SA SMALL BUSINESS INNOVATION RESEARCH PILOT PROGRAM GUIDELINES

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1 SA SMALL BUSINESS INNOVATION RESEARCH PILOT PROGRAM GUIDELINES July

2 Introduction Government, as a major purchaser of goods and services, is in a unique position to stimulate innovation in the private sector. By creating demand for new ideas (to address problems that Government faces) and by acting as a discerning lead customer Government can support the development of new, innovative solutions. To that end, the Small Business Innovation Research Pilot Program will demonstrate the capacity of government to stimulate industry innovation and economic growth through funding the development of innovative, cost effective products and services by smaller manufacturing firms which are then made available as commercial products and services to the Government and other customers. This approach has been used effectively internationally to introduce a competitive environment that encourages small business to engage in research and development that has the potential for commercialisation, through the development of solutions to problems faced by Government Agencies. The approach proposed in this program builds on the lessons from overseas and focuses on kickstarting the process of development to address Government identified challenges. These Procedural Guidelines have been prepared to assist SMEs to understand the program and to guide them in responding to challenges which may be raised through it. Objectives The objectives of the Small Business Innovation Research Pilot Program are to test the capacity of the initiative and methodology to: Stimulate technological innovation in South Australian SMEs. Meet Government Agency research and development needs. Foster and encourage participation in innovation and entrepreneurship by SMEs. Increase private-sector commercialisation of innovations derived from Government Agency research and development funding. Promote the value of innovation procurement activities within Government Agencies. Definitions SME A South Australian based SME with less than 200 Full Time Equivalent (FTE) employees. Partner Agency A South Australian Government Agency for which the challenge is being addressed. Also referred to as the Procuring Agency Invitation to Submit a Proposal the document outlines the challenge to be addressed, the associated timeframes, process for application and other associated information.

3 Program Structure The SBIR pilot program is a three-phased initiative where SMEs will be invited to provide competing solutions to a problem or challenge identified by a Government Agency. This approach is intended to progress and develop the best ideas and de-risk future procurements arising from the products/services developed under the SBIR. o Phase 1 is a feasibility stage and allows for development and proof of concept activities. This phase will be for a maximum of 6 months and $100,000 per SME. At the end of this phase it is expected that SMEs will have developed their concept for a new technology or modified existing technology. SMEs will be expected to demonstrate the feasibility of the technology at the bench or pilot scale level. This may include a virtual model. o Phase 2 is a development phase which will cover more intensive R&D and detailed product development. By the end of Phase 2, SMEs will be expected to have developed a fully functional prototype of the unit, with engineering plans and demonstration in the field. Commencement of Phase 2 is dependent on the outcomes of Phase 1 and the availability of program funds. o Phase 3 is the commercial development and sale of the product or service. Upon delivery and demonstration of the prototype (in Phase 2), the technology should be suitable for manufacturing and sale in the commercial marketplace. The product or service developed through the SBIR will be taken to the market and open to competitive procurement. No Government funds will be provided as part of the SBIR for this, however, the Department of State Development and Partner Agencies can provide basic advice to assist with the commercialisation process. Several proposals may be funded in response to a single challenge as part of Phase 1. Based on the outcomes of this first Phase, a down-select will occur and some, one or none of the projects may be funded for Phase 2. There is no guarantee of Phase 2 funding for any Phase 1 project. This program targets SMEs. Should they wish, SMEs are welcome to partner with other SMEs and/or the research community (including the university sector) however, the majority of work under the program must be undertaken by the contracted SME. Roles and Responsibilities The Department of State Development Overall management of the SBIR program will be undertaken by the Department of State Development, in partnership with Partner Agencies. The Department of State Development s role will be to: set the overall direction for the program ensure compliance with program requirements assist Partner Agencies with the implementation of the pilot assist with the development and clear definition of the challenges assist with the assessment and selection of successful challenge responses assess the program outcomes at all Phases

4 Partner Agency As part of the pilot program, Partner Agencies will have responsibility for elements of the project, including: identification and development of challenges leading the assessment of SME Challenge responses contracting with, and managing, successful SMEs under the program SME Funding Funding under the pilot SBIR program will be broken into two funded phases (the third phase is the commercial exploitation of the product by the SME which has developed it as is not funded under the pilot program). Phase 1 will provide funding of up to a maximum of $100,000 per SME (for up to 6 months). The final amount of funding made available to a successful applicant will depend on the costs of development in the budget submitted with the proposal. Phase 2 may provide additional funding for a period of up to 24 months depending on the outcomes of Phase 1 and the availability of funds. Phase 3 will provide no funding. SME eligibility The pilot SA SBIR program is intended to stimulate innovation and commercialisation by South Australian SMEs. A SME will need to meet the following criteria to be eligible for the program. the business must be an Small to Medium Enterprise (SME) with less than 200 employees; the business must be located in SA and the majority of work associated with the contract must be undertaken in SA; and the majority of all work associated with a program contract must be undertaken by the contracted SME, consistent with the above criteria. Work will be contracted to a single, legal, SME entity. The contracted SME is allowed to collaborate with other SMEs and/or Research Providers to undertake the work funded by the pilot program. Individuals are allowed to apply for the program; however they will be expected to establish a SME, to undertake the work under the program, prior to contract execution. Application process An Invitation to Submit a Proposal will be listed on both the SBIR website (part of the Department of State Development s website) as well as on the Partner Agency s website. Eligible SMEs will be invited to respond to this document which will set out the challenge to be addressed. This Invitation will set out: o The background to the issue o The challenge to be addressed o Scope of the response sought o Info on the SBRI program o Key dates o Details of a Contact Person who can provide more information

