About SBIR and STTR

The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs are competitive federal grant programs designed to stimulate technological innovation by small businesses. Since 1982, more than $27 billion has been awarded that assisted more than 15,000 firms and resulted in more than 50,000 patents.

Following the submission of proposals, agencies offer awards based on the small business’s qualifications, degree of innovation, technical merit and future market potential.

Small businesses that receive awards then begin a program that can have three-phases:

• Phase I is the startup phase. Awards of up to $150,000 for approximately six months support exploration of the technical merit, feasibility and commercial potential of an idea or technology.
• Phase II awards go up to $1 million, for as many as two years, and expand Phase I results. During this time, the research and development work continues and the commercial potential of the product is evaluated. Only Phase I award winners are considered for Phase II.
• Phase III is the period during which Phase II innovation moves from the laboratory into the marketplace. No SBIR funds support this phase, so the small business must find funding in the private sector or other non-SBIR federal agency funding.

The SBA’s Role

The US Small Business Administration plays an important role as the coordinating agency for the SBIR program. It directs the implementation of the SBIR program by the 11 agencies that offer grants, reviews their progress and reports annually to Congress on its operation. SBA is also the information link to SBIR. The SBA collects solicitation information from all participating agencies and publishes it quarterly in a Pre-Solicitation Announcement (PSA). This PSA is a single source for the topics and anticipated release and closing dates for each agency's solicitations. All of the SBA's programs and services are extended to the public on a nondiscriminatory basis.

Small Business Innovation Research (SBIR) Grants

Each participating federal agency administers its own individual SBIR program within guidelines established by Congress. These agencies designate research and development topics in their solicitations and accept proposals from small businesses. Awards are made on a competitive basis after evaluating proposals. Participating federal agencies issue solicitations for SBIR/STTR proposal topics throughout the year, and each agency has a different process and different timeline for solicitations.

Currently, 11 federal agencies solicit SBIR proposals:

1.  Department of Agriculture (USDA)
2.  Department of Commerce (DOC): National Institute of Standards and Technology (NIST), and the National Oceanic and Atmospheric Administration (NOAA)
3.  Department of Defense (DOD)
4.  Department of Education (ED)
5.  Department of Energy (DOE)
6.  Department of Health and Human Services (DHHS)
7.  Department of Homeland Security (DHS)
8.  Department of Transportation (DOT)
9.  Environmental Protection Agency (EPA)
10.  National Aeronautics and Space Administration (NASA)
11.  National Science Foundation (NSF)

SBIR Eligibility

Small businesses must meet certain eligibility criteria to participate in the SBIR program:

• American-owned and independently operated
• For-profit business
• Principal researcher employed by business
• Company size limited to 500 employees

For more information about the SBIR program, visit http://www.sbir.gov. In addition, federal agencies maintain department-specific SBIR program webpages.

Small Business Technology Transfer (STTR) Grants

The Small Business Technology Transfer Research (STTR) program strives to stimulate technological innovation through partnerships between small businesses and nonprofit research institutions. This involvement with nonprofit research institutions is a major difference between SBIR and STTR grants. These federal agencies designate research and development topics and accept STTR proposals:

1.  Department of Defense (DOD)
2.  Department of Energy (DOE)
3.  Department of Health and Human Services (DHHS)
4.  National Aeronautics and Space Administration (NASA)
5.  National Science Foundation (NSF)

Businesses must meet certain eligibility criteria to participate in the STTR program:

• American-owned and independently operated
• For-profit business
• Principal researcher need not be employed by the business
• Company size limited to 500

The nonprofit research institution must also meet certain eligibility criteria:

• Located in the US
• Meet one of three definitions:

1. 1.  Nonprofit college or university
   2.  Domestic nonprofit research organization
   3.  Federally funded research and development center (FFRDC)

There is no size limit on the number of employees for the nonprofit research institution.

For more information about the STTR program, visit http://www.sba.gov/content/small-business-technology-transfer-program-sttr-0. In addition, federal agencies maintain department-specific STTR program webpages.

