SBIR performance benchmarks, explained

A company that has won many Small Business Innovation Research (SBIR) or Small Business Technology Transfer (STTR) awards must show that the awards led somewhere before it can win more. Two performance benchmarks do that test: a Phase I to Phase II transition rate and a commercialization rate. The statute, 15 U.S.C. 638(qq), calls them minimum performance standards. The U.S. Small Business Administration (SBA) states the current ratios, thresholds, and dates on its Performance Benchmark Requirements page, and section 6(a)(7) of the SBIR/STTR Policy Directive, effective May 3, 2023, tells agencies how to apply them.

The consequence of failing is concrete: one year with no new Phase I proposals. The inputs are also concrete, because the commercialization numbers come from the Company Commercialization Report (CCR) each firm maintains on SBIR.gov and, for Department of Defense proposals, uploads as Volume 4 in the Defense SBIR/STTR Innovation Portal (DSIP). This post sets out the exact tests, who is measured, what failing does, how the report works, and which public laws built the system. For the phases the benchmarks measure between, see SBIR Phase I, II, and III, explained.

The Phase I to Phase II transition rate benchmark

SBIR.gov states the test. The transition rate benchmark applies only to a company that has received 21 or more Phase I awards during the past 5 fiscal years, excluding the most recently completed fiscal year. Such a company must have an average Phase II to Phase I ratio of at least 0.25, one Phase II award for every four Phase I awards. The ratio is total Phase II awards divided by total Phase I awards from all agencies, and Phase II awards are counted starting one year after the Phase I period, so that a Phase I has time to produce its Phase II. The page's fiscal year 2025 example counts Phase I awards from 2019 through 2023 and Phase II awards from 2020 through 2024: a company with 21 Phase I and 7 Phase II awards, a ratio of 0.33, passes; one with 21 Phase I and 3 Phase II awards, 0.14, fails; one with 20 Phase I awards is not measured.

The rate has not always been uniform. The Federal Register notice of May 23, 2013, at 78 FR 30951, records that SBA first published the agency transition benchmarks on October 16, 2012 at 77 FR 63410, that the Department of Transportation's rate was then 0.45 over 5 years and was being lowered to 0.25, and that the Environmental Protection Agency and the Department of Education were moving from a 10-year calculation period to 5 years. The amended table in that notice lists 0.25 and 5 years for each of the 11 agencies it names, among them the Department of Defense, NASA, the Department of Energy, and the National Science Foundation; the Department of Health and Human Services, the parent of NIH, does not appear in it. The notice cites 15 U.S.C. 638 as its authority and gave an effective date of July 22, 2013.

The commercialization rate benchmark

SBIR.gov states that the commercialization rate benchmark applies only to a company that has received 16 or more Phase II awards during the past 10 fiscal years, excluding the 2 most recently completed fiscal years. Such a company must show either an average of at least $100,000 in sales and investments per Phase II award, or patents equal to at least 15 percent of the number of Phase II awards. The sales and investment figures come from the Company Commercialization Report, and sales include government-designated Phase III awards. The fiscal year 2025 example counts Phase II awards from 2013 through 2022: a company with 16 Phase II awards and $3.2 million in sales and investment passes on dollars; one with 20 awards, $1.9 million, and 3 patents passes on patents at 0.15; one with 30 awards, $2.5 million, and 3 patents fails both tests; one with 15 awards is not measured.

The Federal Register notice of September 26, 2013, at 78 FR 59410, records the origin. It cites section 5165 of the SBIR/STTR Reauthorization Act of 2011, Public Law 112-81, as the requirement for an SBA-approved commercialization benchmark for firms with multiple Phase II awards, describes the benchmark as the level of Phase III commercialization a firm must have achieved from prior Phase II work to receive a new Phase I award, and says it applies only to firms with more than 15 Phase II awards during the last 10 fiscal years, excluding the two most recently completed. SBA had announced the benchmark on August 8, 2013 at 78 FR 48537; the September notice reopened comments and delayed the effective date to November 15, 2013.

