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An Assessment of the SBIR Program at the Department of Defense
3
SBIR Awards at DoD
3.1
INTRODUCTION
This chapter reviews SBIR awards made by DoD, based on data provided by the department. All awards at DoD are made in the form of contracts, and as such require a deliverable. At a minimum, this means a final report; in some cases, a prototype or working model is also delivered.
The chapter provides a comprehensive overview of the distribution of awards, giving a context into which questions regarding outcomes and program management can best be placed.
This is especially important because of the very decentralized character of the DoD SBIR program. Each agency or service in effect operates its own program within the guidelines sets by the Small Business Administration (SBA) and Defense Research & Engineering (DDR&E). Program objectives, mechanisms, and assessment are all developed and implemented primarily at the service and agency level.
Overall, the number of awards made at DoD has grown sharply in recent years, reflecting increases in the department’s R&D budget.
3.2
NUMBER OF PHASE I AWARDS
While SBIR funding for DoD has substantially increased in recent years (see Figure 3-1), the number of Phase I awards awarded has not. The number of Phase I awards remained relatively constant from 1993 to 2001 before increasing substantially in 2002. Since then the number of Phase I awards has again stayed relatively flat. (See Table 3-1.) The substantial (65 percent) increase in the number of Phase I awards made by DoD in 2002 resulted from a number of factors.
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An Assessment of the SBIR Program at the Department of Defense
FIGURE 3-1 SBIR funding at DoD, FY1998–2006.
SOURCE: Michael Caccuitto, DoD SBIR/STTR Program Administrator, and Carol Van Wyk, DoD CPP Coordinator, Presentation to SBTC SBIR in Rapid Transition Conference, September 27, 2006, Washington, DC.
After several years of relatively constant funding, the DoD R&D set-aside increased by 15 percent in FY2001. Cautiously, DoD awarded less than 8 percent more Phase I contracts. In 2002, DoD received a further increase of 22 percent in R&D funding and it became clear that the FY2003 and FY2004 DoD R&D budgets were likely to grow even further.
TABLE 3-1 SBIR Awards at DoD, 1992–2005
Year
Number of Phase I Awards
Number of Phase II Awards
Total
1992
1,065
433
1,498
1993
1,303
591
1,894
1994
1,370
406
1,776
1995
1,262
575
1,837
1996
1,372
611
1,983
1997
1,526
638
2,164
1998
1,286
672
1,958
1999
1,393
568
1,961
2000
1,220
626
1,846
2001
1,310
702
2,012
2002
2,162
661
2,823
2003
2,113
1,078
3,191
2004
2,075
1,173
3,248
2005
2,344
998
3,342
Total
21,801
9,732
31,533
SOURCE: DoD awards database.
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An Assessment of the SBIR Program at the Department of Defense
DoD responded by increasing the number of SBIR topics by about 10 percent in FY2002, but received about 75 percent more proposals as the private, venture-funding technology bubble burst and small technology companies sought new sources of funding. The confluence of increased funding available, more topics, and more demand led to a significantly higher number of Phase I awards.
Agency-specific factors also played a part. In 2001, the Missile Defense Agency (MDA) was seeking to exit the SBIR program. This led to a reduced number of MDA contracts in FY2001 and the “loaning-out” of MDA set-aside funding for use by other agencies. When this exit strategy was rejected by DoD, MDA found that the low number of Phase I contracts it awarded in FY2001 resulted in a reduced number of Phase II contracts in FY2002. But because MDA was now fully committed to spending its entire SBIR set-aside, it had to give out an extra-large number of Phase I contracts in FY2002.
The substantial increase in Phase I contracts in 2002 helps to explain the 59 percent increase in the number of Phase II awards between 2001 and 2003. Since this step jump, numbers have increased only slightly (see Table 3-1).
3.2.1
Phase I—Median Award Size
Figure 3-2 shows that DoD Phase I awards have generally averaged just under $90,000 since 1997. The increase from 1994–1997 resulted from changes in SBA guidelines after the 1992 SBIR reauthorization.
3.2.2
Phase I—New Winners
The share of Phase I awards going to new winners—firms that have not previously participated in the DoD SBIR program—is an important measure of the
FIGURE 3-2 Phase I Awards at DoD: Mean award size, FY1992–2003.
SOURCE: DoD awards database.
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An Assessment of the SBIR Program at the Department of Defense
FIGURE 3-3 Prior SBIR participation/success of the pool of Phase I award winners, FY2005.
