STTR vs SBIR: the differences in law and policy

The Small Business Technology Transfer (STTR) program is a smaller companion to Small Business Innovation Research (SBIR): the same three phases, but reserved for "cooperative research and development" between a small business and a research institution. 15 U.S.C. 638(e), in the 2024 edition of the code, defines both programs and requires that at least 40 percent of STTR work be done by the small business and at least 30 percent by the institution. The U.S. Small Business Administration (SBA) sets operating rules for both in one Policy Directive, effective May 3, 2023. Public Law 119-83, approved April 13, 2026, extended SBIR to September 30, 2031 and STTR through fiscal year 2031.

The research institution partner

The statute defines a research institution as a nonprofit institution, including federally funded research and development centers (FFRDCs) identified by the National Science Foundation. The directive adds that the institution must have a place of business in the United States, and that a nonprofit means one owned and operated exclusively for scientific or educational purposes. Hospitals and military educational institutions can qualify if they meet that definition.

The small business stays in charge. The directive requires it to exercise management direction and control and to be the primary party responsible for the project, whatever the split of work or funding. Before an STTR award, the business must negotiate a written agreement with the institution allocating intellectual property rights and any rights to follow-on work.

The Department of Defense (DoD) 2027 STTR solicitation, with Release 1 topics pre-released October 7, 2026, applies these rules to defense topics under the Department of War name. The 30 percent must come from a single research institution. Federal laboratories do not qualify as the research partner and may be used only within the remaining 30 percent. The allocation of rights agreement goes in with the proposal.

How the work must be split

The split is the sharpest legal difference. For STTR Phase I and Phase II, the directive repeats the statute: not less than 40 percent by the small business and not less than 30 percent by the research institution. It adds that deviations "are not allowed," because the requirement is in statute.

SBIR is set by the directive instead. In Phase I, the small business must perform at least two-thirds of the research or analytical effort, and in Phase II at least one-half. A funding agreement officer may approve deviations in writing after consulting the agency's program manager.

The directive lets an agency measure the effort by award dollars or labor hours, as long as the solicitation explains how. DoD's solicitations for both programs, including the 2027 SBIR solicitation, measure it by direct and indirect costs.

Who the principal investigator works for

For both programs, the directive requires the principal investigator's primary employment, meaning more than one-half of the person's employment time, to be with the awardee at award and during the project. That rule precludes full-time employment elsewhere. Under STTR only, the primary employer may instead be the research institution.

The 2027 STTR solicitation adds a safeguard. At award, the small business must have at least one employee in a management position whose primary employment is with the business and who is not also employed by the research institution. The SBIR solicitation keeps the investigator with the business.

A Congressional Research Service (CRS) report updated October 21, 2022 lists the three differences SBA emphasizes: the intellectual property agreement, the 40 and 30 percent split, and no requirement that the investigator be primarily employed by the small business.

Which agencies run STTR and how much they must spend

The two set-asides use different thresholds. Under subsection (f), an agency with an extramural research budget over $100,000,000 must spend at least 3.2 percent of it on SBIR in fiscal year 2017 and each year after. Under subsection (n), an agency over $1,000,000,000 must spend at least 0.45 percent on STTR in fiscal year 2016 and each year after. The 2024 code applied subsection (n) through fiscal year 2025, and Public Law 119-83 changed that to 2031. For DoD, a budget calculation pilot in subsection (zz), added in December 2024 and extended by Public Law 119-83 to September 30, 2031, sets shares from fiscal year 2025 of at least 3.25 percent for SBIR and 0.46 percent for STTR. The base is DoD's average extramural research, development, test, and evaluation budget for the two most recent fully obligated years.

The list of STTR agencies has changed. CRS counted five as of 2021: DoD, the Department of Energy, Health and Human Services, the National Aeronautics and Space Administration, and the National Science Foundation. The Department of Agriculture said on August 23, 2023 that it began STTR in 2022 after reaching the $1 billion threshold, and announced its first STTR awards: $2.5 million to 15 businesses in 12 states. SBIR.gov's agency directory, viewed October 21, 2026, labels all six as SBIR/STTR.

Where the programs meet

The two programs share most rules, and some paths cross between them. The directive lets an agency give an SBIR Phase II award to an STTR Phase I awardee, or the reverse, if the firm meets the rules of the program making the Phase II award. Phase I timing differs: the directive says Phase I normally should not exceed 6 months for SBIR or 1 year for STTR.

Ownership differs too. The directive marks the option for firms majority-owned by multiple venture capital operating companies, hedge funds, or private equity firms as SBIR only.

One gap closed in 2026. Section 10(a) of Public Law 119-83 extended the Direct to Phase II authority in subsection (cc), which lets an agency skip Phase I, to the STTR program. The 2027 STTR solicitation now includes a Direct to Phase II section for eligible STTR topics.

What to check

• Does the work plan show at least 40 percent by the small business and 30 percent by one research institution, measured as the solicitation requires?
• Does the partner meet the research institution definition, or is it a federal laboratory that cannot fill the 30 percent?
• Is the allocation of rights agreement signed and included with the proposal?
• Where is the principal investigator primarily employed, and is that allowed for this program?
• Which year's percentage, and which version of the code, does a funding figure rely on?

Sources

1. 1United States Code, 2024 Edition, Title 15, Section 638 - Research and development · U.S. Government Publishing Office
2. 2Public Law 119-83: Small Business Innovation and Economic Security Act · U.S. Government Publishing Office
3. 3Policy Directives (SBA SBIR/STTR Policy Directive, effective May 3, 2023) · U.S. Small Business Administration, SBIR.gov
4. 42027 STTR Broad Agency Announcement (BAA), Release 1 Preface · Department of War SBIR/STTR Program, DoW SBIR/STTR Innovation Portal, October 2026
5. 52027 SBIR Broad Agency Announcement (BAA), Release 1 Preface · Department of War SBIR/STTR Program, DoW SBIR/STTR Innovation Portal, October 2026
6. 6Small Business Research Programs: SBIR and STTR (R43695), updated October 21, 2022 · Congressional Research Service
7. 7USDA Grows Private Sector Tech Innovation in Food and Agriculture (Release No. 0173.23) · U.S. Department of Agriculture, August 23, 2023
8. 8Participating Federal Agencies · U.S. Small Business Administration, SBIR.gov

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