SBIR/STTR federal agency solicitations contain the following information:

• A description of the program
• Deadline for submissions
• Information on funding levels, instructions for applying, method of selection and review criteria
• Research topics and scope of work

SBIR/STTR Award Types: Contract or Grant

Just as federal agencies differ in their solicitation processes, they also differ in the way they administer SBIR/STTR awards. If and when your small business obtains an SBIR or STTR grant, the award will be disbursed to you as either a contract or a grant. The key differences between these two award types are outlined below.

Contracted SBIR/STTR Awards

• Agency establishes plans, protocols and requirements
• Highly focused research topics
• More fiscal requirements

Granted SBIR/STTR Awards

• Investigator initiates research approach
• Broad research topics
• More flexible fiscal requirements

Proposal Review Process

Federal agencies have differing processes for reviewing proposals. Some review proposals internally by agency staff, while others have external review processes that utilize experts from the public and private sectors. Proposal reviews are based on the following:

• Merit—Technical and/or scientific
• Importance of the problem—Response to agency need, relevance to agency mission
• Innovation—Technical and/or scientific
• Potential opportunities and commercialization plan
• Credibility of research team
• Budget—Appropriateness and justification
• Completeness of proposal

For more information about SBIR/STTR grants, see the tabs listed above.

Writing for SBIR and STTR

To increase the effectiveness of your proposal, we recommend that you do the following before you begin writing the SBIR or STTR proposal:

1. Conduct a literature review to help you:

• Understand the state of the technology
• Identify technological applications and markets
• Distinguish alternative methods to solve the research topic
• See what has been previously funded
• Become familiar with agency missions and solicitation topics

2. Learn more about the process of submitting proposals to federal agencies by talking to federal program managers, support organizations and technology experts in your field. For organizations that might be of assistance, see our list of other resources.

Your SBIR/STTR proposal must not exceed 25 pages. Recommended sections and suggested page lengths are as follows:

• Cover sheet (one page)
• Abstract or project summary (one page)
• Significance of the problem (three pages)
• Research objective (one page)
• Research/work plan (six pages)
• Background and related research (two pages)
• Key personnel (up to five pages depending on the number of key personnel)
• Future research and development (one page)
• Commercial applications (two pages)
• References (one page)
• Budget (one page)

The following sections are based on information from Ohio’s SBIR program and included here with their permission.

Basic Information on Writing a Proposal

In any SBIR solicitation, there are a number of key points that you should look for, and here they are in order of importance:

1. Deadline: All SBIR solicitations have specified due dates. The length of your lead time will probably be important in your decision on whether to respond.
2. Funding level: All SBIR solicitations contain explicit funding levels expressed in total dollars available and number of awards to be made. The maximum amount per award may be provided as an average dollar amount and/or in anticipated level of effort (such as one person’s year of effort). Use this funding information to determine if responding to this specific solicitation is worth the effort.
3. Application instructions: Prospective proposal writers need to understand and be able to comply with particular requirements spelled out in the solicitation to which they are responding. Content and format requirements can be very different for the various federal agencies.
4. Scope of work: This is sometimes provided in an explicit statement of work and in great detail. More often, however, the actual scope of work will be determined by the proposer.
5. Additional information: Most announcements will contain an address and/or phone number where you can obtain additional materials and application packages, if required.

Initial Considerations

After reviewing the SBIR solicitation, the following considerations must be addressed.

1. Is the selected topic truly a match with your company’s expertise?
2. Does your organization’s work in this field enhance the chance for success of the intended proposal?
3. What is the principal investigator’s (PI’s) success rate in this field? Are they a good match to the proposed topic?
4. Would the use of a consultant enhance your company’s capabilities or the principal investigator’s capabilities?
5. What capabilities or resources are you missing that would make you more competitive in this arena?

Decision to Write

The only resources you need to write a winning proposal are time, talent and money. Talent in this case is both technical knowledge and writing talent. If you have these critical resources and satisfactory answers to the five questions above, then the benefits probably outweigh the investment. Consequently, it is time to prepare to write.

The development of a proposal needs to be systematic and orderly. Proposal writing need not be an ordeal. The key to success is to adhere to the following:

1. Conduct an honest assessment of your company’s potential specific to the selected topic.
2. Prepare adequately before starting to write.
3. Seek creative and constructive review and guidance from others as you write.

