Small Business Technology Transfer Program Policy Directive, 74926-74947 [05-24043]

Agencies

• SMALL BUSINESS ADMINISTRATION

[Federal Register Volume 70, Number 241 (Friday, December 16, 2005)]
[Notices]
[Pages 74926-74947]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-24043]



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Part III





Small Business Administration





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Small Business Technology Transfer Program Policy Directive; Notice

Federal Register / Vol. 70, No. 241 / Friday, December 16, 2005 / 
Notices

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SMALL BUSINESS ADMINISTRATION

RIN 3245-AE96


Small Business Technology Transfer Program Policy Directive

AGENCY: Small Business Administration.

ACTION: Notice of final Policy Directive.

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SUMMARY: This document revises the Small Business Technology Transfer 
(STTR) Program Policy Directive. This final Policy Directive reflects 
statutory amendments to the program and provides guidance to Federal 
agencies on the general conduct of the STTR program. This revised 
directive includes amendments to streamline and enhance the program.

DATES: This final Policy Directive is effective on December 16, 2005.

FOR FURTHER INFORMATION CONTACT: Edsel Brown, Assistant Administrator 
for the Office of Technology, Office of Government Contracting/Business 
Development, U.S. Small Business Administration, 409 3rd Street, SW., 
Washington, DC 20416, or via e-mail to technology@sba.gov.

SUPPLEMENTARY INFORMATION: In 1992, Congress enacted the Small Business 
Technology Transfer Act of 1992 (STTR Act), Pub. L. 102-564 (codified 
at 15 U.S.C. 638). The STTR Act established the Small Business 
Technology Transfer Program (STTR Program) as a pilot program that 
required Federal agencies with extramural budgets for research or 
research and development (R/R&D) in excess of $1 billion per fiscal 
year to enter into funding agreements with small business concerns 
(SBCs) that engage in a collaborative relationship with a research 
institution. The purpose of the STTR Program is to stimulate a 
partnership of ideas and technologies between innovative SBCs and 
research institutions. The program assists the small business and 
research communities by developing commercially-viable technologies. 
The STTR Program is a phased process, uniform throughout the Federal 
Government, of soliciting proposals and awarding funding agreements for 
R/R&D to meet stated agency needs or missions.
    The STTR Act requires the U.S. Small Business Administration (SBA) 
to ``issue a policy directive for the general conduct of the STTR 
Programs within the Federal Government.'' 15 U.S.C. 638(p)(1). SBA 
published its first STTR Policy Directive in 1993 (58 FR 42607-42620, 
Aug. 10, 1993).
    Congress has since amended the STTR Act, most recently with the 
enactment of the Small Business Technology Transfer Program 
Reauthorization Act of 2001 (Reauthorization Act), Pub. L. 107-50. The 
Reauthorization Act extends the STTR Program through September 30, 
2009, and changes its status from a pilot program to a permanent one. 
In addition, the Reauthorization Act clarifies STTR data rights 
pertaining to STTR Phase I, II, and III awards (see final Policy 
Directive, sections 4(c)(2), 8(b) and Appendix I, Instructions, section 
5(d)(1)(iii)); requires the establishment of an STTR Program 
Government-accessible and a public-accessible database (see final 
Policy Directive, section 11(e)); requires participating agencies to 
increase the amount of their extramural budget to be reserved for the 
STTR Program from 0.15 percent to 0.3 percent (see final Policy 
Directive, section 2(d)); permits agencies to increase the dollar value 
of STTR Phase II awards from $500,000 to $750,000 (see final Policy 
Directive, section 7(i)(1)); and permits agencies to approve a shorter 
or longer duration of time for award performance, where appropriate for 
a particular project (see final Policy Directive, section 7(h)).
    The Reauthorization Act also requires SBA to report to the Senate 
Committee on Small Business and Entrepreneurship and to the House 
Committees on Science and Small Business on the STTR Programs of the 
Federal agencies and to specifically address the number of proposals 
received from, and the number and total amount of awards to, 
Historically Underutilized Business Zone (HUBZone) SBCs under the STTR 
Program. Further, the Reauthorization Act requires agencies to 
implement an outreach program to research institutions and SBCs for the 
purpose of enhancing its STTR Program, in conjunction with any such 
outreach done for purposes of the SBIR Program. The final Policy 
Directive addresses these requirements in sections 10(b)(5) and 
9(a)(15), respectively.
    In addition, the Reauthorization Act requires SBA to promulgate 
regulations establishing a single model agreement that allocates 
between SBCs and research institutions intellectual property rights 
and, if any, rights to carry out follow-on research, development, or 
commercialization. SBA notes that it plans to issue final regulations 
implementing a model agreement for the STTR Program in the near future. 
The Reauthorization Act requires agencies to adopt this model 
agreement. This requirement is noted in the final Policy Directive at 
section 9(a)(13).
    Further, the Reauthorization Act amends the Federal and State 
Technology Partnership (FAST) Program to require the Administrator and 
the Small Business Innovation Research (SBIR) Program Managers to 
consider whether proposals submitted address the needs of SBCs owned 
and controlled by women, SBCs owned and controlled by minorities, and 
located in areas that have historically not participated in the SBIR 
and STTR Programs. SBA notes that section 12 of the SBIR Policy 
Directive (67 FR 60072, September 24, 2002) (also available at https://www.sba.gov/sbir/indexsbir-sttr.html) establishes guidance for the FAST 
Program as does the FAST Program Announcement, which can be found at 
https://www.sba.gov/sbir/indexprograms.html. Further, the 
Reauthorization Act requires SBA to promulgate regulations establishing 
standards for the consideration of proposals under FAST, including the 
standards previously listed. SBA is currently drafting these 
regulations as a separate rulemaking. These regulations are not 
addressed in this final Policy Directive.
    As previously discussed, SBA amends the Policy Directive to address 
the Reauthorization Act's amendments and to simplify and enhance the 
program. For example, SBA has organized the final Policy Directive into 
11 self-explanatory sections: (1) Purpose (2) Summary of Legislative 
Provisions (3) Definitions (4) Competitively Phased Structure of the 
Program (5) Program Solicitation Process (6) Eligibility and 
Application (Proposal) Requirements; (7) STTR Funding Process (8) Terms 
of Agreement Under STTR Awards (9) Responsibilities of STTR 
Participating Agencies and Departments (10) Annual Report to SBA and 
(11) Responsibilities of SBA. Two appendices are also included: (1) 
Instructions for STTR Program Solicitation Preparation; and (2) Tech-
Net Data Fields for the Public database and questionnaire for the 
Government Database. On June 16, 2003, the SBA published a proposed 
policy directive at 68 FR 35748, which addressed the amendments made by 
the Reauthorization Act and those amendments designed to streamline and 
enhance the program. SBA received only three comments which are 
discussed below.

