Learn how the Department of Energy’s redesigned SBIR and STTR programs work, from the Pitch application to milestone-based awards, and how to manage the accounting behind a DOE award.
The Department of Energy’s SBIR and STTR programs fund small businesses developing technologies tied to DOE’s mission, including advanced manufacturing, biotechnology, critical materials, quantum information science, semiconductors, and energy innovation. DOE’s Office of Technology Commercialization (OTC) now manages both programs. The redesign changed how companies apply, how projects move between phases, and how awardees get paid.
This guide explains how the current DOE SBIR program works, what companies with earlier DOE awards should know, and how to set up accounting that supports a DOE award from Phase I through Phase II.
What is the DOE SBIR Program?
The DOE SBIR and STTR programs provide non-dilutive funding to small businesses developing technologies with strong commercial potential that support DOE’s mission. DOE’s Office of Technology Commercialization manages both programs and works with a partnership intermediary, ConnectWerx, which handles outreach, solicitations, negotiations, and executing agreements with selected companies. DOE remains responsible for funding, award selection, and technical oversight.
DOE refers to these awards as grants, and selected companies enter into a funding agreement with DOE and ConnectWerx. The agreement sets the milestones, payment terms, and reporting requirements for the project, so read it closely before setting up the accounting.
To be eligible, your company must:
- Be a for-profit business with a place of business in the United States that operates primarily in the U.S.
- Be at least 51% owned and controlled by U.S. citizens or permanent residents, or by another for-profit business that meets that test
- Have 500 or fewer employees, including affiliates
- Have the principal investigator primarily employed by the small business by the start of an SBIR award
Every applicant also completes a foreign relationships disclosure form, even if the company has no foreign relationships to report.
DOE SBIR and STTR funding by phase:
- Phase I: Up to $250,000 over 6 to 12 months to establish feasibility and proof of concept
- Phase II: Up to $2 million over one to two years for prototyping and demonstration, with additional sequential Phase II awards available, and matching funds required for a third
- Strategic Breakthrough: Up to $30 million over as long as four years for high-performing projects after Phase II
DOE does not currently offer a Direct to Phase II option, so every company enters through Phase I.
SBIR and STTR differ in a few ways that affect the budget:
- Partnership: STTR requires a nonprofit research institution partner. SBIR allows one but doesn’t require it.
- Work share: Under SBIR, your company can subcontract up to 33% of the Phase I research and up to 50% of Phase II. Under STTR, your company must perform at least 40% of the work and the research institution at least 30%.
- Principal investigator: An STTR principal investigator can be employed by either the small business or the research institution. If the PI works for the research institution, they must devote at least 10% of their time to the project.
Consultants: Owners and employees of the small business can’t be paid as consultants on their own award.
How to Apply for DOE SBIR Funding
DOE uses a two-step entry process. Every company submits a short Pitch first, and only companies DOE invites can submit a full Phase I application. Once a company is in the program, it doesn’t submit a new application for each later phase.
Finding Funding Opportunities
DOE posts SBIR and STTR opportunities on its Application Hub, run by ConnectWerx, and expects to release Phase I opportunities each year. Each opportunity lists its topics and sets how many Pitches one company can submit. Your company picks one topic per Pitch, and the topic and the prime small business can’t change between the Pitch and the full application.
Required Registrations
Your company needs three registrations: SAM.gov, which provides your Unique Entity Identifier and can take up to eight weeks; the SBA Company Registry; and the DOE SBIR/STTR Application Hub. A company still being formed can submit a Pitch, but it must complete all registrations before an award.
The Pitch
The Pitch answers four questions in no more than 700 words, and DOE weighs each section equally:
- Summary, topic, and mission alignment (100 words)
- Technical promise (200 words)
- Commercialization potential (200 words)
- Team qualifications (200 words)
Leave proprietary or business-sensitive information out of the Pitch. Applicants must also disclose whether and how they used generative AI to prepare the Pitch and the full application.
