[Federal Register Volume 67, Number 185 (Tuesday, September 24, 2002)]
[Notices]
[Pages 60072-60098]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 02-24026]



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Part IV





Small Business Administration





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Small Business Innovation Research Policy Directive; Notice

Federal Register / Vol. 67, No. 185 / Tuesday, September 24, 2002 / 
Notices

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SMALL BUSINESS ADMINISTRATION

RIN 3245-AE72


Small Business Innovation Research Program Policy Directive

AGENCY: Small Business Administration.

ACTION: Notice of final Policy Directive.

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SUMMARY: This document revises the Small Business Innovation Research 
(SBIR) Program Policy Directive. This revised Policy Directive reflects 
statutory amendments to the SBIR Program and provides guidance to 
Federal agencies for the general conduct of the program.

DATES: This final Policy Directive is effective on September 24, 2002.

FOR FURTHER INFORMATION CONTACT: Maurice Swinton, Assistant 
Administrator for Technology, Office of Technology, Office of 
Government Contracting, Office of Government Contracting/Business 
Development, U.S. Small Business Administration, 409 3rd Street, SW, 
Washington, DC 20416 or via e-mail to technology@sba.gov.

SUPPLEMENTARY INFORMATION: In 1982, Congress enacted the Small Business 
Innovation Development Act of 1982 (SBIDA), Public Law 97-219 (codified 
at 15 U.S.C. 638), which established the Small Business Innovation 
Research Program (SBIR Program). The statutory purpose of the SBIR 
Program is to strengthen the role of innovative small business concerns 
(SBCs) in Federally-funded research and research and development (R/
R&D). The SBIR Program is a phased process, uniform throughout the 
Federal Government, of soliciting proposals and awarding 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 must follow 
a uniform competitive process of three phases: Phase I, Phase II, and 
Phase III.
    SBIDA requires the U.S. Small Business Administration (SBA) to 
``issue Policy Directives for the general conduct of the SBIR programs 
within the Federal Government.'' 15 U.S.C. 638(j)(1). SBA published its 
first Policy Directive, Policy Directive No. 65-01, 19 years ago (47 FR 
52966, Nov. 24, 1982). The last SBIR Policy Directive amendments were 
published 9 years ago (58 FR 6144-6158, Jan. 26, 1993).
    In December of 2000, Congress enacted the Small Business Innovation 
Research Program Reauthorization Act of 2000 (Reauthorization Act), 
Public Law 106-554. The Reauthorization Act extends the SBIR Program 
through September 30, 2008. In addition, the Reauthorization Act: (1) 
Requires SBA to clarify that the rights to data generated during the 
performance of an SBIR award apply to all SBIR awards, including Phase 
I, II, and III; (2) requires the establishment of SBIR Program 
Government-accessible and public-accessible databases; (3) requires 
that each application for a Phase II award contain a succinct 
commercialization plan; (4) requires agencies to report to SBA all 
instances in which the agency pursues research, development, or 
production of a technology developed by an SBIR Phase I or II awardee 
and determined that it was not practicable to enter into a follow-on 
Phase III award with that awardee; (5) clarifies when a Phase III award 
can be issued; (6) requires agencies with SBIR budgets over $50,000,000 
to enter into an agreement with the National Academy of Sciences for 
the National Research Council to conduct a review of their SBIR 
Program; (7) requires agencies to report to SBA annually on the 
calculations of the agency's extramural budget within 4 months of 
enactment of the agency's annual Appropriations Act; and (8) 
establishes the Federal and State Technology (FAST) Partnership Program 
to strengthen the technological competitiveness of SBCs in the United 
States.
    To implement these statutory changes, and to streamline the current 
Directive, SBA published a proposed Policy Directive on May 18, 2001. 
See 66 FR 27721. The public comment period closed on June 18, 2001. 
However, SBA believed that SBCs needed more time to respond and 
therefore re-opened the comment period until July 23, 2001. 66 FR 33598 
(June 22, 2001). SBA received over 200 comments from 30 different 
comment letters on the proposed Directive. This final Directive 
includes changes based on some of the comments received.

Summary of General Comments

    SBA received several comments that were general in nature. One 
commenter noted that the Directive does not diminish the independence 
of participating agencies. SBA concurs. Section 9(j) of the Small 
Business Act (Act) requires that SBA issue an SBIR Program Policy 
Directive to provide guidance to the Federal agencies participating in 
the SBIR Program for the general conduct and operation of the Program. 
While the SBIR agencies are obligated to follow the guidance contained 
in the Policy Directive, each agency determines, in consultation with 
SBA, such items as the categories of research projects to be included 
in its SBIR Program, the number of solicitations issued during a fiscal 
year, the dates for receipt of proposals, and the evaluation and 
selection procedures employed in making SBIR awards. Thus, the Policy 
Directive is designed to guide the SBIR agencies in the operation of 
their program.
    Another commenter noted that this Directive might result in an 
increase in administrative costs in order to comply with all of the 
requirements and that its administrative money might come from outreach 
activities. In response to this comment, SBA reminds agencies that the 
Act prohibits SBIR agencies from using any of their SBIR allocated-
funds for financing the administrative costs associated with the 
operation of the SBIR Program. The Act also requires that agencies 
increase their outreach efforts to increase the participation of 
socially and economically disadvantaged small business concerns and 
women-owned small business concerns in the SBIR Program, including in 
the commercialization phase (Phase III) of the Program. SBA is not 
permitted to offer any relief to the SBIR agencies regarding these 
provisions.
    One commenter stated that there is a need to maximize topics, 
subtopics and descriptions. SBA believes that the Policy Directive 
addresses this concern when it states that each SBIR agency must 
``issue a program solicitation that sets forth a substantial number of 
R/R&D topics and subtopic areas consistent with stated agency needs or 
missions.'' Further, ``each topic and subtopic must describe the needs 
in sufficient detail to assist in providing on-target responses, but 
cannot involve detailed specifications to prescribed solutions of the 
problems.''
    Another commenter noted that it is a good idea to make 
solicitations as uniform as possible. SBA notes that Appendix I of the 
Policy Directive contains instructions to the SBIR agencies designed to 
produce solicitations that are prepared in a standardized, easy-to-
read, and easy-to-understand format.
    Other commenters requested that SBA be consistent with using 
``Phase I,'' etc. as opposed to ``phase one.'' SBA concurs that it is 
easier to read and has changed the Policy Directive to read ``Phase 
I,'' Phase II,'' and ``Phase III,'' as appropriate throughout the 
document.
    One comment letter questioned what happens to the 1993 Policy 
Directive when this one becomes final. SBA would like to make it clear 
that this is the final SBIR Program Policy Directive and upon its 
effective date it supersedes

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any previously issued SBA Policy Directive, including the 1993 
Directive.
    SBA received several comments to the different sections of the 
Directive. In addition, SBA makes some clarifications and changes. The 
following is a section-by-section analysis of the final Directive, 
including comments received for each section and changes made.

Section-by-Section Analysis

    Section 1 of the Policy Directive addresses the purpose of the 
program and Directive. SBA did not receive any comments on this section 
and made no substantive changes to it.
    Section 2 of the Directive is a summary of pertinent legislative 
provisions. SBA received several comments on this section expressing 
concern that the Directive ignored the ``Coordination of Technology 
Development Programs'' which is a statutory requirement of the 
Reauthorization Act. Section 9(u) of the Act permits each agency that 
established a Technology Development Program to utilize that program in 
furtherance of its SBIR Program. The Policy Directive, in section 9, 
Responsibilities of SBIR Participating Agencies and Departments, now 
includes this provision.
    Section 3 of the Directive contains pertinent definitions for the 
program. SBA made several amendments to this section and received 
several comments. SBA added a definition for ``additionally eligible 
state,'' which is consistent with the statutory definition. SBA adds 
this term because it is referenced in the Coordination of Technology 
Development Programs. SBA amends the Policy Directive and addresses 
this program in section 9 of the Directive.
    SBA received two comments on the definition of ``funding 
agreement,'' and amends that definition in response to the comments. 
One commenter stated that the proposed definition recognizes ``other 
transaction'' as a type of SBIR award and to therefore make sure it is 
listed every time ``contract, grant or cooperative agreement'' is 
mentioned. Another commenter believed that the proposed definition of 
``funding agreement'' should not refer to an ``entity,'' should not 
include ``other funding transactions,'' and has been expanded to 
include services, but not products. The commenter recommend deleting 
``other funding transaction'' and ``other entity,'' and revising the 
definition to include all phases of SBIR work scope envisioned by law 
(performance of experimental, developmental, research, services, or 
production of technology).
    SBA concurs with this last commenter. The Small Business Act, in 
defining ``funding agreement,'' identifies the following three award 
instruments only: contract, grant, and cooperative agreement. 
Therefore, the Policy Directive is changed to remove ``other 
transaction'' as a type of award allowable under the SBIR Program. In 
addition, the final definition no longer refers to ``other entity,'' 
and only refers to ``small businesses.'' Finally, SBA believes that the 
definition, which includes awards for the performance of 
``experimental, developmental, or research work'' funded in whole or in 
part by the Government, includes services and products within its 
ambit. SBA has stated so in the Directive.
    Two commenters requested amendments to the definition of ``joint 
venture.'' One commenter stated that a joint venture should be an 
entity that exists as a particular and discrete unit under the law, has 
its own Employer Identification Number (EIN), and qualifies as a SBC 
for eligibility under this program. Another commenter did not believe 
that a joint venture should have to be a totally new and separate legal 
entity with its own EIN. SBA considered these comments and this issue 
and believes that for purposes of the SBIR Program, a joint venture is 
an association of concerns with interests in any degree or proportion 
by way of contract, express or implied, consorting to engage in and 
carry out a single specific business venture for joint profit, for 
which purpose they combine their efforts, property, money, skill, or 
knowledge, but not on a continuing or permanent basis for conducting 
business generally. Further, for purposes of the SBIR Program, a joint 
venture is viewed as a business entity in determining power to control 
its management and is eligible under the SBIR Program provided that the 
entity created is small and each concern that is part of the joint 
venture qualifies as a SBC. This definition of joint venture is 
consistent with the definition of joint venture in the Federal 
Acquisition Regulations (FAR). SBA notes that joint ventures must meet 
the requirement that the principal investigator have his or her primary 
employment with the SBC at the time of a Phase I and II award and 
during the conduct of the SBIR project.
    One commenter recommended changing the definition of ``program 
solicitation'' to a ``formal solicitation of topics.'' SBA does not 
concur entirely with this comment, but has amended the definition of 
Program Solicitation to read: ``A formal solicitation for proposals 
whereby a Federal agency notifies the small business community of its 
R/R&D needs and interests in broad and selected areas, as appropriate 
to the agency, and requests proposals from SBCs in response to these 
needs and interests.''
    SBA adds definitions for the terms ``SBIR Technical Data'' and 
``SBIR Technical Data Rights'' and deletes the term ``data rights.'' 
SBA provides these definitions because it received many inquires from 
SBCs concerning what data was actually protected under the SBIR 
Program, and what rights business concerns have regarding their SBIR 
developed technologies.
    Two commenters expressed concern over the definition of ``small 
business concern'' because they believe the definition indicates that 
by simply paying taxes to the U.S., the requirement of a 51% U.S. 
ownership of the company securing the SBIR award has been met. This is 
not true. The definition of small business concern is a concern that is 
organized for profit, with a place of business located in the United 
States, which operates primarily within the United States or which 
makes a significant contribution to the United States economy through 
payment of taxes or use of American products, materials or labor; has, 
including its affiliates, not more than 500 employees, and is at least 
51 percent owned and controlled by one or more individuals who are 
citizens of, or permanent resident aliens in, the United States.
    SBA adds a definition for the term ``Technology Development 
Program,'' which is consistent with the statutory definition. SBA adds 
this term because it has addressed this program in section 9 of the 
Directive.
    Section 4 of the Directive addresses the competitively phased 
structure of the program. SBA received several comments on this section 
of the Directive and amends several provisions.
    In section (b) of the proposed Policy Directive, SBA proposed a new 
policy that would allow participating Federal agencies to fund Phase II 
awards under their SBIR or Small Business Technology Transfer (STTR) 
Programs, which had its origin in either program. Under this proposal, 
agencies would continue to meet the statutory expenditure of the 
extramural budget of 2.5 percent for the SBIR program and .15 percent 
for the STTR program. Any award that would have been funded through 
this process would have been deemed an award of the program which 
provides the Phase II funding. The awardee would have been required to 
meet the eligibility requirements for the

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program under which the Phase II award is funded.
    SBA received several comments regarding this proposal. Most 
commenters believed that the SBIR and STTR Programs are based on 
distinct law, with distinct legislative history, goals and budgets, and 
are therefore not interchangeable programs. This proposal could, they 
stated, weaken each program. Commenters also believed that most STTR 
funds would be used to fund SBIR Phase I projects, and most SBIR funds 
would fund STTR Phase II projects. Commenters also believed that this 
proposal effectively reduces funding for SBIR Phase I awards and takes 
flexibility away from small businesses competing in the SBIR and STTR 
Programs.
    One commenter, however, supported the idea because it allowed a 
project to be supported by a different program in Phase II and this 
could be important in a few cases. In addition, the commenter believed 
it provided flexibility to the agencies.
    Upon review of the comments and the proposal, SBA agrees that the 
two programs are different and distinct and that the proposal could 
weaken each program. Therefore, SBA amends the Policy Directive and 
removes this proposal.
    In addition, SBA received comments concerning awardees eligible to 
compete for a Phase II award. One commenter recommended adding a 
sentence to make it clear that awardees can change their principal 
investigator upon approval by the funding agency. The commenter 
believed this is necessary because principal investigators sometimes 
leave the SBIR company and SBA should ensure that the new principal 
investigator has the proper credentials to complete the project. 
Another commenter believes that SBA should keep the parenthetical that 
states Phase I awardees that are ``novated'' or ``successors in 
interest'' can receive a Phase II award. However, the commenter thought 
SBA should delete the requirement that the same key staff is needed 
because principal investigators and staff change or leave the company 
after a novation. Another commenter believes that a Phase II novation 
agreement should preclude eligibility for a Phase II award.
    SBA retains the provision relating to novation and successor in 
interests. However, SBA amends section 4(b) to permit agencies ``to 
require the original awardee to relinquish its rights and interests in 
an SBIR project in favor of another applicant as a condition for that 
applicant's eligibility to participate in the SBIR Program for that 
project.'' In addition, all applicants and their proposed personnel, 
including the principal investigator and key supporting staff, must 
meet the eligibility and scientific and technical qualifications 
attendant to the SBIR Program. Furthermore, SBA notes that it amends 
section 6(a)(4) to permit agencies to approve a change in principal 
investigator. Finally, although novated funding agreements are 
discussed in the Policy Directive in the context of Phase II, the same 
applies to situations involving Phase I and III awards.
    SBA received several comments on Phase III of the SBIR Program, 
including several on the scope of a Phase III award. One commenter 
stated that the term ``derives from'' should be deleted from the 
description of Phase III work because it is too broad. Along similar 
lines, one commenter asked that SBA clarify whether all contracts are 
automatically Phase III contracts where an agency makes a series of 
successive follow-on awards to the Phase III contractor further 
developing and producing the SBIR technology. The commenter is 
concerned that the Directive may be limiting an agency's flexibility in 
awarding Phase III contracts or even requiring Phase III awards for 
follow-on efforts to large businesses that developed technology many 
years ago. Another commenter requested clarification that a follow-on 
non-SBIR program funding agreement is a Phase III agreement only when 
the agency is contracting with the same business concern that was 
awarded the Phase II contract. One commenter recommended re-writing 
this paragraph to state that a Phase III award is one that has its 
origins in, extends, or is the logical conclusion of Phases I and II.
    SBA believes that the statute and legislative intent dealing with 
Phase III awards is clear and includes work that ``derives from'' prior 
SBIR work. SBA amends section 4(c) of the Policy Directive to be clear 
in the definition, application, and status of Phase III awards. 
Accordingly, section 4(c) provides that ``SBIR Phase III refers to work 
that derives from, extends, or logically concludes effort(s) performed 
under prior SBIR funding agreements.'' In addition, SBA has amended the 
Directive to state that an agency official may determine, using the 
Directive's guidance, whether a contract or other funding agreement is 
a Phase III award.
    With respect to Phase III in general, one commenter stated that 
``work share'' can be accomplished in Phase I and II, but questioned 
why it could not also be used for Phase III. Statutory provisions for 
the conduct of work with SBIR funds relate to Phases I and II only. 
Arrangements for work to be accomplished in Phase III awards are 
matters of negotiation between agencies and awardees.
    SBA received several comments on data rights for Phase III (which 
are discussed in other sections of the Directive, as well). One 
commenter suggested that an SBIR Phase III awardee should not have data 
rights where a competition is held. Another suggested that the 
Directive should clarify that intellectual property data rights 
protections on an SBIR Phase III award are afforded only to new 
technical data generated under the SBIR funding agreement. The 
commenter believes that any part of a technical data package on a Phase 
III funding agreement that includes data originally generated under 
prior SBIR funding agreements, where intellectual property protections 
have expired, should not be afforded the additional 4 years protection.
    SBA believes that section 4(c)(2) of the Policy Directive clearly 
states that a ``Phase III award is, by its nature, an SBIR award, has 
SBIR status, and must be accorded SBIR data rights.'' As provided in 
section 8(b)(2) of the Directive, data rights are protected by agencies 
for a period of not less than 4 years from delivery of the last 
deliverable under the Phase I, II, or III award. In addition, SBA 
believes that even if a competition is held, if the awardee was a Phase 
II SBIR awardee and the contract is for work that derives from, 
extends, or logically concludes that firm's work, the contract must 
have all SBIR Phase III status and data rights.
    SBA also received comments regarding competition requirements for 
Phase III. Two commenters asked for clarification of Phase III 
``follow-on'' requirements. One stated that the language ``has been 
competitively selected using peer review or scientific review 
criteria'' sounds like competition is necessary, and the other 
commenter asked whether an agency's technical review process under 
Phase I and Phase II meets the requirement for peer review or 
scientific review under Phase III. The statement that Phase III awards 
may be made using non-SBIR funding for the ``continuation of R/R&D that 
has been competitively selected using peer review or scientific review 
criteria'' means that competition is not necessary again, because 
competition via this peer review, etc. occurred for prior SBIR phases.
    SBA also received several comments on the justification and 
approval (J&A) requirements for Phase III awards discussed in section 
4(c)(3). One