Who is measured

Both benchmarks apply only above a threshold count of prior awards, which is why most SBIR firms never meet them. Section 6(a)(7)(iii) of the directive says that for each benchmark, agencies establish a threshold number of prior awards an awardee must have won for the requirement to apply. Section 6(a)(7)(iv) says SBA, using information from agencies and awardees, identifies the companies above the thresholds and calculates their rates, and that agencies use those results to decide eligibility.

The counts and thresholds are from SBIR.gov; the increased standards are stated in 15 U.S.C. 638(qq)(3) as more than 50 and more than 100 awards, which SBIR.gov renders as 51 or more and 101 or more.

What failing a benchmark does

The statute sets the consequence. Under 15 U.S.C. 638(qq)(1)(B) and (2)(B), a firm that is not meeting a minimum performance standard "may not participate in Phase I" of that agency's program, or in Phase II under the authority of subsection (cc), during the one-year period beginning on the determination. Subsection (cc) is Direct to Phase II, so the bar reaches both routes into a new project. Section 6(a)(7)(ii) of the directive states the same rule: a firm that fails either benchmark is not eligible to submit a proposal for a new Phase I award, or a new Phase II under section 4(b)(1)(ii), for one year.

SBIR.gov gives the calendar. SBA notifies failing companies on April 1 and tells them to review and update their SBIR.gov data; feedback is due by May 31 through the SBIR.gov help desk; SBA determines failures on June 1; the bar runs one year from June 1. A failing company may continue work on current awards and may still apply for and receive new Phase II and Phase III awards, since neither is a Phase I.

Failing an increased standard is treated differently. Under 15 U.S.C. 638(qq)(3)(A)(ii) and (B)(ii), the firm may not receive more than 20 total Phase I awards and Direct to Phase II awards from each federal agency during the one-year period. Paragraph (3)(H) says this is not a Phase I bar and does not stop an agency from setting more restrictive limits of its own. SBIR.gov quotes the directive's definition of federal agency for this purpose, which refers to 5 U.S.C. 105 and 102 and excludes the intelligence community. The Department of War's 2027 SBIR Commercial Solutions Opening preface applies that definition: the directive treats the Departments of the Army, Navy, and Air Force each as its own federal agency and the remaining components as one executive agency, so a firm failing an increased standard may receive no more than 80 such awards from the department, 20 each from the Army, the Navy, the Air Force, and all other components combined.

Section 6(a)(7)(iv) of the directive adds process protections. The assessment results and eligibility determinations are not made public; agencies and SBA view them through secure SBIR.gov accounts; each company can view its own last assessment once it has an SBIR.gov account; and a firm that believes its assessment is wrong may give SBA the pertinent award information and request a reassessment. Agencies must notify SBA of any application denied for failing a benchmark. The statute, at (qq)(3)(F), requires SBA to send Congress a confidential annual list of firms that did not meet a standard, beginning July 1, 2023.

How commercialization is reported

The benchmarks run on data the firm supplies. Section 8(k) of the directive requires agencies to make each Phase II awardee update the commercialization information on the award through the company's SBIR.gov account when the last deliverable is complete, and asks the awardee to update it voluntarily each year for at least 5 years. The statute, at 15 U.S.C. 638(k)(2)(B), requires SBA's government database to hold, for each Phase II award, revenue from the sale of new products or services resulting from the research and additional investment from any source other than Phase I or Phase II awards.

