Panel IV
Best Practice for Agency Programs: Program Executive Offices and Program Offices

Moderator:Peter LevineSenate Committee on Armed Services

Mr. Levine said he has observed the SBIR program from the perspective of the Senate Armed Services Committee for the last 10 years or so, and three characteristics stood out for him. First, the SBIR program is a highly competitive program under which the DoD and other federal agencies fund private sector entities to perform science and technology research on behalf of the federal government. Second, at least within DoD, the program has been successful in developing technologies in areas of military need. Third, the SBIR program, despite its competitive nature and high rate of success in developing technologies, has been less productive in bringing those technologies to commercialization. There is a highly competitive front end, a highly successful R&D process, and a much less productive process of transition. He reported a high volume of complaints about the weakness of Phase III, largely from participants in the program.

Accordingly, he asked the panelists to focus on those characteristics of the SBIR program. He said that those three salient characteristics were not unique to the SBIR program, but could also describe, to a significant extent, the S&T program of the DoD as a whole, with its highly competitive program for identifying good ideas that could benefit the national defense. This program, too, was very successful in bringing ideas forward and developing them, but success dropped off when it came time to field them.

He asked the panelists to consider whether the barriers to fielding technologies from the SBIR program were different from the barriers in the DoD as a whole. He said that the distinction was important because it would affect what remedies might succeed. Is it simply a question of doing a better job of technology transition across the Department, he asked, or are there unique problems with the SBIR program that need to be addressed?



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SBIR and the Phase III Challenge of Commercialization: Report of a Symposium Panel IV Best Practice for Agency Programs: Program Executive Offices and Program Offices Moderator:Peter LevineSenate Committee on Armed Services Mr. Levine said he has observed the SBIR program from the perspective of the Senate Armed Services Committee for the last 10 years or so, and three characteristics stood out for him. First, the SBIR program is a highly competitive program under which the DoD and other federal agencies fund private sector entities to perform science and technology research on behalf of the federal government. Second, at least within DoD, the program has been successful in developing technologies in areas of military need. Third, the SBIR program, despite its competitive nature and high rate of success in developing technologies, has been less productive in bringing those technologies to commercialization. There is a highly competitive front end, a highly successful R&D process, and a much less productive process of transition. He reported a high volume of complaints about the weakness of Phase III, largely from participants in the program. Accordingly, he asked the panelists to focus on those characteristics of the SBIR program. He said that those three salient characteristics were not unique to the SBIR program, but could also describe, to a significant extent, the S&T program of the DoD as a whole, with its highly competitive program for identifying good ideas that could benefit the national defense. This program, too, was very successful in bringing ideas forward and developing them, but success dropped off when it came time to field them. He asked the panelists to consider whether the barriers to fielding technologies from the SBIR program were different from the barriers in the DoD as a whole. He said that the distinction was important because it would affect what remedies might succeed. Is it simply a question of doing a better job of technology transition across the Department, he asked, or are there unique problems with the SBIR program that need to be addressed?

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SBIR and the Phase III Challenge of Commercialization: Report of a Symposium Richard McNamaraU.S. Navy Mr. McNamara, Program Executive Officer for PEO Submarines, described himself as an advocate of small business, and said that the centerpiece of his advocacy was the SBIR program. In his Requests for Proposals (RFPs) he incentivizes primes to subcontract certain percentages of the work to small business. For example, he contracted with General Dynamics on the Virginia-Class Program demonstrating that small businesses are a high priority and offered a million-dollar “bounty” per hull as an additional incentive fee for contractors who met small-business sub-contracting goals. The Navy owes it to the large prime contractors, he said, to provide real incentives for a policy considered truly important. Advantages of an Outreach Strategy He said that attending meetings such as this one was part of his outreach strategy to share SBIR experiences and promote the program. He said that he spoke at conferences for many groups and hosted conferences for women-owned businesses. He also visits laboratories and other activities to suggest how they can get more actively involved in SBIR. In actual SBIR transactions he said he has dealt with about 150 different companies over the past decade. Of those, he found that about one in ten was a company he would take anywhere, on any job; one in ten he would not recommend; and the rest were reasonably competent firms that had not reached the transition stage. He said that a significant feature of SBIR companies is that “they’re new faces on the landscape. People don’t know them.” He said that many people do not have the confidence to put money into a Phase III with an SBIR company, but his experience has given him the confidence to take that risk. In doing so, he found that the benefits outweighed the risks and that SBIR awards have become his preferred way of bringing competent small businesses and new faces into the submarine contracting community. Suggestion in the Gansler Memo He recalled a memo of SBIR suggestions written in 1999 by Under Secretary Gansler and said that his office has followed many of them.37 For example: 37 August 10, 1999, Memorandum from Under Secretary Jacques Gansler on the SBIR Program. The memo requested the assistant secretaries of the Army, Navy, and Air Force, the Acquisition Executive of the U.S. Special Operations Command, and the Directors of the Ballistic Missile Defense Organization, the Defense Advanced Research Projects Agency, and the Defense Threat Reduction Agency to, inter alia, “issue guidance to your Component’s acquisition program managers to include SBIR as part of ongoing program planning, and to give favorable consideration, in the acquisition planning process, for funding of successful SBIR technologies.”