The Full Application
Invited companies submit a project narrative with a work plan, a commercialization plan (up to four pages for Phase I and 10 for Phase II), a budget, and a letter of commitment from each subcontractor, consultant, or research institution that states the dollar amount of its work. Covered individuals on the team, including the principal investigator, provide biosketches and current and pending support forms.
DOE scores full applications equally on technical promise, commercialization potential, and team qualifications. The team score includes your financials, meaning a realistic revenue model and a sound plan for using the award funds.
The work plan matters for accounting too. Its tasks and milestones carry into the award, and DOE projects invoice on a set number of business and commercialization milestones. Team 80 can review a proposal budget before submission so the numbers and milestones match your company’s actual costs.
Managing Your DOE SBIR Award
Once DOE makes an award, your accounting needs to show how award funds are spent, support each milestone invoice, and keep DOE costs separate from the rest of the business.
Required Financial Systems
Your accounting system should:
- Separate direct costs from indirect costs, and allocate indirect costs using a consistent, documented method
- Track time for every employee whose pay is charged to the award, with records that show effort by project
- Use a chart of accounts that tracks costs by project and records unallowable costs in separate accounts
- Connect each milestone invoice to the costs behind it
Many DOE awardees also hold state grants or other funding. One Team 80 client with state-level grants alongside its federal work asked whether those grants needed their own books, and Team 80 confirmed it could track them separately within the same accounting file.
Cost Principles for For-Profit DOE Awardees
DOE’s financial assistance rules come from the Uniform Guidance in 2 CFR Part 200 and DOE’s own regulations in 2 CFR Part 910. For for-profit companies, 2 CFR 910.352 replaces the Uniform Guidance cost principles with the cost principles in FAR 31.2, the same rules that apply to government contracts. Patent prosecution costs are unallowable unless the award specifically authorizes them. Awards under DOE’s redesigned program follow the terms of the funding agreement, so confirm which rules your agreement references.
Understanding DOE Cost Categories
- Direct costs: Personnel, materials and supplies, travel, and subcontractor services that are necessary for the project and tied to it specifically.
- Indirect costs: Fringe benefits, overhead, and general and administrative costs, allocated to the award through your indirect rates. Your rates need a documented calculation based on actual cost pools and allocation bases, and your funding agreement states which rates apply. DOE’s NETL indirect cost rate guidance explains how DOE reviews rate proposals.
- Unallowable costs: Under FAR 31.2, these include alcohol, entertainment, lobbying, fines and penalties, and federal income taxes. Keep them in separate accounts so they stay out of milestone invoices and indirect rate calculations.
Staying Compliant Throughout Your Award
A DOE award stays on track when the books are current every month. Milestone invoices, Go/No-Go decisions, and any later review all depend on records your company keeps along the way.
Monthly Compliance Practices
- Budget review: Compare actual costs with the approved budget each month, and resolve variances before the next milestone invoice.
- Cost documentation: Keep invoices, receipts, purchase orders, and subcontractor invoices tied to the project, along with timesheets completed as the work happens.
- Record retention: Organize financial and technical records by award, with a clear trail from each invoice to the costs behind it. Keep them for at least three years after the final financial report, or longer if your agreement requires it.
Team 80 processes bank activity and vendor bills every week, so the information is ready when an invoice is due. When one client funded through milestone payments had an invoicing deadline in the middle of the month, Team 80 offered to move its financials up from the 15th to the 12th or 13th so the invoice could go out on time.
Reporting Requirements
Under DOE’s redesigned program, projects invoice on a set number of business and commercialization milestones, and the funding agreement lists the milestone schedule and reporting requirements. Advancing from Phase I to Phase II also depends on meeting those milestones, so milestone tracking affects both payment and the next phase.
Awards made before DOE’s program transition continue under their original terms and points of contact. Those awards generally list required reports in the award’s Federal Assistance Reporting Checklist, including:
- Federal Financial Reports (SF-425) on the schedule in the award, plus a final SF-425 at closeout
- Technical progress reports on the schedule in the award
- Final technical and financial reports at the end of the period of performance
Under either structure, contact your DOE point of contact before changing the project’s scope, budget, or subawards.
Preparing for Phase II Success
Phase II expands the research scope and the expectations for commercial readiness, with awards of up to $2 million over one to two years.