SOURCE: Michael Caccuitto, DoD SBIR/STTR Program Administrator, and Carol Van Wyk, DoD CPP Coordinator, Presentation to SBTC SBIR in Rapid Transition Conference, September 27, 2006, Washington, DC.
openness of the program. In this context, “openness” means the extent to which the SBIR program remains open to new entrants and has not been “captured” by a limited set of winning companies with well-established connections to DoD.
DoD has provided data covering FY2005 (as of March 2006) that show that 37 percent of awards went to firms that had not previously won a DoD SBIR award. An additional 50 percent of awards were given to companies with five or less Phase II awards. Only 13 percent of Phase I awards went to companies with more than five Phase II awards. (See Figure 3-3.)
Data from the Navy also suggest that the program is open to outside firms without an SBIR track record. For example, about half of all Phase I contracts from NAVAIR go to companies which have never won an SBIR at NAVAIR before; about 40–45 percent of Phase II contracts go to “new” firms as well.1
Figures for NAVAIR alone are naturally higher than for DoD overall, as some of the “new” winners at NAVAIR previously have won SBIR awards elsewhere within DoD, and would therefore not be classified as “new” winners for the department as a whole.
Fundamentally, the evidence is clear that DoD SBIR programs are systematically including large numbers of new entrants. SBIR awards have thus not become the preserve of a small group of multiple winners. While some companies
1
Carol Van Wyk, NAVAIR SBIR Program Manager, presentation to PMA-209, September 2005.
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An Assessment of the SBIR Program at the Department of Defense
have won a large number of awards, there are structural characteristics of DoD that tend to encourage staff to work with companies that have performed well in the past. Overall, the SBIR program is remarkably open to new entrants even as some companies are able to repeatedly win in open competitions for awards.
3.2.3
Phase I—The States and Regions
One of the persistent questions about SBIR concerns how the awards are distributed across the states. Like other federal R&D funding distributed by merit, SBIR funding tends to cluster in high-tech states and high-tech regions within those states.
DoD Phase I SBIR awards go disproportionately to states with well-established traditions of science and engineering (see Table 3-2). The top five award-winning states received 53.8 percent of all DoD Phase I awards between 1992 and 2005. California and Massachusetts together account for 37.42 percent of all Phase I awards between 1992 and 2005.2
Concentration at the top is mirrored in the limited number of awards given to companies in low-award states (see Table 3-3). The bottom 15 states accounted for 1.85 percent of Phase I awards over the same time period, and 10 states averaged less than three awards per year.
This concentration of awards is not unique to the SBIR program. The GAO pointed out in its 1999 study of the SBIR program that, according to the SBA, one-third of the states received 85 percent of all SBIR awards, but also found that the distribution of SBIR awards tends to mirror the distribution of R&D funds in general.3 The same 1999 GAO study also noted concern about the concentration of awards, not only by company (see below), but also by geographic location. With regard to geographic distribution, the GAO report noted that “Companies in a small number of states, especially California and Massachusetts, have submitted the most proposals and won the majority of awards, although the distribution of awards generally follows the pattern of distribution of non-SBIR expenditures for R&D, venture capital investments, and academic research.”4
The study notes further that the data on the “proposal-to-award ratios show that proposals from companies in states with historically lesser amounts of federal research funding won awards at almost the same rate as proposals from companies in other states” (i.e. those receiving fewer awards).5 This suggests that rates
2
As a comparison, California and Massachusetts accounted for 36.5 percent of Phase I awards at NIH.
3
The SBA study mentioned in the report (no citation given) referred to SBIR awards from FY1983 through FY1986. U.S. Government Accounting Office, “Federal Research: Evaluation of Small Business Innovation Research Can Be Strengthened,” GAO/RCED-99-114, Washington, DC: U.S. Government Accounting Office, June 1999, p. 17.
4
Ibid., p. 21. See also pp. 26-27.
5
Ibid, p. 27.