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SBIR and the Phase III Challenge of Commercialization: Report of a Symposium A Program of Advocacy. PEO-SUB advertises the SBIR program within the Program Executive Office and Team Submarine, which employs about 600 people, through a program of active advocacy. He educates program managers that SBIR is a tool for them to use, a way of recovering the tax dollars set aside for the program in ways that solve problems for them. Program managers compete to submit and write up topics that are intended to contribute to tomorrow’s problems, not current ones. “We see the program as an option for the program manager to add to whatever his prime or R&D activity has to offer.” Topic Vetting. The program executive officer reviews and evaluates all topics on which small firms might bid. Each program manager submits a prioritized list of topics, then competes in a rigorous process of SBIR topic selection and a vote is taken. SBIR contract awards are viewed as a reward, not a burden. Treating SBIR as a Program. This includes monitoring and follow-up of small businesses, not just making awards. He creates a spending plan for all SBIR projects by determining how many topics and contracts he can support within the PEO-SUB SBIR budget. He is vigilant in keeping an eye out for opportunities the small businesses can support with their technology and products. He encourages his program managers to demonstrate commitment by sharing the Phase II option costs; this amounts to $75,000, or half the cost. To make Phase III transitions easier, he has designed an acquisition planning process for program managers to award contracts to small business and clear a path toward follow-on awards. Provide Acquisition Coverage. He writes a broad Acquisition Plan that includes a list of all SBIR contracts let by his office and is available to all PEO-SUB program offices. Each year he adds information on the new awards including an approved plan by which every Phase II firm will seek to go on to a Phase III award. Award Phase III Contracts. This creates a convenient vehicle for program managers to reach small businesses, allowing single- and multiple-point solutions. The traditional burdensome DoD process has been streamlined for contracting convenience and flexibility. There is a contract ceiling of $75 million to allow local acquisition approval within the Program Executive Office. Broker Successful SBIR Performers. By pooling resources, money, and talent in one place, program managers can match successful Phase I/II companies with problems in program offices. This helps build the base of talent the office can draw on to solve problems for the submarine community. Recycle Unused Phase I Awards. Many companies never reach Phase II for a variety of reasons, leaving behind a potentially useful idea or technology. The Phase I database is a rich resource for the program managers