Summary of General Comments

    One commenter, a coalition, stated that it had forwarded the 
proposed directive to its members and did not receive any negative 
comments. However, the commenter did suggest one clarification, 
pertaining to section 3(y)(4), which defined the term ``small business 
concern.'' According to the

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proposed directive, a SBC is one that is at least 51 percent owned and 
controlled by one or more individuals who are citizens of, or permanent 
resident aliens in, the United States, except in the case of a joint 
venture, where each entity to the venture must be 51 percent owned and 
controlled by one or more individuals who are citizens of, or permanent 
resident aliens in, the United States. This commenter stated that it 
believes that a company should be ineligible for Phase I or II STTR 
awards if it is owned and controlled by another company that is 
ineligible. However, this commenter believes that Small Business 
Investment Companies (SBICs) should be allowed to own more than 51% of 
an STTR awardee. Because SBA did not propose a change to the STTR 
eligibility requirements when it issued the STTR Policy Directive as 
proposed, it does not believe that it should amend those criteria now.
    SBA also received one comment on section 9(c)(2). In that section, 
SBA clarified that agencies may not allow the funding agreement to 
include a provision subcontracting any portion of the STTR award back 
to the issuing agency or to any other Federal government unit. This 
mirrors a similar provision for the SBIR Program that has been in 
effect since 1997. The SBA believes that this restriction is necessary 
to avoid real and apparent conflicts of interest in STTR proposal 
evaluation and selection. The SBA noted in the preamble to the proposed 
directive that this would not restrict the use of Federal laboratory 
facilities by STTR awardees for STTR project work. Rather, it would 
only prohibit the use of STTR award funds to pay for Federal laboratory 
resources. SBA had also proposed a case-by-case waiver to this 
provision.
    One commenter strongly opposed this section of the policy directive 
because it would restrict awardees from using Federally-funded research 
and development centers (FFRDCs) for STTR Program projects. 
Specifically, this commenter argued that Congress intended for FFRDCs 
to play a role in the STTR Program by allowing them to partner with the 
SBC for an STTR award. In addition, the commenter argued that the Small 
Business Act requires agencies to establish procedures to ensure that 
FFRDCs that participate in the STTR Program are free from 
organizational conflicts of interest relative to the program. As a 
result, this commenter believes that agencies should be allowed to have 
provisions in the funding agreement that subcontract a portion of the 
STTR award to an FFRDC, without requiring a waiver from the SBA. The 
SBA agrees with the commenter and has amended the directive, at Sec.  
9(c)(2), to allow STTR funds to be used to pay for lab resources of 
FFRDCs and no waiver from the SBA is required. However, the SBA notes 
that STTR funds may not be used to pay for lab resources of non-FFRDCs, 
unless a waiver is granted.
    The SBA also received one comment that appears to pertain to 
section 9 of the directive, which addresses the responsibilities of 
STTR participating agencies and departments. According to section 
9(b)(4), which implements section 9(o)(14) of the Small Business Act, 
the SBA and agencies must provide outreach efforts to increase the 
participation of socially and economically disadvantaged SBCs and 
women-owned SBCs in the STTR Program. According to the commenter, 
although he liked many of the changes in the directive, he was 
disappointed that this section did not include veterans, disabled 
veterans or HUBZones as well and requested that these ``special 
groups'' be included. The SBA agrees that agencies should encourage 
participation of all such groups in the STTR Program and should conduct 
outreach efforts to ensure these groups participate in the program and 
has amended the directive accordingly.

Paperwork Reduction Act

    SBA has determined that this rule imposes reporting or 
recordkeeping requirements under the Paperwork Reduction Act, 44 
U.S.C., Chapter 35. The STTR Reauthorization Act amended the Small 
Business Act to require SBA to establish a Public database and a 
Government database on the SBIR and STTR Programs. Both databases will 
be maintained by SBA as part of an internet-based system titled 
Technology Resource Network or Tech-Net. The information that will be 
collected for these databases will be submitted to SBA by the Federal 
agencies that participate in these programs, based on information that 
they collect from Phase I and II awardees and in some instances by the 
awardees directly. SBA has submitted the information to be collected to 
OMB for review and will publish a notice in the Federal Register to 
announce the results of OMB's review.
    Due to the changes in the Tech-Net database since publication of 
the proposed policy directive in 2003, SBA is granting an additional 
30-day comment period. Specifically, in order to clarify the reporting 
requirements, SBA has reformatted Appendix II by changing the 
description of some data fields, and adding fields that were not 
previously listed. SBA has consolidated file format to a single file 
and numbering all sixty-one (61) fields required for reporting. SBA has 
identified those fields which are mandatory for all records, mandatory 
for STTR projects, and mandatory for Phase 2 projects. SBA also renamed 
the field formerly labeled ``Minority,'' as ``Socially and Economically 
Disadvantaged Small Business.'' The STTR reauthorization legislation 
requires collection of information on awardees' HUBZone certification. 
However, the requirement was previously omitted from the public 
database as a reporting field. To rectify this, SBA has added a new 
field for ``HUBZone Certified.'' Finally, SBA has recently completed 
the development and design of the questionnaire for the Government 
database and now includes the questionnaire in the Appendix.
    Written comments must be received on or before January 17, 2006 and 
should be addressed to: Agency Clearance Officer, Jacqueline White, 
Small Business Administration, 409 3rd Street, SW., 5th Floor, 
Washington, DC 20416; and Office of Information and Regulatory Affairs, 
Office of Management and Budget, Attention: Desk Officer for SBA, New 
Executive Office Building, Washington, DC 20503.
    If necessary, SBA will revise the information collection in 
response to any comments the Agency receives by the close of the 
comment period. The Agency invites comments on: (1) Whether the final 
collection of information is necessary for the proper performance of 
SBA's responsibilities and functions under the STTR Program, including 
whether the information will have a practical utility; (2) the accuracy 
of SBA's estimate of the burden of the final collections of 
information, including the validity of the methodology and assumptions 
used; (3) ways to enhance the quality, utility, and clarity of the 
information to be collected; and (4) ways to minimize the burden of the 
collection of information on respondents, including through the use of 
automated collection techniques, when appropriate, and other forms of 
information technology.

