Congress established the Small Business Innovation Research (SBIR) Program to stimulate technological innovation, utilize small business to meet Federal research and development (R&D) needs, encourage participation by minority and disadvantaged businesses in technological innovation, and increase private sector commercialization of innovations derived from Federal R&D. The SBIR Program is a highly competitive, awards-based program that encourages domestic small businesses to engage in research and development addressing high-priority research areas within the United States Department of Transportation (USDOT). The mission of the SBIR Program is to support scientific excellence and technological innovation through the investment of Federal research funds in critical American priorities to build a strong national economy. The program’s goals are fourfold: 1) stimulate technological innovation, 2) meet Federal research and development needs, 3) foster and encourage participation in innovation and entrepreneurship by socially and economically disadvantaged persons, and 4) increase private-sector commercialization of innovations derived from Federal research and development funding. The Federal Highway Administration's SBIR Program favors research that has the potential for commercialization through products and applications sold to the private-sector transportation industry, State DOTs, USDOT, or other Federal agencies.

Federal legislation requires that each Federal agency with an extramural budget for R/R&D in excess of $100,000,000 must participate in the SBIR Program and reserve a percentage (3.2 percent since fiscal year 2017) of their extramural R/R&D budgets for awards to small business concerns for R/R&D. The USDOT SBIR Program is administered by the Volpe Transportation Center. FHWA manages the SBIR Program for both FHWA and Intelligent Transportation Systems Joint Program Office. The SBIR Program Office publishes two solicitations each fiscal year for proposals on specific research topics of interest to USDOT operating administrations, including the FHWA.

The USDOT SBIR Program awards contracts in two phases and recognizes a follow-on Phase III.

The objective of Phase I contracts is to establish the technical merit, feasibility, and commercial potential of the proposal. Phase I awards normally do not exceed $150,000 total costs for 6 months.

Phase II contracts are only available to small businesses that have successfully completed Phase I. The objective of Phase II is to develop and commercialize the Phase I technologies. Contracts awards and normally do not exceed $1,000,000 total costs for 2 years.

Phase III is for small businesses to pursue commercialization objectives resulting from the Phase I and Phase II activities. The SBIR Program does not fund Phase III. Where applicable, Phase III may involve follow-on non-SBIR funded R&D or production contracts for products, processes, or services intended for use by the U.S. Government.