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SBIR and the Phase III Challenge of Commercialization: Report of a Symposium who has a problem and needs an idea. Matching possible topics to the Phase I back-lists of reliable firms gives a manager a resource of “instant contracts” to solve a near-term problem. The topic or idea may go directly to a Phase II contract, which can reduce the topic cycle by 18 months and bring new technology to the fleet faster. The PEO-SUB SBIR history includes more than 300 awards to 150 different companies since record keeping began in 1988. Since the first Phase III award in 1994, Team Submarine has made $1 billion in Phase III follow-on awards to about 15 companies. Three of the companies account for about $500 million. In summary, he said, “SBIR works.” He showed a return-on-investment slide, indicating that a contribution of $126 million from Team Submarine ultimately spawned $1 billion of follow-on awards. Since all NAVSEA awards totaled about $1.5 billion dollars in the same period, the submarine program itself was very successful. He highlighted about 15 companies that made or soon will make the transition to Phase III funding, including Chesapeake Sciences Corp., Progeny Systems, and Digital System Resources. Mr. McNamara concluded by encouraging managers to “take a good look at what you’re doing, try to build in flexibility and follow the rules that Dr. Gansler drew up.” Stephen LeeU.S. Army Research Office Dr. Lee described himself as a “feet-on-the-ground” scientist who manages a research program that is focused on long-term, basic research. He writes topics, reviews proposals, oversees a process for Army reviewers to vet the topics, and designs strategy for his research organization and for the SBIR program. When writing a topic, he tries to anticipate who will support the Phase II step, Phase III and ultimately commercialization. Thus, because he worked more on the “push” side of the SBIR program than many participants, he suggested that his perspective would be different. He noted that he could not place his activities on the highly complex DoD acquisition flow chart circulated at the meeting, describing his office as a “6.1 organization,” which is the DoD’s budget category for basic research. “Typically,” he said, “we’re feeding things before that chart begins.” He said that the mission of the Army Research Office is to “seed scientific and far-reaching technological discoveries that enhance Army capabilities.” This mission, he said, gave him a broad spectrum to investigate and enabled him to take some risks in the longer term. For this reason, he used the STTR program more actively than many people would—because of his basic research interest and involvement of academia.

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SBIR and the Phase III Challenge of Commercialization: Report of a Symposium An Emphasis on Research The Army Research Office is divided into several directorates: engineering sciences, physical sciences, and mathematical and information sciences. Each directorate has three or four program managers who write SBIR and STTR topics. And while Dr. Lee said he has a good idea of what the Program Executive Officer for a certain subject area wants, he also has “a more fundamental, basic research, higher-risk thought pattern that I’m going through.” He showed an organization chart that illustrated how technology gathered from various sources (industry, academia, foreign laboratories, etc.) would typically transfer through SBIR programs in the direction of technology application (other services, program managers/program executive offices, Research Development Engineering Centers, other customers). This chart also showed that the Army Research Office was part of the Army Research Laboratory. The Army Research Office has no laboratories: it is an extramural funding office that supports research in universities and industries. While working with many customers outside the Army, including the Defense Threat Reduction Agency, the Army Research Office is responsible for “technology generation” and “technology enhancement” in the Army laboratory system. Thinking about Commercialization from the Outset Dr. Lee said that in writing topics, he tried to think from the beginning about where he would find support in moving it from Phase II to Phase III. He would also think about how to present a new proposal and move it toward a recommendation for funding. He conjectured that much of the success of his programs, like those of some other program managers in his position, is that they are “on the ground” and talking with the user, bringing the user directly to the small company and ensuring a connection from the beginning of Phase I when the topic is written. This is reinforced by the requirement to have a program executive officer or a program manager buy into the topic from the outset. SBIR Projects that Benefited from Collaboration He offered several examples of SBIR projects. The first was the Agentase Traffic Light Sensor, an STTR award with a co-Principal Investigator at the University of Pittsburgh. It was a defense technology of a type not discussed previously—a Homeland Security-based idea that was really dual-use. This one was a simple color-changing, enzyme-based assay incorporated into a new format with advantages over existing systems. It stabilizes enzymes in a polymer system. The sensor begins as yellow when wiped on a surface, then, if a nerve agent is present, it changes in less than two minutes to red. In the absence of a nerve agent it turns light green after about 15 minutes. The users worked with the developers to en-