Summary of Collection

Public Database

    The public database will include the following information: the 
name, size, location, and identification number assigned by the SBA 
Administrator of each Small Business Concern (SBC) that has received a 
Phase I or Phase II award; a description of each SBIR and STTR Phase I 
or Phase II award including an

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abstract of the project funded by the award; the awarding Federal 
agency; and the date and amount of the award. This information has been 
collected by the participating Agencies from applicants since the 
inception of the programs and is submitted annually to the SBA.
    For purposes of the STTR Program only, the agencies will also now 
collect and report to SBA information on whether the SBC or the 
research institution initiated the collaboration on the STTR project; 
whether the research institution is a college or university; whether 
the educational institution is designated as an Alaska Native-Serving 
Institution (ANSI), Historically Black College or University (HBCU), 
Hispanic-Serving Institution (HSI), Tribal College or University (TCU), 
or Native Hawaiian-Serving Institution (NHSI); what dollar amount the 
SBC proposes to subcontract to the research institution under Phase I, 
the exact dollar amount subcontracted to the NHSI, ANSI, HBCU, TCU or 
HSI under a Phase II award, whether the SBC or the research institution 
originated any technology as a result of the project; how long it took 
to negotiate any licensing agreement between the SBC and the research 
institution; and how the proceeds from commercialization, marketing, or 
sale of technology resulting from each assisted STTR project were 
allocated between the SBC and the research institution. Please note 
that the information mentioned in this paragraph is classified as 
sensitive and will not be accessible to the general public. (See 
Appendix II (a) of this Policy Directive).

Government Database.

    This secure database will contain information on the 
commercialization of SBIR and STTR Phase II awards. Specifically SBA 
will collect information on: revenue from the sale of new products or 
services resulting from the research conducted under each Phase II 
award; additional investment from any source other than Phase I or 
Phase II STTR or SBIR awards to further the research and development 
conducted under each Phase II award; and any other information that the 
Administrator, in conjunction with the program managers of the 
participating agencies, considers relevant and appropriate to the SBIR 
and STTR programs. (see Appendix II (c) of this Policy Directive).
    Title of Information Collection: Technology Resource Network (Tech-
Net) (No SBA Form Number).
    Description of Respondents:
    (a) Public Database: All SBCs receiving a SBIR or STTR Phase I or 
II award from any of the participating SBIR/STTR Federal agencies.
    (b) Government Database: All SBCs that apply for a SBIR or STTR 
Phase I or II award from any of the participating SBIR/STTR Federal 
agencies and have previously won a SBIR or STTR Phase II award. Also, 
all SBIR or STTR Phase I or Phase II applicants who submitted proposals 
that were not awarded funding.
    Estimates of burden hours:
(a) Public Database
    Estimated number of respondents: 3,500 SBCs.
    Estimated number of responses: 7,000.
    Frequency of response: Annually.
    Estimated time for response: 0.5 hour.
    Total estimated annual burden hours: 3,500.
(b) Government Database
    (1) Applicants receiving SBIR or STTR Phase II award:
    Estimated number of respondents: 3,000.
    Estimated number of responses: 3,000.
    Frequency of response: Annually.
    Estimated time for response: 1.0 hours.
    Estimated annual burden hours: 3,000.
    (2) Applicants with unfunded proposals:
    Estimated number of respondents: 13,500.
    Estimated number of responses: 27,000.
    Frequency of response: Annually.
    Estimated Time for Response: 0.5 hours.
    Estimated Annual Burden Hours: 13,500.

Notice of Final Policy Directive; Small Business Technology Transfer 
Program

    To: The Small Business Technology Transfer Program Directors.
    Subject: Small Business Technology Transfer Program Reauthorization 
Act of 2001--Amendments to the Small Business Technology Transfer 
(STTR) Program.
    1. Purpose. Section 9(p) of the Small Business Act (15 U.S.C. 638) 
(as amended by Public Law 107-50) requires the Administrator of the 
U.S. Small Business Administration (SBA) to modify its Small Business 
Technology Transfer (STTR) Program Policy Directive, issued for the 
general conduct of the STTR Program.
    2. Authority. This Policy Directive is issued pursuant to 15 U.S.C. 
638(p).
    3. Procurement Regulations. It is recognized that the Federal 
Acquisition Regulation may need to be modified to conform to the 
requirements of the Reauthorization Act and the final Policy Directive. 
SBA's Administrator or designee must review and concur with any 
regulatory provisions that pertain to areas of SBA responsibility. 
SBA's Office of Technology coordinates such regulatory actions.
    4. Personnel Concerned. This Policy Directive serves as guidance 
for all Federal Government personnel who are involved in the 
administration of the STTR Program, issuance and management of funding 
agreements or contracts pursuant to the STTR Program, and the 
establishment of goals for small business concerns in research or 
research and development acquisition or grants.
    5. Originator. SBA's Office of Technology, Office of Government 
Contracting, Office of Government Contracting and Business Development.
    6. Date. A final Policy Directive will be effective on the date 
published in the Federal Register.

Authorized By:
Calvin Jenkins,
Acting Associate Deputy Administrator, for Government Contracting and 
Business Development.

Hector V. Barreto,
Administrator, U.S. Small Business Administration.

Small Business Technology Transfer (STTR) Program

Final Policy Directive

Table of Contents 1

1. Purpose
2. Summary of Legislative Provisions
3. Definitions
4. Competitively Phased Structure of the Program
5. Program Solicitation Process
6. Eligibility and Application (Proposal) Requirements
7. STTR Funding Process
8. Terms of Agreement Under STTR Awards
9. Responsibilities of STTR Participating Agencies And Departments
10. Annual Report to the Small Business Administration
11. Responsibilities of SBA
    Appendix I: Instructions for STTR Program Solicitation 
Preparation
    Appendix II: Tech-Net: Data Fields for Public Database and 
Questionnaire for Government Database

1. Purpose

    (a) Section 9(p) of the Small Business Act (Act) requires that the 
Small Business Administration (SBA) issue an STTR Program Policy 
Directive for the general conduct of the STTR Program within the 
Federal Government.
    (b) This Policy Directive fulfills SBA's statutory obligation to 
provide guidance

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to the participating Federal agencies for the general operation of the 
STTR Program. Additional or modified instructions may be issued by the 
SBA as a result of public comment or experience.
    (c) The purpose of the STTR Program is to stimulate a partnership 
of ideas and technologies between innovative small business concerns 
(SBCs) and research institutions through Federally-funded research or 
research and development (R/R&D). By providing awards to SBCs for 
cooperative R/R&D efforts with research institutions, the STTR Program 
assists the small business and research communities by commercializing 
innovative technologies.
    (d) Federal agencies participating in the STTR Program (STTR 
agencies) are obligated to follow the guidance provided by this Policy 
Directive. Each agency is required to review its rules, policies, and 
guidance on the STTR Program to ensure consistency with this Policy 
Directive and to make any necessary changes in accordance with each 
agency's normal procedures. This is consistent with the statutory 
authority provided to the SBA concerning the STTR Program.