The SBIR.gov guide to completing the Company Commercialization Report defines the fields. Sales means cash revenue from the sale of new products or non-R&D services embodying the technology developed under the project, counting only the component's share when the technology is part of a larger product. Sales does not include SBIR or STTR contracts or grants, revenue from other R&D activities including follow-on R&D contracts, or sales to an affiliate. Third-party revenue is cash received by another entity, for example a licensee, from products embodying the technology. Additional investment is money from any source other than the SBIR/STTR programs spent on further R&D, manufacturing start-up, plant and equipment, intellectual property protection, certifications, marketing, or workforce training. The guide's rules: do not include Phase I or Phase II awards as sales or investment; do not count an item as both; record additional R&D services as investment, not sales; apportion a product's sales among contributing projects without double counting; count only dollars received to date and, for government, only obligated amounts; do not report a government Phase III contract under sales or investment as well; report outside funding received through Fast Track or Phase II Plus, Enhancement, or IIB programs as additional investment but not the government's SBIR match; and treat the firm as including all affiliates.

The CCR as Volume 4 in DSIP

For Department of Defense proposals, the CCR is a proposal volume. The 2027 Commercial Solutions Opening preface lists seven DSIP volumes, with Volume 4 the Company Commercialization Report, and explains the mechanics. SBA requires awardees to maintain the CCR on SBIR.gov. A firm with prior Phase I or Phase II awards, from any agency and whether or not it has commercialization to report, must log in to SBIR.gov, create or update the report, certify and submit it, download the CCR PDF from My Documents, and have its DSIP firm administrator upload it to the Firm Forms section, where it attaches to every proposal the firm submits. In Volume 4 the proposal asks: "Do you have a new or revised Company Commercialization Report to upload?" The preface warns that uploading a new CCR, or clicking Save or Submit in one proposal's Volume 4, counts as a change to every proposal under any open solicitation, so previously certified Phase I or Direct to Phase II proposals reopen and must be recertified and resubmitted or they will not be evaluated.

Whether the report is scored is a component decision. The preface refers firms to component instructions for how CCR information is considered during proposal evaluations. The Navy's fiscal year 2027 Release 1 instructions say DSIP requires Volume 4 for submission and list it as "Not evaluated." Separately, the preface's Phase II commercialization strategy section requires a schedule of anticipated results at one year, at completion, and after completion, and says that after award the firm must report actual sales and investment data in its SBA report on SBIR.gov at least annually.

The public law provisions

Three laws built the system, and one moved its benchmarks within the directive.

• Public Law 112-81. The September 26, 2013 notice cites section 5165 of the SBIR/STTR Reauthorization Act of 2011, enacted as part of the National Defense Authorization Act for Fiscal Year 2012, as the source of the requirement. The resulting text at 15 U.S.C. 638(qq)(1) and (2) required each agency, within 1 and 2 years of December 31, 2011, to establish a system to measure Phase I awardees' success in receiving Phase II and Phase III awards and a minimum performance standard for each, subject to SBA approval under paragraph (4), which must exceed a de minimis level, and to 60 days of notice and comment under paragraph (5).
• The 2019 directive. The notice of April 2, 2019 at 84 FR 12794 records that SBA moved the benchmark provisions from section 4 to section 6 of the directive "because these benchmarks affect program eligibility," and describes them as designed to ensure a minimum degree of progress toward commercialization.
• Public Law 117-183. Section 8 of the SBIR and STTR Extension Act of 2022, titled "Increased Minimum Performance Standards for Experienced Firms," inserted paragraph (3) into subsection (qq): the doubled transition standard for firms with more than 50 Phase I awards, the $250,000 and $450,000 commercialization standards for firms with more than 50 and more than 100 Phase II awards, the 20-award consequence, the documentation of covered sales, the bar on using patents, the SBA waiver for topics critical to an agency's mission or national security, the confidential annual list to Congress, and an effective date of April 1, 2023. It also added to subsection (b)(7) a requirement that SBA's annual report state the standards and the number of firms that failed them, without identifying the firms. The paragraph carried a termination date of September 30, 2025.
• Public Law 119-83. Section 10(f) of the Small Business Innovation and Economic Security Act, approved April 13, 2026, strikes September 30, 2025 from 15 U.S.C. 638(qq)(3)(I) and inserts September 30, 2031, so the increased standards run as long as the programs themselves. The 2027 Commercial Solutions Opening preface, written after the law, continues to apply them.

