Gail & Jim Greenwood, Greenwood Consulting Group, Inc.

Copyright © 2000 by Greenwood Consulting Group, Inc.

SBIR awards are made as either grants or contracts. Most agencies use the contract mechanism, including the Departments of Commerce, Defense, Education, Health and Human Services, and Transportation; Environmental Protection Agency; and NASA. The granting agencies are the Departments of Agriculture, Energy, Health and Human Services, and National Science Foundation. Note that Department of Health and Human Services falls into both categories. DHHS is the only SBIR awarding agencies that makes both grants and contracts with winning companies.

This is not just a fun fact to know and share at cocktail parties. DHHS’s grant and contract programs differ in many important respects. First, the DHHS grant program dwarfs the contract program, with roughly 95% of the department’s SBIR dollars going into grants. Second, DHHS accepts grant proposals on three dates throughout the year (April 1, August 1, and December 1), while it only accepts contract proposals on one date in November (this year, November 3, 2000). Third, DHHS’s SBIR contract program is more restrictive than its grant program in areas such as funding limits (grant program allows Phase I awards in excess of $100k) and ownership of equipment purchased (equipment bought in grant program belongs to small company, while that bought with contract funds belongs to DHHS). Fourth, DHHS has extremely broad topics in its grants solicitation, and makes the point repeatedly that those topics are "only suggestions." In contrast, the contract solicitation specifies, at least by DHHS standards, some pretty narrow topics.

This fourth difference reflects a fundamental difference between SBIR grants and SBIR contracts both at DHHS and in most other SBIR awarding agencies. Grants are made to support valuable and beneficial research leading to commercial products and/or services, but the responsibility for specifying that research effort and commercial opportunity lies with you, the proposer. In contrast, SBIR contracts are made to companies that demonstrate the ability to conduct research that addresses a problem or opportunity that the agency has specified. This difference should be reflected in a Phase I proposal that is submitted to DHHS’s SBIR contract program versus its grant program. The contract proposal must show an understanding and appreciation of the problem that the agencies has specified, and then show a credible but innovative way to solve that problem. In the grant solicitation, your Phase I proposal should convince the reader that the problem or opportunity that you have identified is important and worthy of DHHS’s support, and then convince the reviewers that you are credible in solving the problem.

If you are responding to a topic in a contract solicitation (with DHHS or any of the other agencies listed above who make their SBIR awards as contracts), you will want to learn as much as you can about the problem or opportunity that the agency is asking you to solve. Most of us are not lucky enough to know everything that we’d like to know about the topic based on our past experience or education. Therefore, we always urge companies who are writing a proposal in response to a contract solicitation to contact the agency (preferably the person who wrote the topic) and learn everything you can about the topic and the agency’s perspective on it. Unfortunately, many of the SBIR contracting agencies limit your contact with their technical personnel, including the topic author, because it would be "unfair" for them to be accessible to proposers. This in the past has been the case with DHHS’s SBIR contract program. However, at the National Institutes of Health (NIH, which is the primary DHHS component in terms of making SBIR awards) SBIR conference held this past summer in Bethesda, a representative of one of the NIH SBIR Contract programs stated that he believes that there is a new attitude, based on changes to the Federal Acquisition Regulation (FAR), that should make technical representatives of NIH available to discuss topics in its contract solicitation. Because of the importance of talking with NIH’s technical folks about their contract topics before you prepare your proposal, we encourage you to call or email the contracting representative specified in the contract solicitation for the NIH institute responsible for the topic you’re interested in, remind them of the comments made at the NIH SBIR conference this summer, and ask for an opportunity to have a technical discussion with relevant NIH staffer or representative.

One final thought: contracting agencies sometimes specify SBIR topics in which their own agency is the anticipated customer for the Phase III commercialization effort. Do not expect NIH to be your Phase III customer in the vast majority of cases. NIH supports research at universities, research institutions and industry, and performs considerable research itself, but it is not in the business of buying health-related technology. There may be some exceptions—such as an SBIR technology that leads to a new medical research instrument that NIH staff might use in their own work—but they are definitely the exception rather than the rule.