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SBIR and the Phase III Challenge of Commercialization: Report of a Symposium sure that it was the right size, what it should look like, and whether it could be packaged in such a way that emergency personnel in safety suits could use it. As program manager, it was it was Dr. Lee’s job to ensure such features of usability even before the chemistry was finalized. Key to developing this sensor was the transition phase. Who should guide this process? The answer was the special operations man, who, in his responsibility for combating nerve agents, has a powerful interest in doing surface wiping. Interestingly, in the final commercial product, three colors proved to be too complicated and to bring potential liability issues. So the sensor begins at green and remains green if the environment is safe, turning red if contaminated. Some Phase III funding came from the Defense Threat Reduction Agency to ensure that the system would work with mustard agents and with blood and blister agents, as well as nerve agents, for deployment in Iraq. The process required close collaboration between Dr. Lee and the company in identifying the users. The largest sales for the company are now made to first responders. The second example he cited was a solution called FAST-ACT, made by NanoScale Materials of Manhattan, Kansas, and based on research performed at Kansas State University. These were non-toxic reactive nanomaterials effective against a wide range of toxic chemicals, including chemical warfare agents. Dr. Lee wrote up an SBIR topic based in this area, and over several years the process had been scaled up and moved to Phase III, with the goal of producing multi-ton quantities of material. The material also required a great deal of animal testing, for which the Army Research Office had to identify one or more partners equipped to do this expensive work. This product was now commercially available; it has been examined by the greater military, including the Special Forces, and used by first responders at Aberdeen Proving Ground as protection against chemical accidents. It was also being considered by the larger acquisition process and has been featured for sale by the influential Fisher Scientific. Dr. Lee concluded by saying that he was particularly pleased with both of these SBIR projects, partly because of the close and successful collaboration between his office, the small company, and the users. Tracy Van ZuidenU.S. Air Force Major Van Zuiden said that he has worked with the SBIR program for barely a year, after considerable experience in maintenance and logistics, and that he enjoyed hearing the lessons of those with longer SBIR experience. He began with the Joint Strike Fighter, saying that it was the Air Force’s vision to build an advanced and affordable strike fighter for the next generation for world wide customers. He said that SBIR projects would play a key role in the “advanced and affordable part of that equation.” In the multi-service collabora-

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SBIR and the Phase III Challenge of Commercialization: Report of a Symposium tion on the Joint Strike Fighter, the Air Force had 138 Phase I contracts and 57 Phase II contracts (total contracts), while the Navy had 64 Phase I awards, 54 Phase II awards, and 13 Phase III active contracts. He said that his major challenge was in managing all these topics and contracts. The Air Force and Navy combined were generating approximately 70 new topics a year, and he thanked the SBIR offices of both services for helping with the complex management task. He listed the topics under four headings: Air Systems, Air Vehicle, Autonomic Logistic, and Propulsion. Then he broke down those topics by Integrated Product Teams to illustrate the kinds of technology projects in the program. He said that the important feature of these projects, which were used by the Integrated Product Teams, was that they have appropriate scope and relevance to move along a transition path to the final platform, the aircraft. Success from the Point of View of Integrated Product Teams He said he has thought about what makes SBIR projects successful from the points of view of the Integrated Product Teams, a small business, and the prime contractor. He suggested these behaviors for the Integrated Product Teams: Accurately Define the Problem. From the Integrated Product Team’s point of view (represented by a floor engineer who travels extensively and is under pressure to move a product out the door) the most important tool is an accurate definition of the problem. It had turned out to be more difficult than he anticipated to define a problem so that a potential SBIR contractor understands what the SBIR office needs. Don’t Dictate the Path to a Solution. It was difficult to persuade engineers to listen to all the topics before proposing a predetermined solution to a problem. Actively Engage with the SBIR Contractor. The program manager must do this not only during Phase I, and several times during Phase II, but continuously, to make sure the project is on track. Involve the Prime Contractor and Supplier. Involve the suppliers lower in the process than the prime contractors in the SBIR process. This is where the technology will be incorporated. Promote Clear Communication Between Program Office, SBIR Contractor, Prime Contractor, and Supplier. Communication is essential to SBIR success. Success from the Prime’s Point of View Second, from the prime contractor’s point of view, the keys to success are slightly different:

