You probably know that the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs are reserved for American businesses. But do you know how "American" is defined? Or how "American" impacts where the SBIR/STTR work is done, where materials are purchased, and where Phase III products/services are sold? If not, then read on…

SBIR/STTR funding is reserved for American-owned businesses. However, the definition is pretty lenient: simply majority ownership in the company of 51 percent or more by United States citizens and/or permanent resident aliens is all that is required. This provides some flexibility for companies, say, that are owned by three buddies, two of whom are US citizens and one who is not - as long as the two US citizens own at least 51 percent of the company, their firm can compete for SBIR/STTR awards.

So that was simple: now how about that second question about where the work has to be performed? The restriction is tougher here: ALL work on an SBIR/STTR Phase I or II project must be performed within the United States. There are only two exceptions.. First, the definition of "US" has been broadened to include Puerto Rico, various territories in the Pacific, and even Washington, DC! Second, read carefully the solicitation of the agency to which you are applying for SBIR/STTR: some indicate that exceptions to this "all work done in the US" position will be considered, while others do not.

What about the citizenship of folks working on your SBIR/STTR project? Workers can have citizenship in whatever country they come from. Again, there are several considerations here. First, see the prior statement about all work must be done in the US. Therefore, it is okay to have a Russian scientist working on your SBIR/STTR, but s/he must travel to the US to perform the work (again read your agency's solicitation carefully to see if any exceptions will be considered). Second, be practical: a proposal to develop a low-cost nuclear reactor that features foreign scientists from North Korea or Iran probably won't be given favorable consideration even if they agree to do the research in the US Third, you will still need to ensure that any foreign workers on your SBIR/STTR project meet US government employment restrictions, which have become stricter after September 11th.

As you might expect, the SBIR/STTR programs emphasize "buy American" when it comes to goods, materials, and equipment that you are purchasing for your project. But the world isn't so black and white anymore: for example, with Hondas built in Alabama and Fords built in Canada, what really is an "American car?" Unless quality, features, or other important considerations suggest the need to go with a foreign-made product, then give preference to what is (or at least as best as you can tell is) American made. You may want to discuss this further with the agency to which you are submitting your proposal to make sure they don't have strong feelings about what is okay or not.

So we need to be an American company doing all the Phase I and II work in America using primarily American parts and equipment. But what happens when it comes to selling the Phase III products/services? Some companies assume that, with all of this American emphasis, the sales need to be in the US. This is not correct. Barring situations of national security or other sensitivity, you can sell internationally. In fact, imagine the great story you can weave into the commercialization plan of your SBIR/STTR proposal: your product/service will be sold abroad and thus help balance that pesky US trade deficit. If there is a chance of a national security or similar issue arising, you may want to discuss foreign sales limitations with the SBIR/STTR agency to which you are applying.

Only one America vs. abroad issue remains: what about manufacturing "off shore" in Phase III? With the flow of US jobs abroad in the manufacturing sector, this is a touchy subject. Here's our advice: consider early in your project whether manufacturing will be part of your Phase III strategy. If so, then give further thought whether you are likely in a situation in which manufacturing abroad may be necessary for competitive reasons (such as when you are entering a highly competitive market in which price is a major factor). If so, continue to ponder whether there might be a compromise, such as importing components that can be assembled by US workers. Finally, given the political sensitivity of the off shore issue, we recommend that you down-play this aspect of commercialization in your SBIR/STTR proposals - unless, of course, you have found a way to create US manufacturing jobs while competitors are doing everything off shore, in which case you may want to tout your "Made in the USA" advantage.

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