SBIR Gateway

SBIR Insider Newsletter
February 14, 2012

Dear SBIR Insider,

The post-reauthorization future of SBIR and STTR is not totally clear but is now coming into focus. As most of you know, SBIR/STTR reauthorization is now law (P.L. 112-81) and one thing we know for sure is that our programs are now authorized to run through the end of fiscal year 2017 (September 30, 2017).

Don't expect to see many major changes anytime soon. As we described in our last issue, the SBA must first develop updated policy directives (PDs) for both SBIR and STTR programs (see ). The policy directives provide the guidance to the agencies as to how the new laws and statutory mandates will be followed.

This issue of your SBIR Insider will report on the progress and future projections of the policy directive efforts. We were fortunate to have a "sit down" with Mr. Sean Greene, SBA Associate Administrator for Investment and Innovation, who is leading the SBIR policy directive efforts in the SBA. He offered some valuable perspective as well as the ordinals that are being employed to create the new SBIR and STTR policy directives

We only offer a couple of direct quotes from Mr. Greene because you will be able to get information directly from the horse's mouth in an upcoming blog post he will be doing on SBA's web site. We'll send you a quick notification with a link to it when it happens.

Of course we are also including information from SBIR Insider sources with experience and corporate memory from previous iterations of SBIR reauthorization and policy directive creation and updating.

Similar to reauthorization, SBIR policy directive creation is time consuming and often not pretty. Severe battles ensued in both the 2000 SBIR reauthorization and the policy directive efforts. The 2000 SBIR reauthorization was passed at the end of December 2000, but the policy directive was not completed until late September of 2002, that's almost 2 years (ok, I exaggerate, it was actually 1 year, 10 months and 3 days).

Sean Greene is keenly aware of this (although he was not previously involved) and wants to avoid a protracted implementation of policy directives. Unlike 2000 which was only SBIR, Greene has both SBIR and STTR policy directives to deal with, and a 2 year time span is not an option.

The Plan In Brief : Where We Are Right Now

For the near future EVERYTHING stays the same and operates under the same rules we have been following EXCEPT for one item: the percentage for SBIR & STTR allocation. As of January 1, 2012, the SBIR allocation was raised from 2.5% to 2.6%, and STTR from 0.3% to 0.35%. The result is more money for the SBIR and STTR programs, at least for now (no changes to award levels).

All other items and policies remain the same for the time being. That includes not implementing hot items such as eligibility (VC or hedge fund ownership), award level caps, and admin money to the agencies, just to name a few.

Basically SBIR and STTR are business as usual, but now we have certainty of funding, (not the month to month CR mess we've been dealing with since 2008).

Since January 3, 2012, the SBA has been, and will continue to work diligently to update the policy directives and attempt to meet the target dates for publishing the proposed rules. They have assembled an internal team which includes some SBIR agency members to provide agency input in drafting the language. At this point there are no outside stakeholders involved in the drafting process. This will come during the public comment stage later.

The issue of size standards (addressing eligibility regulations such as VC and/or foreign ownership of a small business) will be handled separately from the other program issues. Size standard issues are targeted for an April 30, 2012 release of proposed rules, while the overall SBIR and STTR proposed rules are targeted for June 30, 2012.

After publishing the proposed rules, there will be a period (estimated to be 60 days) for public comment, then SBA will consider the feedback, structure and publish the final rules (policy directives). It is hoped that final rules for both the size standards and the overall policy directives will be complete by the end of this calendar year.

The Plan In Brief : Behind the Scenes (The Dark Side)

The scenario above is a thumbnail to give you an overall idea of the process. However, a thumbnail sometimes attracts a fungus. In the case of previous SBIR reauthorizations and policy directives, this fungus was known by three letters, OMB. OMB (short for Office of Management and Budget) has previously been the enemy to many small business programs including SBIR (under various administrations).

The OMB infection tried to discolor the value of small business, and for quite a while acted as a small business impediment. The treatment for this disorder didn't come from the medical community, it came from Congress, and in one case, directly from the Vice President!

Hopefully the OMB of today can look past the short sightedness of their predecessors and see that OMB's previous views on small business (especially SBIR) were sadly mistaken. Many Insiders remain somewhat skeptical.