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SBIR and the Phase III Challenge of Commercialization: Report of a Symposium The SBIR Project Must Meet a Technology Need. The prime contractor must see a technology push to realize the need for the SBIR. Prime contractors often assume they have a good enough solution, so they don’t see a better one when it emerges from the R&D stage. The Project Must Make Business Sense. It is not sufficient to have a great technology: Is there a good business case for developing it? Can it be repeated? Is it cost-effective? Willingness of SBIR Contractor to Partner with a Prime. This is the path that leads to a working platform, as it is with the JSF. Are Other Sources of Technology Available. The prime has to be willing to look at sources other than the ones that are in use or that are familiar. Success from the Small Business Point of View Third, the picture again looks different from the small business point of view: Know Your Customer and Keep Them Informed. This, he said was supremely important—“it should be in red, with fireworks coming out of it.” In proposing a technology for the Joint Strike Fighter, for example, where “weight is king,” there is no point in designing a part that is heavier than existing technology. Be Technically Accurate But Not Overbearing. He said that sometimes a small business will be technically overbearing, as though to emphasize their competence. This, he said, is unnecessary and possibly counterproductive; the Army already knows that most innovation comes from small firms. The Prime Contractor/Supplier Can Be Your Best Friend. Although it can be hard to develop a relationship with prime contractors, they can be the best allies in helping to transition new technologies. Build a Better Mousetrap. The customer is counting on the small business for innovation, not “just the same mousetrap painted a different color.” Build a Sound Business Case. The small business has to help the prime contractors and subs do this; no one knows the product better than the small firm, and they need to explain it to the prime contractors and subs. He described a product that has been a success story, in several ways. The Army needed increased ear protection to dampen noise on jet aircraft, and a small firm developed new hearing protection. What made this SBIR product successful was that it turned out to have wide dual-use applicability not only to the Air Force and Navy but also in commercial applications. There was strong support from both the Air Force and Navy, which tried the task models and made helpful sug-

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SBIR and the Phase III Challenge of Commercialization: Report of a Symposium gestions for improvement, as did the prime contractor. Also, the SBIR contractors realized that the product needed some variations to suit different users; the person who works at an admin desk in a flight-line operation does not need the same level of protection as the person who works on the deck. So the firm offered various levels of protection. Major Van Zuiden also reported on a process that has been a success story. To find one, he reviewed the Joint Strike Fighter program to see which Integrated Product Teams did an outstanding job of managing, and found it was the propulsion branch. One reason was its long history of organized S&T, during which it did an excellent job of integrating its SBIR topics with the technology maturation process. Further, it enjoyed very active support from engine manufacturers, which is essential in the transition phase. And finally, it designated a full-time person to manage and promote SBIR projects within that Integrated Product Team. He concluded that this management pattern, which developed engines so sophisticated that they need almost no attention from the pilot, could provide a model for other technologies, such as data sensor fusion. In summary, he offered the following measures to make SBIR more effective: Involve the Prime Contractors and Suppliers—especially including the suppliers two and three levels down, who will understand how the technology must be used. Maintain Adequate Staff to Run the Process. The SBIR office moved to web-based tools to help manage the process, but this cannot replace “the person behind the database.” Maintain Flexibility in the Use of SBIR Awards. The traditional awards are $100,000 for Phase I and $750,000 for Phase II. There are few projects that can be done for a million dollars, he said, especially on a fighter aircraft. Even at the low end, projects cost from $3 to 5 million. “So we have to look at flexibility in the way we can use our SBIR products.” Peter HughesNASA Goddard Space Flight Center Mr. Hughes introduced himself as the acting chief technologist at Goddard Space Flight Center and said he would talk about his perspective on the use of the SBIR program as “an investment tool in the R&D program.” For FY04, the SBIR budget for the agency as a whole was roughly $110 million. At Goddard the SBIR budget was $14 million and the STTR budget was $3.5 million. The SBIR constituted about 20 percent of his “investments,” in this sense, the rest being either internal investments, IRAD (internal R&D) core capabilities, Director’s Discretionary Fund (designed to support high-risk, high-payoff efforts), or external competitive awards. He said that about six years previously, NASA experienced a

