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SBA Publishes New Draft SBIR Rules – Requests Public Comments

May 21st, 2012 | by Michael Kurek
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The reauthorization of the SBIR/STTR programs in December 2011 legislated changes that require the Small Business Administration (SBA) to update its policy directives for the programs. The SBA has now published the first of these draft changes and is inviting comments from interested stakeholders until July 16, 2012. We urge you to review the changes and make your opinions known.

These proposed rule changes cover issues of size determination of the applicant small business, ownership and control, and affiliation, in addition to other related items, and provides examples of how these new rules would be applied. Here are some of the highlights:

  • The same rules would cover both the SBIR and the STTR programs.
  • Applicants must have fewer than 500 employees and be:
    • More than 50% owned and controlled by U.S. citizens, permanent resident aliens, or domestic business concerns; or
    • Majority-owned by multiple domestic  venture capital operating companies (VCOCs), hedge funds or private equity firms.
  • A small business that is more than 50% owned by a single VCOC, hedge fund or private equity firm would not be eligible.
  • However, for example, a small business owned 49% by a domestic VCOC, 2% by an individual U.S. citizen, and 49% by a non-domestic corporation, would be eligible because it is more than 50% owned by a U.S. citizen and a domestic business concern.
  • Under the proposed rules an applicant’s size and eligibility would be determined both at the time of application (that is, at proposal submission) and at the time of award. The current rule requires determination only at the time of award.

“Affiliation” is a complicated issue because it involves control (or the power to control) of the small business that might not be reflected in the ownership structure. Control may be exercised through managment or through other relationships or interactions between one or more parties. Affiliation is important because SBA counts all employees of any domestic and foreign affiliates in determining the size of a small business.

The proposed new rules might affect your company’s eligibility for SBIR/STTR or might simply offend your idea of fairness. Whatever the motivation, please make your voice heard by posting your comments before July 16,2012.

A special thanks to Rick Shindell of SBIR Insider for keeping the community so well informed of the happenings at the SBA and in Washington DC in general. 

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Michael Kurek, PhD, MBA, is a partner with BBC.