SBA Proposes Tougher Commercialization Benchmarks for Repeat SBIR/STTR Award Recipients

What the rule does

The U.S. Small Business Administration (SBA) is publishing for public comment updated minimum performance standards for commercialization applicable to firms funded through the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Programs. The revised benchmark, issued under the authority of Section 9 of the Small Business Act, will supersede the benchmark previously announced at 78 FR 48537 and 78 FR 59410, and has been approved by SBA for all 11 participating agencies.

Who is covered

The standard applies to any Small Business Concern (SBC) that has received more than 25 Phase II awards — counting SBIR and STTR awards combined, across all participating agencies — during the five most recently completed fiscal years, excluding the current fiscal year. The benchmark establishes a minimum share of annual revenue that a covered SBC must derive from sources other than SBIR or STTR program funding in order to remain eligible for a new Phase I or Direct-to-Phase II award.

How the measurement works

For purposes of this benchmark, "non-SBIR revenue share" is defined as the percentage of an SBC's total revenue that is not derived from Phase I or Phase II SBIR or STTR award funding. The document notes that non-SBIR revenue includes revenue received from awards made under Phase III authority of the SBIR and STTR programs. The denominator for the calculation is the SBC's total company revenue from all sources within the three most recent fiscal years, excluding the current fiscal year.

Phased implementation

SBA will phase in the required non-SBIR revenue share as follows. For the Fiscal Year 2027 assessment, a covered SBC must demonstrate a non-SBIR revenue share of at least 33 percent during the three most recent fiscal years excluding the current fiscal year. Beginning with the Fiscal Year 2028 assessment and each fiscal year thereafter, a covered SBC must demonstrate a non-SBIR revenue share of at least 50 percent during the same measurement window.

The document provides an illustrative example: a company that received 30 Phase II awards across Fiscal Years 2022 through 2026 would be subject to the benchmark at the June 1, 2027, determination. If that company reported total revenue of $4,000,000 over the three most recent fiscal years — of which $800,000 came from private commercial sales, $300,000 from a Phase III authority award, and $100,000 from another government contract, for combined non-SBIR revenue of $1,200,000 — its non-SBIR revenue share would represent 30 percent of total revenue, falling below the 33 percent Fiscal Year 2027 threshold. The same company would need to reach a 50 percent non-SBIR revenue share beginning with the Fiscal Year 2028 assessment.

Consequence of failing the benchmark

An SBC that fails to meet the applicable minimum non-SBIR revenue share threshold is not eligible to submit a proposal for a new Phase I or Direct-to-Phase II award from any participating agency during the one-year period beginning on the date on which the determination was made.

Statutory background and process

Under Section 9 of the Small Business Act (15 U.S.C. 638(qq)(2)), each participating agency must establish a measurement system and minimum performance standard for progress toward Phase III success and evaluate covered SBCs annually. Each agency submits its system and standard to SBA, and the SBA Administrator must approve each standard and ensure it meets a de minimis level. The statute requires that notice and comment occur before a system, standard, or approval takes effect, per 15 U.S.C. 638(qq)(4) and (5). SBA is required to publish, at least 60 days before becoming effective, the system and performance standard to be used and SBA's approval. SBA states it will review all comments received and issue the final commercialization benchmark requirement within the timeframe noted in the notice, after which the requirement will be published at www.sbir.gov, consistent with 15 U.S.C. 638(qq)(4)(A).

What to watch

The updated standards are set to take effect November 15, 2026, and upon publication at www.sbir.gov. The Fiscal Year 2027 assessment — carrying the 33 percent threshold — would mark the first consequential determination under the new benchmark, with the higher 50 percent threshold applying from the Fiscal Year 2028 assessment onward.

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