2. Summary of Legislative Provisions

    (a) The Small Business Technology Transfer Program Reauthorization 
Act of 2001, Pub. L. 107-50, amended section 9 of the Act (15 U.S.C. 
638).
    (1) The amendments:
    (i) Continue the STTR Program through September 30, 2009;
    (ii) Clarify data rights pertaining to STTR Phase I, Phase II, and 
Federally-funded Phase III awards.
    (iii) Establish databases--one for the public and one for 
Government use--to collect and maintain in a common format information 
that is necessary to assist SBCs and assess the STTR Program.
    (b) Each Federal agency with an extramural budget for R/R&D in 
excess of $1,000,000,000 must participate in the STTR Program.
    (c) The statutory requirements establish a uniform, simplified 
process for the operation of the STTR Program while allowing the STTR 
agencies flexibility in the operation of their individual STTR Program. 
This Policy Directive fulfills the Congressional intent to minimize 
regulatory burden in the conduct of this program.
    (d) Each STTR agency must establish an STTR Program by reserving 
not less than 0.3 percent of its extramural budget for awards to SBCs 
for cooperative R/R&D through the following uniform, three-phase 
process:
    (1) Phases I and II: These phases help STTR agencies meet R/R&D and 
commercialization objectives through funding agreements.
    (2) Phase III. This phase, where appropriate, helps Federal 
agencies participating in the STTR Program by:
    (i) Providing Federal agencies the benefits of commercial 
applications derived from the cooperative conduct of Government-funded 
R/R&D which stimulates technological innovation and enhances the 
national return on investment from R/R&D;
    (ii) Providing STTR awardees access to the Federal market through 
non-STTR funding agreements; and
    (iii) Providing STTR awardees access to private sector markets to 
stimulate economic growth and create jobs.
    (e) The Act directs each STTR agency to report annually to SBA. The 
Act also requires SBA to obtain annual reports and monitor each 
agency's STTR Program and to report these findings annually to the 
Senate Committee on Small Business and Entrepreneurship and to the 
House Committees on Science and Small Business.
    (f) The competition requirements of the Armed Services Procurement 
Act of 1947 (10 U.S.C. 2302 et seq.) and the Federal Property and 
Administrative Services Act of 1949 (41 U.S.C. 251 et seq.) must be 
read in conjunction with the procurement notice publication 
requirements of section 8(e) of the Small Business Act (15 U.S.C. 
637(e)). The following notice publication requirements of section 8(e) 
of the Small Business Act apply to STTR agencies using contracts as a 
STTR funding agreement:
    (l) Any Federal executive agency intending to solicit a proposal to 
contract for property or services valued above $25,000 must transmit a 
notice of the impending solicitation to the Government-wide point of 
entry (GPE) for access by interested sources. See FAR 5.201. The GPE, 
located at https://www.fedbizopps.gov, is the single point where 
Government business opportunities greater than $25,000, including 
synopses of final contract actions, solicitations, and associated 
information, can be accessed electronically by the public. In addition, 
an agency must not issue its solicitation until 15 days after the date 
of the publication in the GPE. The agency may not establish a deadline 
for submission of proposals in response to a solicitation earlier than 
30 days after the date on which the solicitation was issued.
    (2) The contracting officer must generally make available through 
the GPE those solicitations synopsized through the GPE, including 
specifications and other pertinent information determined necessary by 
the contracting officer. See FAR 5.102.
    (3) Any executive agency awarding a contract for property or 
services valued at more than $25,000 must submit a synopsis of the 
award through the GPE if a subcontract is likely to result from such 
contract. See FAR 5.301.
    (4) The following are exemptions from the notice publication 
requirements:
    (i) In the case of agencies intending to solicit Phase I proposals 
for contracts in excess of $25,000, the head of the agency may exempt a 
particular solicitation from the notice publication requirements if 
that official makes a written determination, after consulting with the 
Administrator of the Office of Federal Procurement Policy and the SBA 
Administrator, that it is inappropriate or unreasonable to publish a 
notice before issuing a solicitation.
    (ii) The STTR Phase II award process.
    (iii) The STTR Phase III award process.

3. Definitions

    (a) Act. The Small Business Act (15 U.S.C. 631 et seq.), as 
amended.
    (b) Applicant. The organizational entity that, at the time of 
award, will qualify as a SBC and that submits a contract proposal or a 
grant application for a funding agreement under the STTR Program.
    (c) Affiliate. This term has the same meaning as set forth in 13 
CFR Part 121--Small Business Size Regulations, Sec.  121.103, What is 
affiliation?
    (d) Alaska Native-Serving Institution (ANSI). As defined by 20 
U.S.C. 1059d, it is An institution of higher education that is an 
eligible institution that at the time of application, has an enrollment 
of undergraduate students that is at least 20 percent Alaska Native 
students;
    (e) Awardee. The organizational entity receiving an STTR Phase I, 
Phase II, or Phase III award.
    (f) Commercialization. The process of developing marketable 
products or services and producing and delivering products or services 
for sale (whether by the originating party or by others) to Government 
or commercial markets.
    (g) Cooperative Agreement. A financial assistance mechanism used 
when substantial Federal programmatic involvement with the awardee 
during performance is anticipated by the issuing agency. The 
Cooperative Agreement contains the responsibilities and respective 
obligations of the parties.
    (h) Cooperative Research and Development. R/R&D conducted jointly 
by a SBC and a research institution in which not less than 40 percent 
of the