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An Assessment of the SBIR Program at the Department of Defense
TABLE 3-2 Phase I Awards 1992–2005 by State
State
Number of Phase I Awards
Total
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
AK
1
1
1
1
1
1
1
7
AL
14
20
24
32
24
31
21
38
21
32
45
59
63
89
513
AR
1
1
2
1
3
1
3
1
2
15
AZ
14
16
14
23
41
41
31
31
38
32
40
44
46
50
461
CA
262
336
370
294
332
344
275
321
254
302
500
439
436
464
4,929
CO
30
43
47
38
47
68
52
57
76
59
114
101
99
97
928
CT
35
33
55
27
30
30
24
22
14
15
35
27
26
19
392
DC
2
2
3
4
3
2
8
4
3
6
3
3
6
49
DE
6
3
7
3
3
3
4
3
2
3
1
6
6
6
56
FL
31
30
35
36
36
44
35
37
38
38
51
46
60
65
582
GA
6
11
10
7
13
17
16
17
15
13
20
19
17
21
202
HI
4
3
3
4
3
8
3
6
7
4
14
59
IA
1
1
3
1
3
4
1
5
2
21
ID
1
4
2
1
2
5
7
3
3
8
36
IL
12
15
4
11
14
10
12
17
15
9
23
17
29
26
214
IN
5
4
1
4
5
3
8
4
2
3
14
9
8
24
94
KS
4
3
2
3
2
5
3
3
3
4
1
6
1
5
45
KY
1
1
3
3
1
2
2
1
2
2
1
1
20
LA
4
5
1
5
6
2
3
2
1
3
5
8
7
5
57
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State
Number of Phase I Awards
Total
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
MA
181
219
199
194
204
247
189
198
182
176
317
310
298
298
3,212
MD
37
65
59
48
63
73
48
84
53
68
118
101
108
122
1,047
ME
6
5
3
3
1
1
4
1
1
11
9
8
10
63
MI
14
13
20
26
20
37
27
19
23
18
54
41
40
68
420
MN
13
19
25
19
18
26
15
25
20
18
27
23
20
26
294
MO
4
4
6
7
3
10
8
4
5
4
12
6
7
12
92
MS
2
2
3
1
3
4
4
5
2
26
MT
1
2
2
3
2
4
3
4
6
4
8
8
47
NC
9
10
13
10
10
8
10
9
13
15
9
20
26
16
178
ND
2
1
1
1
2
1
1
9
NE
3
1
1
1
2
3
3
3
1
18
NH
8
15
14
17
10
12
15
20
14
18
27
29
22
27
248
NJ
40
42
55
41
44
51
44
44
41
36
63
68
53
65
687
NM
37
40
24
38
37
27
32
33
26
27
35
35
35
30
456
NV
3
2
1
6
4
5
1
6
2
5
14
12
4
4
69
NY
36
53
64
50
57
54
50
52
40
56
78
89
82
108
869
OH
38
51
50
56
45
63
64
58
63
56
92
87
95
111
929
OK
5
2
3
2
6
3
4
3
1
5
6
7
21
16
84
OR
5
7
10
13
8
12
6
5
4
11
13
14
15
17
140
PA
44
38
52
44
53
61
48
46
48
56
74
80
92
101
837
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An Assessment of the SBIR Program at the Department of Defense
RI
9
6
4
8
7
1
5
3
6
2
6
10
2
4
73
SC
2
2
3
4
1
1
7
5
12
12
3
4
56
SD
1
2
1
1
1
1
7
TN
7
10
15
9
9
8
13
11
10
9
9
11
11
10
142
TX
26
45
42
55
53
55
54
38
41
51
80
95
98
115
848
UT
13
8
9
10
16
4
11
14
2
8
14
12
7
23
151
VA
75
88
86
79
105
113
112
94
95
109
151
170
144
186
1,607
VT
2
3
2
1
4
6
3
3
1
1
4
5
4
4
43
WA
16
26
17
23
16
22
17
25
17
14
35
34
32
32
326
WI
5
4
9
5
4
12
5
8
5
2
3
5
8
8
83
WV
3
4
2
1
7
15
10
8
50
WY
1
1
1
1
2
1
3
10
Total
1,065
1,303
1,370
1,262
1,372
1,526
1,286
1,393
1,220
1,310
2,162
2,113
2,075
2,344
21,801
SOURCE: Department of Defense.
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An Assessment of the SBIR Program at the Department of Defense
TABLE 3-3 Phase I Awards to the 15 Lowest Award-receiving States, FY1992–2005
State
Number of Phase I Awards
Total
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
AK
1
1
1
1
1
1
1
7
SD
1
2
1
1
1
1
7
ND
2
1
1
1
2
1
1
9
WY
1
1
1
1
2
1
3
10
AR
1
1
2
1
3
1
3
1
2
15
NE
3
1
1
1
2
3
3
3
1
18
KY
1
1
3
3
1
2
2
1
2
2
1
1
20
IA
1
1
3
1
3
4
1
5
2
21
MS
2
2
3
1
3
4
4
5
2
26
ID
1
4
2
1
2
5
7
3
3
8
36
VT
2
3
2
1
4
6
3
3
1
1
4
5
4
4
43
KS
4
3
2
3
2
5
3
3
3
4
1
6
1
5
45
MT
1
2
2
3
2
4
3
4
6
4
8
8
47
DC
2
2
3
4
3
2
8
4
3
6
3
3
6
49
WV
3
4
2
1
7
15
10
8
50
SOURCE: DoD awards database.
