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Performance Benchmark Requirements

Performance Benchmark Requirements

Companies with multiple SBIR/STTR awards must meet minimum performance benchmark requirements to be eligible to apply for a new Phase I or Direct-to-Phase II award.  The performance benchmark requirements address the extent to which an awardee progresses a project from Phase I to Phase II (i.e., Phase I to Phase II Transition Rate Benchmark) and the extent to which an awardee progresses a project from Phase II towards commercialization (i.e., Commercialization Rate Benchmark). The purpose of these benchmarks is to ensure that Phase I applicants that have won multiple prior SBIR/STTR awards are progressing towards commercialization.  The benchmarks were published in the Federal Register for public comment and agreed upon by all 11 SBIR agencies. The  Phase I to Phase II Transition Rate Benchmark was published at 78 FR 30951 in May 2013, and the Commercialization Rate Benchmark  was published at 78 FR 59410 in September 2013.  The SBIR and STTR Extension Act of 2022 (Public Law 117-183) amended the application of these benchmarks for more experienced firms. This update (March 2023) reflects those statutory changes.

 

Phase I to Phase II Transition Rate Benchmark

The Phase I to Phase II Transition Rate Benchmark only applies when a company has received 21 or more Phase I awards during the past five fiscal years, excluding the most recently completed fiscal year. It requires the company to average a ratio of Phase II to Phase I awards of at least 0.25, meaning they must average one Phase II for every four Phase I awards received during the measurement period.  

To calculate the Phase I to Phase II Transition Rate, SBA divides the total number of SBIR and STTR Phase II awards a company received from all agencies during the past five fiscal years by the total number of SBIR and STTR Phase I awards the company received from all agencies during the past five fiscal years, excluding the most recently completed year. The Phase II period begins one year later because Phase II awards rarely occur during the same year as the Phase I.

Here is an example of what the Phase I to Phase II Transition Rate Benchmark assessment would look like if conducted in Fiscal Year 2023. 

Company

Phase I Awards (2017-2021)

Phase II Awards (2018-2022)

Transition Rate Calculation (Phase II Awards / Phase I Awards)

Assessment Outcome

Company A

21

7

0.33

Pass, ratio is equal or greater than 0.25

Company B

21

3

0.14

Fail, ratio is less than 0.25.

Company C

20

3

N/A

N/A –benchmark does not apply, firm has less than 21 Phase I Awards.

 

 

Commercialization Rate Benchmark

The Commercialization Rate Benchmark only applies when a company has received 16 or more Phase II awards during the past ten fiscal years, excluding the two most recently completed fiscal years. It requires the company to average at least $100,000 of sales and/or investments per Phase II award received during the period; or have received a number of patents equal to or greater than 15% of the number of Phase II awards received during the period. The Commercialization Rate Benchmark calculation is based on data submitted through the SBIR.gov Company Commercialization Report. SBA utilizes reported total sales or revenues—including government designated Phase III awards, total dollars invested, or the number of patents, that resulted at least in part, from work performed under Phase II awards received during the 10-year period to calculate the Commercialization Rate Benchmark. A complete guide with additional details on what should and should not be reported is available here: Guide_for_completing_commercialization_Report_SBIR_Gov_09_15_20.pdf.

To calculate the Commercialization Rate Benchmark, SBA sums the countable commercialization resulting from the specific Phase II awards received during the 10-year period and divides that number by the total number of Phase II awards received during the 10-year period. For determining the Commercialization Rate Benchmark based on patents, SBA divides the number patents reported from the specific Phase II awards received during the 10-year period by the total number of Phase II awards received during the period.

Here is an example of what the Commercialization Rate Benchmark assessment would look like if conducted in Fiscal Year 2023. 

Company

Phase II Awards (2011-2020)

Commercialization ($) Resulting from Phase II Awards received between 2011-2020

Patents Resulting from Phase II Awards received between 2011-2020

Commercialization Rate (Commercialization $ / # of Phase II Awards)

Patent Rate (# of Patents / # of Phase II Awards)

Assessment Outcome

Company A

16

$3,200,000

1

$200,000

.06

Pass. Commercialization rate meets or exceeds a $100,000 average. It does not matter that the patent rate is below the threshold.

Company B

20

$1,900,000

3

$95,000

.15

Pass. Patent rate is at least 15%. It does not matter that the commercialization rate is below the threshold.

Company C

30

$2,500,000

3

$83,333

.10

Fail. Both the commercialization and patent rates are below the minimums.

Company D

15

$3,000,000

0

$200,000

.0

N/A –benchmark does not apply, firm has less than 16 Phase II Awards.

 

 

Commercialization Reporting

SBIR and STTR awardees are required to update and maintain their organization’s Company Commercialization Report via SBIR.gov. The reporting is accessible when an authorized user (user is SAM.gov verified) accesses its SBIR.gov profile under the “My Dashboard” section. SBIR and STTR Phase II awardees are required to update its commercialization record when applying for new Phase II awards, at the conclusion of a Phase II award, and then voluntarily update the information in the database annually thereafter for a minimum period of 5 years (15 U.S.C. 638 (k)).   
 