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SBIR and the Phase III Challenge of Commercialization: Report of a Symposium major change from the historical custom of directing money from NASA headquarters through the program offices, without much internal or external competition. Most projects, including his own, must now compete for that money and adapting the culture to this change will require additional time and effort to be effective. He began with the mission of NASA, which, he said, has “widespread recognition and brand appeal:” To understand and protect our home planet, to explore the universe and search for life; and to inspire the next generation of explorers. One exciting aspect of working with NASA, he said, was the ease of engaging the public, or anyone who wanted to participate in NASA programs. For the most part, he experienced a positive cachet in being affiliated with NASA. Even so, it has been difficult to sustain some worthy R&D programs because of the shift instituted by the President to emphasize the “moon, Mars, and beyond,” but the basic drivers behind the mission and vision programs has changed little. NASA Goddard, in Greenbelt, Maryland, employs about 3,000 civil servants and about 5,800 contractors. Its main foci are science, primarily earth and space science; the development of measurement instrumentation; and creating the platforms to make measurements. He broke down the scientific research further into earth science; making measurements of earth and earth systems; and space science, trying to understand the structure and evolution of the universe and planetary systems. A new area of research is called Vision for Exploration Systems. Underpinning all the science is technology development. He described the core competencies of NASA Goddard as: Experimental and Theoretical Science that drives the instrumentation design and science measurements Sensors, Instruments and Associated Technology, especially in optics and electro-optics, that are used to develop sensors and instruments. End-to-End Mission Systems Engineering, with the capability to perform or lead implementation of all mission systems and operate scientific spacecraft. Advanced Flight and Ground Systems Development for, at any given time, two missions under development in-house involving about 10 to 20 instruments. Large-Scale Scientific Information Systems, to process, archive, extract (mine), and distribute data from multiple spacecraft and instruments to the science community, both inside the gates of Goddard and outside. Program and Project Management, both for in-house and extramural projects. At present, he said, Goddard has 19 active flight projects and about 25 in formulation. It also managed about 36 orbiting “space assets,” about a dozen of them managed from Goddard, including the Hubble Space Telescope. It is “our pride and joy,” he said, “to develop these

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SBIR and the Phase III Challenge of Commercialization: Report of a Symposium space assets and get them into orbit quickly to deliver to the science community the data they so desire.” Goddard was then heavily engaged in managing the development of the James Webb Space Telescope, which is to succeed the Hubble telescope. This platform is a huge challenge, he said, with a six-meter mirror that will operate in an Earth-Sun L2 orbit, about a million miles farther from the sun than Earth. It will allow sensing deep into space using infrared instruments. Despite daunting challenges across the entire mission, Mr. Hughes said Goddard has made good progress because of internal investments and investments through the SBIR program. “Passing the Baton” from Phase II to Phase III In trying to characterize what is important for the transition from Phase II to Phase III, Mr. Hughes used the analogy of a pair of relay runners on a track, where the lead runner who is slowing down must pass the baton to the runner behind who is speeding up. The vital element is a smooth, well-timed hand-off at the precise moment when both are running at the same speed. Managing the “hand-off” from SBIR Phase II to Phase III, he said, requires the same degree of communication and teamwork. Instead of an abrupt termination of work at the end of Phase II, the two phases must run “at the same speed” for a while until the Phase III work moves out on its own. NASA has recorded a number of visible successes in transitioning their technologies into major programs, he said. One was mentioned earlier by Carl Ray— the Mars Exploration Rovers, where Goddard embedded several technologies, including lithium ion batteries, paraffin-based heat switches, and customized commercial microchip technology on the 2003 Rover. Goddard also managed development of a number of technologies for the Aura mission,38 including composite optics, a radiometer, and signal conversion chips. This was a good example of a NASA SBIR program, he said, because well before the start of the mission, Goddard listed the challenges it saw in these areas and was able to infuse some of the technologies as they matured by maintaining close coordination between the program management and the technology programs at Goddard. NASA Goddard also tries to play a unique role in teaming and combining a number of component technologies, or system technologies that come from SBIR and other internal investments in unique ways. Some phenomena have a multi- 38 The Aura (Latin for “breeze”) mission researches the composition, chemistry, and dynamics of Earth’s atmosphere, including studies of ozone levels, air pollution, and climate. Aura is part of the Earth Observing System (EOS), a program dedicated to monitoring the complex interactions that affect the globe using NASA satellites and data systems.

