Madam Chair and Members of the Committee:

We are pleased to be here today to discuss the results of our reviews of the Small Business Innovation Research (SBIR) Program1 and the Small Business Technology Transfer (STTR) Pilot Program.2 The Small Business Innovation Development Act of 1982, which authorized the SBIR Program, emphasized the benefits of technological innovation and the ability of small businesses to transform the results of research and development into new products. Reflecting its view of the program's success, the Congress reauthorized the program in 1992. In the same 1992 legislation, the Congress also established the STTR Program, which is closely modeled on the SBIR Program. The STTR Program differs from SBIR primarily in requiring a company to form a partnership with a non-profit research institution. We have issued two reports on these programs in which we discussed the (1) quality of research proposals in the SBIR and STTR Programs, (2) duplication of funding for SBIR projects, (3) steps being taken to avoid conflict of interest that would arise if a party both submitted and evaluated STTR proposals, and (4) effect of and need for the STTR Program. In addition, as directed by the 1992 legislation, we will provide a detailed study covering all of the major issues affecting the SBIR Program in 1997.

Our discussion today highlights the message of our two most recent reports. In summary, Madam Chair:

• The quality of SBIR and STTR research proposals appeared favorable when we issued our reports. For the SBIR Program, our view was based on the (1) high level of competition, (2) large numbers of proposals that agencies deemed worthy of funding but that received no award, and (3) views expressed by program officials that quality was being maintained. Nevertheless, it was too early to make a conclusive judgment about the long-term quality of SBIR research proposals because the major increases in program funding had not yet occurred. For STTR, technical experts generally concluded that the proposals called for high quality research. As one example, the Department of Energy (DOE) rated the quality of proposed research in all of its winning proposals as being among the top 10 percent of research in the Department. At this time, however, the actual

'Federal Research: Interim Report on the Small Business Innovation Research Program (GAO/RCED-95-59, Mar. 8, 1995)

2Federal Research: Preliminary Information on the Small Business Technology Transfer Program (GAO/RCED-96-19, Jan. 24, 1996)

results of these awards cannot be assessed because of the newness of the program.

• In our SBIR report, we noted that there was duplicate funding of similar research, especially with the increasing numbers of research proposals submitted to the SBIR Program. We made several recommendations to reduce the possibility of duplicate funding in the future. The Small Business Administration (SBA) is preparing to implement our recommendations in this area.

• In our STTR report, we addressed congressional concerns about potential conflicts that might arise if a federally funded research and development center formed a partnership with a company submitting an STTR proposal and then helped a federal agency judge the merits of its own and other proposals. We found that the five agencies in the program have taken steps to avoid such problems.

Views differed on the effect of and need for the STTR Program. The
agencies provided no evidence at this early point in the program to suggest
that the STTR Program was competing for quality proposals with the SBIR
Program or reducing the quality of agency R&D in general. Some officials
noted potentially beneficial effects such as greater collaboration between
small businesses and research institutions in the SBIR Program. The
similarity of the two programs, however, raises an issue about the need for
the pilot program. One way to assess the need for the program is to
determine its effectiveness in transferring technology from research
institutions to the marketplace. Such information will not be ascertainable
for several years because of the time needed to turn an initial concept into
a marketable technology.

Background

The Small Business Innovation Development Act of 1982, which
authorized the SBIR Program, designated 4 major goals for the program: to
stimulate technological innovation, to use small business to meet federal
R&D needs, to foster and encourage participation by minority and
disadvantaged persons in technological innovation, and to increase private
sector commercialization of innovations derived from federal R&D. The
Small Business Research and Development Enhancement Act of 1992
reauthorized the SBIR Program and established the STTR Program, closely
modeled on the SBIR Program.

Eleven federal agencies participate in the SBIR Program. Five major agencies the Department of Defense (DOD); National Aeronautics and Space Administration (NASA); Department of Health and Human Services and particularly its National Institutes of Health (NIH); DOE; and National