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commenter recommended that SBA specifically state that no J&A is needed 
in Phase III. The commenter stated that agencies believe J&As limit 
their authority to issue a sole source award in Phase III. In addition, 
agencies might also limit the scope of Phase III awards to the scope of 
the J&A. Two commenters stated that FAR 6.302-5 states that a J&A is 
not required when the statute expressly requires the procurement be 
made from a specific source but one is required when the statute only 
authorizes it. This commenter argued that the Small Business Act only 
authorizes, but does not require, that the procurement be made from the 
successful Phase II awardee. Another commenter recommended stating that 
issuance of a J&A does not change the SBIR status or limit data rights 
for Phase III awardees and requested that this amendment apply 
retroactively.
    SBA amends the Policy Directive to address several of these 
comments. According to the Competition in Contracting Act, when 
awarding a contract pursuant to 10 U.S.C. 2304(b)(2), the procuring 
agency need not prepare a J&A. 10 U.S.C. 2304(b)(3); see also 41 U.S.C. 
253(b)(3). Section 2304(b)(2) states that the head of an agency may 
provide for the procurement of property or services using competitive 
procedures, but excluding concerns other than small business concerns 
in furtherance of sections 9 and 15 of the Act (15 U.S.C. 638, 644). 10 
U.S.C. 2304(b)(2). Section 9 of the Small Business Act addresses the 
SBIR Program. Therefore, a procuring agency may restrict competition 
under the SBIR to small businesses or a small business (if that is all 
that can perform the award) and is not required by statute to prepare a 
J&A.
    Consequently, SBA has revised the Directive to provide that a J&A 
is not required to fund an SBIR Phase III project, but if an agency 
wishes to prepare one, ``it is sufficient to state for purposes of a 
Justification and Approval pursuant to FAR 6.302-5, that the project is 
an SBIR Phase III award that is derived from, extends, or logically 
concludes efforts performed under prior SBIR funding agreements and is 
authorized under 10 U.S.C. 2304(b)(2) or 41 U.S.C. 253(b)(2).'' All 
provisions of this SBIR Program Policy Directive are effective upon 
publication in the Federal Register and supercede those contained in 
previously issued SBA Policy Directives concerning the SBIR Program, 
but are not retroactive.
    One commenter requested clarification on section 4(c)(5), which 
states there is no limit on the number, duration, or dollar value of 
Phase III awards made to a business concern. One commenter recommended 
such awards be cut off in time (perhaps after the period of protection 
of the SBIR data rights). SBA has reviewed these comments and believes 
the Directive is clear: ``there is no limit on the number, duration, 
type, or dollar value of Phase III awards made to a business concern,'' 
or ``on the time that may elapse between a Phase I or Phase II award 
and Phase III award, or between a Phase III award and any subsequent 
Phase III award.''
    SBA also received several comments on reporting requirements for 
Phase III. Two commenters stated that the Policy Directive implies that 
agencies must report every time they do not issue a Phase III award to 
a Phase II awardee. One commenter noted that the statute limits the 
reporting requirements to instances where the agency is pursuing 
technology developed under the SBIR program of that agency (as opposed 
to the technology developed under the SBIR program of another agency); 
the SBIR business concern remains a small business; and the agency 
makes the decision to pursue the technology from a source other than 
the SBIR business concern. One commenter recommended making it clear 
that agencies only have to report when they issue an award to a 
concern, other than the Phase II awardee, for a technology developed by 
the SBIR concern. Another commenter stated that the agency SBIR Program 
Manager would have no way of knowing whether or not a contract was not 
awarded to an SBIR Participant, so it will be difficult to give such 
data to SBA.
    SBA believes that section 4(c)(7) (and 10(b)(13)) of the Policy 
Directive is clear that agencies are required to report only those 
instances where a follow-on award with non-SBIR funds was issued to a 
concern other than the SBIR awardee that developed the technology to be 
pursued under the follow-on award. In addition, SBA believes that the 
``notice'' requirement in section 4(c)(7), as well as the ``reporting'' 
requirements in section 10(b)(13), require agency coordination of, at 
least, SBIR Program Managers/Coordinators and contracting activities. 
SBA does not believe that the reporting requirements are limited to 
instances where the SBIR business concern remains a small business. The 
statute and legislative history evidence that the intent of the program 
is to help small businesses grow through commercialization in Phase 
III. Therefore, when agencies make follow-on awards to a concern other 
than the one that received the Phase I and II award, this should be 
reported to Congress.
    SBA received several comments concerning the size of a Phase III 
awardee. One commenter stated that there is a contradiction between 
sections 4(c)(7) and 6(a)(1) of the Policy Directive. Section 4 states 
that Phase III awardees need not be eligible as an SBC, but section 6 
states that each awardee under the SBIR Program must qualify as an SBC. 
Several commenters asked for clarification on the size of a Phase III 
awardee. Two commenters thought other than small businesses should not 
qualify for Phase III because it is inconsistent with the intent of the 
SBIR Program. One commenter appeared to support the position that Phase 
III awardees need not be eligible as an SBC.
    SBA reviewed these comments, as well as congressional intent and 
the purpose of the SBIR Program, and determines that Phase III awardees 
do not have to qualify as SBCs. The intent of Congress is that SBIR 
firms should be encouraged in Phase III to develop and expand business 
applications of their SBIR research with the desired outcome that new 
employment and income are generated. The purpose of Phase III is to 
commercialize the innovation and help the SBC grow. Restricting Phase 
III to only SBCs might hinder the growth of SBIR Participants. Section 
4(c)(6) of the Policy Directive is clear that the small business size 
limits do not apply to Phase III awards. Thus status as an SBC is 
required only for receipt of Phase I and Phase II awards.
    One commenter noted that section 4(c)(7) of the Policy Directive 
states that it is the intent of Congress that agencies give special 
acquisition preference, including sole source awards, to the SBIR 
awardee that developed the technology. The commenter asked for 
clarification of this preference and to state that the preference is 
not mandatory. Another commenter stated its support for the special 
acquisition preference for Phase III.
    SBA concurs and believes the Policy Directive is clear that this is 
a preference and is not mandatory. However, there is a statutory 
requirement that SBA establish procedures to ``ensure'' that an agency 
that issues a follow-on award for technology developed by an SBIR 
awardee, executes that follow-on award with that SBIR awardee (see 
Section 4(c)(8) of the Policy Directive) and ``reports'' instances 
where the award was issued to other than that SBIR awardee (see Section 
9(a)(12)). It is clear that Congress intends, to the greatest extent 
practicable, that agencies issue

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Phase III awards to the SBIR awardees that developed the technology.
    Section 5 of the Policy Directive provides guidance on the program 
solicitation process. SBA did not make substantive changes to this 
section. In addition, SBA received few comments on this section. One 
commenter stated its support for the concept of uniform applications 
and standards. SBA notes that the Policy Directive provides 
instructions designed to achieve the maximum consistency practicable 
among the SBIR agencies.
    Another commenter stated that electronic commerce techniques may be 
utilized for soliciting, receiving, evaluating and awarding SBIR 
contracts and the Policy Directive should address this. SBA notes that 
the Policy Directive leaves the identification of and instructions for 
compliance with these techniques to each agency in the presentation of 
its solicitation.
    Section 6 of the Policy Directive sets forth the eligibility and 
application requirements. SBA also received several comments on this 
section.
    One commenter requested that SBA include language in section 
6(a)(1) outlining when a wholly-owned subsidiary can participate in the 
SBIR Program. SBA notes that this issue is addressed in the Policy 
Directive's definition section and in its size regulations (13 CFR 
121.702). Both provide that a concern eligible for an SBIR award must 
be at least 51 percent owned and controlled by one or more individuals 
who are citizens of, or permanent resident aliens in, the United 
States. SBA notes that this issue was also addressed in an Office of 
Hearings and Appeals (OHA) ruling, Size Appeal of CBR Laboratories, 
Inc., SBA No. SIZ 4423 (Jan. 10, 2001). In that appeal, OHA ruled that 
a firm that is otherwise eligible for an SBIR award is disqualified 
because it is wholly-owned by another entity. At this time, SBA is 
considering this issue and if SBA determines that a change in the 
regulation is necessary, it will issue a proposed regulation pursuant 
to Notice and Comment rulemaking. If there is a change in the 
regulation, the Directive will be changed accordingly.
    One commenter suggested that some reference should be made in 
section 6(a) addressing restrictions on the employment of foreign 
nationals to work on SBIR contracts because there are International 
Traffic in Arms Regulations (ITAR), which need to be considered when 
allowing foreign nationals to work on contracts involving technology. 
SBA declines to include this reference because it believes that the 
qualifications of individuals performing under SBIR awards are agency 
determinations.
    One commenter asked for clarification as to whether the 
subcontracting limitation in sections 6(a)(2) and (3) of the Policy 
Directive is defined by dollar value or quantity of work. SBA believes 
that agencies are in the best position to make this determination, 
which may depend on project requirements set by the agency.
    Another commenter noted that Professional Employer Organizations 
(PEO) are referenced in section 6(a)(4) of the Policy Directive, but 
not defined. At this time, SBA is considering a definition that could 
be used for the SBIR Program and for its size regulations, but notes 
that it generally considers a PEO to be an organization that provides 
an integrated approach to the management and administration of the 
human resources and employer risk of its clients, by contractually 
assuming substantial employer rights, responsibilities, and risk, 
through the establishment and maintenance of an employer relationship 
with the workers assigned to its clients.
    One commenter expressed support for section 6(a)(5) of the Policy 
Directive, which allows a grantee to conduct part of the R&D effort 
outside the United States (e.g., proposal may be to develop ways to 
market American Agricultural products overseas so it may be necessary 
to go overseas to conduct some R&D). Another commenter stated that the 
Policy Directive should allow concerns to perform R/R&D outside of the 
United States if there is a special consultant or instrumentation that 
they need. SBA believes that in rare and unique circumstances, agencies 
may approve a portion of the project to be conducted or obtained 
outside of the United States. The Policy Directive provision providing 
for this is designed to increase the likelihood of success in achieving 
the goals and objectives of the research project.
    SBA received a few comments concerning commercialization plans, 
which are discussed in section 6(b) of the Policy Directive. One 
commenter expressed its support for the commercialization plan because 
it will help agencies select Phase II winners with the best chance of 
commercialization. SBA agrees that the statutory requirement for the 
inclusion of a succinct commercialization plan with each Phase II 
proposal moving toward commercialization will enhance significantly the 
likelihood of project success in the marketplace and the ability of the 
agency to identify Phase II participants with the best chance of 
commercialization.
    Another commenter stated that SBA should distinguish between a 
commercialization plan and a business plan in the Policy Directive, 
that there should be a page limit on the commercialization plan and 
that it should not be included in the page limit for the application. 
The Policy Directive prescribes page limits on Phase I proposals only. 
Each agency establishes a Phase II proposal package according to its 
agency-specific requirements. In addition, SBA believes that it has 
provided sufficient guidance in the Policy Directive on what must be 
included in the commercialization plan, and this guidance distinguishes 
a commercialization plan from a business plan.
    One commenter asked for clarification on section 6(b)(1), which 
provides that Phase I proposers with more than 15 Phase II awards must 
``document'' their Phase III funding efforts. In response to this 
comment, SBA notes that an ultimate goal of the SBIR Program is to 
commercialize the subject of the research project. Phase I applicants 
that have received more than 15 Phase II awards in the last 5 fiscal 
years are obligated to ``document the extent to which it was able to 
secure Phase III funding to develop concepts resulting from previous 
Phase II SBIR awards.'' The form of such documentation may include 
letters requesting funding from individuals, financial institutions, 
etc. and the responses received, as well as other items or approaches 
deemed appropriate by agencies in their evaluation of this requirement.
    Section 7 of the Policy Directive outlines the SBIR funding 
process. SBA received several comments to this section. SBA received a 
few comments on section 7(a)(1)(iii). One commenter stated that 
agencies must provide SBA and each SBIR agency a list of Phase I and 
Phase II awardees and suggested that it be sent only to SBA for 
inclusion in Tech-Net so that all agencies can access it. SBA concurs. 
The Tech-Net Database System, as described in Section 11(e) of the 
Policy Directive, is developed and designed to accomplish this 
objective.
    SBA received two comments on funding essentially equivalent work, 
addressed in section 7(a)(1)(iii) of the Policy Directive. One 
commenter thinks it is a good idea for applicants to indicate if 
proposals for essentially equivalent work were made or anticipated to 
be made to prevent duplicative awards. Another commenter noted problems 
that arise with duplicate funding. SBA recognizes that applicants may 
propose essentially equivalent work to more than one agency. The

[[Page 60077]]

requirement is that applicants must inform each agency of a duplicate 
proposal submission to more than one agency. In addition, SBA notes 
that the Policy Directive requires that each agency provide to SBA and 
to each SBIR agency a listing of awardees, including their address and 
title of each project. This information will be uploaded into the SBA 
Tech-Net database, which can then be searched by all SBIR agencies in 
real-time before the issuance of an award for duplicative funding (as 
described in Section 11(e) of the Policy Directive). In addition, 
agency solicitations are required to contain a warning that applicants 
may not receive more than one award for essentially equivalent work.
    SBA received a few comments on reviewing and awarding Phase I 
awards set forth in sections 7(a), (b), and (c) of the Policy 
Directive. One commenter expressed support for external peer review 
with lots of ad hoc reviewers in addition to panel reviewers. The 
commenter felt that this is the best way to ensure a thorough and fair 
review. The commenter noted that outside peer reviews take longer and 
so also supports allowing Phase I to take up to 12 months, based on 
agency needs. Another commenter stated that section 7(a)(1) refers to 6 
months for the time by which Phase I awards should be made after 
solicitation closing date. However, some agencies use less time. The 
commenter questioned whether this was appropriate. Another commenter 
agreed that notifying Phase I awardees within 6 months of a 
solicitation closing date is realistic, although some agencies may be 
doing this in a shorter amount of time.
    SBA recognizes that agencies may have requirements, such as 
external peer review, that may make it difficult to achieve the desired 
time of 6 months from solicitation to award. SBA notes that although 6 
months from the closing date of the solicitation to award is the 
routine ``benchmark,'' agencies are encouraged to reduce that time 
frame wherever practicable. The Policy Directive provides that, based 
on agency needs, agencies are permitted to extend that period up to 12 
months. Although one commenter believes this length of time may place a 
burden on small businesses, SBA disagrees and believes there is a 
strong need for a thorough and fair process.
    One commenter suggested that section 7(c)(1) should state that in 
addition to the basic proposal evaluation criteria, secondary 
considerations might include program balance or critical agency 
requirements. SBA agrees and believes that all proposal evaluation 
considerations should be identified clearly in each agency's 
solicitation. SBA amends the Directive accordingly.
    Several commenters stated that the Directive addresses profit in 
section 7(f), but does not address indirect cost recovery. These 
commenters believe that different indirect cost policies among the 
agencies often cause SBCs to effectively subsidize SBIR projects, which 
is an unintended consequence. Therefore, these commenters recommended 
that SBA provide an indirect cost policy that is uniform across all the 
agencies. SBA does not agree that the Policy Directive should address 
this issue. Each agency has an indirect cost policy designed to 
accommodate the request for recovery of most applicants. Those 
applicants that demonstrate exceptional need should address that need 
to the agency.
    The majority of the comments received on this section concerned the 
funding amounts for Phases I and II. In its proposed Directive, in 
section 7(h), SBA stated that agencies could award SBIR funding 
agreements that exceeded the guideline of $100,000 for Phase I and 
$750,000 for Phase II. Some commenters believed that allowing agencies 
to exceed the Phase I and II guidelines of $100,000 and $750,000, 
respectively, provides too much discretion to the agencies and is 
inconsistent with the statute. These commenters argued that if agencies 
were allowed to award larger funding agreements, less awards would be 
made to small businesses. Other commenters stated that SBA should 
ensure that agencies comply with the funding award guidelines in all 
but limited circumstances and ensure that award amounts are not 
substantially greater than the $100,00 and $750,000 amounts. One 
commenter supported granting awards in excess of the $100,000 and 
$750,000 limitations. Finally, two commenters noted that there was an 
inconsistency in the proposed Directive between sections 7(h)(2) and 
10(b)(7) with respect to when an agency must report Phase I awards to 
SBA.
    SBA has clarified the Policy Directive to identify $100,000 in 
Phase I and $750,000 in Phase II as award amounts that generally may 
not be exceeded. Agencies may exceed these dollar levels where 
appropriate for a particular project, but must provide justification to 
SBA for doing so. SBA believes that this is consistent with the statute 
and legislative history and that flexibility is necessary to achieve 
success in projects that most likely would not be successful otherwise, 
for example, drug discovery.
    Along similar lines, two commenters stated that there should be 
provisions for adjusting the amount of awards for inflation. SBA 
concurs and is currently reviewing the matter. In the meantime, 
agencies may exceed statutory levels where appropriate for a particular 
project, but must provide a written justification to SBA.
    Section 8 of the Policy Directive sets forth the terms of agreement 
under SBIR awards. SBA received several comments on this section. 
Specifically, SBA received numerous comments concerning section 8(b), 
which addresses data rights for Phases I, II and III awards. Two 
commenters suggested that SBA state that the removal or inclusion of 
the SBIR data rights clause is non-negotiable and that the data rights 
clause is automatically inserted into the Phase III award 
notwithstanding an agency's failure or refusal to do so. The commenter 
also wanted these changes to apply retroactively. Another commenter 
thought that agencies should be allowed to negotiate for these rights 
prior to award.
    Several commenters thought this section, addressing the period of 
data rights protection, should be clarified. One commenter believed 
that as set forth in the proposed rule, the clause means that for 
projects that receive both a Phase I and Phase II award, the 4 year 
protection period begins at the end of Phase I and ends four years 
later. This would mean that data rights from Phase II would only be 
protected for approximately two years following completion of the Phase 
II project. Another comment recommended that SBA should ensure in the 
Directive that agencies know they have to protect all SBIR technical 
data from all prior phases for a period of not less than 4 years from 
completion of the last phase of the SBIR Program. Similarly, one 
commenter stated that the Directive is unclear on protecting rights for 
Phase III work that does not immediately follow a Phase II. For 
example, the proposed Directive stated that the four year protection 
period starts at the end of Phase II, then when a Phase III starts, 
protection is granted during the duration of the Phase III and a new 
four year protection period starts when the Phase III ends. The 
commenter asked what happens if the Phase III does not start until 
after the first four-year clock has run out. Finally, one commenter 
recommended SBA amend the Directive to state that data rights apply to 
subcontracts.
    SBA amends the Policy Directive to clarify that agencies are 
required by statute to protect SBIR data rights developed from Phases 
I, II, and III awards, including subcontracts to such

[[Page 60078]]

awards, for a period of at least 4 years from the last deliverable 
under that award. In addition, SBA amends the Directive to emphasize 
that agencies cannot condition a Phase III award on a concern giving up 
its SBIR data rights. Likewise, the Policy Directive clarifies that 
SBIR data rights can not be negotiated or diminished by the funding 
agency. The Policy Directive prohibits the negotiation for SBIR data 
rights before awarding an SBIR funding agreement. Negotiations with the 
SBIR awardee must be via a separate agreement, made without pressure or 
coercion by the agency or any other party.
    The Policy Directive also clarifies that any data developed under a 
Phase III funding agreement must be protected by SBIR data rights. Any 
data developed under Phase I, II, or III continues to be protected for 
a period of at least 4 years from delivery of the last deliverable 
under that award. The Policy Directive clarifies that although agencies 
are released from obligation to protect SBIR data upon expiration of 
the protection period, any such data that is also protected and 
referenced under a subsequent SBIR award must remain protected through 
the protection period of that subsequent SBIR award. For example, if a 
Phase III award that is issued within the Phase II data rights 
protection period refers to and protects the data developed and 
protected under the Phase II award, then that data must continue to be 
protected through the Phase III protection period.
    SBA received one comment on patents and copyrights. The comment 
stated that SBA should clarify the data rights because neither the 
statute nor the SBA Directive establish separate rights of the parties 
respecting patents or copyrights. SBA believes that these subjects are 
covered adequately in the instructions to agencies for preparation of 
SBIR Program solicitations (Appendix I).
    SBA received one comment requesting that the Policy Directive 
address the selling of licenses or technical data language and the 
Government purchasing such data from SBIR awardees. SBA believes that 
agencies or their prime contractors, Government-owned, contractor-
operated facilities, or Federally-funded research and development 
centers should negotiate the purchase or licensed use of SBIR funded 
technology directly with the SBIR awardee. This should be done through 
the agencies' routine acquisition and procurement procedures and should 
not be a condition of the SBIR funding agreement.
    Section 9 of the Policy Directive outlines the responsibilities of 
SBIR Participating Agencies and Departments. One commenter stated that 
it is not realistic for agencies to provide a report to SBA within 4 
months of receiving their appropriations, as required by section 
9(a)(1). SBA can not change this requirement or time period and notes 
that the Small Business Act specifically prescribes this time period.
    SBA received several comments on reporting requirements of SBIR 
agencies. Two commenters queried whether, pursuant to section 9(a)(12) 
of the Policy Directive, participating agencies must report every Phase 
II effort that does not result in a Phase III award. Both commenters 
thought that the requirement was too broad and should be narrowed. A 
separate commenter supported this reporting requirement. Two commenters 
argued that SBIR Program Managers do not know when such a contract may 
have been issued to a non-SBIR awardee.
    Another commenter stated that it interprets the reporting 
requirements of the Policy Directive to apply to cases where an agency 
wants to use the SBC's data/technology but does not want to use the 
original SBC. If the SBIR awardee is still in the four-year protection 
umbrella, the agency cannot release the data/technology. The Policy 
Directive is clear that agencies are required to report only those 
instances where a follow-on award with non-SBIR funds was issued to a 
concern other than the SBIR awardee that developed the technology to be 
pursued under that follow-on award. Finally, SBA believes that the 
satisfaction of this requirement calls for agency coordination of, at 
least, SBIR Program Managers/Coordinators with contracting activities.
    SBA received one comment on section 9(a)(13). The commenter 
questioned who in the agency does the agency's annual performance plan 
and how different that report is from the annual data report. The Act 
requires each agency participating in the SBIR program to submit to SBA 
an annual report on the conduct of its SBIR Program. This is different 
from the Act's requirement that each agency also include a section on 
its SBIR Program as part of its annual performance plan required by 31 
U.S.C. 1115(a) & (b), and must submit such section to the Senate 
Committee on Small Business and Entrepreneurship and to the House 
Committees on Science and Small Business.
    SBA received several comments on the ``Coordination of Technology 
Development Programs,'' and concern that it was not addressed in the 
proposed Directive. Section 9(u) of the Small Business Act permits each 
agency that has established a Technology Development Program to utilize 
that program in furtherance of its SBIR Program. Specifically, the Act 
permits an agency that has established a Technology Development Program 
to review for funding under that program, in each fiscal year, any 
proposal to provide outreach and assistance to 1 or more SBCs 
interested in participating in the SBIR Program. This includes any 
proposal to make a grant or loan to a company to pay a portion or all 
of the cost of developing an SBIR proposal, from an entity, 
organization, or individual located in--(1) a State that is eligible to 
participate in that technology development program; or (2) an 
Additionally Eligible State. This also includes any meritorious 
proposal for an SBIR Phase I award that is not funded through the SBIR 
Program for that fiscal year due to funding constraints, from an SBC 
located in a state identified in (1) or (2) immediately above. The 
Policy Directive, in section 9(b), now includes this provision.
    SBA received two comments seeking clarification on discretionary 
technical assistance. One commenter stated that this section suggests 
that the $4,000 of technical assistance will be in addition to the 
award and will count as part of the agency's SBIR funding. SBA has 
amended section 9(c)(1) of the Policy Directive to provide further 
guidance regarding discretionary technical assistance. The Act allows 
discretionary technical assistance to Phase I and II awardees. Agencies 
may provide up to $4,000 in Phase I for such assistance, in addition to 
the award amount. Each agency may allow Phase II awardees to expend up 
to $4,000 per year for such assistance, using funds available from the 
previously determined award amount. Statutory funding guidelines are 
not altered by this provision.
    SBA received comments noting the ``gaps,'' or length of time 
between SBIR awards. SBA adds a provision addressing gap funding. 
According to section 9(d) of the Policy Directive, agencies are 
encouraged to develop programs to reduce the time period between the 
issuance of SBIR Phase I and Phase II awards. As appropriate, agencies 
should develop accelerated proposal and evaluation procedures designed 
to address the gap in funding these competitive awards.
    SBA adds a provision at section 9(f) that states that each SBIR 
agency must expend 2.5 percent of its extramural budget on awards made 
to SBCs. Agencies may not make available for the

