SBA Just Proposed Killing the SBIR Benchmark That 25-Plus Phase II Winners Have Passed for 13 Years. Comments Close October 31.

SBIR and STTR founders with more than 25 Phase II awards in five years have until October 31, 2026 to comment on a Small Business Administration notice that would require half their revenue to come from outside the program — or bar them from applying at all.

SBA Is Swapping a Dollar Threshold for a Revenue Ratio

On September 2, SBA published Updated Minimum Performance Standards for Commercialization for Firms That Receive Funding Through the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Programs, Federal Register document 2026-17987. It is a notice and request for comment rather than a proposed rule, and it opens no regulations.gov docket. Comments go by mail to Joshua Carter, Associate Administrator, Office of Investment and Innovation, U.S. Small Business Administration, Washington, DC 20416.

The dates are the part to write down. Comments must be received on or before October 31, 2026. The standards "take effect November 15, 2026, and when published on www.sbir.gov." That is a fifteen-day gap between the close of comment and the effective date — SBA is not planning a long deliberation.

The authority cited is Section 9 of the Small Business Act, specifically 15 U.S.C. 638(qq)(2), the measurement-systems-and-minimum-performance-standards provision. And one sentence in the notice does more work than the rest combined: "The revised benchmark will supersede the benchmark announced at 78 FR 48537 and 78 FR 59410." Those are the 2013 notices that have defined the commercialization benchmark for thirteen years. This is not a tune-up. It is a replacement.

The Old Test Rewarded Volume. The New One Audits Your Revenue Mix.

The benchmark being retired works on a per-award dollar basis. Under the current sbir.gov standards, a firm becomes subject to the commercialization benchmark once it has received 16 or more Phase II awards over the past ten fiscal years, excluding the two most recently completed years. To pass, it must show at least $100,000 of sales and/or investment per Phase II award — or, alternatively, a patent count equal to at least 15 percent of its Phase II awards. Firms with 51 or more Phase II awards face a $250,000 average; firms with 101 or more face $450,000, with the patent route closed off at those tiers.

Notice what that structure permits. A company with 40 Phase II awards clears the bar with roughly $4 million in cumulative sales and investment, and it clears it no matter how much SBIR money it collected in the same period. Absolute dollars in the numerator, award count in the denominator, SBIR revenue nowhere in the equation.

The replacement inverts that. The trigger is more than 25 Phase II awards — SBIR and STTR combined — received during the five most recently completed fiscal years, excluding the current fiscal year. Once triggered, the firm must demonstrate a minimum "non-SBIR revenue share," which the notice defines as "the percentage of the small business concern's total revenue, that is not derived from Phase I or Phase II SBIR or STTR award funding," measured across the three most recent fiscal years excluding the current one.

The thresholds phase in:

• FY 2027 assessment: at least 33 percent non-SBIR revenue share
• FY 2028 assessment and every year thereafter: at least 50 percent

A firm can pass the old test and fail the new one on the same books. Growing your commercial sales no longer guarantees compliance, because every additional Phase II award you win inflates the denominator you are being measured against. For the first time, winning more SBIR money can actively push a firm toward ineligibility.

SBA's Own Example Company Fails Its Own Test

The notice includes a worked example, and it is worth reading closely because SBA chose a firm that does not pass.

"If a company received 30 Phase II awards across Fiscal Years 2022 through 2026, it would be subject to this benchmark at the June 1, 2027, determination. If, for the three most recent fiscal years, the company reports total revenue of $4,000,000, of which $800,000 came from private commercial sales, $300,000 came from an award made under Phase III authority from a federal agency, and $100,000 came from another government contract, for a combined non-SBIR revenue of $1,200,000, the company's non-SBIR revenue would represent 30 percent of their total revenue."

Thirty percent against a 33 percent bar. The example firm misses by $120,000 of revenue — and by FY 2028 that same firm would need $2,000,000 in non-SBIR revenue on a $4 million base, a 67 percent increase in outside income to hold its place.