Section 6(a)(7)(v) of the directive says current details and agency implementation processes are posted on SBIR.gov under the Performance Benchmark Requirements tab, that changes take effect when posted there, and that any agency change needs SBA approval and 60 days of public comment.

What to check

• How many Phase I awards did the firm receive in the 5 fiscal years before the most recent one, and how many Phase II awards in the 10 fiscal years before the 2 most recent, counting all agencies and all affiliates?
• Does the Company Commercialization Report on SBIR.gov show sales, investment, Phase III awards, and patents for every Phase II award, entered under the guide's definitions and without double counting?
• Did the firm receive an April 1 notice from SBA, and did it submit corrections through the SBIR.gov help desk before May 31?
• Is the proposal a new Phase I or Direct to Phase II, which a June 1 failure bars for one year, or a Phase II or Phase III, which it does not?
• For a DoD proposal, has the firm administrator uploaded the current CCR PDF to DSIP Firm Forms, and will any later upload reopen proposals already certified under an open solicitation?
• Does the solicitation state the benchmark information section 9(a)(12) of the directive requires, and does it cite 15 U.S.C. 638(qq) as extended by Public Law 119-83?

Azcuna's LEDGER turns a trade study into a Decision Package in which every number cites its source and AI agents draft but never decide. It was proposed to the Army under SBIR Phase I topic ARM26BX06-NV012, and the proposal was submitted on October 21, 2026.

Questions people ask

What is the SBIR commercialization benchmark?

The commercialization rate benchmark is one of two minimum performance standards required by 15 U.S.C. 638(qq). SBIR.gov says it applies to a company with 16 or more Phase II awards in the past 10 fiscal years, excluding the 2 most recently completed years, and requires either an average of at least $100,000 in sales and investments per Phase II award or patents equal to at least 15 percent of the number of Phase II awards. The data come from the Company Commercialization Report on SBIR.gov.

What is the Phase I to Phase II transition rate benchmark?

SBIR.gov says the transition rate benchmark applies to a company with 21 or more Phase I awards during the past 5 fiscal years, excluding the most recently completed year, and requires a ratio of Phase II awards to Phase I awards of at least 0.25, or one Phase II for every four Phase I awards, counted across all agencies. Phase II awards are counted beginning one year after the Phase I period. The May 23, 2013 Federal Register notice set 0.25 over 5 years for each of the 11 agencies in its table.

What happens if a company fails an SBIR benchmark?

Section 6(a)(7)(ii) of the SBA Policy Directive says a firm that fails either benchmark is not eligible to submit a proposal for a new Phase I award, or a Direct to Phase II award, for one year from the determination. SBIR.gov says SBA makes the determination each June 1 and the bar runs one year from that date. The firm may keep working on current awards and may still apply for and receive Phase II and Phase III awards.

What are the SBIR minimum performance standards?

Minimum performance standards is the statutory term in 15 U.S.C. 638(qq) for what SBIR.gov calls performance benchmarks. Paragraph (1) covers progress to Phase II and paragraph (2) progress to Phase III, each with a one-year Phase I bar for failure. Paragraph (3), added by Public Law 117-183, sets increased standards for experienced firms: more than 50 Phase I awards doubles the transition standard, and more than 50 or 100 Phase II awards requires $250,000 or $450,000 average sales and investment per Phase II award.

Who is subject to the increased SBIR performance standards?

SBIR.gov says the increased transition standard applies to companies with 51 or more Phase I awards in the past 5 fiscal years, excluding the most recent, and requires a ratio of 0.50. The increased commercialization standard applies at 51 or more Phase II awards in the past 10 fiscal years, excluding the 2 most recent, requiring $250,000 average sales and investments per Phase II, and at 101 or more Phase II awards, requiring $450,000. Patents cannot be used, and covered sales need supporting documentation.

What is the penalty for failing the increased performance standards?