[[Page 60079]]

purpose of meeting the 2.5 percent an amount of its extramural budget 
for basic research that exceeds 2.5 percent. Funding agreements with 
SBCs for R/R&D that result from competitive or single source selections 
other than an SBIR Program will not be considered to meet any portion 
of the 2.5 percent. This is a statutory requirement that agencies have 
been required to follow for several years, and although the extramural 
budget is discussed in section 2 of the Policy Directive, SBA believes 
it should be set forth in full in this section.
    One commenter claimed that although section 9 of the Policy 
Directive bars use of any SBIR budget for administrative costs, there 
are agencies that do this. The Act and the Policy Directive, at section 
9(f)(2), explicitly prohibit any agency from using any portion of its 
SBIR budget for administrative purposes. Any agency that is in 
violation should cease this practice immediately. SBA will monitor the 
allocations of the agencies SBIR budgets more closely in the future, 
and use the report submitted to SBA for calculating their extramural R/
R&D budgets to determine the actual annual SBIR expenditures each 
should allocate. SBA will report to Congress any agency that fails to 
meet the required annual expenditure.
    SBA removes the provision that would have allowed agencies to 
subcontract portions of the SBIR funding agreement back to the issuing 
agency in all instances. SBA received several comments stating that 
agencies should not be allowed to subcontract portions of the SBIR 
funding agreements back to the funding agency or another agency because 
it creates a serious conflict of interest as the awarding agency would 
benefit directly from a proposal it may award. Some commenters believed 
this takes flexibility away from SBCs. One commenter thought this 
provision was a good idea because some of the best scientists work for 
the Government and SBA should not restrict SBIR awardees from working 
with them.
    SBA amends the Policy Directive at section 9(f)(3) to specifically 
state that an agency must not be allowed to subcontract any portion of 
the SBIR award back to the issuing agency or to any other Federal 
governmental unit unless SBA determines, based upon information 
provided by the agency, that it would be helpful to the small business 
and it would not create a conflict of interest.
    Similarly, SBA received two comments on this issue concerning 
Cooperative Research and Development Agreements (CRADAs). One commenter 
stated that it does not think that the subcontracting section should 
apply to CRADAs. Another commenter stated that collaboration between 
agencies and SBCs is possible without the transfer of funds through 
CRADAs. SBA believes that the prohibition on subcontracting should be 
interpreted to mean that no portion of an award financed under the SBIR 
Program may be returned to the issuing agency or to any other 
Governmental unit, unless approved by SBA. This, however, does not 
interfere with the use of a CRADA, or any other collaborative mechanism 
that does not have SBIR funds attached to it, in the performance of an 
SBIR project.
    SBA received two comments on whether or not a Phase II can be 
funded by an agency that did not fund the Phase I award. One commenter 
thought SBA should not allow Phase II awards to be funded by a 
different agency because it encourages firms to shop a turned down 
Phase II. The other commenter thought SBA should allow a Phase II to be 
funded by another agency as long as there are uniform practices. SBA 
believes that allowing a different agency to fund a Phase II award will 
increase the likelihood of success for meritorious Phase II projects 
that would not receive funding otherwise. It is important to note that 
the SBIR Program has allowed the funding of Phase II proposals within 
an agency (for example, Department of Defense and its components, 
Department of Health and Human Services and its components, including 
the National Institutes of Health and its components, etc.) since the 
inception of the Program. In addition, SBA believes that the guidance 
provided for such transfers between agencies assures uniform practice.
    Section 10 of the Policy Directive describes in detail the annual 
report each participating agency must submit to SBA on the SBIR 
Program. One commenter stated that section 10(b)(7) seems to conflict 
with an earlier statement in the Directive that states agencies must 
report only cases in which the cumulative Phase I and Phase II 
guideline of $850,000 are exceeded. Another commenter argued that 
agencies should not have to report this. The Directive is clear that 
agencies are required to report and justify any Phase I award exceeding 
$100,000 and any Phase II award exceeding $750,000. Although the 
Directive permits agencies to exceed these dollar levels where 
appropriate for a particular project, these instances must be reported 
and justified to monitor the program and ensure there is no abuse.
    Two commenters questioned why agencies have to, pursuant to section 
10(b)(8), report when a Phase I process exceeds 6 months, especially 
since the Policy Directive permits the process to take up to one year. 
While SBA recognizes that an agency may not be able to meet the 6 
months from solicitation to award period in all cases, that time frame 
remains as the standard that all agencies should work toward. SBA 
requires this information because it is charged with monitoring the 
program, including ensuring the solicitation and award process is 
performed in a timely and fair manner.
    Section 10(b)(9) of the Policy Directive states that the agency 
must instruct a Phase III awardee to provide the name, address, project 
title, and dollar amount obligated. One commenter questioned whether 
the agency has such authority and another stated that the agency 
already has this information. SBA amended this section to require each 
agency to provide this data.
    Section 10(b)(10) requires the agency to report when only one 
proposal is received. One commenter believed this is unnecessary and a 
burden on the agencies. The commenter believes that it may encourage 
agencies to reduce, rather than maximize, the number of topics and 
subtopics. SBA disagrees. In order to maintain the competitive nature 
of the SBIR Program, agencies should assess the number of proposals 
received for a given topic or subtopic and use this information to 
determine if they should continue funding this technology in future 
SBIR solicitations. In addition, the Policy Directive requires each 
agency's annual report to contain justification for any award made 
under a topic or subtopic where the agency received only one proposal. 
Collection of this information on a quarterly basis, and updated in the 
agency's annual report, is necessary to meet informational requests 
quickly.
    One commenter stated that agencies should report the duration of 
the SBIR-funded tasking prior to Phase III award and the lapsed time to 
award for Phase III. The commenter stated that in some cases, Phase II 
awards exceed five years to award date from close of the solicitation, 
but SBIR provided about 30 months of funded effort. SBA believes that 
agencies should ensure that the time period between Phase I and Phase 
II, and between Phase II and Phase III, are kept to the absolute 
minimum, based on agency needs and requirements.
    One commenter argued that it is unnecessary for agencies to report 
when companies receive more than 15 Phase II awards. SBA notes that 
this

[[Page 60080]]

requirement, set forth in section 10(b)(11) of the Policy Directive, is 
a corollary to the requirement in the Act that an SBC that has received 
more than 15 SBIR Phase II awards in the last 5 fiscal years must, in 
its Phase I proposal, provide certain data, including the current 
commercialization status of each Phase II award. Therefore, it is not 
an unnecessary requirement.
    Section 11 of the Policy Directive sets forth the SBA's 
responsibilities with respect to the SBIR Program. Two commenters 
questioned how SBA will determine whether follow-on funding non-federal 
commitments were properly considered in the evaluation of Phase II 
proposals as set forth in section 11(c)(3). SBA plans to request 
information from agencies as necessary to meet its monitoring 
responsibilities.
    SBA received several comments about its SBIR database, set forth in 
section 11(e) of the Policy Directive. There were several general 
comments about the database. Two comments supported the database and 
stated that capabilities afforded SBA with Tech Net should improve the 
ability of participating agencies to best implement the SBIR Program. 
One comment expressed concern over the data collection from SBCs, 
believing it may discourage them from wanting to participate in the 
SBIR Program. In contrast, one commenter stated it does not believe the 
Policy Directive sets forth an approach to creating the Government 
database that is responsive to the reauthorization legislation. This 
commenter believes that the database should track commercialization and 
account for outcomes that result in savings to the Government, as well 
as capture the company outcomes like initial public offerings and 
mergers and acquisitions. Yet another commenter recommended that the 
requirements and format for Tech-net commercialization and sales data 
be standardized and uniform for all agencies.
    SBA agrees that the database and its capabilities will improve the 
ability of participating agencies to best implement the SBIR Program 
and allow SBA to evaluate the program as it relates to outcomes and 
outputs. In addition, SBA believes it has developed the data collection 
items to meet the requirements of the Act. The format for the Tech-Net 
commercialization data will be standardized and uniform across 
agencies.
    One commenter stated that because the technical abstract is 
important for the peer review and internal reviews, it should be at 
least 200 words, but no more than 400. SBA disagrees and believes that 
a limit of 200 words, as set forth in section 11(e)(2) of the Policy 
Directive, is sufficient for the technical abstract of the project.
    There were also comments concerning specific aspects of the 
database. Several commenters did not feel that Tech Net should include 
information about applicants that do not receive a Phase I award 
because it is too time consuming and useless information. In response, 
SBA notes that the Act requires specific data to be collected for the 
Government database regarding each applicant that does not receive a 
Phase I or Phase II award.
    Two commenters stated that the Policy Directive should provide that 
Federal agencies are not responsible for submitting or verifying the 
information submitted by the awardees. These commenters also stated 
that SBA should provide detailed guidelines and instructions to the 
Phase II firms on the specific information that SBA wants submitted and 
make allowance for the many ways that companies might try to develop 
revenue. Another commenter noted that it will be difficult to get valid 
revenue and investment information from each Phase II awardee. SBA 
notes that agencies are required to prepare their Phase II proposal 
packages to meet the requirements of the Policy Directive. This does 
not include verification of the information concerning revenue and 
other related information resulting from SBIR awards.
    One commenter questioned how funding agreement officers will be 
able to verify actual awards from other agencies and use the database 
to view the abstract and determine overlap. SBA is currently 
considering mechanisms to enable Tech-Net to be used in this way.
    One commenter expressed concern about the privacy and security of 
the confidential information in the database. SBA concurs and has 
therefore developed the Government Tech-Net Database with security of 
the data as its prime objective. Similarly, one commenter asked how far 
the Freedom of Information Act (FOIA) exemption extends with respect to 
the database. According to the Act, information provided pursuant to 
the Government Tech-Net Database is considered privileged and 
confidential and not subject to disclosure pursuant to the FOIA.
    One commenter suggested that SBA remove the requirement in section 
11(e)(9) that requires the Public Tech-Net database to include 
abstracts for funded projects and replace them with the requirement to 
include the title of the proposed project and the name, address, 
telephone number of the official signing for the applicant. SBA 
disagrees with this suggestion because abstracts are essential to 
understanding the importance of the projects selected for funding.
    One commenter stated that Tech-Net should not replace the current 
state-by-state detailed listing maintained currently by SBA because it 
is useful to state economic development agencies. Tech-Net would 
require states to re-key this information to make specific data 
requests to SBA, which would not be productive. SBA agrees and will 
continue to post the state-by-state listing of awards on its website. 
Similarly, one commenter stated that the Federal Government should 
share the database with state economic development entities that enter 
into a use and nondisclosure agreement with the Government regarding 
the database. SBA concurs. In fact, the Policy Directive provides for 
such an arrangement.
    Another commenter noted that the key word search in Tech-Net has 
not been helpful so far and that new data fields should be 
incorporated. SBA agrees that the keyword search can be improved and 
plans to develop new data fields.
    One commenter requested that agencies collecting the data manage 
all data collection and then provide it to SBA. This commenter does not 
think it is good to introduce another agency (SBA) that the SBC must 
deal with. SBA disagrees with this suggestion. Awardees will not need 
to interact with SBA. Awardees will complete the Tech-Net questions as 
part of each agency's application procedures.
    One commenter stated that the relationship between Pro-Net and Tech 
Net is not clear. In response to this comment, SBA amends the Policy 
Directive to remove any reference to Pro-Net, as Tech-Net has been 
enhanced to provide a seamless link to Pro-Net.
    Section 12 of the Policy Directive establishes guidance for the 
Federal and State Technology (FAST) Program and Outreach Program. SBA 
notes that although the Policy Directive contains guidance on this 
program, Pub. L. 107-50 requires SBA to promulgate regulations 
establishing standards for the consideration of proposals under FAST, 
including standards regarding each of the considerations identified in 
the statute. SBA is currently drafting these regulations.
    Another comment on FAST stated that there should be a reduced match 
to encourage outreach to low-income areas of states, even if those 
states were high-volume states in terms of SBIR awards. There is no 
mention of low-income states in the proposed Policy Directive.

[[Page 60081]]

SBA notes that although this item is not included in the Policy 
Directive, it is specifically addressed in SBA's annual FAST Program 
Announcement, which may be found at www.sba.gov/sbir/
indexprograms.html.
    Appendix I of the Directive contains the instructions for SBIR 
Program solicitation preparation. One commenter believed SBA should 
highlight the part on eligibility in section 1(c) of the Appendix and 
possibly make it a separate section. Although SBA agrees that this is 
an important issue to the program, SBA also believes that eligibility 
is covered adequately in the Appendix I instructions.
    SBA received a few comments on the proposal requirements. One 
commenter asked that SBA make sure the proposal requirements and 
technical and commercialization reporting requirements are uniform. SBA 
believes that the Policy Directive accomplishes these suggestions.
    SBA received a comment that the font size should be at least 11 
point because reviewers often complain when it is smaller. SBA notes 
that the Policy Directive, at 3(a)(1), provides that a 10-point font 
type is the minimum. An agency may specify a larger point font to 
satisfy its needs.
    One commenter stated that SBA should modify section 4(b)(1)(i-iv) 
of the Appendix to state that agencies may use their own wording for 
the evaluation criteria. SBA believes that the Policy Directive states 
the evaluation criteria contained in the Policy Directive are the 
minimum to be developed by each agency. Exact wording is not required, 
as long as these minimum criteria are maintained in the evaluation 
process.
    SBA received a few comments on cost sharing as set forth in section 
5(e) of the Appendix. One commenter stated that some agencies use cost 
sharing as an evaluation factor while another stated that cost sharing 
should be allowed, but it should not be a factor in the review and 
selection process because larger small firms could provide it and it 
would have an unfair advantage over startup firms. SBA amends the 
Policy Directive to state clearly that cost sharing cannot be an 
evaluation factor.
    One commenter stated that the Directive needs to give consideration 
to proposals containing non-monetary aspects that are key elements of 
carrying out research--advancing science through publications, 
presentation and patents, training graduate students through 
collaborations. SBA disagrees, as these are not item considerations 
expressed in the Act.
    One comment stated that the disclosure permission statement in 
3(b)(11) of the Appendix, which asks whether the Government may 
disclose the title, technical abstract page of the proposed project if 
the proposal is not awarded, is not consistent with the current 
requirement that the Government Tech-Net database information be 
collected. SBA disagrees. The disclosure permission statement is 
discretionary and is designed to permit agencies to respond to requests 
from the public for certain information regarding unfunded proposals. 
It is executed on a case-by-case basis as a potential opportunity for 
the unfunded applicant, whereas the Government Tech-Net Database is an 
all-inclusive requirement of the Act.
    Appendix II of the Directive shows the Tech-Net Data Fields for the 
Public Database. SBA did not make any substantive changes to and 
received no comments on this section.
    SBA has determined that this rule imposes additional reporting or 
recordkeeping requirements under the Paperwork Reduction Act, 44 
U.S.C., chapter 35. Specifically, the Reauthorization Act amended the 
Small Business Act to require the creation of a public and Government 
database on the SBIR and STTR Programs. According to the statute, the 
public database will include the name, size, location and an 
identifying number of each SBC that has received a Phase I or II SBIR 
award from a Federal agency; a description of each Phase I or II award 
received by that SBC, including an abstract, the name of the Federal 
agency making the award, and the date and amount of the award; the 
identification of any business concern or subsidiary established for 
the commercial application of a product or service for which an SBIR 
award is made; and information regarding mentors and Mentoring 
Networks. In addition, the Small Business Act now requires the creation 
of a Government database that will contain the following information 
for each Phase II award: information on revenue from the sale of new 
products or services resulting from the research conducted under the 
award; information on additional investment from any source, other than 
Phase I or II SBIR or STTR awards, to further the research and 
development conducted under the award; and any other information 
received in connection with the award that the Administrator and SBIR 
program managers considers relevant and appropriate. The Government 
database will also include narrative information that a SBC receiving a 
Phase II award voluntarily submits to further describe the outputs and 
outcomes of its awards and for each applicant that does not receive a 
Phase II award, the name, size and location of the applicant, an 
abstract of the project and the Federal agency to which the application 
was made. Finally, the Government database may also include any other 
data collected by or available to any Federal agency that such agency 
considers useful for SBIR program evaluation purposes.
    In response to this statutory requirement, in Sec.  9(a)(6), the 
Directive requires Federal agencies to collect or maintain this 
information from awardees and provide it to SBA. In addition, as 
required by the statute, the Directive requires a SBC receiving a Phase 
II award to update information in the database concerning that award. 
Further, as also required by statute, the SBC receiving a Phase II 
award shall be requested to voluntarily update such information 
annually for a period of five years.
    Thus, the Directive outlines the information SBA is required to 
collect from the SBIR agencies, who in turn collect some of this data 
from Phase I and II awardees (some of the data is already available to 
the agencies). Although the statute requires the collection of certain 
information from the agencies and SBIR Phase I and II awardees, it also 
provides discretion to collect data SBA and the agencies deem relevant. 
SBA is currently in the process of developing the Tech Net databases, 
which will house this information, and determining what information not 
prescribed specifically by statute may be relevant to the program.