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work is performed by the SBC, and not less than 30 percent of the work 
is performed by the single, partnering research institution.
    (i) Essentially Equivalent Work. This occurs when (1) substantially 
the same research is final for funding in more than one contract 
proposal or grant application submitted to the same Federal agency (2) 
substantially the same research is submitted to two or more different 
Federal agencies for review and funding consideration or (3) a specific 
research objective and the research design for accomplishing an 
objective are the same or closely related in two or more proposals or 
awards, regardless of the funding source.
    (j) Extramural Budget. The sum of the total obligations for R/R&D 
minus amounts obligated for R/R&D activities by employees of a Federal 
agency in or through Government-owned, Government-operated facilities. 
For the Agency for International Development, the ``extramural budget'' 
must not include amounts obligated solely for general institutional 
support of international research centers or for grants to foreign 
countries. For the Department of Energy, the ``extramural budget'' must 
not include amounts obligated for atomic energy defense programs solely 
for weapons activities or for naval reactor programs.
    (k) Feasibility. The practical extent to which a project can be 
performed successfully.
    (l) Federal Agency. An executive agency as defined in 5 U.S.C. 105, 
or a military department as defined in 5 U.S.C. 102, except that it 
does not include any agency within the Intelligence Community as 
defined in Executive Order 12333, section 3.4(f), or its successor 
orders.
    (m) Funding Agreement. Any contract, grant, or cooperative 
agreement entered into between any Federal agency and any SBC for the 
performance of experimental, developmental, or research work, including 
products or services, funded in whole or in part by the Federal 
Government.
    (n) Funding Agreement Officer. A contracting officer, a grants 
officer, or a cooperative agreement officer.
    (o) Grant. A financial assistance mechanism providing money, 
property, or both to an eligible entity to carry out an approved 
project or activity. A grant is used whenever the Federal agency 
anticipates no substantial programmatic involvement with the awardee 
during performance.
    (p) Hispanic-Serving Institutions (HSI). Pursant to 20 U.S.C. 1101 
(5), a non-profit institution that has at least 25% Hispanic full-time 
equivalent (FTE) enrollment, and of the Hispanic student enrollment at 
least 50% are low income.
    (q) Historically Black College or University (HBCU). Pursuant to 20 
U.S.C. 1061 (2), a black college or university that was established 
prior to 1964, whose principle mission was, and is, the education of 
Black Americans, and that is accredited by a nationally recognized 
agency or association determined by the Secretary of Education to be a 
reliable authority as to the quality of training offered or is, 
according to such an agency or association is making reasonable 
progress toward accreditation, with certain exceptions noted in 
statute.
    (r) Innovation. Something new or improved, having marketable 
potential, including (1) development of new technologies, (2) 
refinement of existing technologies, or (3) development of new 
applications for existing technologies.
    (s) Intellectual Property. The separate and distinct types of 
intangible property that are referred to collectively as ``intellectual 
property,'' including but not limited to: patents, trademarks, 
copyrights, trade secrets, STTR technical data (as defined in this 
section), ideas, designs, know-how, business, technical and research 
methods, other types of intangible business assets, and all types of 
intangible assets either final or generated by an SBC as a result of 
its participation in the STTR Program.
    (t) Joint Venture. An association of concerns with interests in any 
degree or proportion by way of contract, express or implied, consorting 
to engage in and carry out a single specific business venture for joint 
profit, for which purpose they combine their efforts, property, money, 
skill, or knowledge, but not on a continuing or permanent basis for 
conducting business generally. A joint venture is viewed as a business 
entity in determining power to control its management.
    (u) Native Hawaiian-Serving Institutions (NHSI). Pursuant to 20 
U.S.C. 1059(d) is an institution of higher education which is an 
eligible institution under 20 U.S.C. 1058(b) at the time of 
application, and has an enrollment of undergraduate students that is at 
least 10 percent Native Hawaiian students.
    (v) Outcomes. The measures of long-term, eventual, program impact.
    (w) Outputs. The measures of near-term program impact.
    (x) Principal Investigator/Project Manager. The one individual 
designated by the applicant to provide the scientific and technical 
direction to a project supported by the funding agreement.
    (y) Program Solicitation. A formal solicitation for proposals 
whereby a Federal agency notifies the small business community of its 
R/R&D needs and interests in broad and selected areas, as appropriate 
to the agency, and requests proposals from SBCs in response to these 
needs and interests. Announcements in the Federal Register or the GPE 
are not considered STTR Program solicitations.
    (z) Prototype. A model of something to be further developed, which 
includes designs, protocols, questionnaires, software, and devices.
    (aa) Research or Research and Development (R/R&D). Any activity 
that is:
    (l) A systematic, intensive study directed toward greater knowledge 
or understanding of the subject studied;
    (2) A systematic study directed specifically toward applying new 
knowledge to meet a recognized need; or
    (3) A systematic application of knowledge toward the production of 
useful materials, devices, and systems or methods, including design, 
development, and improvement of prototypes and new processes to meet 
specific requirements.
    (bb) Research Institution. One that has a place of business located 
in the United States, which operates primarily within the United States 
or which makes a significant contribution to the U.S. economy through 
payment of taxes or use of American products, materials or labor, and 
is:
    (1) A non-profit institution as defined in section 4(5) of the 
Stevenson-Wydler Technology Innovation Act of 1980 (that is, an 
organization that is owned and operated exclusively for scientific or 
educational purposes, no part of the net earnings of which inures to 
the benefit of any private shareholder or individual) and includes non-
profit medical and surgical hospitals; or
    (2) A Federally-funded R&D center as identified by the National 
Science Foundation in accordance with the Government-wide Federal 
Acquisition Regulation issued in accordance with section 35(c)(1) of 
the Office of Federal Procurement Policy Act (or any successor 
regulation thereto).
    (cc) Small Business Concern. A concern that, on the date of award 
for both Phase I and Phase II funding agreements:
    (1) Is organized for profit, with a place of business located in 
the United States, which operates primarily within the United States or 
which makes a significant contribution to the United

[[Page 74931]]

States economy through payment of taxes or use of American products, 
materials or labor;
    (2) Is in the legal form of an individual proprietorship, 
partnership, limited liability company, corporation, joint venture, 
association, trust or cooperative, except that where the form is a 
joint venture, there can be no more than 49 percent participation by 
foreign business entities in the joint venture;
    (3) Is at least 51 percent owned and controlled by one or more 
individuals who are citizens of, or permanent resident aliens in, the 
United States, except in the case of a joint venture, where each entity 
to the venture must be 51 percent owned and controlled by one or more 
individuals who are citizens of, or permanent resident aliens in, the 
United States; and
    (4) Has, including its affiliates, not more than 500 employees.
    (dd) Socially and Economically Disadvantaged SBC. See 13 CFR Part 
124--8(A) Business Development/Small Disadvantaged Business Status 
Determinations, Sec. Sec.  124.103 (Who is socially disadvantaged?) and 
124.104 (Who is economically disadvantaged?).
    (ee) STTR Participants. Business concerns that have received STTR 
awards or that have submitted STTR proposals/applications.
    (ff) STTR Technical Data. All data generated during the performance 
of an STTR award.
    (gg) STTR Technical Data Rights. The rights an STTR awardee obtains 
in data generated during the performance of any STTR Phase I, Phase II, 
or phase III award that an awardee delivers to the Government during or 
upon completion of a Federally-funded project, and to which the 
Government receives a license.
    (hh) Subcontract. Any agreement, other than one involving an 
employer employee relationship, entered into by an awardee of a funding 
agreement calling for supplies or services for the performance of the 
original funding agreement.
    (ii) Tribal-Serving Institution (TSI). Those institutions defined 
under section 532 of the Equity in Educational Land-Grants Status Act 
of 1994 (7 U.SC. 301 note), any other institution that qualified for 
funding under the Tribally Controlled Community College Assistance Act 
of 1978, (25 U.S.C. 1801 et. seq.) which is also known as tribally 
controlled colleges or universities and the Navajo Community College 
Assistance Act of 1978, Pub. L. 95-471, Title II (25 U.S.C. 640a note).
    (jj) United States. The 50 states, the territories and possessions 
of the Federal Government, the Commonwealth of Puerto Rico, the 
District of Columbia, the Republic of the Marshall Islands, the 
Federated States of Micronesia, and the Republic Women-Owned SBC. of 
Palau.
    (kk) A SBC that is at least 51 percent owned by one or more women, 
or in the case of any publicly owned business, at least 51 percent of 
the stock is owned by women, and women control the management and daily 
business operations.