Not a Phase I bar. 15 U.S.C. 638(qq)(3) says a firm that fails an increased standard may not receive more than 20 total Phase I and Direct to Phase II awards from each federal agency during the one-year period beginning on the determination. The Department of War's 2027 SBIR Commercial Solutions Opening says the directive treats the Army, Navy, and Air Force each as its own agency and the remaining components as one, so a failing firm may receive no more than 80 such awards from the department in total.

How does SBA tell a company it failed a benchmark?

SBIR.gov says that on April 1 each year SBA notifies companies that are failing a benchmark and tells them to review and update their SBIR.gov data, with feedback due by May 31 through the SBIR.gov help desk. SBA then determines failures on June 1. Section 6(a)(7)(iv) of the SBA Policy Directive says the results are not made public, that each company can view its last assessment through its SBIR.gov account, and that a firm may request a reassessment with award information.

What is the Company Commercialization Report?

The Company Commercialization Report, or CCR, is the record on SBIR.gov where a firm reports sales, additional investment, and government Phase III awards resulting from each Phase II award. The SBIR.gov guide defines sales as cash revenue from new products or non-R&D services embodying the technology, excludes SBIR and STTR awards and other R&D revenue, and treats the firm as including all affiliates. SBIR.gov says the commercialization benchmark is calculated from it. Some searchers call it the Company Commercialization Record.

How does the CCR work in DSIP for DoD proposals?

The Department of War's 2027 SBIR Commercial Solutions Opening makes the CCR Volume 4 of a DSIP proposal. A firm with prior Phase I or Phase II awards must update its report on SBIR.gov, download the PDF from My Documents, and have its firm administrator upload it to the Firm Forms section in DSIP, where it attaches to all proposals. Uploading a new CCR or saving Volume 4 reopens every Phase I or Direct to Phase II proposal already certified under an open solicitation, which must then be recertified and resubmitted.

How often must SBIR awardees update commercialization data?

Section 8(k) of the SBA Policy Directive says agencies must require each Phase II awardee to update the commercialization information on the award through its SBIR.gov account when the last deliverable is complete, and asks the awardee to update it voluntarily each year for at least 5 years. The Department of War's 2027 preface repeats that rule and separately requires a Phase II firm to report actual sales and investment data in its SBA report at least annually after award.

Sources

1. 1Performance Benchmark Requirements · U.S. Small Business Administration, SBIR.gov
2. 2United States Code, 2024 Edition, Title 15, Section 638 - Research and development · U.S. Government Publishing Office
3. 3Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Program Policy Directive, effective May 3, 2023 · U.S. Small Business Administration, SBIR.gov
4. 4SBIR/STTR Phase I to Phase II Transition Benchmarks; Amended (78 FR 30951, May 23, 2013) · Federal Register, via U.S. Government Publishing Office
5. 5Small Business Innovation Research and Small Business Technology Transfer Programs Commercialization Benchmark; reopening of comment period and delay of effective date (78 FR 59410, September 26, 2013) · Federal Register, via U.S. Government Publishing Office
6. 6Public Law 117-183: SBIR and STTR Extension Act of 2022 · U.S. Government Publishing Office
7. 7Public Law 119-83: Small Business Innovation and Economic Security Act · U.S. Government Publishing Office
8. 8Completing the Company Commercialization Report: Instructions and Definitions Reference Guide · U.S. Small Business Administration, SBIR.gov
9. 9Department of War SBIR Program, 2027 SBIR Commercial Solutions Opening, Release 1 preface · Department of War SBIR/STTR Program, DSIP
10. 10Department of the Navy SBIR, DoW 2027 SBIR CSO Release 1, Phase I Open Topics Proposal Submission Instructions · Department of the Navy SBIR/STTR Programs, via DSIP
11. 11Small Business Innovation Research Program and Small Business Technology Transfer Program Policy Directive; Final SBIR and STTR Policy Directives (84 FR 12794, April 2, 2019) · Federal Register, via U.S. Government Publishing Office

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