Notice of Final Policy Directive; Small Business Innovation Research 
Program

    To: The Small Business Innovation Research Program Directors.
    Subject: Small Business Reauthorization Act of 2000 
(Reauthorization Act)--Amendments to the Small Business Innovation 
Research Program.
    1. Purpose. Section 9(j)(3) of the Small Business Act (15 U.S.C. 
638(j)(3)) (as amended by Public Law 106-554) requires the 
Administrator of the U.S. Small Business Administration (SBA) to modify 
its Small Business Innovation Research (SBIR) Program Policy Directive, 
issued for the general conduct of the SBIR Program.
    2. Authority. This Policy Directive is issued pursuant to 15 U.S.C. 
638(j).
    3. Procurement Regulations. It is recognized that the Federal 
Acquisition Regulations may need to be modified to conform to the 
requirements of the Reauthorization Act and the final Policy

[[Page 60082]]

Directive. SBA's Administrator or designee must review and concur with 
any regulatory provisions that pertain to areas of SBA responsibility. 
SBA's Office of Technology coordinates such regulatory actions.
    4. Personnel Concerned. This Policy Directive serves as guidance 
for all federal government personnel who are involved in the 
administration of the SBIR Program, issuance and management of funding 
agreements or contracts pursuant to the SBIR Program, and the 
establishment of goals for small business concerns in research or 
research and development acquisition or grants.
    5. Originator. SBA's Office of Technology.
    6. Date. This Policy Directive is effective upon publication in the 
Federal Register.

Luz Hopewell,
Associate Administrator for Business Development, Government 
Contracting/Business Development, Small Business Administration.
Hector V. Barreto,
Administrator, Small Business Administration.

Small Business Innovation Research (SBIR) Program Final Policy 
Directive

Contents

Section

1. Purpose
2. Summary of Legislative Provisions
3. Definitions
4. Competitively Phased Structure of the Program
5. Program Solicitation Process
6. Eligibility and Application (Proposal) Requirements
7. SBIR Funding Process
8. Terms of Agreement Under SBIR Awards
9. Responsibilities of SBIR Participating Agencies and Departments
10. Annual Report to the Small Business Administration (SBA)
11. Responsibilities of SBA
12. Federal and State Technology (FAST) Partnership Program and 
Outreach Program
Appendix I: Instructions for SBIR Program Solicitation Preparation
Appendix II: Tech-Net Data Fields for Public Database

1. Purpose

    (a) Section 9(j) of the Small Business Act (Act) requires that the 
Small Business Administration (SBA) issue an SBIR Program Policy 
Directive for the general conduct of the SBIR Program within the 
Federal Government.
    (b) This Policy Directive fulfills SBA's statutory obligation to 
provide guidance to the participating Federal agencies for the general 
operation of the SBIR Program. Additional or modified instructions may 
be issued by the SBA as a result of public comment or experience.
    (c) The statutory purpose of the SBIR Program is to strengthen the 
role of innovative small business concerns (SBCs) in Federally-funded 
research or research and development (R/R&D). Specific program purposes 
are to: (1) Stimulate technological innovation; (2) use small business 
to meet Federal R/R&D needs; (3) foster and encourage participation by 
socially and economically disadvantaged SBCs, and by SBCs that are 51 
percent owned and controlled by women, in technological innovation; and 
(4) increase private sector commercialization of innovations derived 
from Federal R/R&D, thereby increasing competition, productivity and 
economic growth.
    (d) Federal agencies participating in the SBIR Program (SBIR 
agencies) are obligated to follow the guidance provided by this Policy 
Directive. Each agency is required to review its rules, policies, and 
guidance on the SBIR Program to ensure consistency with this Policy 
Directive and to make any necessary changes in accordance with each 
agency's normal procedures. This is consistent with the statutory 
authority provided to the SBA concerning the SBIR Program.

2. Summary of Legislative Provisions

    (a) The Small Business Innovation Research Program Reauthorization 
Act of 2000, Public Law 106-554, amended section 9 of the Act (15 
U.S.C. 638).
    (1) The amendments:
    (i) Continue the SBIR Program through September 30, 2008;
    (ii) Clarify data rights pertaining to SBIR Phase I, Phase II, and 
Federally-funded Phase III awards.
    (iii) Establish databases--one for the public and one for 
Government use--to collect and maintain in a common format information 
that is necessary to assist SBCs and assess the SBIR Program.
    (iv) Require agencies with an SBIR budget of over $50,000,000 for 
fiscal year 1999 to enter into an agreement with the National Academy 
of Sciences for the National Research Council to conduct a review of 
each agency's SBIR Program.
    (v) Require SBIR agencies to report to SBA on the calculation of 
the agency's extramural budget within 4 months of enactment of each 
agency's annual Appropriations Act.
    (vi) Establish the Federal and State Technology (FAST) Partnership 
Program to strengthen the technological competitiveness of SBCs.
    (vii) Extend the Rural Outreach Program through September 30, 2005.
    (b) Each Federal agency with an extramural budget for R/R&D in 
excess of $100,000,000 must participate in the SBIR Program.
    (c) The statutory requirements establish a uniform, simplified 
process for the operation of the SBIR Program while allowing the SBIR 
agencies flexibility in the operation of their individual SBIR Program. 
This Policy Directive fulfills the Congressional intent to minimize 
regulatory burden in the conduct of this program.
    (d) Each SBIR agency must establish an SBIR Program by reserving, 
in each fiscal year, not less than 2.5 percent of its extramural budget 
for awards to SBCs for R/R&D through the following uniform, three-phase 
process:
    (1) Phases I and II. These phases help SBIR agencies meet R/R&D and 
commercialization objectives through funding agreements.
    (2) Phase III. This phase, where appropriate, helps Federal 
agencies participating in the SBIR Program by:
    (i) providing Federal agencies the benefits of commercial 
applications derived from Government-funded R/R&D which stimulates 
technological innovation and enhances the national return on investment 
from R/R&D,
    (ii) providing SBIR awardees access to the Federal market through 
non-SBIR funding agreements; and
    (iii) providing SBIR awardees access to private sector markets to 
stimulate economic growth and create jobs.
    (e) The Act directs each SBIR agency to report annually to SBA. The 
Act also requires SBA to obtain annual reports and monitor each 
agency's SBIR Program and to report these findings annually to the 
Senate Committee on Small Business and Entrepreneurship and to the 
House Committees on Science and Small Business.
    (f) The competition requirements of the Armed Services Procurement 
Act of 1947 (10 U.S.C. 2302 et seq.) and the Federal Property and 
Administrative Services Act of 1949 (41 U.S.C. 251 et seq.) must be 
read in conjunction with the procurement notice publication 
requirements of section 8(e) of the Small Business Act (15 U.S.C. 
637(e)). The following notice publication requirements of section 8(e) 
of the Small Business Act apply to SBIR agencies using contracts as a 
SBIR funding agreement.
    (1) Any Federal executive agency intending to solicit a proposal to 
contract for property or services valued above $25,000 must transmit a 
notice of the impending solicitation to the Governmentwide point of 
entry (GPE)

[[Page 60083]]

for access by interested sources. See FAR 5.201. The GPE, located at 
http://www.fedbizopps.gov, is the single point where Government 
business opportunities greater than $25,000, including synopses of 
proposed contract actions, solicitations, and associated information, 
can be accessed electronically by the public. In addition, no agency 
must issue its solicitation for at least 15 days from the date of the 
publication of the GPE. The agency may not establish a deadline for 
submission of proposals in response to a solicitation earlier than 30 
days after the date on which the solicitation was issued.
    (2) The contracting officer must generally make available through 
the GPE those solicitations synopsized through the GPE, including 
specifications and other pertinent information determined necessary by 
the contracting officer. See FAR 5.102.
    (3) Any executive agency awarding a contract for property or 
services valued at more than $25,000 must submit a synopsis of the 
award through the GPE if a subcontract is likely to result from such 
contract. See FAR 5.301.
    (4) The following are exemptions from the notice publication 
requirements:
    (i) In the case of agencies intending to solicit Phase I proposals 
for contracts in excess of $25,000, the head of the agency may exempt a 
particular solicitation from the notice publication requirements if 
that official makes a written determination, after consulting with the 
Administrator of the Office of Federal Procurement Policy and the SBA 
Administrator, that it is inappropriate or unreasonable to publish a 
notice before issuing a solicitation.
    (ii) The SBIR Phase II award process is exempt.
    (iii) The SBIR Phase III award process is exempt.

3. Definitions

    (a) Act. The Small Business Act (15 U.S.C. 631 et seq.), as 
amended.
    (b) Additionally Eligible State. A State in which the total value 
of funding agreements awarded to SBCs (as defined in this section) 
under all agency SBIR Programs is less than the total value of funding 
agreements awarded to SBCs in a majority of other States, as determined 
by SBA's Administrator in biennial fiscal years and based on the most 
recent statistics compiled by the Administrator.
    (c) Applicant. The organizational entity that, at the time of 
award, will qualify as an SBC and that submits a contract proposal or a 
grant application for a funding agreement under the SBIR Program.
    (d) Affiliate. This term has the same meaning as set forth in 13 
CFR part 121--Small Business Size Regulations, Sec.  121.103, What is 
affiliation?
    (e) Awardee. The organizational entity receiving an SBIR Phase I, 
Phase
    II, or Phase III award.
    (f) Commercialization. The process of developing marketable 
products or services and producing and delivering products or services 
for sale (whether by the originating party or by others) to Government 
or commercial markets.
    (g) Cooperative Agreement. A financial assistance mechanism used 
when substantial Federal programmatic involvement with the awardee 
during performance is anticipated by the issuing agency. The 
Cooperative Agreement contains the responsibilities and respective 
obligations of the parties.
    (h) Eligible State. A State: (1) where the total value of SBIR and 
Small Business Technology Transfer (STTR) Program awards made to 
recipient businesses in the State during fiscal year 1995 was less than 
$5,000,000 (as reflected in SBA's database of fiscal year 1995 awards), 
and (2) that certifies to SBA's Administrator that it will, upon 
receipt of assistance, provide matching funds from non-Federal sources 
in an amount that is not less than 50 percent of the amount of 
assistance provided.
    (i) Essentially Equivalent Work. This occurs when (1) substantially 
the same research is proposed for funding in more than one contract 
proposal or grant application submitted to the same Federal agency; (2) 
substantially the same research is submitted to two or more different 
Federal agencies for review and funding consideration; or (3) a 
specific research objective and the research design for accomplishing 
an objective are the same or closely related in two or more proposals 
or awards, regardless of the funding source.
    (j) Extramural Budget. The sum of the total obligations for R/R&D 
minus amounts obligated for R/R&D activities by employees of a Federal 
agency in or through Government-owned, Government-operated facilities. 
For the Agency for International Development, the ``extramural budget'' 
must not include amounts obligated solely for general institutional 
support of international research centers or for grants to foreign 
countries. For the Department of Energy, the ``extramural budget'' must 
not include amounts obligated for atomic energy defense programs solely 
for weapons activities or for naval reactor programs. (Also see Section 
7(i) of this Policy Directive for additional exemptions related to 
national security.)
    (k) Feasibility. The practical extent to which a project can be 
performed successfully.
    (l) Federal Agency. An executive agency as defined in 5 U.S.C. 105, 
or a military department as defined in 5 U.S.C. 102, except that it 
does not include any agency within the Intelligence Community as 
defined in Executive Order 12333, Section 3.4(f), or its successor 
orders.
    (m) Funding Agreement. Any contract, grant, or cooperative 
agreement entered into between any Federal agency and any SBC for the 
performance of experimental, developmental, or research work, including 
products or services, funded in whole or in part by the Federal 
Government.
    (n) Funding Agreement Officer. A contracting officer, a grants 
officer, or a cooperative agreement officer.
    (o) Grant. A financial assistance mechanism providing money, 
property, or both to an eligible entity to carry out an approved 
project or activity. A grant is used whenever the Federal agency 
anticipates no substantial programmatic involvement with the awardee 
during performance.
    (p) Innovation. Something new or improved, having marketable 
potential, including (1) development of new technologies, (2) 
refinement of existing technologies, or (3) development of new 
applications for existing technologies.
    (q) Intellectual Property. The separate and distinct types of 
intangible property that are referred to collectively as ``intellectual 
property,'' including but not limited to: patents, trademarks, 
copyrights, trade secrets, SBIR technical data (as defined in this 
section), ideas, designs, know-how, business, technical and research 
methods, other types of intangible business assets, and all types of 
intangible assets either proposed or generated by an SBC as a result of 
its participation in the SBIR Program.
    (r) Joint Venture. An association of concerns with interests in any 
degree or proportion by way of contract, express or implied, consorting 
to engage in and carry out a single specific business venture for joint 
profit, for which purpose they combine their efforts, property, money, 
skill, or knowledge, but not on a continuing or permanent basis for 
conducting business generally. A joint venture is viewed as a business 
entity in determining power to control its management.
    (s) Outcomes. The measures of long-term, eventual, program impact.
    (t) Outputs. The measures of near-term program impact.
    (u) Principal Investigator/Project Manager. The one individual 
designated

[[Page 60084]]

by the applicant to provide the scientific and technical direction to a 
project supported by the funding agreement.
    (v) Program Solicitation. A formal solicitation for proposals 
whereby a Federal agency notifies the small business community of its 
R/R&D needs and interests in broad and selected areas, as appropriate 
to the agency, and requests proposals from SBCs in response to these 
needs and interests. Announcements in the Federal Register or the GPE 
are not considered an SBIR Program solicitation.
    (w) Prototype. A model of something to be further developed, which 
includes designs, protocols, questionnaires, software, and devices.
    (x) Research or Research and Development (R/R&D). Any activity that 
is:
    (1) A systematic, intensive study directed toward greater knowledge 
or understanding of the subject studied;
    (2) A systematic study directed specifically toward applying new 
knowledge to meet a recognized need; or
    (3) A systematic application of knowledge toward the production of 
useful materials, devices, and systems or methods, including design, 
development, and improvement of prototypes and new processes to meet 
specific requirements.
    (y) Small Business Concern. A concern that, on the date of award 
for both Phase I and Phase II funding agreements:
    (1) is organized for profit, with a place of business located in 
the United States, which operates primarily within the United States or 
which makes a significant contribution to the United States economy 
through payment of taxes or use of American products, materials or 
labor;
    (2) is in the legal form of an individual proprietorship, 
partnership, limited liability company, corporation, joint venture, 
association, trust or cooperative, except that where the form is a 
joint venture, there can be no more than 49 percent participation by 
foreign business entities in the joint venture;
    (3) is at least 51 percent owned and controlled by one or more 
individuals who are citizens of, or permanent resident aliens in, the 
United States, except in the case of a joint venture, where each entity 
to the venture must be 51 percent owned and controlled by one or more 
individuals who are citizens of, or permanent resident aliens in, the 
United States; and
    (4) has, including its affiliates, not more than 500 employees.
    (z) Socially and Economically Disadvantaged SBC. See 13 CFR part 
124-8(A) Business Development/Small Disadvantaged Business Status 
Determinations, Sec. Sec.  124.103 (Who is socially disadvantaged?) and 
124.104 (Who is economically disadvantaged?).
    (aa) SBIR Participants. Business concerns that have received SBIR 
awards or that have submitted SBIR proposals/applications.
    (bb) SBIR Technical Data. All data generated during the performance 
of an SBIR award.
    (cc) SBIR Technical Data rights. The rights an SBC obtains in data 
generated during the performance of any SBIR Phase I, Phase II, or 
Phase III award that an awardee delivers to the Government during or 
upon completion of a Federally-funded project, and to which the 
Government receives a license.
    (dd) Subcontract. Any agreement, other than one involving an 
employer-employee relationship, entered into by an awardee of a funding 
agreement calling for supplies or services for the performance of the 
original funding agreement.
    (ee) Technology Development Program.
    (1) the Experimental Program to Stimulate Competitive Research of 
the National Science Foundation as established under 42 U.S.C. 1862g;
    (2) the Defense Experimental Program to Stimulate Competitive 
Research of the Department of Defense;
    (3) the Experimental Program to Stimulate Competitive Research of 
the Department of Energy;
    (4) the Experimental Program to Stimulate Competitive Research of 
the Environmental Protection Agency;
    (5) the Experimental Program to Stimulate Competitive Research of 
the National Aeronautics and Space Administration;
    (6) the Institutional Development Award Program of the National 
Institutes of Health; and
    (7) the National Research Initiative Competitive Grants Program of 
the Department of Agriculture.
    (ff) United States. Means the 50 states, the territories and 
possessions of the Federal Government, the Commonwealth of Puerto Rico, 
the District of Columbia, the Republic of the Marshall Islands, the 
Federated States of Micronesia, and the Republic of Palau.
    (gg) Women-Owned SBC. An SBC that is at least 51 percent owned by 
one or more women, or in the case of any publicly owned business, at 
least 51 percent of the stock is owned by women, and women control the 
management and daily business operations.

4. Competitively Phased Structure of the Program

    The SBIR Program is a phased process, uniform throughout the 
Federal Government, of soliciting proposals and awarding funding 
agreements for R/R&D, production, services, or any combination, to meet 
stated agency needs or missions. In order to stimulate and foster 
scientific and technological innovation, including increasing 
commercialization of Federal R/R&D, the program must follow a uniform 
competitive process of the following three phases:
    (a) Phase I. Phase I involves a solicitation of contract proposals 
or grant applications (hereinafter referred to as proposals) to conduct 
feasibility-related experimental or theoretical R/R&D related to 
described agency requirements. These requirements, as defined by agency 
topics contained in a solicitation, may be general or narrow in scope, 
depending on the needs of the agency. The object of this phase is to 
determine the scientific and technical merit and feasibility of the 
proposed effort and the quality of performance of the SBC with a 
relatively small agency investment before consideration of further 
Federal support in Phase II.
    (1) Several different proposed solutions to a given problem may be 
funded.
    (2) Proposals will be evaluated on a competitive basis. Agency 
criteria used to evaluate SBIR proposals must give consideration to the 
scientific and technical merit and feasibility of the proposal along 
with its potential for commercialization. Considerations may also 
include program balance or critical agency requirements.
    (3) Agencies may require the submission of a Phase II proposal as a 
deliverable item under Phase I.
    (b) Phase II. The object of Phase II is to continue the R/R&D 
effort from the completed Phase I. Only SBIR awardees in Phase I are 
eligible to participate in Phases II and III. This includes those 
awardees identified via a ``novated'' or ``successor in interest'' or 
similarly-revised funding agreement, or those that have reorganized 
with the same key staff, regardless of whether they have been assigned 
a different tax identification number. Agencies may require the 
original awardee to relinquish its rights and interests in an SBIR 
project in favor of another applicant as a condition for that 
applicant's eligibility to participate in the SBIR Program for that 
project.
    (1) Funding must be based upon the results of Phase I and the 
scientific and technical merit and commercial

