Letter From the National Aeronautics and Space Administration Concerning the SBIR Program

A letter from the General Accounting Office dated December 3, 1987, requested my judgments of the effects of our Small Business Innovation Research (SBIR) activities on the research programs of the National Aeronautics and Space Administration (NASA), and the basis for those judgments. This letter conveys my judgments on SBIR and outlines the process by which they were developed.

To assess SBIR's effects, we conducted a study of all SBIR Phase II projects which had been completed or which were nearly completed by the end of 1987. This group consisted of 73 projects carried out by 63 small business firms. Most of the projects stemmed from our 1983 and 1984 SBIR Program Solicitations.

Our study concentrated on the effects these projects have had on the
performance of the NASA mission in aeronautics and space, and it also
addressed the quality of research sponsored by the agency. In addition, we
investigated the extent to which the results of the 73 completed projects were
being utilized in commercial and/or other Federal agency applications outside
the NASA program.

The information for our study was obtained from comprehensive interviews with NASA personnel who had managed the research and with the principal investigators and company officials of the firms performing the research. Finally, we obtained the opinions of each NASA Center Director on the value of the SBIR Program to the Center's activities and to the NASA mission.

Our interviews revealed that the technical staff at each NASA Center highly rated the quality of research in most of the 73 SBIR projects, judging it to be equal to or better than other contract research for which they were responsible. Many reported that some of these SBIR projects (and others not yet completed) have established new insights and directions for NASA's research efforts. They also reported that the results of at least 39 of the 73 projects are either now in use by NASA or will likely be chosen for use within five years, including mission applications in mainline NASA programs. This is an excellent record for research projects of this nature.

Letter From the National Aeronautics and

Space Administration Concerning the
SBIR Program

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All our information makes it clear that small businesses are valuable and cost-effective sources of R&D innovations for NASA and that SBIR is an effective way to discover and use them. Without exception, the NASA Center Directors support continuation of the SBIR program and intend to ensure the integration of small business capabilities in their pursuit of NASA's R&D goals.

I was pleased to learn also that significant commercial benefits have already accrued to a number of participating firms. Company officials for 16 of the projects reported commercial sales of products and services to private and public entities and/or receipt of additional R&D funding from private sources and Federal agencies other than NASA. Good prospects for future commercial applications of the results of another 12 projects were also reported. Considering the recent completions of many of the research projects, these findings are impressive.

In summary, I am pleased to report my judgments of the SBIR program: that the quality of most of the research is high, that its effects on NASA's research are positive, and that many small businesses in the SBIR program produce valuable and cost-effective results. We expect continued benefits from SBIR in both its support of the NASA mission and its contributions to the national economy.

Sincerely,

farm latter

James C. Fletcher
Administrator

Letter From the National Science Foundation

Concerning the SBIR Program

This letter responds to your request of December 3, 1987 for
NSF's views of the Small Business Innovation Research program
(SBIR) as it has been implemented by the National Science
Foundation. As you know, the SBIR program was initiated at the
Foundation in 1977 and served as a model for the overall
legislation.

The NSF review of the program indicates that research of high
quality has been carried out by small high technology firms
during the past ten years under grants from the Foundation.
This letter and the enclosure furnishes you with details on the
success of the SBIR program at the National Science Foundation.
The data presented respond to the legislative requirement for
"evaluating the effectiveness to date of phase one and phase
two of the SBIR program as set out in section 9(e)(4) of the
Small Business Act.

The high quality of the SBIR-funded research stems first from
the program's adherence to the Foundation's research
objectives. Second, the use of the Foundation's merit review
procedures assures quality in the selection of projects to be
supported. Finally, the need to aim for commercialization
establishes the capacity to contribute to economic
competitiveness. These factors ensure the selection of
scientifically meritorious innovative proposals. The program
has also served an important technology transfer function
between university and industry research. More than 50 percent
of these projects involved collaboration with university
faculty.

The Small Business Innovation Research program was designed and implemented by the Foundation in 1977. It served as the model for the Small Business Innovation Development Act of 1982 and

Letter From the National Science Foundation
Concerning the SBIR Program

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eventually became the national SBIR program. Then, as now, it served to stimulate innovation and to couple small high technology firms to the basic research community. In the decade since its inception, SBIR has complemented the Foundation's basic research programs by providing a linking mechanism between these and the marketplace. While many studies may be cited, a Rand Corporation study of 1984 points out that the results of basic research do not readily find their way to the marketplace without the use of intermediate mechanisms. SBIR provides one such mechanism. In addition, the Foundation's experience demonstrates that the program results feed back to the basic research community through the creation of new research instruments, sensors, and materials. Much of this success stems from the program design feature whereby each of the Foundation's research divisions formulates research topics for the SBIR solicitation.

The four purposes stated in the legislation are the basis of NSF's review of the accomplishments of the SBIR program:

* stimulation of technological innovation

* use of small business to meet Federal research and development needs,

* fostering minority and disadvantaged persons to participate in innovation, and

* increasing private sector commercialization of innovations from Federal research and development.

Both the quantity and quality of proposals received from the 1987 solicitation measure the program's success in stimulating innovation. Of the 1250 proposals received, over 300, or one in four, were found by merit review to be scientifically worthy of support. Because of funding limitations only 160 of this group of 300 projects were selected for award.

The SBIR award history shows that the profile of technologies included in the funded projects has tracked the National Academy of Sciences five year outlook of 1981 and the OSTP report to the Congress of 1983 as to projected national technological needs. Another measure of relevance to ational needs is the emphasis on increased productivity and competitiveness. Fully 40 percent of the SBIR research projects funded through 1987 related to improved manufacturing processes, productivity, or quality.

The SBIR program fostered the interest and participation of minorities and the disadvantaged in research and innovation. In 1986 the Foundation sponsored a conference for small high technology firms underrepresented in science and technology. A similar session was included in the 1987 "Federal High Tech"