5 In responding to the challenge proposed, SMEs must submit their response using the provided response template. SMEs will be required to address key areas, including: o An abstract/summary of the proposed approach including a summary of anticipated results, implications of the approach proposed and potential commercial applications. o Specific technical information including: Identification and significance of problem Technical objectives Work plan Related R&D Key personnel Relationship with future R&D Facilities Potential for broader applications of outcomes Similar proposals o Cost breakdown/proposed budget In completing the submission response template, SMEs are required to limit their responses to a maximum of 25 pages, including all attachments. Any material beyond 25 pages may not be considered. Response Assessment Responses received from eligible SMEs will be assessed by a panel including representatives of the Procuring Agency and Department of State Development. Independent experts may also be invited to participate on the assessment panel. Responses will be assessed against a range of criteria, which may include but are not limited to: o Skills and Capability of the SME o Novelty of approach o Likelihood of success o The broader commercial applicability of the proposed solution o Similarity to other projects/existing products The selection criteria may very between challenges. Proposals will be evaluated for full compliance with the requirements set out in the Invitation to Submit a Proposal document. Contracting Contracts under the SBIR Pilot Program will be between the Procuring Agency and an eligible SME and will cover a single Phase of the program. A maximum of 5 eligible SMEs will be contracted under Phase 1 of the pilot program. A maximum of 2 eligible SMEs will contracted under Phase 2 of the pilot program.

6 A simplified contract will be used for Phase 1 of the SBIR Pilot program. It will be included as part of the Invitation to Submit a Proposal. Deliverables SMEs will be required to provide progress reports at key points in the SBIR pilot program. This reporting is important for both the assessment of the outcomes of projects and for the consideration of Phase 2 funding potential. For Phase 1 contracts, SMEs will be required to report at the end of their contract. This report will outline the outcomes of their contract both in outright terms and against their expected outcomes as set out in their original proposal and contract. SMEs will also be required to demonstrate the feasibility of their proposal, including demonstrating the technology at the bench or pilot scale level (this may include a virtual model). For Phase 2 contracts, SMEs will be expected to provide a progress report 12 months after signing their Phase 2 contract, outlining their progress against the expected outcomes as set out in their contract, as well as a completion report at the end of their contract. This report will outline the outcomes of their contract both in outright terms and against their expected outcomes as set out in their proposal and contract. By the end of Phase 2 SMEs will be expected to have developed a fully functional prototype of the unit (should a product be developed), with engineering plans and demonstration in the field. SMEs who have received both Phase 1 and Phase 2 funding will be required to provide post SBIR program reports, on the outcomes of their commercialisation activity, after 1 and 2 years out of the program. Agreement to this requirement will be a condition of receiving Phase 2 funding. Additional reporting requirements may be specified in the Invitation to Submit a Proposal. Access to Phase 2 of the Program Funding for projects under Phase 2 of the SBIR Pilot will only be available to progress a successfully complete Phase 1 project. On completion of Phase 1, eligible SMEs which have successfully completed Phase 1 may be invited to express their interest, in writing, to receiving follow on funding. This expression of interest should set out: o the outcomes achieved in Phase 1, o the outcomes sought in Stage 2, and o a succinct commercialisation plan, including: analysis of potential markets customer and competition analysis intellectual property management longer term external financing, if necessary. The outcomes of the challenge, including completion reports, and the expressions of interest received will be considered by a Panel comprising the Procuring Agency and the Department of State Development (and external experts as necessary). This Panel will assess the competing outcomes of Phase 1 and will assess which, if any, of the projects merit additional funding, in the form of a Phase 2 agreement.

7 Phase 2 of the SBIR Pilot Program is dependent on the outcomes of Phase 1 and the availability of funds. There is no guarantee of Phase 2 funding for any project under the SBIR pilot. Intellectual Property Intellectual property developed through the SBIR program will remain the property of the SME contracted to develop it. SMEs are expected to identify and appropriately protect this knowledge. Costs associated with securing intellectual property are the responsibility of the SME. As part of any funding awarded under the SBIR Pilot Program, participating SMEs will be required to grant the Procuring Agency and the State of South Australia a non-exclusive, perpetual, royalty free licence to use any intellectual property created using the funding. At the end of program, SMEs are free to sell their newly developed product/technology to the market (including to the Partner Agency). Procurement arising from the program Participation in the SBIR pilot program does not represent a commitment by the Procuring Agency, or the State of South Australia, to procure any goods and/or services developed under the program. All procurement, including of products and services arising from the SBIR Pilot program, will be undertaken consistent with Government and Agency procurement policies. For further information contact: Joanne Galley Senior Project Officer Business Sustainability Manufacturing & Innovation Department of State Development T +61 (8) F +61 (8) M +61 (0) E Joanne.Galley@sa.gov.au