[[Page 60085]]

potential of the Phase II proposal. Phase II awards may not necessarily 
complete the total research and development that may be required to 
satisfy commercial or Federal needs beyond the SBIR Program. The Phase 
II funding agreement with the awardee may, at the discretion of the 
awarding agency, establish the procedures applicable to Phase III 
agreements. The Government is not obligated to fund any specific Phase 
II proposal.
    (2) The SBIR Phase II award decision process requires, among other 
things, consideration of a proposal's commercial potential. Commercial 
potential includes the potential to transition the technology to 
private sector applications, Government applications, or Government 
contractor applications. Commercial potential in a Phase II proposal 
may be evidenced by:
    (i) the SBC's record of successfully commercializing SBIR or other 
research;
    (ii) the existence of Phase II funding commitments from private 
sector or other non-SBIR funding sources;
    (iii) the existence of Phase III, follow-on commitments for the 
subject of the research; and
    (iv) other indicators of commercial potential of the idea.
    (c) Phase III. SBIR Phase III refers to work that derives from, 
extends, or logically concludes effort(s) performed under prior SBIR 
funding agreements, but is funded by sources other than the SBIR 
Program. Phase III work is typically oriented towards commercialization 
of SBIR research or technology.
    (1) Each of the following types of activity constitutes SBIR Phase 
III work:
    (i) commercial application of SBIR-funded R/R&D financed by non-
Federal sources of capital (Note: The guidance in this Policy Directive 
regarding SBIR Phase III pertains to the non-SBIR federally-funded work 
described in (ii) and (iii) below. It does not address the nature of 
private agreements the SBIR firm may make in the commercialization of 
its technology.);
    (ii) SBIR-derived products or services intended for use by the 
Federal Government, funded by non-SBIR sources of Federal funding;
    (iii) continuation of R/R&D that has been competitively selected 
using peer review or scientific review criteria, funded by non-SBIR 
Federal funding sources.
    (2) A Phase III award is, by its nature, an SBIR award, has SBIR 
status, and must be accorded SBIR data rights. (See Section 8(b)(2) 
regarding the protection period for data rights.) If an SBIR awardee 
wins a competition for work that derives from, extends, or logically 
concludes that firm's work under a prior SBIR funding agreement, then 
the funding agreement for the new, competed work must have all SBIR 
Phase III status and data rights. A Federal agency may enter into a 
Phase III SBIR agreement at any time with a Phase II awardee. 
Similarly, a Federal agency may enter into a Phase III SBIR agreement 
at any time with a Phase I awardee. An agency official may determine, 
using the criteria set forth in the Directive as guidance, whether a 
contract or agreement is a Phase III award.
    (3) The competition for SBIR Phase I and Phase II awards satisfies 
any competition requirement of the Armed Services Procurement Act, the 
Federal Property and Administrative Services Act, and the Competition 
in Contracting Act. Therefore, an agency that wishes to fund an SBIR 
Phase III project is not required to conduct another competition in 
order to satisfy those statutory provisions. As a result, in conducting 
actions relative to a Phase III SBIR award, it is sufficient to state 
for purposes of a Justification and Approval pursuant to FAR 6.302-5, 
that the project is a SBIR Phase III award that is derived from, 
extends, or logically concludes efforts performed under prior SBIR 
funding agreements and is authorized under 10 U.S.C. 2304(b)(2) or 41 
U.S.C. 253(b)(2).
    (4) Phase III work may be for products, production, services, R/
R&D, or any combination thereof.
    (5) There is no limit on the number, duration, type, or dollar 
value of Phase III awards made to a business concern. There is no limit 
on the time that may elapse between a Phase I or Phase II award and 
Phase III award, or between a Phase III award and any subsequent Phase 
III award.
    (6) The small business size limits for Phase I and Phase II awards 
do not apply to Phase III awards.
    (7) For Phase III, Congress intends that agencies or their 
Government-owned, contractor-operated facilities, Federally-funded 
research and development centers, or Government prime contractors that 
pursue R/R&D or production developed under the SBIR Program, give 
preference, including sole source awards, to the awardee that developed 
the technology. In fact, the Act requires reporting to SBA of all 
instances in which an agency pursues research, development, or 
production of a technology developed by an SBIR awardee, with a concern 
other than the one that developed the SBIR technology. (See Section 
4(c)(7) immediately below for agency notification to SBA prior to award 
of such a funding agreement and Section 9(a)(12) regarding agency 
reporting of the issuance of such award.) SBA will report such 
instances, including those discovered independently by SBA, to 
Congress.
    (8) For Phase III, agencies, their Government-owned, contractor-
operated facilities, or Federally-funded research and development 
centers, that intend to pursue R/R&D, production, services, or any 
combination thereof of a technology developed by an SBIR awardee of 
that agency, with an entity other than that SBIR awardee, must notify 
SBA in writing prior to such an award. This notice requirement also 
applies to technologies of SBIR awardees with SBIR funding from two or 
more agencies where one of the agencies determines to pursue the 
technology with an entity other than that awardee. This notification 
must include, at a minimum: (a) The reasons why the follow-on funding 
agreement with the SBIR awardee is not practicable; (b) the identity of 
the entity with which the agency intends to make an award to perform 
research, development, or production; and (c) a description of the type 
of funding award under which the research, development, or production 
will be obtained. SBA may appeal the decision to the head of the 
contracting activity. If SBA decides to appeal the decision, it must 
file a notice of intent to appeal with the contracting officer no later 
than 5 business days after receiving the agency's notice of intent to 
make award. Upon receipt of SBA's notice of intent to appeal, the 
contracting officer must suspend further action on the acquisition 
until the head of the contracting activity issues a written decision on 
the appeal. The contracting officer may proceed with award if he or she 
determines in writing that the award must be made to protect the public 
interest. The contracting officer must include a statement of the facts 
justifying that determination and provide a copy of its determination 
to SBA. Within 30 days of receiving SBA's appeal, the head of the 
contracting activity must render a written decision setting forth the 
basis of his or her determination.

5. Program Solicitation Process

    (a) At least annually, each agency must issue a program 
solicitation that sets forth a substantial number of R/R&D topics and 
subtopic areas consistent with stated agency needs or missions. Both 
the list of topics and the description of the topics and subtopics must 
be sufficiently comprehensive to provide a wide range of opportunities 
for SBCs to participate in the agency R&D programs. Topics and 
subtopics

[[Page 60086]]

must emphasize the need for proposals with advanced concepts to meet 
specific agency R/R&D needs. Each topic and subtopic must describe the 
needs in sufficient detail to assist in providing on-target responses, 
but cannot involve detailed specifications to prescribed solutions of 
the problems.
    (b) The Act requires issuance of SBIR (Phase I) Program 
solicitations in accordance with a Master Schedule coordinated between 
SBA and the SBIR agency. The SBA office responsible for coordination 
is: Office of Technology, Office of Government Contracting, Office of 
Government Contracting and Business Development, U.S. Small Business 
Administration, 409 Third Street, SW., Washington, DC 20416. Phone: 
(202) 205-6450. Fax: (202) 205-7754. E-mail: technology@sba.gov. 
Internet site: www.sba.gov/sbir.
    (c) For maximum participation by interested SBCs, it is important 
that the planning, scheduling and coordination of agency program 
solicitation release dates be completed as early as practicable to 
coincide with the commencement of the fiscal year on October 1. 
Bunching of agency program solicitation release and closing dates may 
prohibit SBCs from preparation and timely submission of proposals for 
more than one SBIR project. SBA's coordination of agency schedules 
minimizes the bunching of proposed release and closing dates. 
Participating agencies may elect to publish multiple program 
solicitations within a given fiscal year to facilitate in-house agency 
proposal review and evaluation scheduling.
    (d) Master Schedule
    SBA posts an electronic Master Schedule of release dates of program 
solicitations with links to Internet web sites of agency solicitations. 
Agencies must post on their Internet web sites the following 
information regarding each program solicitation:
    (1) The list of topics upon which R/R&D proposals will be sought.
    (2) Agency address, phone number, or email address from which SBIR 
Program solicitations can be requested or obtained, especially through 
electronic means.
    (3) Names, addresses, and phone numbers of agency contact points 
where SBIR-related inquiries may be directed.
    (4) Release date(s) of program solicitation(s).
    (5) Closing date(s) for receipt of proposals.
    (6) Estimated number and average dollar amounts of Phase I awards 
to be made under the solicitation.
    (e) On or before August 1, each agency representative must notify 
SBA in writing or by e-mail of its proposed program solicitation 
release and proposal due dates for the next fiscal year. SBA and the 
agency representatives will coordinate the resolution of any 
conflicting agency solicitation dates by the second week of August. In 
all cases, SBA will make final decisions.
    (f) For those agencies that use both general topic and more 
specific subtopic designations in their SBIR solicitations, the topic 
data should accurately describe the research solicited. For example, 
rather than just announcing topic information characterized as 
``Chemistry'' or ``Aerodynamics,'' the SBIR agency should summarize the 
subtopic statements and, where appropriate, utilize National Critical 
Technologies.
    (g) Simplified, Standardized, and Timely SBIR Program Solicitations
    (1) The Act requires ``* * * simplified, standardized and timely 
SBIR solicitations'' and for SBIR agencies to use a ``uniform process'' 
minimizing the regulatory burden for SBCs. Therefore, the instructions 
in Appendix I to this Policy Directive purposely depart from normal 
Government solicitation format and requirements. SBIR Program 
solicitations must be prepared according to Appendix I.
    (2) Agencies must provide SBA's Office of Technology with two hard 
copies or an e-mail version of each solicitation and any modifications 
no later than the date of release of the solicitation or modification 
to the public. Agencies that issue program solicitations in electronic 
format only must provide the Internet site at which the program 
solicitation may be accessed no later than the date of posting at that 
site of the program solicitation.
    (3) SBA does not intend that the SBIR Program solicitation replace 
or be used as a substitute for unsolicited proposals for R/R&D awards 
to SBCs. In addition, the SBIRProgram solicitation procedures do not 
prohibit other agency R/R&D actions with SBCs that are carried on in 
accordance with applicable statutory or regulatory authorizations.

6. Eligibility and Application (Proposal) Requirements

    (a) Eligibility Requirements:
    (1) To receive SBIR funds, each awardee of a SBIR Phase I or Phase 
II award must qualify as an SBC.
    (2) For Phase I, a minimum of two-thirds of the research or 
analytical effort must be performed by the awardee. Occasionally, 
deviations from this requirement may occur, and must be approved in 
writing by the funding agreement officer after consultation with the 
agency SBIR Program Manager/Coordinator.
    (3) For Phase II, a minimum of one-half of the research or 
analytical effort must be performed by the awardee. Occasionally, 
deviations from this requirement may occur, and must be approved in 
writing by the funding agreement officer after consultation with the 
agency SBIR Program Manager/Coordinator.
    (4) For both Phase I and Phase II, the primary employment of the 
principal investigator must be with the SBC at the time of award and 
during the conduct of the proposed project. Primary employment means 
that more than one-half of the principal investigator's time is spent 
in the employ of the SBC. This precludes full-time employment with 
another organization. Occasionally, deviations from this requirement 
may occur, and must be approved in writing by the funding agreement 
officer after consultation with the agency SBIRProgram Manager/
Coordinator. Further, an SBC may replace the principal investigator on 
an SBIR Phase I or Phase II award, subject to approval in writing by 
the funding agreement officer. For purposes of the SBIR Program, 
personnel obtained through a Professional Employer Organization or 
other similar personnel leasing company may be considered employees of 
the awardee. This is consistent with SBA's size regulations, 13 CFR 
121.106--Small Business Size Regulations.
    (5) For both Phase I and Phase II, the R/R&D work must be performed 
in the United States. However, based on a rare and unique circumstance, 
agencies may approve a particular portion of the R/R&D work to be 
performed or obtained in a country outside of the United States, for 
example, if a supply or material or other item or project requirement 
is not available in the United States. The funding agreement officer 
must approve each such specific condition in writing.
    (b) Proposal Requirements:
    (1) Documentation of commercialization record of firms with 
multiple Phase II awards. An SBC submitting a proposal for a funding 
agreement for Phase I of an SBIR Program that has received more than 15 
Phase II SBIR awards during the preceding 5 fiscal years must document 
the extent to which it was able to secure Phase III funding to develop 
concepts resulting from previous Phase II SBIR awards.
    (2) Commercialization Plan. A succinct commercialization plan must

[[Page 60087]]

be included with each proposal for an SBIR Phase II award moving toward 
commercialization. Elements of a commercialization plan may include the 
following:
    (i) Company information: Focused objectives/core competencies; 
size; specialization area(s); products with significant sales; and 
history of previous Federal and non-Federal funding, regulatory 
experience, and subsequent commercialization.
    (ii) Customer and Competition: Clear description of key technology 
objectives, current competition, and advantages compared to competing 
products or services; description of hurdles to acceptance of the 
innovation.
    (iii) Market: Milestones, target dates, analyses of market size, 
and estimated market share after first year sales and after 5 years; 
explanation of plan to obtain market share.
    (iv) Intellectual Property: Patent status, technology lead, trade 
secrets or other demonstration of a plan to achieve sufficient 
protection to realize the commercialization stage and attain at least a 
temporal competitive advantage.
    (v) Financing: Plans for securing necessary funding in Phase III.
    (vi) Assistance and mentoring: Plans for securing needed technical 
or business assistance through mentoring, partnering, or through 
arrangements with state assistance programs, SBDCs, Federally-funded 
research laboratories, Manufacturing Extension Partnership centers, or 
other assistance providers.
    (3) Data Collection: Each Phase II applicant will be required to 
provide information to the Tech-Net Database System (http://
technet.sba.gov). See Appendix I, Section 3(c), ``Data Collection 
Requirement,'' for additional information.

7. SBIR Funding Process

    Because the Act requires a ``simplified, standardized funding 
process,'' specific attention must be given to the following areas of 
SBIR Program administration:
    (a) Timely Receipt and Review of Proposals.
    (1) Participating agencies must establish appropriate dates and 
formats for review of proposals.
    (i) All activities related to Phase I proposal reviews must 
normally be completed and awards made within 6 months from the closing 
date of the program solicitation. However, agencies may extend that 
period up to 12 months based on agency needs.
    (ii) Program solicitations must establish proposal submission dates 
for Phase I and may establish proposal submission dates for Phase II. 
However, agencies may also negotiate mutually acceptable Phase II 
proposal submission dates with individual Phase I awardees, accomplish 
proposal reviews expeditiously, and proceed with Phase II awards. While 
recognizing that Phase II arrangements between the agency and applicant 
may require more detailed negotiation to establish terms acceptable to 
both parties, agencies must not sacrifice the R/R&D momentum created 
under Phase I by engaging in unnecessarily protracted Phase II 
proceedings.
    (iii) SBIR participants often submit duplicate or similar proposals 
to more than one soliciting agency when the work projects appear to 
involve similar topics or requirements, which are within the expertise 
and capability levels of the applicant. To the extent feasible, more 
than one agency should not fund ``essentially equivalent work'' under 
the SBIR or other Federal programs. For this purpose, the standardized 
program solicitation will require applicants to indicate the name and 
address of the agencies to which essentially equivalent work proposals 
were made, or anticipated to be made, and to identify by subject the 
projects for which the proposal was submitted and the dates submitted. 
The same information will be required for any previous Federal 
Government awards. To assist in avoiding duplicate funding, each agency 
must provide to SBA and to each SBIR agency a listing of Phase I and 
Phase II awardees, their complete address, and the title of each SBIR 
project. This information should be distributed no later than release 
of the funding agreement award information to the public.
    (b) Review of SBIR Proposals. SBA encourages SBIR agencies to use 
their routine review processes for SBIR proposals whether internal or 
external evaluation is used. A more limited review process may be used 
for Phase I due to the larger number of proposals anticipated. Where 
appropriate, ``peer'' reviews external to the agency are authorized by 
the Act. SBA cautions SBIR agencies that all review procedures must be 
designed to minimize any possible conflict of interest as it pertains 
to applicant proprietary data. The standardized SBIR solicitation 
advises potential applicants that proposals may be subject to an 
established external review process and that the applicant may include 
company designated proprietary information in its proposal.
    (c) Selection of Awardees. Normally, SBIR agencies must establish a 
proposal review cycle wherein successful and unsuccessful applicants 
will be notified of final award decisions within 6-months of the 
agency's Phase I proposal closing date. However, agencies may extend 
that period up to 12 months based on agency needs.
    (1) The standardized SBIR Program solicitation must:
    (i) Advise Phase I applicants that additional information may be 
requested by the awarding agency to evidence awardee responsibility for 
project completion.
    (ii) Advise applicants of the proposal evaluation criteria for 
Phase I and Phase II.
    (2) The SBIR agency and each Phase I awardee considered for a Phase 
II award must arrange to manage Phase II proposal submissions, reviews, 
and selections.
    (d) Cost Sharing. Cost sharing can serve the mutual interests of 
the SBIR agencies and certain SBIR awardees by assuring the efficient 
use of available resources. However, cost sharing on SBIR projects is 
not required, although it may be encouraged. Therefore, cost sharing 
cannot be an evaluation factor in the review of proposals. The 
standardized SBIR Program solicitation (Appendix I) will provide 
information to prospective SBIR applicants concerning cost sharing.
    (e) Payment Schedules and Cost Principles.
    (1) SBIR awardees may be paid under an applicable, authorized 
progress payment procedure or in accordance with a negotiated/
definitized price and payment schedule. Advance payments are optional 
and may be made under appropriate law. In all cases, agencies must make 
payment to recipients under SBIR funding agreements in full, subject to 
audit, on or before the last day of the 12-month period beginning on 
the date of completion of the funding agreement requirements.
    (2) All SBIR funding agreements must use, as appropriate, current 
cost principles and procedures authorized for use by the SBIR agencies. 
At the time of award, agencies must inform each SBIR awardee, to the 
extent possible, of the applicable Federal regulations and procedures 
that refer to the costs that, generally, are allowable under funding 
agreements.
    (f) Funding Agreement Types and Fee or Profit. Statutory 
requirements for uniformity and standardization require consistency in 
application of SBIR Program provisions among SBIR agencies. However, 
consistency must allow for flexibility by the various agencies in 
missions and needs as well as the wide variance in funds required to be 
devoted to SBIR Programs in the

[[Page 60088]]

agencies. The following instructions meet all of these requirements:
    (1) Funding Agreement. The type of funding agreement (contract, 
grant, or cooperative agreement) is determined by the awarding agency, 
but must be consistent with 31 U.S.C. 6301-6308.
    (2) Fee or Profit. Except as expressly excluded or limited by 
statute, awarding agencies must provide for a reasonable fee or profit 
on SBIR funding agreements, consistent with normal profit margins 
provided to profit-making firms for R/R&D work.
    (g) Periods of Performance and Extensions.
    (1) In keeping with the legislative intent to make a large number 
of relatively small awards, modification of funding agreements to 
extend periods of performance, to increase the scope of work, or to 
increase the dollar amount should be kept to a minimum, except for 
options in original Phase I or II awards.
    (2) Phase I. Period of performance normally should not exceed 6 
months. However, agencies may provide a longer performance period where 
appropriate for a particular project.
    (3) Phase II. Period of performance under Phase II is a subject of 
negotiation between the awardee and the issuing agency. The duration of 
Phase II normally should not exceed 2 years. However, agencies may 
provide a longer performance period where appropriate for a particular 
project.
    (h) Dollar Value of Awards.
    (1) Generally, a Phase I award may not exceed $100,000 and a Phase 
II award may not exceed $750,000. SBA may adjust these amounts once 
every 5 years to reflect economic adjustments and programmatic 
considerations. There is no dollar level associated with Phase III SBIR 
awards.
    (2) An awarding agency may exceed those award values where 
appropriate for a particular project. After award of any funding 
agreement exceeding $100,000 for Phase I or $750,000 for Phase II, the 
agency's SBIR representative must provide SBA with written 
justification of such action. This justification must be submitted with 
the agency's Annual Report data. Similar justification is required for 
any modification to a funding agreement that would bring the cumulative 
dollar amount to a total in excess of the amounts set forth above.
    (i) National Security Exemption. The Act provides for exemptions 
related to the simplified standardized funding process ``* * * if 
national security or intelligence functions clearly would be 
jeopardized.'' This exemption should not be interpreted as a blanket 
exemption or prohibition of SBIR participation related to the 
acquisition of effort on national security or intelligence functions 
except as specifically defined under section 9(e)(2) of the Act, 15 
U.S.C. 638(e)(2). Agency technology managers directing R/R&D projects 
under the SBIR Program, where the project subject matter may be 
affected by this exemption, must first make a determination on which, 
if any, of the standardized proceedings clearly place national security 
and intelligence functions in jeopardy, and then proceed with an 
acceptable modified process to complete the SBIR action. SBA's SBIR 
Program monitoring activities, except where prohibited by security 
considerations, must include a review of nonconforming SBIR actions 
justified under this public law provision.

