Last week I talked about the history of the SBIR and STTR programs, when they were created, when they were re-authorized and a couple of success stories. This week I would like to talk about the magnitude of the programs and how they have grown over the years. The SBIR program today provides over $2 Billion a year to small businesses for the purpose of developing new technology and new products. The STTR program provides almost $1/2 Billion in awards also, but small business must split these awards with a research institute like a university. Typically the small business must keep at least 40% of the STTR funds and spend at least 30% with a single approved research institute.
We talked about how the SBIR program was started as a pilot program in the National Science Foundation. The first awards (in the late 70's) were from a budget pool of $1M and 42 Phase I recipients were selected. The awards averaged about $25,000 each in this first round. In 1982 the SBIR program became official with the SBIR Development Act of 1982. The Act provided for $50,000 for Phase I efforts and $500,000 for Phase II efforts. The act directed Federal Agencies with Extramural R&D budgets in excess of $100M to set aside 0.2% of their R&D budget for SBIR awards. The total budget for the SBIR program in FY 83 was $45 Million. The set-aside for SBIR grants was directed to grow to 0.6% of the extramural R&D budgets in 1984, to 1.0% in 1985 and 1.25% thereafter. If extramural budgets were greater than $10B, the limits were somewhat lowered.
The SBIR program was re-authorized by the Small Business Research and Development Enhancement Act of 1992. This act increased the agencies percentage of the extramural budget to be set aside for the SBIR program to 1.5% the first two years, to 2.0% the second two years (1995 & 1996) and to 2.5% for all years thereafter. This act also increased the award amount to $100,000 for Phase I awards and $750,000 for Phase II awards. The program was re-authorized again in 2000 with passage of The Small Business Reauthorization Act of 2000. There were no major changes in funding associated with the 2000 act. Finally the National Defense Authorization Act For Fiscal Year 2012 revised the program again. This act increases the allocation from 2.5% to 3.2% over a couple of years and increasing the maximum award amounts for Phase I to $150,000 and for Phase II to $1 Million.
The STTR program was initialized with The Small Business Technology Transfer Act of 1992. The program is modeled after the SBIR program with the exception that the small business must partner with a research institute (like a university) and 30% of the award must go to the research institute. Another significant difference is that the Principle Investigator may work for the research institute and not be a principle employee of the small business. The participating agencies must have an extramural R&D budget exceeding $1 Billion. The initial set-aside amount was 0.05% of that R&D budget. Only 5 government agencies participate. The set-aside grew to 0.15% in 1996 and then to 0.3% in FY04. Today the set-aside for the STTR program is 0.35% of the budget.
Today there are 11 agencies with SBIR budgets. The Department of Defense makes up almost half of the total SBIR award money and the National Institute of Health makes up another 30% of the total dollars allocated. In total, 5 agencies make up almost 95% of all SBIR money dispersed (DoD, NIH, NASA, DoE & NSF). These 5 agencies also happen to be the 5 agencies providing STTR funding. There are differences between contracts and grants with the various agencies as well as the specific needs for each agency. Please don't hesitate to call one of our experts to help you sort through this.