DOD SBIR-Funded Program Meets Most Goals, But Participation by Women/Minorities is Low

The Department of Defense’s (DOD) SBIR program is meeting three of its four legislative/mission-related goals, according to new study from the National Research Council (NRC) of the National Academies – SBIR at the Department of Defense. Those four congressional objectives of the DOD SBIR program are to:

• Stimulate technological innovation;
• Use small businesses to meet federal R&D needs;
• Foster and encourage the participation of socially and economically disadvantaged small businesses; and,
• Increase the private sector commercialization of innovations derived from federal R&D.

While DOD SBIR-funded projects are commercializing at a substantial rate, aligned with the DOD needs, and developing innovative technologies, the DOD has failed to increase the involvement of woman- and minority-owned small businesses in its SBIR program.

The authors reported that DOD SBIR-funded projects are commercialized at a substantial rate and are attracting significant amounts of follow-on private investments. Approximately 70 percent of all Phase II projects have reached market, according to data from the DOD commercialization database. Over 45 percent of awarded firms reported continuing sales of products/services funded by SBIR awards. Other findings include:

• Approximately 60 percent of SBIR-funded projects received follow-on funding, up from 54 percent in 2005;
• The median size of firms grew from 17 employees at the time of award to 24 employees at the time of survey;
• About 60 percent of reported sales by value from SBIR projects go to either DOD directly or to DOD prime contractors; and,
• In fiscal year FY09, approximately $650 million in Phase III contracts were signed with SBIR companies.

In addition to successful commercialization results for DOD purposes, NRC found that almost 40 of the products and services developed leveraging DOD SBIR grants were purchased by entities for uses other than DOD-related and DOD prime contractor purposes.

DOD has failed to meet congressional objective of increasing involvement of woman- and minority-owned small businesses in developing and commercializing new technologies through the SBIR program. The researchers found that the DOD SBIR program’s involvement by underrepresented groups is low and not increasing. Findings include:

• Fifteen percent of all DOD SBIR awards went to woman-owned small businesses; and,
• Seven percent to minority-owned small businesses.

The involvement of black-owned businesses (0.5 percent) and Hispanic-owned businesses (one percent) is especially troublesome.

NRC findings about DOD components involved in the SBIR program include:

• The Air Force and Navy accounted for more than 50 percent of all Phase I awards granted;
• The Army and Missile Defense Agency accounted for an additional 30 percent of all awards; and,
• The Defense Health Program, Defense Logistics Agency, Defense Microelectronics Agency, and the National Geospatial-Intelligence Agency (NGA) together accounted for 0.6 percent of all awards.

The study highlights some year-to-year variation in the number of awards made by components. However, there is no clear reason presented for the variation.

In the study, NRC makes several recommendations for the DOD to improve the DOD SBIR program including:

• The adoption of different kinds of financial and other incentives to encourage DOD contractors to work more effectively — and more often — with SBIR firms to commercialize new technologies.
• The development of an outreach and education program focused on expanding participation of underrepresented populations.
• The better alignment of data collection, agreed metrics, and utilization of effective evaluation and assessment tools to guide program management.
• The creation of a comprehensive toolset of mechanisms for transferring both formal and informal knowledge about best practices for SBIR program management.
• The adoption of less onerous and more effective auditing procedures for small businesses that can be completed in a timelier manner.

The study appendices include several useful information sources including selected case studies of DOD SBIR-funded projects, comparison group analysis, a list of universities involved in DOD SBIR awards, and a description of major changes to the SBIR program that were a result of the 2011 SBIR Reauthorization Act. The study was commissioned by the U.S. Congress. Read the report…