8. Terms of Agreement Under SBIR Awards

    (a) Proprietary Information Contained in Proposals. The 
standardized SBIR Program solicitation will include provisions 
requiring the confidential treatment of any proprietary information to 
the extent permitted by law. Agencies will discourage SBCs from 
submitting information considered proprietary unless the information is 
deemed essential for proper evaluation of the proposal. The 
solicitation will require that all proprietary information be 
identified clearly and marked with a prescribed legend. Agencies may 
elect to require SBCs to limit proprietary information to that 
essential to the proposal and to have such information submitted on a 
separate page or pages keyed to the text. The Government, except for 
proposal review purposes, protects all proprietary information, 
regardless of type, submitted in a contract proposal or grant 
application for a funding agreement under the SBIR Program, from 
disclosure.
    (b) Rights in Data Developed Under SBIR Funding Agreement. The Act 
provides for ``retention by an SBC of the rights to data generated by 
the concern in the performance of an SBIR award.''
    (1) Each agency must refrain from disclosing SBIR technical data to 
outside the Government (except reviewers) and especially to competitors 
of the SBC, or from using the information to produce future technical 
procurement specifications that could harm the SBC that discovered and 
developed the innovation.
    (2) SBIR agencies must protect from disclosure and non-governmental 
use all SBIR technical data developed from work performed under an SBIR 
funding agreement for a period of not less than four years from 
delivery of the last deliverable under that agreement (either Phase I, 
Phase II, or Federally-funded SBIR Phase III) unless, subject to (b)(3) 
of this section, the agency obtains permission to disclose such SBIR 
technical data from the awardee or SBIR applicant. Agencies are 
released from obligation to protect SBIR data upon expiration of the 
protection period except that any such data that is also protected and 
referenced under a subsequent SBIR award must remain protected through 
the protection period of that subsequent SBIR award. For example, if a 
Phase III award is issued within or after the Phase II data rights 
protection period and the Phase III award refers to and protects data 
developed and protected under the Phase II award, then that data must 
continue to be protected through the Phase III protection period. 
Agencies have discretion to adopt a protection period longer than four 
years. The Government retains a royalty-free license for Government use 
of any technical data delivered under an SBIR award, whether patented 
or not. This section does not apply to program evaluation.
    (3) SBIR technical data rights apply to all SBIR awards, including 
subcontracts to such awards, that fall within the statutory definition 
of Phase I, II, or III of the SBIR Program, as described in Section 4 
of this Policy Directive. The scope and extent of the SBIR technical 
data rights applicable to Federally-funded Phase III awards is 
identical to the SBIR data rights applicable to Phases I and II SBIR 
awards. The data rights protection period lapses only: (i) Upon 
expiration of the protection period applicable to the SBIR award, or 
(ii) by agreement between the awardee and the agency.
    (4) Agencies must insert the provisions of (b)(1), (2), and (3) 
immediately above as SBIR data rights clauses into all SBIR Phase I, 
Phase II, and Phase III awards. These data rights clauses are non-
negotiable and must not be the subject of negotiations pertaining to an 
SBIR Phase III award, or diminished or removed during award 
administration. An agency must not, in any way, make issuance of an 
SBIR Phase III award conditional on data rights. If the SBIR awardee 
wishes to transfer its SBIR data rights to the awarding agency or to a 
third party, it must do so in writing under a separate agreement. A 
decision by the awardee to relinquish, transfer, or modify in any way 
its SBIR data rights must be made without pressure or coercion by the 
agency or any other party. Following issuance of an SBIR Phase III 
award, the awardee may enter into an agreement with the awarding agency 
to transfer or

[[Page 60089]]

modify the data rights contained in that SBIR Phase III award. Such a 
bilateral data rights agreement must be entered into only after the 
SBIR Phase III award, which includes the appropriate SBIR data rights 
clause, has been signed. SBA must immediately report to the Congress 
any attempt or action by an agency to condition an SBIR award on data 
rights, to exclude the appropriate data rights clause from the award, 
or to diminish such rights.
    (c) Title Transfer of Agency-Provided Property. Under the Act, the 
Government may transfer title to equipment provided by the SBIR agency 
to the awardee where such transfer would be more cost effective than 
recovery of the property.
    (d) Continued Use of Government Equipment. The Act directs that an 
agency allow an SBIR awardee participating in the third phase of the 
SBIR Program continued use, as a directed bailment, of any property 
transferred by the agency to the Phase II awardee. The Phase II awardee 
may use the property for a period of not less than 2 years, beginning 
on the initial date of the concern's participation in the third phase 
of the SBIR Program.
    (e) Grant Authority. The Act does not, in and of itself, convey 
grant authority. Each agency must secure grant authority in accordance 
with its normal procedures.
    (f) Conflicts of Interest. SBA cautions SBIR agencies that awards 
made to SBCs owned by or employing current or previous Federal 
Government employees may create conflicts of interest in violation of 
FAR Part 3 and the Ethics in Government Act of 1978, as amended. Each 
SBIR agency should refer to the standards of conduct review procedures 
currently in effect for its agency to ensure that such conflicts of 
interest do not arise.
    (g) American-Made Equipment and Products. Congress intends that the 
awardee of a funding agreement under the SBIR Program should, when 
purchasing any equipment or a product with funds provided through the 
funding agreement, purchase only American-made equipment and products, 
to the extent possible, in keeping with the overall purposes of this 
program. Each SBIR agency must provide to each awardee a notice of this 
requirement.

9. Responsibilities of SBIR Participating Agencies and Departments

    (a) The Act requires each agency participating in the SBIR Program 
to:
    (1) Submit to SBA's Administrator, not later than 4 months after 
the date of enactment of its annual Appropriations Act, a report 
describing the methodology used for calculating the amount of its 
extramural budget. The report must also include an itemization of each 
research program excluded from the calculation of its extramural budget 
and a brief explanation of why it is excluded.
    (2) Unilaterally determine the categories of projects to be 
included in its SBIR Program, giving special consideration to broad 
research topics and to topics that further one or more critical 
technologies, as identified by:
    (i) the National Critical Technologies panel (or its successor) in 
reports required under 42 U.S.C. 6683, or
    (ii) the Secretary of Defense in accordance with 10 U.S.C. 2522.
    (3) Release SBIR solicitations in accordance with the SBA master 
schedule.
    (4) Unilaterally receive and evaluate proposals resulting from 
program solicitations, select awardees, issue funding agreements, and 
inform each awardee under such agreement, to the extent possible, of 
the expenses of the awardee that will be allowable under the funding 
agreement.
    (5) Require a succinct commercialization plan with each proposal 
submitted for a Phase II award.
    (6) Collect and maintain information from awardees and provide it 
to SBA to develop and maintain the Tech-Net Database, as identified in 
Section 11(e) of this policy Directive.
    (7) Administer its own SBIR funding agreements or delegate such 
administration to another agency.
    (8) Include provisions in each SBIR funding agreement setting forth 
the respective rights of the United States and the awardee with respect 
to intellectual property rights and with respect to any right to carry 
out follow-on research.
    (9) Ensure that the rights in data developed under each Federally-
funded SBIR Phase I, Phase II, and Phase III award are protected 
properly.
    (10) Make payments to awardees of SBIR funding agreements on the 
basis of progress toward or completion of the funding agreement 
requirements and in all cases make payment to awardees under such 
agreements in full, subject to audit, on or before the last day of the 
12-month period beginning on the date of completion of such 
requirements.
    (11) Provide an annual report on the SBIR Program to SBA. See 
Section 10 of this Policy Directive.
    (12) Report at least annually to SBA's Office of Technology all 
instances in which an agency pursued research, development, production, 
or any such combination of a technology developed by an SBC using an 
award made under the SBIR Program of that agency, where the agency 
determined that it was not practicable to enter into a follow-on non-
SBIR Program funding agreement with that concern. The report must 
include, at a minimum:
    (i) the reasons why the follow-on funding agreement with the 
concern was not practicable;
    (ii) the identity of the entity with which the agency contracted to 
perform the research, development, or production; and
    (iii) a description of the type of funding agreement under which 
the research, development, or production was obtained.
    (13) Include in its annual performance plan required by 31 U.S.C. 
1115(a) and (b) a section on its SBIR Program, and submit such section 
to the Senate Committee on Small Business and Entrepreneurship and to 
the House Committees on Science and Small Business.
    (b) The Act permits an agency that has established a Technology 
Development Program to review for funding under that program, in each 
fiscal year:
    (1) any proposal to provide outreach and assistance to 1 or more 
SBCs interested in participating in the SBIR Program, including any 
proposal to make a grant or loan to a company to pay a portion or all 
of the cost of developing an SBIR proposal, from an entity, 
organization, or individual located in--
    (i) a State that is eligible to participate in that technology 
development program; or
    (ii) an Additionally Eligible State.
    (2) any meritorious proposal for an SBIR Phase I award that is not 
funded through the SBIR Program for that fiscal year due to funding 
constraints, from an SBC located in a state identified in (i) or (ii) 
immediately above.
    (c) The Act allows discretionary technical assistance to SBIR 
awardees.
    (1) Agencies may enter into agreements with vendors to provide 
technical assistance to SBIR awardees, which may include access to a 
network of scientists and engineers engaged in a wide range of 
technologies or access to technical and business literature available 
through on-line data bases. Each agency may select a vendor for a term 
not to exceed 3 years. The vendor must be selected using competitive 
and merit-based criteria. The purpose of this technical assistance is 
to assist SBIR awardees in:
    (i) making better technical decisions on SBIR projects;
    (ii) solving technical problems that arise during SBIR projects;

[[Page 60090]]

    (iii) minimizing technical risks associated with SBIR projects; and
    (iv) commercializing the SBIR product or process.
    (2) Phase I awards: Each agency may provide up to $4,000 of SBIR 
funds for the technical assistance described above in (c)(1). The 
amount will be in addition to the award and will count as part of the 
agency's SBIR funding.
    (3) Phase II awards: Each agency may allow awardees to expend up to 
$4,000 of SBIR funds per year, using funds available from the SBIR 
award, for the technical assistance described above in (c)(1).
    (d) Agencies are encouraged to develop programs to reduce the time 
period between the issuance of SBIR Phase I and Phase II awards. As 
appropriate, agencies should adopt accelerated proposal, evaluation, 
and selection procedures designed to address the gap in funding these 
competitive awards.
    (e) Interagency actions.
    (1) Joint funding. An SBIR project may be financed by more than one 
Federal agency. Joint funding is not required but can be an effective 
arrangement for some projects.
    (2) Phase II awards. An SBIR Phase II award may be issued by a 
Federal agency other than the one that made the Phase I award. The 
Phase I and Phase II agencies should document their files 
appropriately, providing clear rationale for the transfer of the Phase 
II proposal to, and award by, the funding Federal agency.
    (3) Timely notification of awards. In order to avoid duplicate 
funding of an SBIR project, agencies must promptly search the Tech-Net 
Database System for awards for essentially equivalent work. Discussion 
among agencies receiving similar proposals is strongly encouraged 
before an SBIR award is made.
    (4) Participation by women-owned SBCs and socially and economically 
disadvantaged SBCs in the SBIR Program. In order to meet statutory 
requirements for greater inclusion, SBA and the Federal participating 
agencies must conduct outreach efforts to find and place innovative 
women-owned SBCs and socially and economically disadvantaged SBCs in 
the SBIR Program information system. These SBCs will be required to 
compete for SBIR awards on the same basis as all other SBCs. However, 
participating agencies are encouraged to work independently and 
cooperatively with SBA to develop methods to encourage qualified women-
owned SBCs and socially and economically disadvantaged SBCs to 
participate in the SBIR Program.
    (f) Limitation of participation and use of funds.
    (1) Each SBIR agency must expend 2.5 percent of its extramural 
budget on awards made to SBCs. Agencies may not make available for the 
purpose of meeting the 2.5 percent an amount of its extramural budget 
for basic research that exceeds 2.5 percent. Funding agreements with 
SBCs for R/R&D that result from competitive or single source selections 
other than an SBIR Program must not be considered to meet any portion 
of the 2.5 percent.
    (2) An agency must not use any of its SBIR budget for the purpose 
of funding administrative costs of the program, including costs 
associated with program operations, employee salaries, and other 
associated expenses.
    (3) An agency must not issue an SBIR funding agreement that 
includes a provision for subcontracting any portion of that agreement 
back to the issuing agency, to any other Federal Government agency, or 
to other units of the Federal Government. SBA may issue a case-by-case 
waiver to this provision after review of an agency's written 
justification that includes the following information:
    (i) An explanation of why the SBIR research project requires the 
use of the Federal facility or personnel, including data that verifies 
the absence of non-federal facilities or personnel capable of 
supporting the research effort.
    (ii) Why the Agency will not and can not fund the use of the 
federal facility or personnel for the SBIR project with non-SBIR money.
    (iii) The concurrence of the SBC's chief business official to use 
the federal facility or personnel.
    (4) No agency, at its own discretion, may unilaterally cease 
participation in the SBIR Program. R/R&D agency budgets may cause 
fluctuations and trends that must be reviewed in light of SBIR Program 
purposes. An agency may be considered by SBA for a phased withdrawal 
from participation in the SBIR Program over a period of time sufficient 
in duration to minimize any adverse impact on SBCs. However, the SBA 
decision concerning such a withdrawal will be made on a case-by-case 
basis and will depend on significant changes to extramural R/R&D 3-year 
forecasts as found in the annual Budget of the United States Government 
and National Science Foundation breakdowns of total R/R&D obligations 
as published in the Federal Funds for Research and Development. Any 
withdrawal of an SBIR Federal participating agency from the SBIR 
Program will be accomplished in a standardized and orderly manner in 
compliance with these statutorily mandated procedures.
    (5) Federal agencies not otherwise qualified for the SBIR Program 
may participate on a voluntary basis. Federal agencies seeking to 
participate in the SBIR Program must first submit their written 
requests to SBA. Voluntary participation requires the written approval 
of SBA.

10. Annual Report to the Small Business Administration

    The Act requires a ``simplified, standardized and timely annual 
report'' from the SBIR agencies. The following paragraphs explain more 
about this requirement, including the due date, the kinds of 
information to be included, and the number of copies to be submitted to 
SBA.
    (a) Annual Report Due Date and Number of Copies. Reporting must be 
on an annual basis and will be for the period ending September 30 of 
each fiscal year. A single, hard copy report is due to SBA by March 15 
of each year. For example, the report for FY 2002 (October 1, 2001--
September 30, 2002) must be submitted to SBA by March 15, 2003. SBA 
encourages agencies to submit their annual report before the March 15 
due date. The report should be sent to the address noted in Section 
5(b). However, if agencies choose to send an electronic version, it 
should be sent to technology@sba.gov.
    (b) Annual Report Content
    (1) Agency total fiscal year, extramural R/R&D total obligations as 
reported to the National Science Foundation pursuant to the annual 
Budget of the United States Government.
    (2) SBIR Program total fiscal year dollars derived by applying the 
statutory percentum to the agency's extramural R/R&D total obligations.
    (3) SBIR Program fiscal year dollars obligated through SBIR Program 
funding agreements for Phase I and Phase II.
    (4) Number of topics and subtopics contained in each program 
solicitation.
    (5) Number of proposals received by the agency for each topic and 
subtopic in each program solicitation. Identify the number of proposals 
received from HUBZone SBCs.
    (6) For both Phase I and Phase II, the awardee's name and address, 
solicitation topic and subtopic, solicitation number, project title, 
and total dollar amount of funding agreement. Identify women-owned 
SBCs, economically and socially disadvantaged SBCs, HUBZone SBCs, and 
Phase II awardees with follow-on funding commitments.

[[Page 60091]]

    (7) Justification for the award of any funding agreement exceeding 
$100,000 for Phase I or $750,000 for Phase II.
    (8) The number of awardees for whom the Phase I process exceeded 6 
months, starting from the closing date of the SBIR solicitation to 
award of the funding agreement.
    (9) For an agency Phase III award using non-SBIR Federal funds to 
continue a Phase II project, the agency must provide the name, address, 
project title, and dollar amount obligated.
    (10) Justification for awards made under a topic or subtopic where 
the agency received only one proposal. Agencies must also provide the 
awardee's name and address, the topic or subtopic, and the dollar 
amount of award. Information must be collected quarterly, but updated 
in the agency's annual reports.
    (11) An accounting of Phase I awards made to SBCs that have 
received more than 15 Phase II awards from all agencies in the 
preceding 5 fiscal years. Each agency must report: name of awardee; 
Phase I funding agreement number and date of award; Phase I topic or 
subtopic title; amount and date of previous Phase II funding; and 
commercialization status for each prior Phase II award.
    (12) If applicable, report the number of National Critical 
Technology topic or subtopic funding agreements issued, including an 
identification of the specific critical technology topics, and the 
percentage by number and dollar amount of the agency's total SBIR 
awards to such National Critical Technologies topics.
    (13) Report all instances in which an agency pursued R/R&D, 
services, production, or any combination of a technology developed by 
an SBIR awardee and determined that it was not practicable to enter 
into a follow-on funding agreement with non-SBIR funds with that 
concern. See Section 9(a)(12) for minimum reporting requirements.
    (14) Report the number and dollar value of each SBIR and non-SBIR 
award over $10,000 and compare the number and amount of SBIR awards 
with awards to other than SBCs.

11. Responsibilities of SBA

    (a) SBA's Office of Technology will annually obtain available 
information on the current critical technologies from the National 
Critical Technologies panel (or its successor) and the Secretary of 
Defense and provide such information to the SBIR agencies.
    (b) SBA will request this information in June of each year. The 
data received will be submitted to each of the participating Federal 
agencies and will also be published in the September issue of the SBIR 
Pre-Solicitation Announcement.
    (c) Examples of SBIR Areas to be Monitored by SBA.
    (1) SBIR Funding Allocations. The magnitude and source of each SBIR 
agency's annual allocation reserved for SBIR awards are critical to the 
success of the SBIR Program. The Act defines the SBIR effort (R/R&D), 
the source of the funds for financing the SBIR Program (extramural 
budget), and the percentage of such funds to be reserved for the SBIR 
Program (2.5 percent). The Act requires that SBA monitor these annual 
allocations.
    (2) SBIR Program Solicitation and Award Status. The accomplishment 
of scheduled SBIR events, such as SBIR Program solicitation releases 
and the issuance of funding agreements, is critical to meeting 
statutory mandates and to operating an effective, useful program. SBA 
monitors these and other operational features of the SBIR Program. SBA 
does not plan to monitor administration of the awards except in 
instances where SBA assistance is requested and is related to a 
specific SBIR project or funding agreement.
    (3) Follow-on Funding Commitments. SBA will monitor whether follow-
on non-Federal funding commitments obtained by Phase II awardees for 
Phase III were considered in the evaluation of Phase II proposals as 
required by the Act.
    (4) Agency Rules and Regulations. It is essential that no policy, 
rule, regulation, or interpretation be promulgated by the SBIR agencies 
that are inconsistent with the Act or this Policy Directive. SBA's 
monitoring activity will include review of policies, rules, 
regulations, interpretations, and procedures generated to facilitate 
intra- and interagency SBIR Program implementation.
    (d) SBA develops, participates in, and, when appropriate and 
feasible, sponsors seminars for innovative women-owned SBCs and 
socially and economically disadvantaged SBCs to inform them of the SBIR 
Program and Federal and commercial assistance and services available 
for potential SBIR Program participants.
    (e) Standardized Collection of Data--``Technology Resources Access 
Network'' (Tech-Net) Database System Overview
    (1) SBA's Office of Technology, as functional program manager for 
the SBIR and the STTR Programs, is required to collect and report to 
the Congress, information regarding awards made to SBCs by each Federal 
agency participating in these programs.
    (2) The Office of Technology maintains an internal database of 
awards and uses the system to report on technology and demographical 
statistics regarding the SBIR and the STTR Programs. The system also 
stores the 200-word technical abstract for each SBIR and STTR award 
that is prepared by the awardee summarizing the research effort that 
has been supported by the Federal Government. The system also provides 
the Office of Technology with the ability to perform keyword searches 
in many areas, including any part of the name, address, and technical 
abstract of the awardee. The system produces many reports that are used 
in the conduct of audits performed by the General Accounting Office 
(GAO) and to expose potential duplication of research and development 
efforts funded by the SBIR agencies.
    (3) The Office of Technology, in a joint effort with SBA's Office 
of the Chief Information Officer, has redesigned the Office of 
Technology's internal awards database system to operate on the 
Internet. The Internet system is titled the ``Technology Resources 
Network,'' or Tech-Net.
    (4) Tech-Net offers a vast array of user-friendly capabilities, and 
is accessible by the public at no charge. Tech-Net allows for the 
online submission of SBIR/STTR awards data from all SBIR agencies. 
Tech-Net also allows any end-user to perform keyword searches and 
create formatted reports of SBIR/STTR awards information. Tech-Net will 
allow for potential research partners to view research and development 
efforts that are ongoing in the SBIR and the STTR Programs, increasing 
the investment opportunities of the SBIR/STTR SBCs in the high tech 
arena. Tech-Net serves as an excellent marketing tool for the small, 
high tech business community, allowing investors to view first-hand the 
technical capabilities of SBIR/STTR awardees. This will ultimately 
produce investments, partnerships, and strategic alliances resulting in 
commercialization of SBIR/STTR research.
    (5) Tech-Net also houses legislatively mandated information on all 
SBIR and STTR awards, as well as confidential outcome and output 
information that will be relevant to measuring the effectiveness and 
success of the programs.
    (6) Awardees can update their information and add project 
commercialization and sales data with user names and passwords. User 
name and passwords will be assigned only to awardees to provide access 
to their respective awards information maintained in the Tech-Net 
system.