4. Competitively Phased Structure of the Program

    The STTR Program is a phased process, uniform throughout the 
Federal Government, of soliciting proposals and awarding funding 
agreements for R/R&D, production, services, or any combination, to meet 
stated agency needs or missions. In order to stimulate and foster 
scientific and technological innovation, including increasing 
commercialization of Federal R/R&D, the program must follow a uniform 
competitive process of the following three phases:
    (a) Phase I. Phase I involves a solicitation of contract proposals 
or grant applications (hereinafter referred to as proposals) to conduct 
feasibility-related experimental or theoretical R/R&D related to 
described agency requirements. These requirements, as defined by agency 
topics contained in a solicitation, may be general or narrow in scope, 
depending on the needs of the agency. The object of this phase is to 
determine the scientific and technical merit and feasibility of the 
final effort and the quality of performance of the SBC with a 
relatively small agency investment before consideration of further 
Federal support in Phase II.
    (l) Several different final solutions to a given problem may be 
funded.
    (2) Proposals will be evaluated on a competitive basis. Agency 
criteria used to evaluate STTR proposals must give consideration to the 
scientific and technical merit and feasibility of the proposal along 
with its potential for commercialization. Considerations may also 
include program balance or critical agency requirements.
    (3) Agencies may require the submission of a Phase II proposal as a 
deliverable item under Phase I.
    (b) Phase II. The object of Phase II is to continue the R/R&D 
effort from the completed Phase I. Only STTR awardees in Phase I are 
eligible to participate in Phases II and III. This includes those 
awardees identified via a ``novated'' or ``successor in interest'' or 
similarly-revised funding agreement, or those that have reorganized 
with the same key staff, regardless of whether they have been assigned 
a different tax identification number. Agencies may require the 
original awardee to relinquish its rights and interests in an STTR 
project in favor of another applicant as a condition for that 
applicant's eligibility to participate in the STTR Program for that 
project.
    (l) Funding shall be based upon the results of Phase I and the 
scientific and technical merit and commercial potential of the Phase II 
proposal. Phase II awards may not necessarily complete the total 
research and development that may be required to satisfy commercial or 
Federal needs beyond the STTR Program. The Phase II funding agreement 
with the awardee may, at the discretion of the awarding agency, 
establish the procedures applicable to Phase III agreements. The 
Government is not obligated to fund any specific Phase II proposal.
    (2) The STTR Phase II award decision process requires, among other 
things, consideration of a proposal's commercial potential. Commercial 
potential includes the potential to transition the technology to 
private sector applications, Government applications, or Government 
contractor applications. Commercial potential in a Phase II proposal 
may be evidenced by:
    (i) The SBC's record of successfully commercializing STTR or other 
research;
    (ii) The existence of Phase II funding commitments from private 
sector or other non-STTR funding sources;
    (iii) The existence of Phase III, follow-on commitments for the 
subject of the research; and
    (iv) Other indicators of commercial potential of the idea.
    (c) Phase III. STTR Phase III refers to work that derives from, 
extends, or logically concludes effort(s) performed under prior STTR 
funding agreements, but is funded by sources other than the STTR 
Program. Phase III work is typically oriented towards commercialization 
of STTR research or technology.
    (l) Each of the following types of activity constitutes STTR Phase 
III work:
    (i) Commercial application of STTR-funded R/R&D financed by non-
Federal sources of capital (Note: The guidance in this Policy Directive 
regarding STTR Phase III pertains to the non-STTR federally-funded work 
described in (ii) and (iii) below. It does not address the nature of 
private agreements the STTR firm may make in the commercialization of 
its technology.);
    (ii) STTR-derived products or services intended for use by the 
Federal

[[Page 74932]]

Government, funded by non-STTR sources of Federal funding;
    (iii) Continuation of R/R&D that has been competitively selected 
using peer review or scientific review criteria, funded by non-STTR 
Federal funding sources.
    (2) A Phase III award is, by its nature, an STTR award, has STTR 
status, and must be accorded STTR data rights. (See Section 8(b)(2) 
regarding the protection period for data rights.) If an STTR awardee 
wins a competition for work that derives from, extends, or logically 
concludes that firm's work under a prior STTR funding agreement, then 
the funding agreement for the new, competed, work must have all STTR 
Phase III status and data rights. A Federal agency may enter into a 
Phase III STTR agreement at any time with a Phase II awardee. 
Similarly, a Federal agency may enter into a Phase III STTR agreement 
at any time with a Phase I awardee. An agency official may determine, 
using the criteria set forth in the Directive as guidance, whether a 
contract or agreement is a Phase III award.
    (3) The competition for STTR Phase I and Phase II awards satisfies 
any competition requirement of the Armed Services Procurement Act, the 
Federal Property and Administrative Services Act, and the Competition 
in Contracting Act. Therefore, an agency that wishes to fund an STTR 
Phase III project is not required to conduct another competition in 
order to satisfy those statutory provisions. As a result, in conducting 
actions relative to a Phase III STTR award, it is sufficient to state 
for purposes of a Justification and Approval pursuant to FAR 6.302-5, 
that the project is a STTR Phase III award that is derived from, 
extends, or logically concludes efforts performed under prior STTR 
funding agreements and is authorized under 10 U.S.C. 2304(b)(2) or 41 
U.S.C. 253(b)(2).
    (4) The Phase III work may be for products, production, services, 
R/R&D, or any combination thereof.
    (5) There is no limit on the number, duration, type, or dollar 
value of Phase III awards made to a business concern. There is no limit 
on the time that may elapse between a Phase I or Phase II award and 
Phase III award, or between a Phase III award and any subsequent Phase 
III award.
    (6) The small business size limits for Phase I and Phase II awards 
do not apply to Phase III awards.
    (7) For Phase III, Congress intends that agencies or their 
Government-owned, contractor-operated facilities, Federally-funded 
research and development centers, or Government prime contractors that 
pursue R/R&D or production developed under the STTR Program, give 
preference, including sole source awards, to the awardee that developed 
the technology. In fact, the Act requires reporting to SBA of all 
instances in which the agency pursues research, development, or 
production of a technology developed by an STTR awardee, with a concern 
other than the one that developed the STTR technology. (See section 
4(c)(8) immediately below for agency notification to SBA prior to award 
of such a funding agreement and section 9(a)(11) regarding agency 
reporting of the issuance of such award.) SBA will report such 
instances, including those discovered independently by SBA, to 
Congress.
    (8) For Phase III, agencies, their Government-owned, contractor-
operated facilities, or Federally-funded research and development 
centers, that intend to pursue R/R&D, production, services or any 
combination thereof of a technology developed by an STTR awardee of 
that agency, with an entity other than that STTR awardee, must notify 
SBA in writing prior to such an award. This notice requirement also 
applies to technologies of STTR awardees with STTR funding from two or 
more agencies where one of the agencies determines to pursue the 
technology with an entity other than that awardee. This notification 
must include, at a minimum: (a) The reasons why the follow-on award 
with the STTR awardee is not practicable; (b) the identity of the 
entity with which the agency intends to make an award to perform 
research, development, or production; and (c) a description of the type 
of funding award under which the research, development, or production 
will be obtained. SBA may appeal the decision to the head of the 
contracting activity. If SBA decides to appeal the decision, it must 
file a notice of intent to appeal with the contracting officer no later 
than 5 business days after receiving the agency's notice of intent to 
make award. Upon receipt of SBA's notice of intent to appeal, the 
contracting officer must suspend further action on the acquisition 
until the head of the contracting activity issues a written decision on 
the appeal. The contracting officer may proceed with award if he or she 
determines in writing that the award must be made to protect the public 
interest. The contracting officer must include a statement of the facts 
justifying that determination and provide a copy of its determination 
to SBA. Within 30 days of receiving SBA's appeal, the head of the 
contracting activity must render a written decision setting forth the 
basis of his or her determination.