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An Assessment of the SBIR Program at the Department of Defense
TABLE 3-4 Phase I Awards—Top Zip Codes
Zip Code
Number of Phase I Awards
92121
353
01801
324
90501
314
01803
257
02154
253
35805
203
01824
193
80301
192
02451
191
01810
190
85706
177
02138
163
94043
144
90505
141
24060
137
93117
135
87109
132
77840
131
01730
129
03755
129
SOURCE: DoD awards database.
of application are a major determinant of success in winning awards from the program.
Awards are also distributed unequally within states. The top 20 winning zip codes account for 17.8 percent of Phase I awards overall (see Table 3-4). This is a lower degree of concentration than at NIH, but in both cases, the data illustrate that the SBIR awards, like other innovation activity, tend to be concentrated in relatively small geographic areas. These clusters of innovation are, in effect, the relevant unit of measure. Even states with high numbers of awards find that they are not distributed across the state but instead are concentrated in these innovation clusters. Moreover, other sources of early-stage funding such as venture capital tend to be concentrated as well, and normally in the same areas.6
6
For example, venture capital investment is widely recognized to be concentrated in California with some 47 percent of national venture funding, yet 35 percent of the nation’s VC investments are in Silicon Valley, just under 7 percent in Los Angeles/Orange County, 4.6 percent in San Diego, while the rest of California receives 0.5 percent of the $7.6 billion invested there in 2005. See the presentation “The Private Equity Continuum” by Steve Weiss, Executive Committee Chair of Coachella Valley Angel Network, citing PricewaterhouseCoopers Money Tree data at the Executive Seminar on Angel Funding, University of California at Riverside, December 8-9, 2006, Palm Springs, California.
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3.2.4
Commercialization and Multiple-award Winners
In the first eight years of the program, a number of companies were successful in winning multiple awards. Many of the projects funded by these awards were not commercialized. There are several reasons for this. In part, the low commercialization rates reflect the uncertainties inherent in the funding of relatively early-stage technology development. It may also reflect imperfect alignment between solicitations and the needs of procurement agencies and the complexities and long lead times of the procurement process. Perhaps most important, it may reflect the lower emphasis on commercialization in the early years of the program than is now the case.7 Lastly, it reflects the different goals of participating companies documented in previous NRC research.8 Understanding these different goals is important in this context.
Companies that participate in the program, like the agencies themselves, often have multiple objectives.
Firms approach the SBIR award process at different stages of development and with different objectives. Some firms are developing technology concepts; some firms see their vocation as contract research organizations; others actively seek to develop commercial products, either for public agencies or for the marketplace.9
Investigator-led firms, limited in size and focused on a single concept may seek multiple awards as they advance research on a promising technology.10
7
As a Creare representative, Nabil Elkouh, points out, in the early years of the program, small companies had not figured out how to use it, nor had the departments figured out how to run the program, and the award process was less competitive than it is today. Emphasis on commercialization was minimal. Program managers defined topics that represented an interesting technical challenge. See the case study of Creare, Inc., August 2005, in National Research Council, An Assessment of the SBIR Program at the Department of Energy, Charles W. Wessner, ed., Washington, DC: The National Academies Press, 2008.
8
National Research Council, The Small Business Innovation Research Program: An Assessment of the Department of the Defense Fast Track Initiative, Charles W. Wessner, ed., Washington, DC: National Academy Press, 2000.
9
See Reid Cramer, “Patterns of Firm Participation in the Small Business Innovation Research Program in the Southwestern and Mountain States,” in National Research Council, The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative, op. cit., p. 151. The author describes the incremental nature of technical advance, which sometimes necessitates several awards. See also John T. Scott, “An Assessment of the Small Business Innovation Research Program in New England: Fast Track Compared with Non-Fast Track,” in National Research Council, The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative, op. cit., p. 109, for a discussion of Foster-Miller, Inc.