[[Page 60092]]

Award and commercialization data maintained in the Tech-Net database 
can be changed only by the awardee, SBA, or the awarding SBIR /STTR 
Federal agency.
    (7) Project commercialization and sales data can only be viewed by 
Congress, GAO, agencies participating in the SBIR and the STTR 
Programs, Office of Management and Budget (OMB), Office of Science and 
Technology Policy (OSTP), Office of Federal Procurement Policy (OFPP), 
and other authorized persons (for example, authorized contractors) who 
are subject to a use and nondisclosure agreement with the Federal 
Government covering the use of the database.
    (8) To use the Tech-Net database system, visit the Web site http://
tech-net.sba.gov. Online help is available.
    (9) Public Tech-Net Database (See Appendix II for Data Fields). The 
public Tech-Net Database is a searchable, up-to-date, electronic 
database that includes:
    (i) the name, size, location, funding agreement number, and 
identifying number assigned by the Administrator of each SBC that has 
received an SBIR or STTR Phase I or Phase II award from a Federal 
agency;
    (ii) a description of each SBIR or STTR Phase I or Phase II award 
received by the SBC including:
    (A) an abstract of the project funded by the award, excluding any 
proprietary information so identified by the awardee;
    (B) the Federal agency making the award; and
    (C) the date and amount of the award.
    (iii) an identification of any business concern or subsidiary 
established for the commercial application of a product or service for 
which an SBIR or STTR award is made; and
    (iv) information regarding mentors and Mentoring Networks, as 
required in the Federal and State Technology (FAST) Partnership Program 
described in Section 12 of this Policy Directive.
    (10) Government Tech-Net Database. SBA, in consultation with the 
Federal agencies participating in the SBIR and the STTR Programs, 
develops and maintains a secure database that:
    (i) contains, for each Phase II award:
    (A) information on revenue from the sale of new products or 
services resulting from the research conducted under each Phase II 
award;
    (B) information on additional investment from any source, other 
than Phase I or Phase II SBIR or STTR awards, to further the research 
and development conducted under each Phase II award; and
    (C) any other information received in connection with the award 
that the Administrator, in conjunction with the SBIR program managers 
of the participating agencies, considers relevant and appropriate;
    (ii) includes any narrative information that a Phase II awardee 
voluntarily submits to further describe the outputs and outcomes of its 
awards;
    (iii) includes for each applicant that does not receive a Phase I 
or Phase II award:
    (A) the name, size, location, and identifying number assigned by 
SBA; (B) an abstract of the project; and (C) the Federal agency to 
which the application was made;
    (iv) includes any other data collected by or available to any 
Federal agency that such agency considers to be useful for SBIR program 
evaluation; and
    (v) is available for use solely for program evaluation purposes by 
the Federal Government or, in accordance with Policy Directives issued 
by SBA, by other authorized persons who are subject to a use and 
nondisclosure agreement with the Federal Government covering the use of 
the database
    (11) Data Collection for Government Tech-Net Database
    (i) Each SBC applying for a Phase II award is required to update 
the appropriate information in the Tech-Net database for any of its 
prior Phase II awards. In meeting this requirement, the SBC may 
apportion sales or additional investment information relating to more 
than one Phase II award among those awards, if itnotes the 
apportionment for each award.
    (ii) Each Phase II awardee is required to update the appropriate 
information in the Tech-Net database on that award upon completion of 
the last deliverable under the funding agreement. In addition, the 
awardee is requested to voluntarily update the appropriate information 
on that award in the Tech-Net database annually thereafter for a 
minimum period of 5 years.
    (iii) Pursuant to 15 U.S.C. 638(k)(4), information provided to the 
Government Tech-Net Database is privileged and confidential and not 
subject to disclosure pursuant to 5 U.S.C. 552 (Government Organization 
and Employees); nor must it be considered to be publication for 
purposes of 35 U.S.C. 102 (a) or (b).
    (iv) SBA will minimize the data reporting requirements of SBCs, 
make updating available electronically, and provide standardized 
procedures.

12. Federal and State Technology (FAST) Partnership Program and 
Outreach Program

    (a) Federal and State Technology Partnership Program The Small 
Business Innovation Research Program Reauthorization Act of 2000, 
Public Law 106-554, established the Federal and State Technology 
Partnership Program (FAST Program) to strengthen the technological 
competitiveness of SBCs in the United States. Congress found that 
programs that foster economic development among small high-technology 
firms vary widely among the States. Thus, the purpose of the FAST 
Program is to improve the participation of small technology firms in 
the innovation and commercialization of new technology, thereby 
ensuring that the United States remains on the cutting-edge of research 
and development in the highly competitive arena of science and 
technology. SBA administers the FAST Program. Additional and detailed 
information regarding this program is available at www.sba.gov/SBIR.
    (b) Rural Outreach Program
    (1) The Rural Outreach Program is authorized by section 9(s) of the 
Small Business Act, 15 U.S.C. 638(s). The Small Business Innovation 
Research Program Reauthorization Act of 2000, Public Law 106-554, 
extends the program through September 30, 2005.
    (2) Historically, SBCs located in a relatively small number of 
states have been highly successful in securing awards under the SBIR 
Program. To expand competition under the SBIR and STTR Programs, and to 
encourage the maximum number of SBCs to submit proposals and succeed in 
winning awards, SBA provides Federal assistance to support statewide 
outreach to small high-technology businesses located in states that are 
underrepresented in SBIR/STTR awards. Cooperative agreements to 
``Eligible States'' are made on a matching funds basis. The awards will 
be made in a ratio of Federal dollars to non-Federal dollars of 2:1, 
with a maximum Federal contribution of $100,000. Assistance provided to 
an Eligible State under this program announcement must be used by the 
State, in consultation with State and local departments and agencies, 
for programs and activities to increase the participation of SBCs 
located in the State in the SBIR and STTR Programs.
    (3) Only Eligible States may submit proposals for the Rural 
Outreach Program.
    (4) SBA has determined that there are 25 ``Eligible States'': 
Alaska, Arkansas,

[[Page 60093]]

Delaware, District of Columbia, Hawaii, Idaho, Indiana, Iowa, Kentucky, 
Louisiana, Maine, Mississippi, Missouri, Montana, Nebraska, Nevada, 
North Dakota, Oklahoma, Puerto Rico, Rhode Island, South Carolina, 
South Dakota, Vermont, West Virginia, and Wyoming.

Appendix I: Instructions for SBIR Program Solicitation Preparation

    a. General. Section 9(j) of the Small Business Act (15 U.S.C. 
638(j)) requires ``. . . simplified, standardized and timely SBIR 
solicitations'' and for SBIR agencies to utilize a ``uniform 
process'' minimizing the regulatory burden of participation. 
Therefore, the following instructions purposely depart from normal 
Government solicitation formats and requirements. SBIR solicitations 
must be prepared and issued as program solicitations in accordance 
with the following instructions.
    b. Limitation in Size of Solicitation. In the interest of 
meeting the requirement for simplified and standardized 
solicitations, while also recognizing that the Internet has become 
the main vehicle for distribution, each agency should structure its 
entire SBIR solicitation to produce the least number of pages 
(electronic and printed), consistent with the procurement/assistance 
standing operating procedures and statutory requirements of the 
participating Federal agencies.
    c. Format. SBIR Program solicitations must be prepared in a 
simple, standardized, easy-to-read, and easy-to-understand format. 
It must include a cover sheet, a table of contents, and the 
following sections in the order listed.

1. Program Description
2. Definitions
3. Proposal Preparation Instructions and Requirements
4. Method of Selection and Evaluation Criteria
5. Considerations
6. Submission of Proposals
7. Scientific and Technical Information Sources
8. Submission Forms and Certifications
9. Research Topics

    d. Cover Sheet. The cover sheet of an SBIR Program solicitation 
must clearly identify the solicitation as a SBIR solicitation, 
identify the agency releasing the solicitation, specify date(s) on 
which contract proposals or grant applications (proposals) are due 
under the solicitation, and state the solicitation number or year.

Instructions for Preparation of SBIR Program Solicitation

Sections 1 through 9

    1. Program Description. (a) Summarize in narrative form the 
invitation to submit proposals and the objectives of the SBIR 
Program.
    (b) Describe in narrative form the agency's SBIR Program 
including a description of the three phases. Note in your 
description that the solicitation is for Phase I proposals only.
    (c) Describe program eligibility, as follows:
    Eligibility. Each concern submitting a proposal must qualify as 
an SBC for R/R&D purposes at the time of award. In addition, the 
primary employment of the principal investigator must be with the 
SBC at the time of award and during the conduct of the proposed 
research, unless otherwise approved in writing by the funding 
agreement officer after consultation with the agency SBIR Program 
Manager/Coordinator. Also, for both Phase I and Phase II, the R/R&D 
work must be performed in the United States. However, based on a 
rare and unique circumstance, for example, a supply or material or 
other item or project requirement that is not available in the 
United States, agencies may allow that particular portion of the R/
R&D work to be performed or obtained in a country outside of the 
United States. Approval by the funding agreement officer for each 
such specific condition must be in writing. Phase II proposals may 
be submitted only by Phase I awardees.
    (d) List the name, address and telephone number of agency 
contacts for general information on the SBIR Program solicitation.
    2. Definitions. Whenever terms are used that are unique to the 
SBIR Program, a specific SBIR solicitation or a portion of a 
solicitation, they will be defined in a separate section entitled 
``Definitions.'' At a minimum, the definitions of ``funding 
agreement,'' ``R/R&D,'' ``SBC,'' ``SBIR technical data,'' ``SBIR 
technical data rights,'' ``subcontract,'' and ``women-owned SBC,'' 
as stated in this Policy Directive, must be included.
    3. Proposal Preparation Instructions and Requirements. The 
purpose of this section is to inform the applicant on what to 
include in the proposal and to set forth limits on what may be 
included. It should also provide guidance to assist applicants, 
particularly those that may not have previous Government experience, 
in improving the quality and acceptance of proposals.
    (a) Limitations on Length of Proposal. Include at least the 
following information:
    (1) SBIR Phase I proposals must not exceed a total of 25 pages, 
including cover page, budget, and all enclosures or attachments, 
unless stated otherwise in the agency solicitation. Pages should be 
of standard size (8\1/2\'' x 11''; 21.6 cm x 27.9 cm) and should 
conform to the standard formatting instructions. Margins should be 
2.5 cm and type at least 10 point font.
    (2) A notice that no additional attachments, appendices, or 
references beyond the 25-page limitation shall be considered in 
proposal evaluation (unless specifically solicited by an agency) and 
that proposals in excess of the page limitation shall not be 
considered for review or award.
    (b) Proposal Cover Sheet. Every applicant is required to include 
at least the following information on the first page of proposals. 
Items 8 and 9 are for statistical purposes only.
    (1) Agency and solicitation number or year.
    (2) Topic Number or Letter.
    (3) Subtopic Number or Letter.
    (4) Topic Area.
    (5) Project Title.
    (6) Name and Complete Address of Firm.
    (7) Small Business Certification (by statement or checkbox) as 
follows: ``The above concern certifies that it is an SBC and meets 
the definition as stated in this solicitation or that it will meet 
that definition at time of award.''
    (8) Socially and Economically Disadvantaged SBC Certification 
(by statement or checkbox) as follows:
    ``The above concern certifies that______it does______does not 
qualify as a socially and economically disadvantaged SBC as defined 
in this solicitation.''
    (9) Women-owned SBC Certification (by statement or checkbox) as 
follows: ``The above concern certifies that it______does______does 
not qualify as a women-owned SBC as defined in this solicitation.''
    (10) An information statement regarding duplicate research as 
follows: ``The applicant and/or Principal 
Investigator______has______has not submitted proposals for 
essentially equivalent work under other Federal program 
solicitations or______has______has not received other Federal awards 
for essentially equivalent work.'' (Identify proposals/awards in 
Section 3(e)(10), ``Similar Proposals and Awards.'')
    (11) Disclosure permission (by statement or checkbox), such as 
follows, may be included at the discretion of the funding agency: 
``Will you permit the Government to disclose the title and technical 
abstract page of your proposed project, plus the name, address, and 
telephone number of the corporate official of your concern, if your 
proposal does not result in an award, to concerns that may be 
interested in contacting you for further information? Yes No______''
    (12) Signature of a company official of the proposing SBC and 
that individual's typed name, title, address, telephone number, and 
date of signature.
    (13) Signature of Principal Investigator or Project Manager 
within the proposing SBC and that individual's typed name, title, 
address, telephone number, and date of signature.
    (14) Legend for proprietary information as described in the 
``Considerations'' section of this program solicitation if 
appropriate. May also be noted by asterisks in the margins on 
proposal pages.
    (c) Data Collection Requirement
    (1) Each Phase II applicant is required to provide information 
for the Tech-Net Database System (http://technet.sba.gov). The 
following are examples of the data to be entered by applicants into 
Tech-Net:
    (i) Any business concern or subsidiary established for the 
commercial application of a product or service for which an SBIR 
award is made.
    (ii) Revenue from the sale of new products or services resulting 
from the research conducted under each Phase II award;
    (iii) Additional investment from any source, other than Phase I 
or Phase II awards, to further the research and development 
conducted under each Phase II award.
    (iv) Update the information in the Tech-Net database for any 
prior Phase II award received by the SBC. The SBC may apportion 
sales or additional investment information relating to more than one 
Phase II award among those awards, if it notes the apportionment for 
each award.

[[Page 60094]]

    (2) Each Phase II awardee is required to update the appropriate 
information on the award in the Tech-Net database upon completion of 
the last deliverable under the funding agreement and is requested to 
voluntarily update the information in the Tech-Net database annually 
thereafter for a minimum period of 5 years.
    (d) Abstract or Summary. Applicants will be required to include 
a one-page project summary of the proposed R/R&D including at least 
the following:
    (1) Name and address of SBC.
    (2) Name and title of principal investigator or project manager.
    (3) Agency name, solicitation number, solicitation topic, and 
subtopic.
    (4) Title of project.
    (5) Technical abstract limited to two hundred words.
    (6) Summary of the anticipated results and implications of the 
approach (both Phases I and II) and the potential commercial 
applications of the research.
    (e) Technical Content. SBIR Program solicitations must require, 
as a minimum, the following to be included in proposals submitted 
thereunder:
    (1) Identification and Significance of the Problem or 
Opportunity. A clear statement of the specific technical problem or 
opportunity addressed.
    (2) Phase I Technical Objectives. State the specific objectives 
of the Phase I research and development effort, including the 
technical questions it will try to answer to determine the 
feasibility of the proposed approach.
    (3) Phase I Work Plan. Include a detailed description of the 
Phase I R/R&D plan. The plan should indicate what will be done, 
where it will be done, and how the R/R&D will be carried out. Phase 
I R/R&D should address the objectives and the questions cited in 
(e)(2) immediately above. The methods planned to achieve each 
objective or task should be discussed in detail.
    (4) Related R/R&D. Describe significant R/R&D that is directly 
related to the proposal including any conducted by the project 
manager/principal investigator or by the proposing SBC. Describe how 
it relates to the proposed effort, and any planned coordination with 
outside sources. The applicant must persuade reviewers of his or her 
awareness of key, recent R/R&D conducted by others in the specific 
topic area.
    (5) Key Personnel and Bibliography of Directly Related Work. 
Identify key personnel involved in Phase I including their directly-
related education, experience, and bibliographic information. Where 
vitae are extensive, summaries that focus on the most relevant 
experience or publications are desired and may be necessary to meet 
proposal size limitation.
    (6) Relationship with Future R/R&D.
    (i) State the anticipated results of the proposed approach if 
the project is successful (Phase I and II).
    (ii) Discuss the significance of the Phase I effort in providing 
a foundation for the Phase II R/R&D effort.
    (7) Facilities. A detailed description, availability and 
location of instrumentation and physical facilities proposed for 
Phase I should be provided.
    (8) Consultants. Involvement of consultants in the planning and 
research stages of the project is permitted. If such involvement is 
intended, it should be described in detail.
    (9) Potential Post Applications. Briefly describe:
    (i) Whether and by what means the proposed project appears to 
have potential commercial application.
    (ii) Whether and by what means the proposed project appears to 
have potential use by the Federal Government.
    (10) Similar Proposals or Awards. WARNING--While it is 
permissible with proposal notification to submit identical proposals 
or proposals containing a significant amount of essentially 
equivalent work for consideration under numerous Federal program 
solicitations, it is unlawful to enter into funding agreements 
requiring essentially equivalent work. If there is any question 
concerning this, it must be disclosed to the soliciting agency or 
agencies before award. If an applicant elects to submit identical 
proposals or proposals containing a significant amount of 
essentially equivalent work under other Federal program 
solicitations, a statement must be included in each such proposal 
indicating:
    (i) The name and address of the agencies to which proposals were 
submitted or from which awards were received.
    (ii) Date of proposal submission or date of award.
    (iii) Title, number, and date of solicitations under which 
proposals were submitted or awards received.
    (iv) The specific applicable research topics for each proposal 
submitted or award received.
    (v) Titles of research projects.
    (vi) Name and title of principal investigator or project manager 
for each proposal submitted or award received.
    (11) Prior SBIR Phase II Awards. If the SBC has received more 
than 15 Phase II awards in the prior 5 fiscal years, the SBC must 
submit in its Phase I proposal: name of the awarding agency; date of 
award; funding agreement number; amount of award; topic or subtopic 
title; follow-on agreement amount; source and date of commitment; 
and current commercialization status for each Phase II award. (This 
required proposal information will not be counted toward the 
proposal pages limitation.)
    (f) Cost Breakdown/Proposed Budget. The solicitation will 
require the submission of simplified cost or budget data.
    4. Method of Selection and Evaluation Criteria. (a) Standard 
Statement. Essentially, the following statement must be included in 
all SBIRProgram solicitations:

    ``All Phase I and II proposals will be evaluated and judged on a 
competitive basis. Proposals will be initially screened to determine 
responsiveness. Proposals passing this initial screening will be 
technically evaluated by engineers or scientists to determine the 
most promising technical and scientific approaches. Each proposal 
will be judged on its own merit. The Agency is under no obligation 
to fund any proposal or any specific number of proposals in a given 
topic. It also may elect to fund several or none of the proposed 
approaches to the same topic or subtopic.''

    (b) Evaluation Criteria.
    (1) The SBIR agency must develop a standardized method in its 
evaluation process that will consider, at a minimum, the following 
factors:
    (i) The technical approach and the anticipated agency and 
commercial benefits that may be derived from the research.
    (ii) The adequacy of the proposed effort and its relationship to 
the fulfillment of requirements of the research topic or subtopics.
    (iii) The soundness and technical merit of the proposed approach 
and its incremental progress toward topic or subtopic solution.
    (iv) Qualifications of the proposed principal/key investigators, 
supporting staff, and consultants.
    (v) Evaluations of proposals require, among other things, 
consideration of a proposal's commercial potential as evidenced by:
    (A) the SBC's record of commercializing SBIR or other research,
    (B) the existence of second phase funding commitments from 
private sector or non-SBIR funding sources,
    (C) the existence of third phase follow-on commitments for the 
subject of the research, and,
    (D) the presence of other indicators of the commercial potential 
of the idea.
    (2) The factors in (b)(1) above and other appropriate evaluation 
criteria, if any, must be specified in the ``Method of Selection'' 
section of SBIR Program solicitations.
    (c) Peer Review. The program solicitation must indicate if the 
SBIR agency contemplates that as a part of the SBIR proposal 
evaluation, it will use external peer review.
    (d) Release of Proposal Review Information. After final award 
decisions have been announced, the technical evaluations of the 
applicant's proposal may be provided to the applicant. The identity 
of the reviewer must not be disclosed.
    5. Considerations. This section must include, as a minimum, the 
following information:
    (a) Awards. Indicate the estimated number and type of awards 
anticipated under the particular SBIR Program solicitation in 
question, including:
    (i) Approximate number of Phase I awards expected to be made.
    (ii) Type of funding agreement, that is, contract, grant, or 
cooperative agreement.
    (iii) Whether fee or profit will be allowed.
    (iv) Cost basis of funding agreement, for example, firm-fixed-
price, cost reimbursement, or cost-plus-fixed fee.
    (v) Information on the approximate average dollar value of 
awards for Phase I and Phase II.
    (b) Reports. Describe the frequency and nature of reports that 
will be required under Phase I funding agreements. Interim reports 
should be brief letter reports.
    (c) Payment Schedule. Specify the method and frequency of 
progress and final payment under Phase I and II agreements.
    (d) Innovations, Inventions and Patents.
    (1) Limited Rights Information and Data.

