(an atricle by John Davis that appeared in Technology Transfer Business magazine, 1997 winter issue)

Many small firms decry what they say is the unfairness of the bid-advantaged positions afforded "small, disadvantaged businesses" under the Small Business Administration's 8(a) Program. However, small non-8(a) firms -- up to 500 personnel in size -- do not have to go completely without; with a little work and a good idea, similar bid-advantaged positions are available to them as well.

Little known, but strategically important, provisions in the law that established the Small Busienss Innovatve Research (SBIR) program allow products and services that have been developed under that program to be procured on a sole-source basis by all US government agencies. Of course, just as with the 8(a) program, there is no "requirement" that they be procured this way, but this allows the government procuring officials to avoid those costly, time consuming, competitive procurements when the technology is needed. This seems to be justified because the government has already invested in the development of the technology (SBIR Phases I and II) so that it is likely to be the least costly, latest and best available. Apparently congress intended that the small businesses participating in these programs would have at least some level of "built-in" business base to encourage the ultimate commercialization of these technologies; seems like a good idea that should work.

With this in mind, the seemingly low value (to some) of the SBIR is not so low after all. It's not just the $60 - $100,000 in Phase I, or even the up to $750,000 available in Phase II that is the real incentive to bid on an SBIR. Its the potentially millions (or even, theoretically, billions), available on a sole-source basis in Phase III that is the real incentive. Now securing this bid-advantaged position is a potentially important part of any long term business strategy -- every small business should be bidding several each year.

For the 8(a) company, already well versed at marketing through the bid-advantaged approach, this could well be the primary survival strategy that brings them through the post graduation period. And, for the small, non-8(a) small business, a ticket to taking part in 8(a)-like sole-source procurements to stabilize them and foster a predictable income stream. What's more, sole-source purchases under these gender and color neutral provisions do NOT run into the problems/issues surrounding the Adarand decision, so they are not likely to be challenged from that angle.

SURPRISE!!! This potentially lucrative way of doing business has been available for years (the law creating the SBIR Program was enacted in 1982). However, it has also been one of the best kept secrets in government contracting. The small businesses that do know about these provisions have no reason to tout it to others (and bring in more competition). Apparently the Government Program Managers at the SBA and the 10 agencies that fund and operate SBIR/STTR programs either do not recognize the importance of this provision to industry or, possibly, are afraid to say it "too loudly" in fear of some activist on The Hill (US Congress) thinking this is another of those "welfare programs for industry" and trying to shoot it down. So, it remains a $1 Billion secret. By the way, neither the SBIR nor the STTR programs even comes close to qualifying as "welfare to industry", but that is the subject for another column to be tackled here in the near future -- stay tuned.

© JADE Research Corporation, 1996

John Davis is General Manager of the SBIR Resource CenterTM, the nation's leading providers of custom software, proposal development tools and consulting resources to support the SBIR/STTR community since 1994. He can be reached at (410) 315-8101, via E-mail at or via the Center's Web site at

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