Addressing Primary Issues

Three questions are basic to the majority of research proposals:

1. What do you want to accomplish?
2. Why is it important?
3. What approach will you take?

By this time in the process, you should have a good idea about what you want to accomplish and what approach you will take. You should have a basic understanding of what you are missing and where to obtain what you need. In other words, you may be ready to start writing a proposal based on a well-conceived research plan. The preceding effort will save you time and money throughout the proposal process. It is essential that you allow sufficient time to prepare any proposal. Plan to write several drafts; allow time to review and revise.

Writing the Proposal

As you initiate the writing process, remember that no amount of skill in writing can disguise research that is poorly designed. No matter how well organized, a proposal that reflects poor methods is usually rejected.

As you write, review and edit, pay close attention to the following:

1. Orderly presentation of ideas: Thought units, whether single words, a sentence or a paragraph, or longer sequences, must be orderly.
2. Smoothness of expression: Scientific writing serves a different purpose than creative writing. The aim of your SBIR proposal should be one of clear and logical scientific communication.
3. Economy of expression: Since you have a 25-page limit on SBIR proposals, avoid redundancy, wordiness, jargon and evasiveness.
4. Be precise and clear in your choice of words: Make certain that every word means exactly what you intend it to mean and that it will be clear to those who read your proposal.

After drafting the proposal, it can be very helpful to ask for feedback from researchers, colleagues, SBIR/STTR consultants and other experts before submission.

Preparing an SBIR Cost Proposal

The Basics
It’s not uncommon for SBIR proposal writers to feel more comfortable with the technical part of the proposal than with cost estimation. However, the cost proposal or budget is an integral part of the total proposal. First, it is important to understand the terms and process of preparing a cost proposal in order to comply with government requirements. Just as significant, an inadequate budget may hamper a firm’s ability to perform the work proposed. Some companies omit indirect costs or fees from a proposal due to a lack of understanding of how these items are calculated. However, rent, utilities, fringe benefits and supplies are real costs and must be covered.

The following is an introduction to the basic elements, definitions and rules related to SBIR cost proposals. Although not comprehensive, the information should be helpful to companies in areas where more clarification may be necessary when preparing the budget section of a proposal. Although each agency has specific guidelines and formats for cost proposals or budgets, the basic elements are as follows in this section on costs and fees.

Direct Costs
Costs which are identified specifically with a particular project or contract are called “direct costs.” Thus, direct materials are those goods or services that are purchased for and used directly on a specific project. Subcontract costs may be included in this section.

Direct Labor
This is the most important element and frequently the largest dollar amount in a Phase I proposal. Careful estimates must be made of the number of hours that the principal investigator, key personnel, and other employees will work on the contract or grant if awarded. These hours are multiplied by the relevant hourly rate, and the results are totaled.

Overhead Rate
The overhead rate is the means by which overhead costs are spread among all projects. It is a percentage that is typically calculated by dividing the total of overhead costs (or the pool) by the dollar amount of direct labor (or the base). Note that the pool and base are period expenses, which means they are calculated for a period of time (usually a year) and not for a specific project. Thus, the base consists of all direct labor expected to be used on all projects during the year.

Indirect Costs
Any costs that are not identifiable with a specific project are called “indirect costs.” Examples are rent, utilities, office supplies, salaries/wages of personnel not working on direct activities and benefits. Some expenses such as tools and travel may be direct or indirect depending on the purpose. In larger companies, indirect costs are broken down between overhead and general and administrative (G and A) costs. In smaller companies, all indirect costs are added together to form the overhead pool.

Other Direct Costs
All direct costs not included in direct materials or direct labor are included in this category. Direct travel, consultants and special equipment or testing are typically classified as other direct costs.

General and Administrative Rate
The G and A rate, as it is commonly known, is the means by which general management and administrative costs are spread among the projects. For companies with less than about 50 employees, it is usually not necessary to calculate a G and A rate. One indirect rate (the overhead rate) is sufficient. The G and A rate is calculated by dividing the total amount of G and A expenses (including management/planning labor costs, accounting costs and legal expenses, and marketing expenditures) by the sum of direct labor costs and overhead costs.

