SBIR PD 2002
PD Section-by-Section Analysis - Section 7
SBIR Funding Process
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 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.