The SBIR program in EPA annually solicits proposals from science and
technology firms that meet the federally mandated criteria mentioned above. The goal of this program is to fulfill the missions of NCER, ORD and EPA while also strengthening the role of small businesses in the realm of federal contracting. The types of proposals that receive funding from EPA vary from year to year but maintain a theme of proposed environmental benefits. EPA’s phasing system follows the guidelines determined by the SBA, which allows EPA to spend small amounts of their contract budget on a research idea in a high-risk study to determine if the research can be made technologically feasible. EPA’s Phase I and II contracts are smaller than the previously mentioned federal limits for SBIR money disbursement as seen in section 2.3.1. “Under Phase I, the scientific merit and technical feasibility of the proposed concept is investigated. EPA awards firm-fixed-price Phase I contracts of up to $70,000 and the period of performance is typically six months” (EPA SBIR Description, 2006). Phase II contracts are awarded to companies that show promise during Phase I in amounts up to $225,000 for assisting in the development of the technology for commercialization over a typical period of two years. However, these contract award amounts can vary depending on the type of
technology being sponsored and how central the research idea is to the mission of EPA at the time of the proposal.
Some previously funded projects through EPA’s SBIR program include the development of an Arsenic Removal System for Point-of-Use/Point-of-Entry Drinking Water Systems by ADA Technologies, Inc., Nanoparticle-Anchored Plasticizers by TDA Research, Inc. and a Solid Scrubber for the Semiconductor Industry by ATMI, Inc. (EPA Small Business Innovation Research: Success Stories, 2006).
2.3.2.1 Option Funding
The objective of Phase II is “to continue the research or R&D initiated under Phase I and work toward commercialization of the technology” (Funding Opportunities, 2006). EPA does understand that Phase II may not “complete the total research and development required to satisfy commercial or federal needs beyond the SBIR program”
and that in fact may end up being completed in Phase III, which EPA does not fund (Funding Opportunities, 2006). At the end of Phase II, EPA offers the Phase II awardees two options.
For Phase II, the Agency is planning to require two Phase II Options: (1) Phase II Commercialization Option under which Phase II offerors shall submit a proposal for $70,000 additional funding to expand R&D efforts to accelerate the project from full scale testing and demonstration to full commercialization; and (2) Phase II Verification Testing Option under which Phase II offerors shall submit a proposal for up to $50,000 additional funding to facilitate third party research/ R&D verification testing that will improve the quality assurance and quality control (QA/QC) of the technology and accelerate the acceptance and use of improved and more cost-effective technologies (Funding Opportunities, 2006).
EPA changed the documentation requirements for receiving the additional option task funding about one to two years ago. This rule change only applies to the Phase II Commercialization Option, not the Phase II Verification Testing Option. Originally, companies had to prove that they were receiving a certain amount of in-kind donations
from sponsors, potential end-users, venture capitalists, universities, etc. In-kind donations are recognized as non-monetary donations, such as use of equipment or services.
Documentation for the Phase II Commercialization Option are receipts showing that at least $100,000 was transferred to the contractor from one or more third party investors, such as venture capital firm, an individual “angel” investor, state or local funding source, or another company under a partnership, licensing or joint venture arrangement, or any combination of third parties. Documentation for the Verification Testing Option is the signed Commitment Letter with the third party testing organization (Funding Opportunities, 2006).
Similar to the Phase II SBIR program of the National Science Foundation, as of today, EPA requires companies to prove that they have received cash only
donations/support from other sources. The question now is why EPA would want to do that. It is important to consider that changing the policy and procedure may have a larger than anticipated impact on the companies that are dependent on the EPA SBIR program.
EPA changed the funding from cash donations to in-kind to increase the seriousness of companies receiving funding. It is very hard to track in-kind donations, or donations of services rather than monetary donations. This makes it difficult to prove how much in-kind donations SBIR Phase II awardees are actually receiving. EPA became reluctant to giving out the additional $70,000 for the Phase II Commercialization Option. EPA noticed that companies had a tendency to “fluff” up the amount of in-kind donations they received, to add up to $100,000. Again, in-kind donations are difficult to track, to know their true value, and how much the small businesses are actually receiving and using is even more difficult. EPA felt that they had to change the rule to only cash donations which amount to $100,000. The cash donations have to actually be in the small businesses’ bank account in order to receive the $70,000. Doing so has diminished
EPA’s reluctance to grant the additional funding since it is nearly impossible for small businesses to take advantage of the SBIR program this way.
2.3.2.2 Foresight Science and Technology
Foresight Science and Technology is an independent technology-market assessment company that EPA uses to provide marketing assistance to SBIR funded companies. EPA feels that it is important for companies developing a new technology to not only develop it but to also spend time on the marketing aspect of things. If a
company develops a new technology, that is great. But unless the technology sells it doesn’t beneficially impact the environment. Foresight helps companies developing new technologies consider potential markets for their technology. This allows the technology under development to take a path that will lead to a product that has a market.
Foresight provides something similar to what they call a Niche Construction Analysis™. “The Niche Construction Analysis™ discovers practical applications for scientific and engineering advances and identifies partners, positions the technology, and opens a dialog with champions in potential partners able to provide R&D funding and/or downstream commercialization support (Foresight NCA, 2006).” A niche study is provided to all EPA SBIR Phase I awardees. This market analysis is paid for by EPA out of the Phase I contract award. It provides the companies developing the new technology an idea of what different potential markets are. The study also provides a list of
companies that may be interested in the technology. This list has specific contact names and numbers for the SBIR companies to contact at their convenience. By getting future technology buyers involved early, the SBIR funded companies will hopefully develop a
positive relationship with these future buyers. Down the road this will provide a valuable resource for the SBIR companies to use when they are trying to sell their technology.