Contracting Cone

Small Business Set-Asides vs SBIR/STTR Programs

Small Business Set-Asides Small Business Innovation Research (SBIR) and
Small Business Technology Transfer (STTR) Programs
Set-asides are a method for setting acquisitions aside for exclusive competitive participation by small businesses, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business (8(a)), and women-owned small business concerns.

Direct 8(a) awards are a method to use sole source procedures to award to a single contractor under the 8(a) business development program if the following conditions apply:

  • Determination that the qualified small business is responsible
  • The resulting contract can be awarded at a fair market price
  • The anticipated total value of the contract doesn’t exceed the designated threshold for manufacturing requirements or threshold for all other requirements (There’s an exception to this rule for for an Indian tribe or an Alaska Native Corporation)
SBIR is a competitive program that encourages small businesses to engage in Federal Research and Development (R&D) with the potential for commercialization to stimulate innovation.  STTR is another program that expands funding opportunities for innovative R&D for small businesses to collaborate with non-profit U.S. research institutions.

SBIR/STTR is a gated process with three (3) phases executed through BAA contracts, grants, or agreements:

  • Phase I Concept Development: Explore technical merit and feasibility of an idea or technology and determine the quality of performance of the small business prior to providing further Federal support in Phase II. Contracts are no more than 6 months in duration and are funded by the SBIR/STTR program. Typically, Phase I awards are typically less than $150,000.
  • Phase II Prototype Development: Continue R&D efforts initiated in Phase I and evaluate commercialization potential. Contracts are no more than 24 months, are funded by the SBIR/STTR program, and typically are less than $1 million. Award amounts are based on Phase I results and scientific and technical merit for commercialization.
  • Phase III Commercialization: Work that derives from, extends, or completes R&D efforts under prior SBIR/STTR Phase I/II and enables a small business to pursue commercialization. Phase III work may be for products (including test and evaluation), production contracts, and/or R&D activities. There is no limit on the number, duration, type, or dollar value of Phase III award. Phase III awards cannot be funded by the SBIR program. Agencies may enter into a Phase III SBIR contracts, grants, or agreements at any time (competitively or non-competitively) with a Phase I or Phase II awardee

Although agencies primarily use procurement contracts, grants, or agreements in the SBIR program, the use of Other Transactions (OTs) as award instruments is authorized. Section 863-864 of the FY18 NDAA includes express authority to allow for the award of Prototype OTs in the SBIR program.

Common Applications
  • All types of supplies and services
  • Defense Business Systems
  • Solutions and technologies
  • IT software and products
  • Research and development
  • Advisory and assistance services
  • Engineering services
  • Special studies
  • Research & Development
  • Prototypes
  • Science & Technology (S&T) efforts
  • Technology maturation
  • Set-asides increase opportunity to meet mandatory agency small business goals
  • Small businesses provide culture of flexibility and innovation offering acquisition programs unique solutions to solving capability gaps
  • Ability to award directly to an 8(a) program qualifying vendor within FAR threshold reduces procurement lead time
  • Ability to uniquely negotiate terms and conditions, and pricing arrangements enables improved mission outcomes
  • Ability to award sole source to SBIR Phase I/Phase II vendors for Phase III work reduces procurement lead time
  • Phase III SBIR award procedures provide opportunity for acquisition programs to deliver capability quickly
  • Many small businesses do not have approved cost accounting systems limiting selection of contract types
  • 8(a) sole source may increase risk to cost, schedule, and performance risk if vendor is under-performing
  • Effort remains 8(a) set-aside designation for future re-compete activities unless the Small Business Administration agrees to remove the requirement from the program
  • SBIR/STTR data rights protection limits Government’s IP strategy
  • Technology insertion/transition process into program of record increases risk of project failure
  • Acquisitions below the Simplified Acquisition Threshold must be reserved exclusively for small businesses unless the contracting officer determines there is not a reasonable expectation of obtaining offers from two or more responsible small business concerns that are competitive in terms of fair market prices, quality, and delivery
  • Acquisitions over the Simplified Acquisition Threshold, must set aside if there are two or more small businesses that could do the work and award will be made at fair market prices
  • SBIR/STTR data rights protection: Apply to all phases and restricts the Government from disclosing SBIR data outside the Government. Government cannot compete technologies containing SBIR data.
  • Sole source Phase III awards may not be appropriate in all cases if multiple sources exist in the open market for similar product.