The National Defense Authorization Act Makes Significant Changes Relevant to SBIR and STTR Program Participants

By David Hayden and Jackson Moore

On December 12, 2017, President Trump signed the National Defense Authorization Act for Fiscal Year 2018 (the “NDAA FY18”). The NDAA FY18 authorizes and prioritizes funding for the Department of Defense (“DoD”) and prescribes military personnel strengths for Fiscal Year 2018.

In addition to appropriating $695.9 billion to the DoD, the NDAA FY18 made changes to the Small Business Innovation Research (“SBIR”) and Small Business Technology Transfer (“STTR”) programs. These provisions remove barriers to and increase the availability of funding for SBIR and STTR participants, more closely integrate program participants with other initiatives in the DoD, and provide additional resources for SBIR and STTR entities.

 A summary of the relevant sections of the NDAA FY18 is provided below:

Section 864: Other Transaction Authority for Certain Prototype Projects

• This provision (1) increases the amount of funding that can be authorized through the rapid prototyping program from $50 to $100 million for Department Secretaries and from $250 to $500 million for the Secretary of Defense and (2) specifically authorizes SBIR and STTR firms to compete for such funding through the Other Transaction Authority (“OTA”) contracting vehicle. 10 U.S.C. § 2371b.
• This additional funding for rapid prototyping projects is a potentially significant resource beyond the scope of Phase I-III funding for SBIR and STTR participants.

Section 1708: Inclusion of SBIR and STTR Programs in Technical Assistance

• The NDAA FY18 authorizes the DoD to provide procurement technical assistance to SBIR and STTR participants. 10 U.S.C. § 1708; 15 U.S.C. § 638.
• Technical assistance is free to SBIR and STTR participants and aids small businesses in navigating the contract bidding and competition processes. Small businesses in North Carolina desiring such assistance should contact the Small Business and Technology Development Center, which serves as North Carolina’s Procurement Technical Assistance Center. Contact information can be found at www.stbdc.org.

Section 1709: Requirements Relating to Competitive Procedures and Justification for Awards under the SBIR and STTR Programs

• Before the NDAA FY18, Phase II SBIR and STTR participants had to “recompete” for Phase III funding. 15 U.S.C. § 638(r)(4).
• This provision removes a significant barrier to acquiring Phase III funding by prioritizing this funding for the SBIR and STTR participants that developed the technology in question without a requirement for further justification by the agency.

Section 1710: Pilot Program for Streamlined Technology Transition from the SBIR and STTR Programs of the Department of Defense

• The NDAA FY18 requires the Secretary of Defense to establish a pilot program for the commercialization of products and services produced by SBIR and STTR participants.
• Significantly, this section encourages commercialization to proceed through multiple award contracts (“MACs”), thereby granting funding to multiple SBIR and STTR firms as well as the opportunity to compete with one another for business within the DoD.

Section 1714: Report on Utilization of Small Business Concerns for Federal Contracts

• This provision requires the Administrator of the Small Business Administration to issue periodic reports to the Senate and House of Representatives on (1) the prevalence of small business utilization in the federal market on multiple award contracts and (2) whether the performance requirements being set for multiple award contracts are feasible and appropriate for small businesses.
• These metrics will likely provide the impetus for wider usage of small businesses, such as those participating in the SBIR and STTR programs, for DoD contracts.

As is outlined above, the NDAA FY18 makes many changes to the DoD’s acquisition processes that are relevant to small businesses participating in the SBIR and STTR programs. Additionally, the proposed National Defense Authorization Act for Fiscal Year 2019 (the “NDAA FY19”) is likely to make further adjustments. The current draft of the NDAA FY19 would give the DoD permanent authority to grant SBIR and STTR contracts, removing the current sunset provisions eliminating the SBIR and STTR programs on September 30, 2022. These and other changes, if passed, will affect small businesses entering the SBIR and STTR programs for decades to come.

Special thanks to contributing writer Mark Rothrock, current student at the Duke University School of Law.

For more information about the content in this Alert, please contact a member of Smith Anderson’s Government Contracts team with whom you normally work.