[[Page 60095]]

    (i) Proprietary Information. Essentially, the following 
statement must be included in all SBIR solicitations:

    ``Information contained in unsuccessful proposals will remain 
the property of the applicant. The Government may, however, retain 
copies of all proposals. Public release of information in any 
proposal submitted will be subject to existing statutory and 
regulatory requirements. If proprietary information is provided by 
an applicant in a proposal, which constitutes a trade secret, 
proprietary commercial or financial information, confidential 
personal information or data affecting the national security, it 
will be treated in confidence, to the extent permitted by law. This 
information must be clearly marked by the applicant with the term 
``confidential proprietary information'' and the following legend 
must appear on the title page of the proposal: ``These data shall 
not be disclosed outside the Government and shall not be duplicated, 
used, or disclosed in whole or in part for any purpose other than 
evaluation of this proposal. If a funding agreement is awarded to 
this applicant as a result of or in connection with the submission 
of these data, the Government shall have the right to duplicate, 
use, or disclose the data to the extent provided in the funding 
agreement and pursuant to applicable law. This restriction does not 
limit the Government's right to use information contained in the 
data if it is obtained from another source without restriction. The 
data subject to this restriction are contained on pages______of this 
proposal.''
    Any other legend may be unacceptable to the Government and may 
constitute grounds for removing the proposal from further 
consideration, without assuming any liability for inadvertent 
disclosure. The Government will limit dissemination of such 
information to within official channels.''

    (ii) Alternative To Minimize Proprietary Information. Agencies 
may elect to instruct applicants to:
    (A) Limit proprietary information to only that absolutely 
essential to their proposal.
    (B) Provide proprietary information on a separate page with a 
numbering system to key it to the appropriate place in the proposal.
    (iii) Rights in Data Developed Under SBIR Funding Agreements. 
Agencies should insert essentially the following statement in their 
SBIR Program solicitations to notify SBCs of the necessity to mark 
SBIR technical data before delivering it to the Agency:

    ``To preserve the SBIR data rights of the awardee, the legend 
(or statements) used in the SBIR Data Rights clause included in the 
SBIR award must be affixed to any submissions of technical data 
developed under that SBIR award. If no Data Rights clause is 
included in the SBIR award, the following legend, at a minimum, 
should be affixed to any data submissions under that award.
    These SBIR data are furnished with SBIR rights under Funding 
Agreement No. ______ (and subcontract No. ______ if appropriate), 
Awardee Name ______, Address, Expiration Period of SBIR Data Rights 
______. The Government may not use, modify, reproduce, release, 
perform, display, or disclose technical data or computer software 
marked with this legend for (choose four (4) or five (5) years). 
After expiration of the (4-or 5-year period), the Government has a 
royalty-free license to use, and to authorize others to use on its 
behalf, these data for Government purposes, and is relieved of all 
disclosure prohibitions and assumes no liability for unauthorized 
use of these data by third parties, except that any such data that 
is also protected and referenced under a subsequent SBIR award shall 
remain protected through the protection period of that subsequent 
SBIR award. Reproductions of these data or software must include 
this legend.''

    (iv) Copyrights. Include an appropriate statement concerning 
copyrights and publications; for example:

    ``With prior written permission of the contracting officer, the 
awardee normally may copyright and publish (consistent with 
appropriate national security considerations, if any) material 
developed with (agency name) support. (Agency name) receives a 
royalty-free license for the Federal Government and requires that 
each publication contain an appropriate acknowledgement and 
disclaimer statement.''

    (v) Patents. Include an appropriate statement concerning 
patents. For example:

    ``Small business concerns normally may retain the principal 
worldwide patent rights to any invention developed with Government 
support. The Government receives a royalty-free license for Federal 
Government use, reserves the right to require the patent holder to 
license others in certain circumstances, and requires that anyone 
exclusively licensed to sell the invention in the United States must 
normally manufacture it domestically. To the extent authorized by 35 
U.S.C. 205, the Government will not make public any information 
disclosing a Government-supported invention for a minimum 4-year 
period (that may be extended by subsequent SBIR funding agreements) 
to allow the awardee a reasonable time to pursue a patent.''

    (vi) Invention Reporting. Include requirements for reporting 
inventions. Include appropriate information concerning the reporting 
of inventions, for example:

    ``SBIR awardees must report inventions to the awarding agency 
within 2 months of the inventor's report to the awardee. The 
reporting of inventions may be accomplished by submitting paper 
documentation, including fax.''

    Note: Some agencies provide electronic reporting of inventions 
through the NIH Edison Invention Reporting System (Edison System). 
Use of the Edison System satisfies all invention reporting 
requirements mandated by 37 CFR part 401, with particular emphasis 
on the Standard Patent Rights Clauses, 37 CFR 401.14. Access to the 
system is through a secure interactive Internet site, http://
www.iedison.gov, to ensure that all information submitted is 
protected. All agencies are encouraged to use the Edison System. In 
addition to fulfilling reporting requirements, the Edison System 
notifies the user of future time sensitive deadlines with enough 
lead-time to avoid the possibility of loss of patent rights due to 
administrative oversight.


    (e) Cost-Sharing. Include a statement essentially as follows:

    ``Cost-sharing is permitted for proposals under this program 
solicitation; however, cost-sharing is not required. Cost-sharing 
will not be an evaluation factor in consideration of your Phase I 
proposal.''

    (f) Profit or Fee. Include a statement on the payment of profit 
or fee on awards made under the SBIR Program solicitation.
    (g) Joint Ventures or Limited Partnerships. Include essentially 
the following language:

    ``Joint ventures and limited partnerships are eligible provided 
the entity created qualifies as a small business concern as defined 
in this program solicitation.''

    (h) Research and Analytical Work. Include essentially the 
following statement:

    (1) ``For Phase I a minimum of two-thirds of the research and/or 
analytical effort must be performed by the proposing small business 
concern unless otherwise approved in writing by the funding 
agreement officer after consultation with the agency SBIR Program 
Manager/Coordinator.
    (2) For Phase II a minimum of one-half of the research and/or 
analytical effort must be performed by the proposing small business 
concern unless otherwise approved in writing by the funding 
agreement officer after consultation with the agency SBIR Program 
Manager/Coordinator.''

    (i) Awardee Commitments. To meet the legislative requirement 
that SBIR solicitations be simplified, standardized and uniform, 
clauses expected to be in or required to be included in SBIR funding 
agreements must not be included in full or by reference in SBIR 
Program solicitations. Rather, applicants must be advised that they 
will be required to make certain legal commitments at the time of 
execution of funding agreements resulting from SBIR Program 
solicitations. Essentially, the following statement must be included 
in the ``Considerations'' section of SBIR Program solicitations:

    ``Upon award of a funding agreement, the awardee will be 
required to make certain legal commitments through acceptance of 
numerous clauses in Phase I funding agreements. The outline that 
follows is illustrative of the types of clauses to which the 
contractor would be committed. This list is not a complete list of 
clauses to be included in Phase I funding agreements, and is not the 
specific wording of such clauses. Copies of complete terms and 
conditions are available upon request.''

    (j) Summary Statements. The following are illustrative of the 
type of summary statements to be included immediately following the 
statement in subparagraph (i). These statements are examples only 
and may vary depending upon the type of funding agreement used.
    (1) Standards of Work. Work performed under the funding 
agreement must conform to high professional standards.
    (2) Inspection. Work performed under the funding agreement is 
subject to Government inspection and evaluation at all times.

[[Page 60096]]

    (3) Examination of Records. The Comptroller General (or a duly 
authorized representative) must have the right to examine any 
pertinent records of the awardee involving transactions related to 
this funding agreement.
    (4) Default. The Government may terminate the funding agreement 
if the contractor fails to perform the work contracted.
    (5) Termination for Convenience. The funding agreement may be 
terminated at any time by the Government if it deems termination to 
be in its best interest, in which case the awardee will be 
compensated for work performed and for reasonable termination costs.
    (6) Disputes. Any dispute concerning the funding agreement that 
cannot be resolved by agreement must be decided by the contracting 
officer with right of appeal.
    (7) Contract Work Hours. The awardee may not require an employee 
to work more than 8 hours a day or 40 hours a week unless the 
employee is compensated accordingly (for example, overtime pay).
    (8) Equal Opportunity. The awardee will not discriminate against 
any employee or applicant for employment because of race, color, 
religion, sex, or national origin.
    (9) Affirmative Action for Veterans. The awardee will not 
discriminate against any employee or application for employment 
because he or she is a disabled veteran or veteran of the Vietnam 
era.
    (10) Affirmative Action for Handicapped. The awardee will not 
discriminate against any employee or applicant for employment 
because he or she is physically or mentally handicapped.
    (11) Officials Not To Benefit. No Government official must 
benefit personally from the SBIR funding agreement.
    (12) Covenant Against Contingent Fees. No person or agency has 
been employed to solicit or secure the funding agreement upon an 
understanding for compensation except bonafide employees or 
commercial agencies maintained by the awardee for the purpose of 
securing business.
    (13) Gratuities. The funding agreement may be terminated by the 
Government if any gratuities have been offered to any representative 
of the Government to secure the award.
    (14) Patent Infringement. The awardee must report each notice or 
claim of patent infringement based on the performance of the funding 
agreement.
    (15) American Made Equipment and Products. When purchasing 
equipment or a product under the SBIR funding agreement, purchase 
only American-made items whenever possible.
    (k) Additional Information. Information pertinent to an 
understanding of the administration requirements of SBIR proposals 
and funding agreements not included elsewhere must be included in 
this section. As a minimum, statements essentially as follows must 
be included under ``Additional Information'' in SBIR Program 
solicitations:
    (1) This program solicitation is intended for informational 
purposes and reflects current planning. If there is any 
inconsistency between the information contained herein and the terms 
of any resulting SBIR funding agreement, the terms of the funding 
agreement are controlling.
    (2) Before award of an SBIR funding agreement, the Government 
may request the applicant to submit certain organizational, 
management, personnel, and financial information to assure 
responsibility of the applicant.
    (3) The Government is not responsible for any monies expended by 
the applicant before award of any funding agreement.
    (4) This program solicitation is not an offer by the Government 
and
    does not obligate the Government to make any specific number of 
awards. Also, awards under the SBIR Program are contingent upon the 
availability of funds.
    (5) The SBIR Program is not a substitute for existing 
unsolicited proposal mechanisms. Unsolicited proposals must not be 
accepted under the SBIR Program in either Phase I or Phase II.
    (6) If an award is made pursuant to a proposal submitted under 
this SBIR Program solicitation, a representative of the contractor 
or grantee or party to a cooperative agreement will be required to 
certify that the concern has not previously been, nor is currently 
being, paid for essentially equivalent work by any Federal agency.
    6. Submission of Proposals.
    (a) This section must clearly specify the closing date on which 
all proposals are due to be received.
    (b) This section must specify the number of copies of the 
proposal that are to be submitted.
    (c) This section must clearly set forth the complete mailing 
and/or delivery address(es) where proposals are to be submitted.
    (d) This section may include other instructions such as the 
following:
    (1) Bindings. Please do not use special bindings or covers. 
Staple the pages in the upper left corner of the cover sheet of each 
proposal.
    (2) Packaging. All copies of a proposal should be sent in the 
same package.
    7. Scientific and Technical Information Sources. Wherever 
descriptions of research topics or subtopics include reference to 
publications, information on where such publications will normally 
be available must be included in a separate section of the 
solicitation entitled ``Scientific and Technical Information 
Sources.''
    8. Research Topics. Describe sufficiently the R/R&D topics and 
subtopics for which proposals are being solicited to inform the 
applicant of technical details of what is desired. Allow flexibility 
in order to obtain the greatest degree of creativity and innovation 
consistent with the overall objectives of the SBIR Program.
    9. Submission Forms and Certifications. Multiple copies of 
proposal preparation forms necessary to the contracting and granting 
process may be required. This section may include Proposal Summary, 
Proposal Cover, Budget, Checklist, and other forms the sole purpose 
of which is to meet the mandate of law or regulation and simplify 
the submission of proposals. This section may also include 
certifying forms required by legislation, regulation or standing 
operating procedures, to be submitted by the applicant to the 
contracting or granting agency. This would include certifying forms 
such as those for the protection of human and animal subjects.

Appendix II: Tech-Net Data Fields for Public Database

    The following are the data fields for the Public Tech-Net 
DataBase described in Section 11(e)(9) of this Policy Directive.
    (a) For all Agency SBIR/STTR Annual Data Submissions to the SBA

----------------------------------------------------------------------------------------------------------------
              Field name                           Type                 Width               Description
----------------------------------------------------------------------------------------------------------------
Program Identification................  Numeric..................               1  SBIR/STTR Award Program
                                                                                    Identifier* ( see below).
Company...............................  Char.....................              80  Company Name*.
Street1...............................  Char.....................              80  Street Address1*.
Street2...............................  Char.....................              80  Street Address 2.
City..................................  Char.....................              40  City*.
State.................................  Char.....................               2  State*.
Zip...................................  Numeric..................               5  Zip*.
Zip4..................................  Numeric..................               4  Zip + 4.
Minority Code.........................  Numeric..................               1  Minority code indicator 0 =
                                                                                    yes 1 = no*.
Women.................................  Numeric..................               1  Women-owned company indicator
                                                                                    0 = yes 1 = no*.
Contact First.........................  Char.....................              40  Company Official contact
                                                                                    first name.
Contact Last..........................  Char.....................              40  Contact last name.
Contact Middle Init...................  Char.....................               1  Contact middle initial.
Contact Title.........................  Char.....................              40  Contact Official title.
Contact Phone.........................  Char.....................              10  Contact Official phone.

[[Page 60097]]

 
Contact Email Address.................  Char.....................              50  Contact email address.
Employees.............................  Numeric..................               5  Number of employees.
Agency Code...........................  Numeric..................               2  Awarding agency name (ex.
                                                                                    DOD)* (see below).
Branch................................  Number...................               1  Awarding DOD branch name (ex.
                                                                                    Navy) (see below).
Phase.................................  Numeric..................               1  Phase number 1 or 2*.
Award Year............................  Numeric..................               4  Phase award year*.
Award Amount..........................  Numeric..................              10  Phase award amount*.
PI First..............................  Char.....................              40  Principal Investigator First
                                                                                    Name*.
PI Last...............................  Char.....................              40  Principal Investigator Last
                                                                                    Name*.
PI Middle Init........................  Char.....................               1  Principal Investigator middle
                                                                                    initial.
PI Title..............................  Char.....................              40  Principal Investigator Title.
PI Phone..............................  Char.....................              10  Principal Investigator phone.
PI Email Address......................  Char.....................              50  Principal Investigator email
                                                                                    address.
Topic Code............................  Char.....................              15  Agency Solicitation Topic
                                                                                    Number*.
RI TYPE...............................  Numeric..................               1  Type of research institution
                                                                                    (see below).
RI Name...............................  Char.....................              80  Research institution.
RI Street 1...........................  Char.....................              80  Research institution address.
RI Street 2...........................  Char.....................              80  Research institution address.
RI City...............................  Char.....................              40  Research institution city.
RI State..............................  Char.....................               2  Research institution State.
RI Zip................................  Numeric..................               5  Research institution Zip.
RI Zip4...............................  Numeric..................               4  Research institution Zip + 4.
RI Official First.....................  Char.....................              40  Research institution Official
                                                                                    First Name.
RI Official Last......................  Char.....................              40  Research institution Official
                                                                                    Last Name.
RI Official Initial...................  Char.....................               1  Research institution Official
                                                                                    Middle Initial.
RI Official Phone.....................  Char.....................              10  .............................
Tracking Number.......................  Char.....................              20  Agency key identifier
                                                                                    (Internal number scheme)*.
TIN/EIN...............................  Char.....................              10  Taxpayer/Employer
                                                                                    Identification number*.
                                                                                   Prefix with 1 for EIN 2 for
                                                                                    Social Security Number.
Contract/Grant Number.................  Char.....................              20  Agency award contract/grant
                                                                                    number.
Solicitation Number...................  Char.....................              20  Solicitation Number.
Solicitation Year.....................  Numeric..................               4  Year of the Solicitation.
Project Initiator.....................  Char.....................               1  Initiator of STTR
                                                                                    collaborative effort.
Technology Used (Y/N).................  Char.....................               1  SBC or RI originate any
                                                                                    technology used in the STTR
                                                                                    project.
Time to establish license agreement     Numeric..................               2  Time duration to establish
 (months).                                                                          any STTR license agreement.
STTR Proceeds Distribution to SBC (%).  Numeric..................               3  Allocation of proceeds from
                                                                                    sale of STTR technology.
STTR Proceeds Distribution to RI (%)..  Numeric..................               3  Allocation of proceeds from
                                                                                    sale of STTR technology.
---------------------------------------
                      From this point each data element should be sent as a separate file.
----------------------------------------------------------------------------------------------------------------
TITLE.................................  Char.....................             800  Title of research project*.
Tracking Number.......................  Char.....................              20  Agency key identifier
                                                                                    (Internal number scheme)*.
Abstract..............................  Char.....................            1500  Technical abstract (500
                                                                                    words).
Tracking Number.......................  Char.....................              20  Agency key identifier
                                                                                    (Internal number scheme)*.
Abstract SeqNmb.......................  Numeric..................               1  .............................
Results...............................  Char.....................            1000  --Project anticipated
                                                                                    results.
Tracking Number.......................  Char.....................              20  Agency key identifier
                                                                                    (Internal number scheme)*.
COMMENTS..............................  Char.....................            1000  --Project comments.
Tracking Number.......................  Char.....................              20  Agency key identifier
                                                                                    (Internal number scheme)*.
Industry Share Amount.................  Numeric..................              10  ATP Program Cost Share
                                                                                    Amount.
Cost Share Tracking Number............  Char.....................              20  ATP Cost Share Tracking
                                                                                    Number.
----------------------------------------------------------------------------------------------------------------


    Note: Those fields denoted with an asterisk are deemed mandatory 
in all agency submissions. It is understood that all agencies will 
not have data for each data field listed above. Each agency must 
ensure that data submissions to the SBA include all of the data 
fields above, even if they are empty.

Code Research Institution Types
    1 Nonprofit college or university
    2 Domestic nonprofit research organization
    3 Federally-funded research and development center (FFRDC)
    (b) Codes

(1) Program Identification Code
    0 STTR (Small Business Technology Transfer)
    1 SBIR (Small Business Innovation Research)
    2 ATP (Advanced Technology Program)

(2) Agency Codes
    1 DOD (Department of Defense)
    2 DOE (Department of Energy)
    3 NASA (National Aeronautics and Space Administration)
    4 HHS (Health and Human Services)
    5 NSF (National Science Foundation)
    6 DOT (Department of Transportation)
    7 EPA (Environmental Protection Agency)
    8 ED (Department of Education)
    9 DOA (Department of Agriculture)
    10 DOC (Department of Commerce)
    11 NIST (National Institute of Standards and Technology)

(3) Branch Codes
    1 AF (Department of the Air Force)
    2 ARMY (Department of the Army)
    3 MDA (Missile Defense Agency)
    4 DARP (Defense Advanced Research Projects Agency)

[[Page 60098]]

    5 DSWA (Defense Special Weapons Agency)
    6 NAVY (Department of the Navy)
    7 OSD (Office of the Secretary of Defense)
    8 SOCO (Special Operations Command)
    9 NIMA (National Imaging and Mapping Agency)

(4) If any new codes, please advise the Office of Technology.

[FR Doc. 02-24026 Filed 9-23-02; 8:45 am]
BILLING CODE 8025-01-P