Accounting Office Washington, D.C. 20548 Resources, Community, and Economic Development Division B-209790 January 23, 1989 The Honorable Dale Bumpers Chairman, Committee on Small Business The Honorable John J. LaFalce Chairman, Committee on Small Business House of Representatives The Honorable Robert A. Roe Chairman, Committee on Science, Space, and Technology The Honorable John D. Dingell Chairman, Committee on Energy and Commerce House of Representatives This report on the effectiveness of Phases I and II of Small Business Innovation Research (SBIR) programs is required by the Small Business Innovation Development Act of 1982, as reauthorized in 1986. In preparing this report, we sent questionnaires to firms carrying out 1,406 SBIR projects begun during fiscal years 1983 to 1985 and to 530 project officers at federal agencies. Agencies differ in the emphasis they place on the SBIR program goals of meeting federal research and development needs and increasing private sector commercialization of federal research and development. All agencies seek to stimulate technological innovation and to encourage and foster participation by minority and disadvantaged firms. Overall, agency project officers assessed 29 percent of the SBIR projects as being of higher quality than other research under their responsibility and about half as being of the same quality. As required by law, we will provide a report on activities under Phase III of the SBIR programs in 1991. This work was performed under the direction of Flora H. Milans, Associate Director. Other major contributors are listed in appendix XXVII. Executive Summary Purpose Background Since 1983, federal agencies with large research and development budgets have operated Small Business Innovation Research (SBIR) programs to strengthen the role of small innovative firms in federally supported research and development. SBIR awards to small business have totaled over $1.35 billion through fiscal year 1988. In reauthorizing SBIR programs in 1986, the Congress directed GAO to SBIR legislation gives the Small Business Administration responsibility for issuing directives for the general conduct of SBIR programs, but each agency with an SBIR program is unilaterally responsible for targeting research areas, reviewing proposed projects, and making research awards. The legislation requires a three-phase process for SBIR programs: Phase I is a 6-month test of scientific merit and feasibility; Phase II provides funding for 1 to 2 years of further development; and Phase III consists of either nonfederal funding or federal, non-SBIR, funding for developing applications of the SBIR research for either private sector or government use. When an agency's external research and development obligations exceed or monitor individual SBIR projects in conjunction with responsibility for other research. Results in Brief All agencies seek to stimulate technological innovation and to encourage and foster the participation of minority and disadvantaged firms, but the agencies differ in the emphasis they place on the remaining two SBIR goals. DOD and NASA emphasize meeting federal research and development needs with projects directed toward specific mission requirements. In contrast, programs at NSF and HHS focus on the SBIR goal of private sector commercialization and solicit projects within broader technological areas. Overall, agency project officers assessed 29 percent of the SBIR projects as being of higher quality than other research under their responsibility and half as being of the same quality. Project officers differed from agency to agency in their overall assessment of research quality and in specific factors, such as the likelihood that projects will lead to new scientific or technical discoveries and the skills and expertise of the project staff. At all agencies, however, project officers rated SBIR projects as more likely than other research to lead to inventing and commercializing new products. In general, the 11 agency heads that provided judgments concerning the effect of SBIR legislation on their research programs reported favorable impacts. Although they differed on specifics, most agencies reported that SBIR programs had developed new research areas, placed more emphasis on the application of research results, and led to wider use of small businesses as research performers. Principal Findings Meeting Program Goals To stimulate technological innovation, SBIR programs have adopted procedures to identify and select technically superior and innovative proposals. Agency project officers consider many SBIR Phase II projects to be technologically innovative. Furthermore, firms responding to GAO's questionnaire reported that they probably or definitely would not have undertaken 64 percent of their SBIR projects without SBIR funding. According to the questionnaire responses, these projects are about as likely as other projects to result in patents or market testing, indicating Executive Summary Quality of SBIR Projects that SBIR programs are encouraging technological innovations that might not occur otherwise. Heads of agencies and project officers responsible for SBIR projects reported that SBIR programs help meet their agency research and development needs. SBIR program managers and project officers identified ways in which SBIR programs helped accomplish this, including support of high-risk research and research on technologies with long-range potential. Agencies differ in their efforts to use small business to meet research and development needs. DOD and NASA solicit and fund SBIR projects that meet specific agency research and development objectives, while NSF and HHS select projects with high potential for private sector commercialization, within broad categories of technological interest to the agency. Other agencies fall between these extremes. These differences in agency emphasis are reflected in proposal solicitation and in research management. In comparison with NSF and HHS, DOD and NASA proposal solicitations are more specific and their projects are more closely monitored. Because only a small portion of all SBIR projects have completed Phase II, To compare the quality of SBIR projects with other agency research, GAO sent questionnaires to 530 project officers who monitor SBIR research as well as other projects at the 5 agencies providing 96 percent of all SBIR funding. Overall, respondents assessed 29 percent of the SBIR projects as Judgments of Department and Agency Heads being of higher quality than non-SBIR research and indicated that about half of the SBIR projects were similar in overall quality to other research. Project officers at all agencies rated SBIR projects substantially higher than other research under their responsibility regarding the potential for leading to the invention and commercialization of new products, processes, or services, with NSF having the highest level. Agency project officers differed, however, on other factors, such as the likelihood that the project will lead to new scientific and technical discoveries. The heads of the 11 departments and agencies with SBIR programs reported generally favorable effects on agency research programs. For example, seven agencies identified ways in which SBIR programs help attain their research goals through filling gaps in other agency research programs, expanding in new research directions, and other means. GAO is not making recommendations in this report. Recommendations Agency Comments GAO asked the 11 agencies that conduct SBIR programs, as well as the Small Business Administration, to comment on a draft of our report. The agencies either had no comment on the report or expressed agreement with its contents. |