SBIR Gateway

SBIR Insider Newsletter
SBA Proposed Rule, Request for Comments
May 15, 2012

Dear SBIR Insider,

There has been a lot of SBIR action going on behind the scenes at SBA as work continues on the SBIR and STTR policy directives. Most of the SBA's work has been behind closed doors with federal agency SBIR program managers and the White House Office of Management and Budget (OMB) officials.

To quote my grandmother, "There has been much to talk about, but nothing to say." For the last several weeks her idiom was correct, but now things are a changin'. We are seeing action and it is time to get you up to speed.

As mentioned in previous issues, the SBA's time sensitive mission for SBIR & STTR is the creation of Policy Directives (PD) which serve to guide the running of these programs. In our February interview with Sean Greene (SBA'a Associate Administrator for Investment, and Special Advisor for Innovation), he described the flow of PD creation, and today the first major milestone has been met.

On May 15, 2012 the SBA has published (in the Federal Register) its first proposed rule for size standards relating to SBIR/STTR. The reason for publishing a proposed rule is to solicit informed public comment on the rule, which will be considered by SBA before they publish a final rule. This is your chance to make a difference, and you have 60 days to do it (we'll explain later).

This rule is limited to the areas of:

A. Definitions and Programs Subject to Size Determinations
B. Ownership and Control
C. Affiliation
D. When SBA Determines Size and Eligibility
E. Certification of size and eligibility
F. Initiating a Protest or Request for Formal Size Determination
G. Time Limits That Apply to Size Protests

Although the scope of this rule may seem small, it is tremendously important and complex because it speaks to allowing (for the first time ever) a small business to be majority owned by non-small business entities, and still compete for programs reserved for small businesses.

In essence, this rule is established to comply with the new SBIR reauthorization law (Section 5107 of PL 112–81) that allows (under defined circumstances), that a small business may be majority owned and controlled by multiple Venture Capital Operating Companies (VCOC), Hedge Funds, and/or Private Equity Firms, and still be eligible to compete for SBIR/STTR funding.

SBA has taken a careful approach to make sure these new rules are limited to SBIR & STTR only, not other small business programs. However, our non SBIR small business readers should look at these rules to make sure they see no slippery slope that could affect other small business programs.

Another issue is that of foreign (non domestic) ownership. If the small business is majority owned by foreign entities, they would not be eligible. Of course this could be sticky even with minority ownership by foreign concerns in areas of national defense and ITAR.

The SBA has worked hard to make this proposed rule easy to read and even easier for you to comment on. Although your comments cannot reverse the congressional intent of the law, it can help shape how the rules are applied, and what measures can be taken to make the programs more responsive to its intended purpose.

There are always several paths to get the information:

Title: Small Business Size Regulations, Small Business Innovation Research (SBIR) Program and Small Business Technology Transfer (STTR) Program

Legal Description:
13 CFR Part 121
RIN 3245–AG46

Web Locations:

Easiest to read and comment on line (new site):

Also good and official:!documentDetail;D=SBA-2012-0008-0001

Old fashion hard copy Federal Register PDF

You must submit your comments on or before July 16, 2012

The SBA provides good guidance on the rule and how to comment.

Please note that in an unrelated recent notice of proposed rulemaking for "Reform of Federal Policies Relating to Grants and Cooperative Agreements" more than 349 universities and non-profits offered comments, greatly influencing that policy.

It is important that the small business community show up and comment on these important SBIR/STTR rules otherwise the conversation may be dominated by large special interests. The SBA wants to hear from you!

We will be following this SBIR Insider up with some comments and explanations from SBIR experts in the field, with the hopes of clarifying some of the issues for you. I hope to have it for you next week.

Federal employees please note: Your comments may be very important in these issues, but it must be as an individual, not a government employee. If you feel uncomfortable posting directly to SBA, feel free to send me your comments and we'll include them without attribution.

Your SBIR Insider does not want, nor should try to shape your comments on SBA's call for public comment. However, we want to keep you informed so you will be more willing to provide your thoughts to SBA. We will have more information on overall SBIR news in our next issue.

Note to our DoD readers: Wednesday May 16, general debate will take place in the House on H.R. 4310, National Defense Authorization Act for Fiscal Year 2013. The House Report includes Section 1617 "Restoration of 1% Funding for Administrative Expenses of Commercialization Readiness Program (CRP) of Department of Defense.

The SBIR reauthorization bill inadvertently didn't include the 1% funding for the CRP (formerly known as the CPP) and this section corrects that error. This is a non-controversial section and is expected to survive. The big question is when/if H.R. 4310 gets passed in the House. Many expect it to pass, but in this congress, you never know.

I'm sorry this Insider is mainly a 1 topic issue, but I wanted you to be able to get up to speed. There are many other items to report on, and I promise you an issue next week.



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

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