How Companies Reach Phase II
Companies that enter DOE’s redesigned program move from Phase I to Phase II through a Go/No-Go decision based on the milestones and performance criteria set during award negotiation, without submitting a new application. Companies with Phase I awards made under DOE’s earlier structure apply through Phase II opportunities on the Application Hub, and DOE contacts eligible awardees directly.
Strong projects can receive a second Phase II award. A third Phase II requires matching funds equal to the award from an eligible third-party investor, such as another small business, a venture capital firm, an individual investor, or a non-SBIR federal, state, or local government source. SBIR or STTR funding from any agency can’t count toward the match.
What Phase II Requires
- Commercialization plan: Up to 10 pages, including a milestone-driven development roadmap that looks beyond the award itself
- Market evidence: Customer validation, competitive positioning, and a realistic path to revenue
- Letters of funding commitment: Optional for a first or second Phase II, and required for a third
Scaling Your Accounting for Phase II
A larger award usually brings more employees, more subcontractors, and new research partners. If your project includes a DOE national laboratory or another federally funded research and development center, the DOE Agreements Officer must authorize that partner in writing before it performs any work. All award funds go to your company, which then pays the lab and every other subcontractor and consultant.
Each partner’s costs need their own tracking so you can show work share at any point, since SBIR allows up to 50% of Phase II research to be subcontracted. Team 80 tracks each subcontractor’s costs separately in the monthly project cost reports.
Additional DOE SBIR Support
DOE’s Office of Technology Commercialization offers support to SBIR and STTR awardees beyond the award funding itself.
Technical and Business Assistance (TABA)
Awardees may request up to $6,500 in Phase I and up to $50,000 in Phase II for Technical and Business Assistance, in addition to the award maximum. TABA can pay for services that help your company make better technical decisions, solve technical problems, reduce technical risk, commercialize new products, protect intellectual property, and screen for foreign involvement in the technology.
Your company can use an outside vendor, or it can use TABA internally to hire staff, augment staff, or train staff in those areas. DOE doesn’t provide a TABA vendor, and all TABA services must be completed during the award’s period of performance. Track TABA spending as its own line in the project budget so it stays within the limit and the timeline.
Commercialization Support
DOE’s commercialization resources for awardees include customer discovery training, an annual pitch showcase, a Phase I principal investigator meeting, and active project management. DOE also works with the Foundation for Energy Security and Innovation to connect awardees with expertise, networks, and market opportunities.
Team 80’s DOE SBIR Accounting Services
Team 80 manages the recurring accounting behind Phase I and Phase II DOE SBIR and STTR awards, from the chart of accounts set up at the start of Phase I to the added tracking a larger Phase II award needs. Each client works with a dedicated Chief Accounting Officer who manages the monthly close and reviews the results with the company.
Accounting Support for DOE Awards
Services include:
- Chart of accounts setup that separates direct, indirect, and unallowable costs
- Monthly bookkeeping, financial statements, and project cost reports
- Timekeeping and labor allocation
- Indirect rate calculations compared against the rates in your budget
- Subcontractor and research partner cost tracking
- Milestone invoice preparation, when invoicing is part of your service agreement
- Accounts payable, with the client approving each payment
- Payroll through Gusto, when included in your service agreement
- Support during audits and reviews
With more than 25 years of experience supporting SBIR and STTR awardees and government contractors, Team 80 builds the accounting around the terms of your DOE funding agreement, so the records behind each milestone invoice are ready before the invoice is due.
Sarah Sinicki
Team 80 CEO
Sarah is a leader focused on serving small businesses in various industries. She has worked with a multitude of companies over the last 25 years and loves helping business owners find success. Sarah is genuinely committed to unburdening Team 80 clients so that they have the freedom to focus on their business. In her free time, you can find her spending time with her husband, two kids, and her Yorkies, Marley and Ziggy. When she is not helping business owners, you can find her in a Reb3l Groove class dancing it out. Sarah is also an avid Colorado Avalanche fan, so if you ever want to talk about hockey, she’s your gal.
