Federal Research

Small Business Innovation Research Shows Success but Can Be Strengthened Gao ID: RCED-92-37 March 30, 1992

As a nation competing in a global economy, the United States depends heavily on research and development (R&D). The Small Business Innovation Research Program was created in 1982 to strengthen the R&D role of small, innovative companies. Even though many program projects have not yet had enough time to achieve their full commercial potential, the program is showing success in Phase III, which involves the use of nonfederal funds for commercial application of a technology. Most Phase III activity took place in the private sector, showing a trend toward one of the program's goals--increasing private-sector commercialization. Major federal agencies, however, differ in their responses to this goal, as shown by their wide variation in average sales per project and the percentage of sales to the private sector. GAO notes three issues that need to be addressed: (1) the extent of the Defense Department's commitment to the goal of increasing private-sector commercialization, (2) inconsistent practices in requiring competition for projects entering Phase III, and (3) the need to clarify the circumstances under which an agency may work on its own or continue working with the company through follow-on contractors after program funding ends. GAO summarized this report in testimony before Congress; see: Federal Research: Small Business Innovation Research Program Shows Success but Can Be Strengthened, by Jim Wells, Associate Director for Energy Issues, before the Subcommittee on Innovation, Productivity, and Technology, Senate Committee on Small Business. GAO/T-RCED-92-45, Mar. 31, 1992 (20 pages).

GAO found that: (1) Congress authorized the SBIR Program to strengthen the role of small, innovative companies in research and development; (2) Phase III involves the use of nonfederal funds for commercial application of technology or non-SBIR federal funds for government contracts for government application; (3) as of July 1991, the SBIR Program had generated about $1.1 billion in Phase III sales and additional funding for technical development; (4) according to a survey of 1,457 Phase II projects, 934 projects have remained active while 518 have been discontinued; (5) commercialization trends vary by agency; (6) reasons for such differences in commercialization trends include the wide variation in markets for SBIR projects or processes and in links between projects and agency missions; (7) issues that affect Phase III activity include the extent of the Department of Defense's (DOD) commitment to the goal of increasing private-sector commercialization, inconsistent procurement practices in requiring competition for SBIR projects entering phase III, and whether the company or the agency that funded the work should perform additional work after phase II if the agency wishes to continue work on the technology; and (8) the Small Business Administration (SBA) has initiated a study of the operating attributes of firms with multiple Phase II awards, since such companies have lower sales and require additional funding.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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