[Comments on Agency Participation in SBIR Program]

B-230594.2, Mar 15, 1988, 88-1 CPD ***

PROCUREMENT - Socio-Economic Policies - Small Businesses - Research/Development Programs - Voluntary Participation - Funding Restrictions DIGEST: The Small Business Development Act of 1982, 15 U.S.C. Sec. 638(f)(1), mandates establishment of the Small Business Innovation Research (SBIR) program in federal agencies with yearly extramural research or research and development obligations of over $100,000,000, for awards to small businesses. However, there is no legislative restriction on voluntary participation in the program by agencies with smaller budgets. This will not violate competitive requirements of Competition in Contracting Act of 1984, as amended, since 41 U.S.C. Sec. 253(b)(2) specifically authorizes an exception for small business in furtherance of the SBIR program.

The Honorable John J. LaFalce Chairman, Committee on Small Business House of Representatives:

This is in response to your request for a legal opinion from this Office as to whether federal agencies may voluntarily participate in the Small Business Innovation Research (SBIR) program. Your request was made at a hearing conducted by the Committee on Small Business on March 1, 1988, which dealt with a Nuclear Regulatory Commission (NRC) proposal to withdraw from the SBIR program. At the hearing, our Office expressed the view that the Competition in Contracting Act of 1984 (CICA) does not prohibit an agency from continuing its SBIR program on a voluntary basis when its extramural Research and Development (R&D) budget falls below $100,000,000 in any given year. You asked us to provide a more detailed explanation in writing.

The Small Business Innovation Development Act of 1982 (SBIR Act), Pub. L. No. 97-219, 96 Stat. 217, which amended section 9 of the Small Business Act, created the SBIR program. Under section 9(f)(1) of the Small Business Act (15 U.S.C. Sec. 638(f)(1)), an agency with an extramural research and development budget (obligations) of over $100,000,000 in fiscal year 1982 or thereafter, must obligate not less than a stated percentage of funds for award to qualified small business concerns.

The NRC's R&D budget has dropped below $100,000,000 and its Assistant General Counsel for Administration, in a memorandum dated October 24, 1986, said that continued participation in the SBIR program would subject the Commission to protests that it was violating CICA by improperly earmarking funds for small businesses without the statutory authority of the SBIR Act. We disagree.

The House Committee on Small Business described the purpose of the SBIR legislation "as providing a long-needed mechanism ... to increase the share of the federal R&D budget awarded to small businesses." (H. R. Rep. No. 349, Part I, 97th Cong., lst Sess. 19 (1981).) Section 9(e)(4) of the Small Business Act (15 U.S.C. Sec. 638(e)(4)) defines SBIR to mean a program under which a portion of a federal agency's research or R&D effort is reserved for award to small businesses through a uniform process.

The fact that section 9(f) (15 U.S.C. Sec. 638(f)) mandates SBIR programs for agencies with annual extramural research or R&D budgets in excess of $100,000,000 does not mean, in our view, that agencies with smaller budgets are precluded from voluntarily establishing programs. The purpose of the SBIR Act is to provide small businesses with a greater part of the federal R&D budget. This same purpose is served by other provisions of the Small Business Act, including section 9(h) (15 U.S.C. Sec. 638(h)), which provides for agencies with research or R&D budgets in excess of $20,000,000 to establish their own goals for funding agreements with small businesses. Also, section 15(i) (15 U.S.C. Sec. 644(i)) broadly authorizes federal agencies to set aside research and development procurements for small businesses. We see nothing in the statute establishing the SBIR program to suggest there is any prohibition on voluntary participation by federal agencies and we see no basis for implying such a prohibition, given the broad purpose of the Small Business Act.

The CICA, as amended, 41 U.S.C. Sec. 253(b)(2), specifically authorizes an agency to limit competition in the procurement of property or services "in furtherance" of 15 U.S.C. Sec. 638 (the SBIR program). Accordingly, as long as an agency is participating in a SBIR program-- regardless of the reason it may limit the field of competition to small businesses under the authority of 41 U.S.C. Sec. 253(b)(2). Even if one regards a program under the $100,000,000 level as not yet having attained the status of an SBIR program, section 253(b)(2) of CICA provides the same exemption for all small business programs under section 15 of the Small Business Act, 15 U.S.C. Sec. 644.

Therefore, we conclude that federal agencies, including NRC, are not precluded either by the SBIR Act or by CICA from voluntary participation in the SBIR program.

Unless you publicly announce its contents earlier, we do not plan to distribute this opinion further until 10 days from its issue date.