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SBIR and the Phase III Challenge of Commercialization: Report of a Symposium plier effect when combined, but when they were integrated, they sometimes produce unique measurement properties not anticipated at the outset. What Works, What Doesn’t Work He then moved to procedures that are working and not working for the SBIR program. First, he said, it was his personal belief that NASA should use the SBIR program as a new and unique source of innovations. He viewed SBIR as “his ERAD,” the External R&D program. He had considerable resources for IRAD (Internal R&D), but he wanted to be able to reach out to new R&D communities and try to bring them into the fold at Goddard. He wanted to “break the mindset” that the SBIR program was not just a set-aside for small business, but rather an external source of innovation that we want to include as members of Goddard’s R&D team. Second, he said that he wanted to push the subtopic managers to identify really tough problems that were tough to solve and put them out to small firms. He did not want to “just lob some softballs” to these firms; he wanted his managers to be “really pitching sliders” that were going to require real creativity to solve. Third, he stressed the importance of maintaining clear strategic priorities in these technologies and inducing the Phase II and Phase III proposers to try new directions in their technologies where applicable. Fourth, he said it was essential to have top talent review these proposals— people who understand the technology and who were going to be Contracting Officer’s Technical Representatives (COTRs). In his early years at NASA, he said, he was amazed at how often these reviews were done by junior people when no one else was available. He said that some of the most successful SBIR elements had the very senior, technical, experienced reviewers and the COTRs providing oversight. Fifth, he emphasized the importance of looking for and helping the SBIR Principal Investigators develop a realistic work plan that could be accomplished within the stated period of time. Often the small firm is “so enthralled with what they propose to do” that the program manager does not ensure that they have thought through the development process thoroughly. SBIR firms often encounter a culture shock in working with the agency and the rigorous systems engineering to which NASA technology is subjected before it can be put into operation. A Principal Investigator new to the NASA system must understand that space systems have one and only one chance for success and that there is no way to correct for failure after launch. For that reason, the program managers want to avoid any risk whatsoever, and need to work with the SBIR firms on a clear and specific risk-mitigation plan. Finally, he said that NASA must consider carefully the long incubation process for new technologies, which may take five, six, or seven years. This must be

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SBIR and the Phase III Challenge of Commercialization: Report of a Symposium anticipated in the planning from the outset in order to anticipate whether the project can really by ready in time for infusion into the larger system. Factors that Bring Success He then outlined some of the success factors for execution that NASA had discovered over the years: Keep the SBIR program managers and the subtopic managers focused on the strategic priorities for the technology and redirect them when appropriate. Encourage the task manager/subtopic manager to work closely and interactively with the Principal Investigators. It is not enough for them just to agree on the parameters of the grant and then meet at the conclusion of the program. Those Principal Investigators who work closely with the topic managers throughout development have the most success. Encourage the subtopic manager and Principal Investigator to actively engage in trying to identify infusion opportunities. This involves close teamwork with the NASA office of technology transfer to understand the market potential both inside Goddard and at other agencies. Leverage the cachet of working with NASA. At the same time, the company must independently try to take the technology all the way to an infusion point with NASA and understand the rigors of doing so. Keep these SBIR tasks off the critical path. They should not be used for development until the risks are understood and a strategy for reducing those risks has been set. Mr. Hughes said that what is working well in the SBIR program was the special procurement authority available at Phase III. If projects had to be reopened to general competition at this stage it would not work. Where to Add, Where to Strengthen He summarized the procedures that should be added or strengthened, as follows: Increase the focus by SBIR technical managers on the strategic value and utilization of the technology—not solely on completing a Phase III contract. Bring more rigor to the analysis of the Phase III return on investment and the factors that contribute to strong returns. Find some way to overcome the poor access to Progress and Final Reports of SBIR projects at other agencies and even other NASA centers, in order

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SBIR and the Phase III Challenge of Commercialization: Report of a Symposium to take advantage of technologies that are dual-use or applicable to other programs. Add a mechanism that permits some mid-year start-ups to meet new, urgent needs. Such a mechanism was needed when the new Vision for Space Exploration was launched the previous year. DISCUSSION Mr. Levine, the moderator, asked other members of the panel to suggest their own improvements for the SBIR program. Mr. McNamara said that for him the program was running well. He pointed to the lack of pre-planned budget for SBIR Phase III transitions’ Valley of Death as a general concern, and suggested that higher dollar values for Phase II would help in the transition to Phase III. He also urged more education of people on how best to use the program. Other than that, he praised the acquisition tools and the sole-source follow-on as making the program powerful. Mr. Levine agreed that major strengths of the program are the flexibility of Phase III procedures, especially the ability to start a Phase III project with few bureaucratic hurdles. He suggested that more people, even within the military, would be interested in knowing more about these advantages. He also said the program should be improved by speeding up the process of producing and publicizing the topics. In terms of the Valley of Death, he called for a better mechanism to help firms doing fundamental science plan how to scale up or build a prototype after the principle has been proved. Major Van Zuiden said he would like “to steal an idea from NAVAIR,” which was a concept called “clustering” of SBIR awards. This might occur for problems that proved too complex for one or two SBIR projects and might require that five, six, or seven firms work together on a common problem, each taking a different aspect. When that project is finished, a prime or perhaps an SBIR contractor might integrate the work to form a solution that can be commercialized. He added that he would like a better way to “spring-load the Phase III”—perhaps by placing interim milestones in Phase II that would be linked with some bridge funding before commitment to the full terms of the Phase III. Dr. Wessner said that the suggestions all sounded helpful, and asked why they could not be implemented. Mr. McNamara said that when he needed a Phase II award that was larger than the official limit of $750,000, he often received a flexible response from the Navy program manager, John Williams, with extra funding to help reach Phase III. “So when you want to pull the trigger and go to Phase III,” he said, “I think the rules basically allow you enough flexibility.”

