An SBIR award comes with a place-of-performance condition: the research has to be carried out in the United States. It is one of the easier requirements to satisfy and one of the easier ones to breach by accident, because modern product development routinely reaches offshore for prototyping, board assembly and specialist testing without anyone thinking of it as moving the research abroad.

What the requirement says

The rule is that all or substantially all of the work under the award must be performed inside the United States, which for this purpose includes the states, the District of Columbia and US territories. It applies to the awardee and, in principle, to the subawardees and contractors doing funded work on the project.

Exceptions exist but are narrow and conditional. Where a critical capability, material, instrument or facility genuinely does not exist domestically, agencies can approve foreign performance — but that is a written request and a written approval, obtained through the agency, not a judgment you make yourself and explain later. The threshold, the approval mechanism and the documentation all sit in the current solicitation and the award terms.

The subcontracting angle

SBIR also caps how much of the work may be subcontracted out at all, with different limits for Phase I and Phase II and variation by agency. That limit is separate from the location rule but interacts with it: a founder planning to run a lean company with most engineering outsourced needs to check both numbers before writing the budget. Getting either wrong shows up as a compliance problem later, in the same category as the budget mistakes that sink an application.

The practical questions to answer for each vendor are simple:

  • Is this vendor performing funded research, or supplying a commercial off-the-shelf item?
  • If it is funded work, is it happening on US soil?
  • Does it count against the subcontracting limit for this phase?
  • Is it disclosed in the proposal and the budget justification?

What this means for hardware projects

Buying standard components manufactured abroad is ordinary procurement and is not the same thing as performing research abroad. Sending your novel design to an overseas shop to be developed, iterated and characterized is much closer to the line. The distinction matters most for hardware teams whose instinct is to send a first article to an overseas manufacturer — sensible commercially, awkward under an award with a domestic performance condition.

The workable pattern for most funded projects is to keep design, development, integration and test domestic during the award, and to treat offshore manufacturing as a commercialization-stage decision rather than a development-stage one. Where you genuinely need a foreign capability, ask the agency in advance and get the approval in writing before any money moves. Program contacts expect these questions, and asking early costs nothing.

This is general information, not legal advice. Performance location and subcontracting limits are set by the funding agency in its current solicitation and award terms and have been revised over time; confirm the applicable rules with the agency and your own counsel before you build a plan around a foreign vendor. Related eligibility answers are in the SBIR and STTR guide.

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