10
Ibid. The mirror image of this approach is the program manager that makes several awards for similar technologies among different companies. In fact, it is not uncommon to have multiple awardees on the same Phase I topic. For an example, see the Navy’s SBIR Web site selections page for their FY-06.1 awardees, available at <http://www.navysbir.com/06_1selections.html>. This page not only shows several awardees for each topic, but if you click on the “Details” link, you can see the differences in companies’ approaches to the topics.
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FIGURE 3-8 Phase II median award size, 1992–2005.
SOURCE: DoD awards database.
3.3.2
Phase II Awards—By Company
As with Phase I, some companies have received numerous Phase II awards. The companies receiving many Phase I awards are often also successful in applying for multiple Phase II awards, as on average, 42 percent of Phase I winning proposals receive Phase II awards.
FIGURE 3-9 Oversized Phase II awards at DoD, 1992–2005.
SOURCE: DoD awards database.
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TABLE 3-9 Phase II Multiple-award Winners 1992–2005 at DoD
Firm Name
Number of Phase I Awards
Number of Phase II Awards
Phase I/Phase II Conversion Rate
FOSTER-MILLER, INC.
361
140
38.8
PHYSICAL OPTICS CORP.
316
117
37.0
PHYSICAL SCIENCES, INC.
170
75
44.1
MISSION RESEARCH CORP.
126
69
54.8
ALPHATECH, INC.
117
68
58.1
CREARE, INC.
129
60
46.5
CHARLES RIVER ANALYTICS, INC.
112
60
53.6
CFD RESEARCH CORP.
107
56
52.3
TRITON SYSTEMS, INC.
125
55
44.0
COHERENT TECHNOLOGIES, INC.
101
53
52.5
TECHNOLOGY SERVICE CORP.
90
42
46.7
CYBERNET SYSTEMS CORP.
95
41
43.2
SCIENTIFIC SYSTEMS CO., INC.
91
38
41.8
DIGITAL SYSTEM RESOURCES, INC.
48
36
75.0
STOTTLER HENKE ASSOC., INC.
84
36
42.9
TEXAS RESEARCH INSTITUTE AUSTIN, INC.
77
36
46.8
ORINCON CORP.
97
36
37.1
METROLASER, INC.
66
35
53.0
SYSTEMS & PROCESS ENGINEERING CO.
69
35
50.7
TOYON RESEARCH CORP.
65
34
52.3
Total and Average (conversion rate)
2,446
1,122
48.6
SOURCE: DoD awards database.
Table 3-9 shows the top Phase II award winners. Note that these results are estimates only.25
Together, the top 20 winners account for 11.5 percent of all Phase II awards made at DoD from FY1992 to FY2005. This compares with 11.1 percent at NIH. It is also worth noting that some of the top 20 winners are no longer eligible. For example, Foster-Miller, Inc., has been purchased by a foreign-owned corporation; Alphatech, Inc., Digital System Resources, Inc., and Triton Systems, Inc., have each been acquired and are now part of companies which have more than 500 employees.
3.3.3
Phase II Awards—By State
As would be expected with merit-based R&D awards, the geographical distribution of Phase II awards approximates but does not equal the distribution for Phase I awards. As can be seen in Table 3-10, the states with many Phase I
25
Because companies change names, and in some cases tax ID numbers, a precise count would require a manual examination of all records.