Fees or Profits
A fee or profit, usually calculated as a percentage of total costs, is available to small businesses under the SBIR program. The general requirement is the fee must be reasonable, although some agencies give more specific guidance. For example, the amount of fee approved for awards under the current Public Health Service omnibus solicitation may not exceed 7 percent of total costs. For all agencies, the sum of the proposed fee plus costs may not exceed the maximum award amount specified in the solicitation.

General Rules and Guidelines

Allowable and Unallowable Costs
In general, costs are allowed if they are reasonable, can be allocated to one or more projects or contracts (either directly or indirectly), and if they are not classified as unallowable in the Federal Acquisition Regulations (FARs). If costs do not meet these criteria, they cannot be included in cost proposals (either as direct costs or in the calculation of indirect rates), and these costs will not be paid by the government.

Some of the most common types of unallowable costs are:

• Interest and other financial costs
• Bad debts
• Most contributions/donations
• Certain entertainment costs
• Fines and penalties
• Organizational expenses
• Unreasonable compensation
• Federal income taxes
• Sales promotion
• Trade shows and conventions
• Most advertising
• Lobbying costs
• Certain legal costs
• Cost of acquiring a patent (unless required by contract and the federal government will own the patent)

Travel
The general rule for travel is that allowable costs are limited to the amounts set by the government for travel by government employees. Travel costs for lodging, meals and incidentals may generally not exceed the per diem rates published by the government in the Federal Acquisition Regulations. The per diem rates are set by locality, so it is necessary to consult these rates when preparing a cost proposal that includes travel. Actual costs that exceed these limits may be allowed on a case-by-case basis with sufficient written justification.

Developing an Adequate Accounting System
From the government’s point of view, the main criterion for adequacy is: can the business properly segregate and accumulate costs? In other words, does the firm’s accounting system distinguish between direct and indirect costs and between allowable and unallowable costs, and is there a system for tracking and accumulating costs by contract (or grant)? The minimum components are a chart of accounts, a timecard system with specific codes for projects and indirect labor, a chart of accounts, and the appropriate journals and project cost summaries. A well-constructed, detailed annual budget is an excellent starting point.

Types of Contracts
Some agencies, such as the Public Health Service of HHS and the National Science Foundation, make awards in the form of grants. The Department of Defense and other agencies award contracts. There are two main forms of contracts used in the SBIR Program: Firm Fixed Price (FFP) and Cost Plus Fixed Fee (CPFF). The great majority of Phase I contracts are FFP; Phase II contracts are either FFP or cost-reimbursement contracts such as CPFF.

The main characteristics of a Firm Fixed Price contract are:

• The federal agency and contractor agree to a fixed price that cannot be adjusted due to actual costs. The contractor bears all the cost risk.
• The contractor is required to deliver the end product(s) described in the contract (the deliverables) even if it costs more than the amount of the contract to do so. Therefore, the deliverables must be specified carefully.
• There is usually more oversight by audit agencies (such as the Defense Contract Audit Agency or DCAA) prior to award with FFP contracts.
• Contract financing is generally obtained by submitting progress payment requests.
• FFP contracts are relatively simple to administer.

The main characteristics of a Cost Plus Fixed Fee contract are:

• The federal agency reimburses the contractor for allowable incurred costs plus a fee. Thus, the federal agency bears the cost risk.
• The contractor is required to make satisfactory progress and usually must deliver the end product described in the contract to earn the fee. 
• Although a pre-award survey may be performed, there is generally more oversight at the end of a CPFF contract. An incurred cost audit is required before the remaining costs and fee are paid.
• The contractor is paid when an approved invoice (public voucher) is submitted.
• CPFF contracts are more complex to administer and require compliance with more cost regulations.

Seek Feedback After Submitting Proposal
Ask for feedback from federal agency staff and reviewers after submission to learn how to improve your future submissions. If you’re going to put in the time to do a proposal, getting feedback from those who evaluate proposals is an excellent strategy for increasing the success rate of future proposals.

The Following Publications Contain Additional Information

Information for Contractors, by the Department of Defense’s Defense Contract Audit Agency, DCAAP 7641.90, July 1998. 703–767–3274

Federal Acquisition Regulations, Superintendent of Documents, U.S. Government Printing Office, Washington DC, 20402. Federal Acquisition Regulations (FARs) and other reference manuals also are available from the Commerce Clearing House, www.cch.com

Accounting Guide for Government Contracts, Commerce Clearing House, 800–835–5224, www.cch.com

An SBIR Program Development Blueprint, by James R. Atchison, Kettering, OH, 513–294–7394

For more information about SBIR/STTR grants, see the webpages listed above.