The consequence is stated flatly: an SBC that fails "is not eligible to submit a proposal for a new Phase I or Direct-to-Phase-II award from any participating agency during the one-year period beginning on the date on which the determination was made." Not the agency that funded you. Any participating agency. One failed determination on June 1 locks a firm out of DoD, NIH, DOE, NSF, and every other participating component simultaneously for twelve months.

The Patent Escape Hatch Is Gone, and So Is the Ten-Year Cushion

Two features of the 2013 regime quietly disappear in the new text.

First, patents. The existing benchmark lets a firm substitute intellectual property for revenue at the lower tiers — patents equal to 15 percent of Phase II awards. Deep-tech firms in long-cycle domains have leaned on that alternative for over a decade precisely because their technology is not sellable yet. The new notice contains no patent alternative at any threshold. Revenue is the only currency.

Second, the lookback compresses hard. The old trigger counted Phase II awards across ten fiscal years and excluded the two most recent, giving firms a two-year grace period on their newest awards. The new trigger counts across five fiscal years and excludes only the current one. Twenty-six Phase II awards spread across a decade never triggered anything under the old count. Twenty-six across five years triggers immediately under the new one. The rule is deliberately aimed at high-velocity repeat winners, and the shortened window means recently accelerating firms get caught fastest.

Worth noting what the notice does not address: the Phase I–to–Phase II transition rate benchmark — 21 or more Phase I awards over five years requiring a 0.25 Phase II-to-Phase I ratio, rising to 0.50 at 51-plus awards — goes unmentioned entirely. Firms should assume it stands as-is until SBA says otherwise, which means two independent eligibility tests running in parallel from November 15.

This Is the Back End of the April Reauthorization

None of this arrived out of nowhere. The Small Business Innovation and Economic Security Act (S. 3971) passed the Senate unanimously on March 3, cleared the House 345–41 on March 17, and was signed April 13, 2026 — and it rewrote far more than the funding levels, as we covered in our breakdown of the reauthorization's proposal caps and national-security screening. The statute directed SBA to establish updated performance standards. This notice is the agency cashing that check.

It also fits a pattern. The same law created the $30 million Strategic Breakthrough Awards, a mechanism built around matching private capital rather than sequencing more federal R&D — the shift we analyzed in why those awards mark the end of SBIR as pure research funding. Read together, the carrot and the stick point the same direction: outside money is now the metric.

What to Do in the Next Eight Weeks

Run your own numbers first. Count Phase II awards received in FY2022 through FY2026. If the total exceeds 25, you are in scope at the June 1, 2027 determination. Then pull three years of total revenue and calculate what share came from anything other than Phase I and Phase II SBIR/STTR funding. Phase III awards count as non-SBIR — SBA's example explicitly credits $300,000 of Phase III revenue toward the numerator, which makes converting Phase II work into Phase III sole-source contracts the single highest-leverage compliance move available.

File a comment if the math hurts. With no regulations.gov docket, the mailed letter to Joshua Carter's office is the only channel, and the October 31 deadline is firm. The most useful comments will be specific: your award count, your revenue split, and the year you would go ineligible.

Get your FY2027 applications in before the window closes. The June 1, 2027 determination is the first one that bites, which means the NIH omnibus cycle now open — PA-27-100 (Parent SBIR, R43/R44, Clinical Trial Optional), PA-27-102 (Parent STTR, R41/R42), and PA-27-101 (the Phase IIB Strategic Breakthrough Award) — plus the DoD Phase I solicitation DOD_SBIR_2026_P1_CBZ represent submission opportunities that precede any eligibility finding. Firms near the 25-award line should also weigh whether an additional Phase II win is worth the denominator it adds.

Search active SBIR Phase I solicitations across every participating agency on Granted: grantedai.com/grants?q=SBIR Phase I — filter by agency to map which submission deadlines fall before the June 1, 2027 determination date.

Serial Phase I firms have thirteen years of muscle memory built around a benchmark that is about to stop existing. The eight weeks between now and October 31 are the last stretch in which the number is still negotiable.