Increased Performance Standards for More Experienced Firms 

The SBIR and STTR Extension Act of 2022 (Pub. Law 117-183) established increased performance standards for more experienced firms. Effective as of April 1, 2023, the statute modifies the Phase I to Phase II Transition Rate Benchmark and the Commercialization Rate Benchmark based on a higher threshold of received awards.

 

Increased Performance Standard for the Phase I to Phase II Transition Rate Benchmark

The Increased Performance Standard for the Phase I to Phase II Transition Rate Benchmark only applies when a company has received or receives 51 or more Phase I awards during the past five fiscal years, excluding the most recently completed fiscal year. It requires the company to average a ratio of Phase II to Phase I awards of at least 0.50, meaning they must average one Phase II for every two Phase I awards received during the measurement period. 

 

Increased Performance Standard for the Commercialization Rate Benchmark

The Increased Performance Standard for the Commercialization Rate Benchmark establishes two additional tiers, with each tier requiring an elevated performance requirement.

Tier 1 applies when a company has received or receives 51 or more Phase II awards during the past ten fiscal years, excluding the two most recently completed fiscal years. It requires the company to average at least $250,000 in aggregate sales and investments per Phase II award received during the period.

Tier 2 applies when a company has received or receives 101 or more Phase II awards during the past ten fiscal years, excluding the two most recently completed fiscal years. It requires the company to average at least $450,000 in aggregate sales and investments per Phase II award received during the period.

Please note, patents cannot be used to pass the Increased Performance Standards for the Commercialization Rate Benchmark.

 

Increased Performance Standards Documentation Requirement

The SBIR and STTR Extension Act of 2022 requires companies subject to the increased performance standard for the Commercialization Rate Benchmark to submit to SBA supporting documentation to support reported covered sales. The act defines covered sales as follows (15 U.S.C. 638 (qq)(3)(B)(iii)(II)):

In this clause, the term "covered sale" means a sale by a small business concern-

  • that the small business concern claims to be attributable to an SBIR or STTR award;
  • for which no amount of the payment was or is made using Federal funds;
  • which the small business concern uses to meet an applicable increased minimum performance standard under clause (i) [i.e., Increased Performance Standard for the Commercialization Rate Benchmark]; and
  • that was or is received during the 5 fiscal years immediately preceding the fiscal year in which the small business concern uses the sale to meet the increased minimum performance standard.

 Please note that government awards received as a prime or subcontractor that satisfy the definition of Phase III and result, at least in-part, from Phase II award(s) received during the measurement period are not considered covered sales because the payment was or is made using Federal funds.

Note: For the Fiscal Year 2023 assessment, SBA will provide guidance directly to firms triggering the increased performance standards with instructions for providing the covered sales documentation. SBA anticipates company commercialization reporting system modifications to allow for uploading required documentation will be complete prior to the Fiscal Year 2024 assessment.

 

Consequences of Failure to Meet the Benchmarks

SBA will identify, on June 1 of each year, the companies that fail to meet the Phase I to Phase II Transition Benchmark, the Commercialization Rate Benchmark, or the Increased Performance Benchmarks for More Experienced Firms.

Companies that fail to meet either the Phase I to Phase II Transition Benchmark or the Commercialization Rate Benchmark will not be eligible to submit a proposal for a Phase I (or Direct-to-Phase II) award for a period of one year, beginning from the determination date (June 1). 

Companies that fail to meet either of the benchmarks under the Increased Performance Standards for more Experienced Firms may not receive more than 20 total Phase I awards and Direct-to-Phase II awards from each Federal agency during the 1-year period beginning on the date of determination (June 1).

The SBIR/STTR Policy Directive defines a Federal Agency as follows:

(o) Federal Agency. An executive agency as defined in 5 U.S.C. 105, and a military department as defined in 5 U.S.C. 102 (Department of the Army, Department of the Navy, Department of the Air Force), except that it does not include any agency within the Intelligence Community as defined in Executive Order 12333, § 3.4(f), or its successor orders.

 

Notification

SBA will notify companies failing either of the benchmarks and the relevant officials at the participating agencies.  The information on the companies will not be available to the public, but a confidential list of companies failing the benchmarks are required to be submitted to Congress. 

To provide companies with advance warning, SBA notifies companies on April 1 if they are failing any of the benchmark(s).  This notification also instructs companies to review the information available on SBIR.gov and to create or update its company commercialization report to ensure SBA utilizes the most complete and accurate data prior to the official assessment date. Companies identifying inaccuracies may provide feedback through the SBIR.gov helpdesk https://www.sbir.gov/feedback. Companies should review and provide any feedback early, to ensure modifications are able to be addressed well in advance of the May 31 deadline.

Because the performance benchmark requirements only affect a company’s eligibility for new Phase I (or Direct-to-Phase II) awards, a company that fails to meet any of the required benchmarks may continue working on its current or ongoing SBIR/STTR awards and may apply for and receive new Phase II and Phase III awards.

 

 

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