Gail & Jim Greenwood, Greenwood Consulting Group, Inc.

Copyright © 2003 by Greenwood Consulting Group, Inc.

Back in 2001, we reported on the differences between the Small Business Innovation Research (SBIR) program and the Small Business Technology Transfer (STTR) program. Several important changes have occurred in the STTR program and the "environment’ surrounding both programs, so we want to revisit STTR in this article.

STTR is relativey new, being created by Congress in 1992. While an applicant can have a federal lab (or other Federally Funded Research and Development Center, FFRDC), university, or other non profit research institute as a subcontractor on its SBIR proposals, it is mandatory that such an entity be included in any STTR project it proposes.

STTR was reauthorized in 2000, much to the surprise of some observers who felt the program never developed a constuiency to ensure its continuation. Congress not only has continued STTR through Fiscal Year 2009 (FY09), but also made two important changes that become effective in FY04. First, Congress doubled the fraction of agencies’ extramural R&D budget that must be put into STTR projects from 0.15% to 0.30%. Therefore, while STTR projects had a total budget of about $65 million in FY03, this figure should be something like $130 million next year.

Second, Congress increased the maximum size of a Phase II STTR award to $750,000 up from the current maximum of $500,000. This removes one of the complaints about STTR, namely that there was a strong cost disadvantage in applying for an STTR award versus an SBIR one (SBIR Phase II’s have had $750k maximums since 1992).

So more money and higher project budgets are two good reasons to consider applying for STTR in the future. Are there other reasons, you ask?

Yes, Gail and Jim answered. There are at least three more reasons why you may want to consider applying to STTR.

First, many agencies have reported massive increases in the number of SBIR proposals they have received in the past year or so versus previous years. This is attributed to the soft economy and increased awareness of SBIR among small high tech companies. While we have heard no statistics for the number of STTR proposals submitted, we do know that STTR is a much lesser known program than SBIR, and that many experienced SBIR companies have shyed away from STTR—both suggest that you may find the odds of a proposal being funded under STTR being higher than under SBIR.

Second, an unfortunate new SBIR policy directive restricts the use of Federal Laboratories on SBIR projects. While it is not impossible to include a Federal Lab in your SBIR project, it has become more difficult. In contrast, one of the purposes of STTR is to encourage collaboration between small companies and Federal Laboratories, so if you intend to use a Federal Lab on your project you may find it easier to do so through STTR than SBIR.

Third, Phase I SBIR projects can not have more than a total of 33% of the work subcontracted to all persons or entities outside of the small company receiving the award. In Phase II, SBIR allows up to 50% to be subcontracted. In contrast, STTR allows up to 60% of the project to be subcontracted in both Phase I and Phase II (remember that this has to be subbed to a Federal Lab, university, or other non profit research entity). In one simple example we ran, it was possible to subcontract $102k more in an STTR than an SBIR project that involved both Phase I and II efforts. Therefore, companies with projects that require a large fraction of the work (or a costly part of the project) to be subcontracted may find that STTR is the preferred mechanism over SBIR.

If STTR deserves further consideration in your case, we encourage you to go back to our 2001 article for some additional tips and guidance, including treatment of the principal investigator. That article can be found archived on our website (http://g-jgreenwood.home.att.net).