5. Program Solicitation Process

    (a) At least annually, each agency must issue a program 
solicitation that sets forth a substantial number of R/R&D topics and 
subtopic areas consistent with stated agency needs or missions. Both 
the list of topics and the description of the topics and subtopics must 
be sufficiently comprehensive to provide a wide range of opportunities 
for SBCs to participate in the agency R/R&D programs. Topics and 
subtopics must emphasize the need for proposals with advanced concepts 
to meet specific agency R/R&D needs. Each topic and subtopic must 
describe the needs in sufficient detail to assist in providing on-
target responses, but cannot involve detailed specifications to 
prescribed solutions of the problems.
    (b) The Act requires issuance of STTR (Phase I) Program 
solicitations in accordance with a Master Schedule coordinated between 
SBA and the STTR agency. The SBA office responsible for coordination 
is: Office of Technology, Office of Government Contracting, Office of 
Government Contracting and Business Development, U.S. Small Business 
Administration, 409 Third Street, SW., Washington, DC 20416. Phone: 
(202) 205-6450. Fax: (202) 205-7754. Email: technology@sba.gov. 
Internet site: https://www.sba.gov/sbir.
    (c) For maximum participation by interested SBCs, it is important 
that the planning, scheduling and coordination of agency program 
solicitation release dates be completed as early as practicable to 
coincide with the commencement of the fiscal year on October 1. 
Bunching of agency program solicitation release and closing dates may 
prohibit SBCs from preparation and timely submission of proposals for 
more than one STTR project. SBA's coordination of agency schedules 
minimizes the bunching of final release and closing dates. 
Participating agencies may elect to publish multiple program 
solicitations within a given fiscal year to facilitate in-house agency 
proposal review and evaluation scheduling.
    (d) Master Schedule. SBA posts an electronic Master Schedule of 
release dates of program solicitations with links to Internet Web sites 
of agency solicitations. Agencies must post on their Internet Web sites 
the following information regarding each program solicitation:
    (1) The list of topics upon which R/R&D proposals will be sought.
    (2) Agency address, phone number, or e-mail address from which STTR

[[Page 74933]]

Program solicitations can be requested or obtained, especially through 
electronic means.
    (3) Names, addresses, and phone numbers of agency contact points 
where STTR-related inquiries may be directed.
    (4) Release date(s) of program solicitation(s).
    (5) Closing date(s) for receipt of proposals.
    (6) Estimated number and average dollar amounts of Phase I awards 
to be made under the solicitation.
    (e) On or before August 1, each agency representative must notify 
SBA in writing or by e-mail of its final program solicitation release 
and proposal due dates for the next fiscal year. SBA and the agency 
representatives will coordinate the resolution of any conflicting 
agency solicitation dates by the second week of August. In all cases, 
SBA will make final decisions.
    (f) For those agencies that use both general topic and more 
specific subtopic designations in their STTR solicitations, the topic 
data should accurately describe the research solicited. For example, 
rather than just announcing topic information characterized as 
``Chemistry'' or ``Aerodynamics,'' the STTR agency should summarize the 
subtopic statements and, where appropriate, utilize National Critical 
Technologies.
    (g) Simplified, Standardized, and Timely STTR Program 
Solicitations.
    (1) The Act requires `` * * * simplified, standardized and timely 
STTR solicitations'' and for STTR agencies to use a ``uniform process'' 
minimizing the regulatory burden for SBCs. Therefore, the instructions 
in Appendix I to this Policy Directive purposely depart from normal 
Government solicitation format and requirements. STTR Program 
solicitations must be prepared according to Appendix I.
    (2) Agencies must provide SBA's Office of Technology with two hard 
copies or an e-mail version of each solicitation and any modifications 
no later than the date of release of the solicitation or modification 
to the public. Agencies that issue program solicitations in electronic 
format only must provide the Internet site at which the program 
solicitation may be accessed no later than the date of posting at that 
site of the program solicitation.
    (3) SBA does not intend that the STTR Program solicitation replace 
or be used as a substitute for unsolicited proposals for R/R&D awards 
to SBCs. In addition, the STTR Program solicitation procedures do not 
prohibit other agency R/R&D actions with SBCs that are carried on in 
accordance with applicable statutory or regulatory authorizations.

6. Eligibility and Application (Proposal) Requirements

(a) Eligibility Requirements

    (1) To receive STTR funds, each awardee of a STTR Phase I or Phase 
II award must qualify as an SBC.
    (2) For both Phase I and Phase II, not less than 40 percent of the 
R/R&D work must be performed by the SBC, and not less than 30 percent 
of the R/R&D work must be performed by the single, partnering research 
institution.
    (3) For both Phase I and Phase II, the R/R&D work must be performed 
in the United States. However, based on a rare and unique circumstance, 
agencies may approve a particular portion of the R/R&D work to be 
performed or obtained in a country outside of the United States, for 
example, if a supply or material or other item or project requirement 
is not available in the United States. The funding agreement officer 
must approve each such specific condition in writing.
    (4) For both Phase I and Phase II, the principal investigator can 
be with the SBC or the collaborative partner at the time of award and 
during the conduct of the final project. An SBC may replace the 
principal investigator on an STTR Phase I or Phase II award, subject to 
approval in writing by the funding agreement officer. For purposes of 
the STTR Program, personnel obtained through a Professional Employer 
Organization or other similar personnel leasing company may be 
considered employees of the awardee. This is consistent with SBA's size 
regulations, 13 CFR 121.106--Small Business Size Regulations.

