SBIR PD 2002
PD Section-by-Section Analysis - Section 6
Eligibility and Application (Proposal) Requirements
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.