Other SBIR and STTR resources

There are many organizations that provide information, resources and reference material to help your small business learn more about the SBIR and STTR federal grant programs.

The Oregon Small Business Development Center Network provides the list below for informational purposes and does not endorse these organizations. It is the responsibility of the individual researcher, entrepreneur, or business owner to determine the right fit for their needs.

US Small Business Administration
SBIR info— www.sbir.gov
STTR— www.sba.gov/content/small-business-technology-transfer-program-sttr-0

State of Oregon and Other Government Agencies in Oregon
Business Oregon— www.oregon4biz.com
Oregon Manufacturing Extension Partnership (OMEP)— www.omep.org

Oregon's Signature Research Centers 
Oregon Nanoscience and Microtechnologies Institute (ONAMI)— www.onami.us
Oregon Built Environments and Sustainable Technologies Center (BEST)— www.oregonbest.org
Oregon Translational Research and Development Institute (OTRADI)— www.otradi.org
Drive Oregon— www.driveoregon.org
Oregon Wave Energy Trust (OWET)— www.oregonwave.org
Portland Development Commission (PDC)— www.pdc.us

Oregon Universities
Oregon Health Science University (OHSU) Tech Transfer— www.ohsu.edu/xd/research/techtransfer/
Oregon State University (OSU) Office of Commercialization and Corporate Development—http://oregonstate.edu/research/occd/
Portland State University (PSU) Business Accelerator—www.pdx.edu/accelerator
Portland State University (PSU) Innovation and Intellectual Property— www.pdx.edu/research/innovation
University of Oregon (UO) Technology Transfer Services— http://techtran.uoregon.edu/

Coalitions, Consortiums and Nonprofits
Columbia River Economic Development Council (CREDC)— www.credc.org
The Indus Entrepreneurs (TIE)— www.oregontie.org
Microenterprise Inventors Program of Oregon (MIPO)— www.mipooregon.org
Oregon Bioscience Association— www.oregonbio.org
Oregon Entrepreneurs Network/Oregon Angel (OEN)— www.oen.org
Oregon Technology Business Center (OTBC)— www.otbc.org
Portland Incubator Experiment— www.piepdx.com
Portland Seed Fund— www.portlandseedfund.com
Technology Association Oregon— www.techoregon.org
Willamette Angel Conference— www.willametteconference.com

National Resources

SCORE, Oregon chapters:
Portland— http://portlandor.score.org/chapters/portland-score
Eugene— http://willamette.score.org/chapters/willamette-score
Salem— http://salem.score.org/chapters/salem-score
Central Oregon (Bend)— http://centraloregon.score.org/chapters/central-oregon
United Inventors Association of America (UIA)— www.uiausa.org

Other Useful Links
Portland Business Journal and Sustainable Business Oregon— www.sustainablebusinessoregon.com
Oregon State University (OSU) Venture Accelerator--http://oregonstate.edu/advantage/venture-accelerator
SBIR Insider Newsletter (free)-- www.zyn.com/sbir/insider/

For more information about SBIR/STTR grants, see the other SBIR/STTR pages on the tabs that are listed above.

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Oregon’s SBIR/STTR Success Rate

The federal government’s Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) awards program started in 1983. Since then, several hundred Oregon companies have earned grants from agencies of the federal government to fund their research and development (R&D) efforts. Although these grants are not easy to get, many Oregon companies have been successful in developing winning proposals to fund their R&D for bringing new technologies to market.

Since 2008, Oregon businesses have received $69 million in SBIR/STTR grants for research and development.

Here are the totals for successful proposals by Oregon businesses since 1983:

Number of SBIR/STTR Awards for Oregon companies: 1,131 for phase I,
                                                                                 514 for phase II

Number of Oregon companies receiving SBIR/STTR awards: 277

Total dollar amount for these awards: $463,755,312

For more information about SBIR/STTR grants, see the tabs listed above.