(b) Proposal Requirements

    (1) Commercialization Plan. A succinct commercialization plan must 
be included with each proposal for an STTR Phase II award moving toward 
commercialization. Elements of a commercialization plan may include the 
following:
    (i) Company information: Focused objectives/core competencies; 
size; specialization area(s); products with significant sales; and 
history of previous Federal and non-Federal funding, regulatory 
experience, and subsequent commercialization.
    (ii) Customer and Competition: Clear description of key technology 
objectives, current competition, and advantages compared to competing 
products or services; description of hurdles to acceptance of the 
innovation.
    (iii) Market: Milestones, target dates, analyses of market size, 
and estimated market share after first year sales and after 5 years; 
explanation of plan to obtain market share.
    (iv) Intellectual Property: Patent status, technology lead, trade 
secrets or other demonstration of a plan to achieve sufficient 
protection to realize the commercialization stage and attain at least a 
temporal competitive advantage.
    (v) Financing: Plans for securing necessary funding in Phase III.
    (vi) Assistance and mentoring: Plans for securing needed technical 
or business assistance through mentoring, partnering, or through 
arrangements with state assistance programs, SBDCs, Federally-funded 
research laboratories, Manufacturing Extension Partnership Centers, or 
other assistance providers.
    (2) Data Collection: Each Phase II applicant will be required to 
provide information to the Tech-Net Database System (https://technet.sba.gov). See Appendix I, section 3(c), ``Data Collection 
Requirement,'' for additional information.

7. STTR Funding Process

    Because the Act requires a ``simplified, standardized funding 
process,'' specific attention must be given to the following areas of 
STTR Program administration:
    (a) Timely Receipt and Review of Proposals.
    (1) Participating agencies must establish appropriate dates and 
formats for review of proposals.
    (i) All activities related to Phase I proposal reviews must 
normally be completed and awards made within 6 months from the closing 
date of the program solicitation. However, agencies may extend that 
period up to 12 months based on agency needs.
    (ii) Program solicitations must establish proposal submission dates 
for Phase I and may establish proposal submission dates for Phase II. 
However, agencies may also negotiate mutually acceptable Phase II 
proposal submission dates with individual Phase I awardees, accomplish 
proposal reviews expeditiously, and proceed with Phase II awards. While 
recognizing that Phase II arrangements between the agency and applicant 
may require more detailed negotiation to establish terms acceptable to 
both parties, agencies must not sacrifice the R/R&D momentum created 
under Phase I by engaging in unnecessarily protracted Phase II 
proceedings.
    (iii) STTR participants often submit duplicate or similar proposals 
to more than one soliciting agency when the work projects appear to 
involve similar

[[Page 74934]]

topics or requirements, which are within the expertise and capability 
levels of the applicant. To the extent feasible, more than one agency 
should not fund ``essentially equivalent work'' under the STTR or other 
Federal programs. For this purpose, the standardized program 
solicitation requires applicants to indicate the name and address of 
the agencies to which essentially equivalent work proposals were made, 
or anticipated to be made, and to identify by subject the projects for 
which the proposal was submitted and the dates submitted. The same 
information will be required for any previous Federal Government 
awards. To assist in avoiding duplicate funding, each agency must 
provide to SBA and to each STTR agency a listing of Phase I and Phase 
II awardees, their complete address, and the title of each STTR 
project. This information should be distributed no later than release 
of the funding agreement award information to the public.
    (b) Review of STTR Proposals. SBA encourages STTR agencies to use 
their routine review processes for STTR proposals whether internal or 
external evaluation is used. A more limited review process may be used 
for Phase I due to the larger number of proposals anticipated. Where 
appropriate, ``peer'' reviews external to the agency are authorized by 
the Act. SBA cautions STTR agencies that all review procedures must be 
designed to minimize any possible conflict of interest as it pertains 
to applicant proprietary data. The standardized STTR solicitation 
advises potential applicants that proposals may be subject to an 
established external review process and that the applicant may include 
company designated proprietary information in its proposal.
    (c) Selection of Awardees. Normally, STTR agencies must establish a 
proposal review cycle wherein successful and unsuccessful applicants 
will be notified of final award decisions within 6-months of the 
agency's Phase I proposal closing date. However, agencies may extend 
that period up to 12 months based on agency needs.
    (1) The standardized STTR Program solicitation must:
    (i) Advise Phase I applicants that additional information may be 
requested by the awarding agency to evidence awardee responsibility for 
project completion.
    (ii) Advise applicants of the proposal evaluation criteria for 
Phase I and Phase II.
    (2) The STTR agency and each Phase I awardee considered for a Phase 
II award must arrange to manage Phase II proposal submissions, reviews, 
and selections.
    (d) Management of the STTR Project. The SBC, and not the single, 
partnering research institution, is to provide satisfactory evidence 
that it will exercise management direction and control of the 
performance of the STTR funding agreement. Regardless of the proportion 
of the work or funding allocated to each of the performers under the 
funding agreement, the SBC is to be the primary party with overall 
responsibility for performance of the project. All agreements between 
the SBC and the research institution cooperating in the STTR funding 
agreement, or any business plans reflecting agreements and 
responsibilities between the parties during performance of STTR Phase I 
or Phase II funding agreement, or for the commercialization of the 
resulting technology, should reflect the controlling position of the 
SBC.
    (e) Cost Sharing. Cost sharing can serve the mutual interests of 
the STTR agencies and certain STTR awardees by assuring the efficient 
use of available resources. However, cost sharing on STTR projects is 
not required, although it may be encouraged. Therefore, cost sharing 
cannot be an evaluation factor in the review of proposals. The 
standardized STTR Program solicitation (Appendix I) will provide 
information to prospective STTR applicants concerning cost sharing.
    (f) Payment Schedules and Cost Principles.
    (1) STTR awardees may be paid under an applicable, authorized 
progress payment procedure or in accordance with a negotiated/
definitive price and payment schedule. Advance payments are optional 
and may be made under appropriate law. In all cases, agencies must make 
payment to recipients under STTR funding agreements in full, subject to 
audit, on or before the last day of the 12-month period beginning on 
the date of completion of the funding agreement requirements.
    (2) All STTR funding agreements must use, as appropriate, current 
cost principles and procedures authorized for use by the STTR agencies. 
At the time of award, agencies shall inform each STTR awardee, to the 
extent possible, of the applicable Federal regulations and procedures 
that refer to the costs that, generally, are allowable under funding 
agreements.
    (g) Funding Agreement Types and Fee or Profit. Statutory 
requirements for uniformity and standardization require consistency in 
application of STTR Program provisions among STTR agencies. However, 
consistency must allow for flexibility by the various agencies in 
missions and needs as well as the wide variance in funds required to be 
devoted to STTR Programs in the agencies. The following instructions 
meet all of these requirements:
    (1) Funding Agreement. The type of funding agreement (contract, 
grant, or cooperative agreement) is determined by the awarding agency, 
but must be consistent with 31 U.S.C. 6301-6308.
    (2) Fee or Profit. Except as expressly excluded or limited by 
statute, awarding agencies must provide for a reasonable fee or profit 
on STTR funding agreements, consistent with normal profit margins 
provided to profit-making firms for R/R&D work.
    (h) Periods of Performance and Extensions.
    (1) In keeping with the legislative intent to make the largest 
possible number of STTR awards, modification of funding agreements to 
extend periods of performance, to increase the scope of work, or to 
increase the dollar amount should be kept to a minimum, except