-FY12. Since this SBC has received 20 or more Phase I awards during the 5-year period, the SBC is required to meet the Transition Rate Benchmark. The SBC received 8 Phase II awards in FY09-FY13 and therefore has a 5-year Phase II transition rate of 8/24 or 0.33 (# of Phase II awards in FY09-FY13/# of Phase I awards in FY08-FY12). Because the SBC meets or exceeds the agency Transition Rate Benchmark, it is considered for award through the usual proposal evaluation process.

 

            Example 2: On September 1, 2014, an SBC is interested in applying for a Phase I award, knows it has received a number of Phase I awards in recent years, but is unsure if it is meeting the required Phase II transition rate. The company official logs onto the Company Registry at SBIR.gov to check its status and sees a flag saying it did not meet the required benchmark transition rate of 0.25 on June 1, 2014 and is therefore ineligible for a Phase I award through May 31, 2015. The company checks its records and sees that it received 30 Phase I awards during FY08-FY12 and 6 Phase II awards during FY09-FY13. Its transition rate is therefore 6/30 or 0.20 which is under the required rate of 0.25. The SBC does not apply for a new Phase I award through May 31, 2015 because it knows its application would be rejected.

 

            Example 3: On September 1, 2014, an SBC official interested in applying for a Phase I award logs onto the Company Registry at SBIR.gov and sees the flag saying it did not meet the required benchmark transition rate of 0.25 on June 1, 2014 and is not eligible for a Phase I award through May 31, 2015. However, when the company checks its own records, it sees that it received 8 Phase II awards during FY09-FY13, not the 6 awards showing on the Web site. Its transition rate is therefore 8/30 or 0.26 which is above the required rate of 0.25. The company official therefore goes to SBIR.gov, clicks on the “Dispute Transition Rate” button, and enters the information about the discrepancy. SBA uses the information provided by the company and, working with the relevant agencies, identifies that two Phase II awards from FY09 had been inadvertently omitted. SBA updates and corrects the database and informs the firm that it is indeed eligible to receive SBIR Phase I awards.

 

        (B) An SBC that has received more than 20 Phase I awards in the relevant time period can view its Phase II transition rate on the Company Registry page at SBIR.gov. Generally, the award data used to calculate an SBC's transition rate will be complete by the end of March each year. An SBC may view its SBIR/STTR award information on the Company Registry at any time. If an awardee believes its Phase II transition rate is calculated using incomplete award information, the awardee may dispute the rate using the link provided on the Company Registry, provide the additional award information, and request a reconsideration of its transition rate. Requests for reconsideration of a firm's transition rate received by SBA from April 1st through April 30th of each year will be considered for the June 1st transition rate assessment.

 

        (C) Agencies must set the Phase II Transition Rate Benchmark as appropriate for their programs and industry sectors. When setting the Transition Rate Benchmark, agencies should consider that Phase I is designed and intended to explore high-risk, early-stage research ideas and, as a result, not all Phase I awards are expected to result in a Phase II award.

 

    (v) Commercialization Rate Benchmark. By October 1, 2013, each agency will establish an SBA-approved Commercialization Rate Benchmark that establishes the level of Phase III commercialization results an SBC must have received from work it performed under prior Phase II awards, over the prior 5, 10 or 15 fiscal fiscal years, excluding the most recently completed two fiscal years. The agency must report any subsequent change in the benchmark rate to SBA for approval.years, excluding the most recently completed two fiscal years. Agencies may define this benchmark:

 

        (A) in financial terms, such as by using the ratio of the dollar value of revenues and additional investment resulting from prior Phase II awards relative to the dollar value of the Phase II awards received over the prior 5, 10 or 15 fiscal years, excluding the most recently completed two fiscal years; ortime period;

 

        (B) in terms of the share of Phase II awards received over the time period that have resulted in the introduction of a product to the market relative to the number of Phase II awards received over the prior 5, 10, or 15 fiscal years, excluding the most recently completed two fiscal years;market; or

 

        (C) by other means such as using a commercialization scoring system that rates awardees on their past commercialization success.

 

    (vi) Agencies must submit these benchmarkstheir Transition Rate Benchmark, Commercialization Rate Benchmark, and time periods to SBA for approval. SBA will publish the benchmark and seek public comment. The benchmark willbenchmarks and time periods, seek public comment, and maintain a table of the current requirements on www.sbir.gov. The benchmarks and time periods become effective when SBA publishes the final, approved benchmark on www.SBIR.gov. If SBA approves a benchmark for a fiscal year, then the agency must report any posts the approved measures on www.sbir.gov. Agencies must submit any changes to the benchmarks or time periods to SBA for prior approval.

subsequent change in the benchmark to SBA for approval.

 

    (vi) SBA will maintain(vii) SBA maintains a system that records all Phase I and Phase II awardsI, Phase II and Government Phase III awards, and other commercialization information; and calculates the Phase I-II Transition RatesII transition rates for all Phase I awardees and the Commercialization Rates for all Phase II awardees. The small business will then be required to provide this information to the agency as part of its application.commercialization rates for all Phase II awardees.

 

    (vii) If the applicant meets these benchmarks, the agency must still evaluate the commercial potential of the specific application and can base this evaluation on agency-specific criteria.(viii) If an applicant fails to meet an agency's benchmark, its name will appear on the list of companies made available to the agencies on June 1 of each year. An agency may not make a Phase I award to an applicant that does not meet the agency's benchmark.

 

    (ix) If an awardee believes its determination was made in error, it may provide SBA with the pertinent award information and request a reassessment. To do so, awardees may use the link on the Company Registry at www.sbir.gov.