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SBIR and the Phase III Challenge of Commercialization: Report of a Symposium Navy-Air Force Collaboration A questioner asked whether anything should be done to improve the collaboration between the technical communities in the Navy, especially the submarine program, and the Air Force. Mr. McNamara said the two communities did run “in parallel,” and were moving closer together. The submarine technology effort focuses its R&D efforts on mainstream R&D research and on transitions from 6.2 (applied research) to 6.3 and 6.4 (development and applications). That is usually focused through the Navy laboratories, he said, producing a buy-in and a process to follow. When a “disruptive” (innovative) technology becomes available, it may not draw immediate interest in this more traditional environment. SBIR awards allow the effort to by-pass that environment and to jump-start the new technology or allow it to compete for attention. He said that the SBIR efforts were complementary to the Navy laboratories and could accelerate transitions from Navy activities into tactical systems. Major Van Zuiden said that for submarines, the technical people in the laboratories helped evaluate SBIR projects. He added that as some of the laboratory budgets decrease, with reductions in defense spending, they will probably use SBIR awards to augment their own research and development. Dealing with the Problem of Timing A participant asked Mr. McNamara about his comment that the SBIR awards should be used for tomorrow’s problems, not today’s. Part of the problem with the transition, however, comes when the results from Phase II research emerge after three or four years only to find that the original requirement had disappeared or that the new technology was too disruptive to be introduced smoothly. He also referred to Mr. Hughes’ comment that the timing of the infusion is very important, and if SBIR development is out of the R&D mainstream there might already exist other solutions. Mr. McNamara agreed that by the time a topic is written, vetted, and advertised, and a small business is selected for an award, the time has passed to solve “today’s problem.” If he had today’s problem to solve, he said, and he wanted to use an SBIR, he would look for a Phase I result to recycle. This would give him a head start. He might also look at a number of sources, whether a prime contractor or a Phase III SBIR, that are already working on the question or a related question, or look at a laboratory. Does Advocacy Bring Success? The questioner said that Mr. McNamara’s seemed to be a very successful SBIR organization, with by far the largest number of Phase III awards. He noted that as executive director, Mr. McNamara devoted much of his time to advocat-

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SBIR and the Phase III Challenge of Commercialization: Report of a Symposium ing for the SBIR program. He asked if this advocacy was the essential role of the program manager, to promote the introduction of science and technology into acquisition programs, whether this would be appropriate for other science and technology activities. He also asked whether the other science and technology areas were transitioning to his program as he had SBIR transitioning to his program. Mr. McNamara said he was active as an SBIR advocate because before he arrived, the SBIR had been largely overlooked or assigned low value, with no linkage to acquisition. He said that the acquisition offices were the key agents in moving SBIR projects into Phase III. Also, he said that his office now did “a pretty good job,” partly because he had been around long enough that the SBIR was ingrained in the organization. People now wanted to work with it and welcomed opportunities to submit their topics. He added that some of his sister organizations did not seem to be quite as interested yet. They did use the SBIR money and had started to treat it like a program, but they had not had Phase III successes. He said that a common problem for them was that they could not interest the prime contractors in their projects. The submarine program tried to get its SBIR projects to the prime for each new technology under development. It also had an instant market in the inservice community, which allowed them to move their products out to other markets within the Navy much more rapidly. The best strategy, he said, was not to tie a project to a single large program, such as a single Virginia-class submarine, but to introduce several dozen new technologies or “back-fits” per year, and to become known for producing specified R&D solutions.