Now that you have a skewed view of OMB, lets see the role they play in the policy directive process, and why it is so important.

The Plan In Brief : The Projected Order for a Final Policy Directive

1. The SBA drafts the rules and language for the policy directive the sends it to the relevant offices of SBA to get them to sign off on it (i.e., CFO, Advocacy, IG, etc).

2. SBA sends it to OMB who will do a review and perform an interagency clearance process to get feedback from the agencies (can take up to 90 days).

3. SBA takes inputs from OMB then publishes the proposed rules for public comment.
(a) SBA will issue guidance to the agencies that the proposed rules will take effect immediately, meaning the policy directive guidance starts immediately and stays in effect until the final rule is published [this is unusual in that the action is tantamount to an interim rule that has yet to receive public comment, but it is being done to allow the changes in the programs to be implemented much more quickly.]

4. SBA solicits and receives public comments, respond to them, and revise the rules as they deem appropriate

5. SBA sends the final draft to OMB for approval

6. Upon OMB approval, SBA publishes the policy directive as the final rule(s) which become effective as described in the document. These will immediately supercede any directives from 3(a).

Variations from Previous Rule Making Efforts

There are two major and controversial differences in the way SBA is handling the policy directive situation. Both differences are being employed to save a great deal of time in implementing the new provisions of SBIR/STTR law.

1. No ANPRN: Usually under the Administrative Procedure Act, an agency will issue an Advance Notice of Proposed Rulemaking (ANPRM) by which the agency publishes a notice in the Federal Register asking for public comment before it develops a detailed proposed rule. This allows stakeholders to voice concerns before pen is put to paper (or fingers put to keyboards). In an effort to save time, this is not being done. SBA will utilize a Notice of Proposed Rulemaking (NPRN) which differs from the ANPRM in that it allows comment only after the initial drafts are made and published, BUT it does allow public input and modifications often result from that input.

2. Quasi-Creation of an "Interim Rule" (see 3a above): In this case the term "Interim Rule" was your Insider's choice, not SBA's. It is not customary that an NPRN acts as an interim rule, but in this case it appears to be. An interim rule goes through a procedure similar to that of a final rule.

Your SBIR Insider is not inferring that any favoritism or foul play is involved, quite the contrary. However, there is a good amount of discomfort in 3a above. If the NPRN contains most of what you like, the SBA becomes your hero, if not, you feel the "fix is in" and consider suing.

It should be noted that 5 U.S.C. 553 provides for certain exemptions to rule making procedures, and SBA may be utilizing one of those. Their thought was that quick (perhaps temporary) implementation of the new SBIR statutes serves the program better than having to wait for a protracted period of time.

When asked about the unusual procedure SBA was going to utilize in the policy directive implementations, Sean Greene stated:

"We're not going to get it perfect, but lets not let the 'perfect' be the enemy of the good. I would rather get something very good out there in the time lines that we are talking about, then get a lot of good feedback and iterate from there."

It is Greene's vision that the policy directives should be updated more frequently (as needed) rather than wait several years between updates. If we look at the last SBIR policy directive, it was released September of 2002 and not updated until March of 2010.

Fortunately the rule making for the size standards issues will go through a separate and more customary process. There will be some SBIR specific size standard changes. Great care has to be taken to prevent any erosion in small business size standards that could affect the entire small business community. SBA hopes to have a size standard NPRN out by the end of April BUT unlike the other SBIR issues, the NPRN will not be an interim rule, it will ask for public comments (60 days) then they hope to issue a final rule by the end of the year.


Sean Greene is committed to making this work in a timely manner. If anyone can do it, I'll bet on Sean. He has been a major SBIR force from within SBA, and SBIR is but a tiny part of his overall responsibilities.

He has taken great care to insure that no special access or preferences are given to anyone (including BIO, NVCA, SBTC or SBBC) during the initial formulation stages. Everyone will have equal access to comment during the public commenting period, hopefully April 30 for size standards, and June 30 for everything else.

On the other hand, there have been many issues where Sean and your SBIR Insider have disagreed, but I always knew what drove his methodology, and there was no question as to his integrity, or commitment to small business.

Stay tuned.



Rick Shindell
SBIR Gateway
Zyn Systems
40 Alderwood Dr.
Sequim, WA 98382
[email protected]

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