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TABLE 3-10 Phase II Awards—By State
State
Number of Phase II Awards
Total
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
AK
1
1
2
AL
11
13
3
7
16
21
16
6
18
8
15
32
31
30
227
AR
2
1
3
2
8
AZ
1
5
8
5
7
11
15
10
11
16
14
16
17
19
155
CA
100
130
114
132
147
155
160
103
133
163
160
236
254
211
2,198
CO
11
22
13
22
19
25
31
33
29
39
32
54
57
48
435
CT
20
19
5
18
20
15
10
7
7
12
6
18
17
17
191
DC
2
1
1
2
1
1
2
2
1
13
DE
1
4
1
3
2
2
2
2
1
1
2
21
FL
4
17
4
16
17
13
19
18
15
18
14
33
26
26
240
GA
3
1
2
5
1
8
8
10
8
9
6
12
9
10
92
HI
3
1
3
3
1
2
3
4
20
IA
1
1
3
2
1
1
9
ID
1
1
1
4
2
1
3
13
IL
7
6
6
2
2
2
4
3
10
8
3
12
13
16
94
IN
1
3
1
2
3
4
1
1
2
7
6
5
36
KS
1
2
2
1
2
4
2
1
3
1
3
22
KY
1
2
1
1
1
1
7
LA
1
1
1
1
2
2
2
1
2
3
2
18
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State
Number of Phase II Awards
Total
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
MA
67
102
66
87
92
91
106
87
86
100
98
152
159
119
1,412
MD
19
19
20
25
24
26
24
23
35
29
25
52
56
54
431
ME
5
2
2
2
3
9
3
26
MI
12
5
6
10
7
14
22
9
11
15
9
30
24
20
194
MN
5
9
3
6
14
9
4
7
12
9
12
18
10
9
127
MO
2
1
1
1
2
6
1
5
1
2
1
6
1
30
MS
1
1
1
1
3
4
11
MT
1
1
3
1
2
2
2
3
3
2
5
25
NC
3
4
7
5
2
7
5
6
4
5
4
5
12
10
79
ND
1
1
1
2
1
6
NE
2
2
1
2
2
1
1
11
NH
8
11
2
7
11
7
5
7
10
7
8
11
22
8
124
NJ
12
25
19
26
24
17
19
21
21
20
21
28
32
24
309
NM
20
14
10
15
7
16
15
19
14
11
10
13
17
12
203
NV
3
3
1
1
2
2
4
1
2
3
6
6
11
3
48
NY
24
26
16
29
21
29
23
25
23
21
20
44
49
50
400
OH
14
13
14
31
27
19
36
25
31
39
29
57
53
59
447
OK
1
1
2
3
2
3
1
1
3
2
4
6
29
OR
2
2
3
4
7
4
4
4
1
5
4
6
8
9
63
PA
15
27
16
32
16
32
29
31
22
28
30
49
47
39
413
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RI
2
4
2
2
3
2
2
3
2
4
5
1
32
SC
1
1
2
4
1
5
1
4
19
SD
1
1
2
TN
3
3
4
5
8
4
4
3
5
7
3
1
9
10
69
TX
10
19
9
16
24
14
22
25
25
26
22
40
50
44
346
UT
4
12
4
4
6
5
4
4
4
4
4
10
5
6
76
VA
29
48
30
37
48
56
48
47
42
60
63
73
83
77
741
VT
1
2
1
2
2
2
3
5
1
19
WA
8
7
7
11
9
11
11
8
9
11
12
18
29
14
165
WI
5
2
2
3
4
4
3
4
2
2
1
5
6
3
46
WV
1
2
2
1
5
9
5
25
WY
1
1
1
3
Total
433
591
406
575
611
638
672
568
626
702
661
1,078
1,173
998
9,732
SOURCE: DoD awards database.
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award-winners tended to get the most Phase II awards. Not surprisingly, states with few Phase I awards had few Phase II awards.
Still, states do vary substantially in the degree to which their companies successfully convert Phase I awards into Phase II. Table 3-11 shows the percentage share of Phase II awards between 1992 and 2005, by state, expressed as a percentage of the Phase I awards between 1992 and 2005, by state. This metric indicates which states appear to be particularly successful at converting Phase I awards into Phase II awards.
The data show that the top 10 states on this metric had companies that converted Phase I into Phase II at a rate of 50 percent or better; the ten lowest receiving states all converted at rates of less than 35 percent. This suggests avenues for state-level research. It is possible that enthusiastic outreach efforts at the state level—perhaps by state S&T or economic development agencies—have encouraged firms to submit Phase I proposals that in the end have not justified Phase II funding. This may not necessarily be a good strategy for either the firm or the state. On the other hand, states can perhaps help companies learn to develop a more successful approach to Phase II. These data may also be impacted by sample size. None of the 15 states with the most Phase II awards are on either list.
The number of “low award” states—those with 10 or fewer Phase II awards per year—has fallen substantially between 1992 and 2005, from 28 to 16. This may be partly explained by the substantial increase that took place during this period in the number of awards. Nonetheless, it is clear that companies from areas traditionally not regarded as S&T hubs do have opportunities to win Phase II wards at DoD, an advantage of the program given the required concentration of early-stage capital.
TABLE 3-11 Phase II Awards—Conversion Rates for Phase IIs by State, 1992-2005, Expressed as a Percent of Phase Is
High Conversion
Low Conversion
NV
69.6
OK
34.5
ND
66.7
SC
33.9
NE
61.1
HI
33.9
WI
55.4
AZ
33.6
AR
53.3
MO
32.6
MT
53.2
LA
31.6
WA
50.6
WY
30.0
UT
50.3
AK
28.6
NH
50.0
SD
28.6
WV
50.0
DC
26.5
SOURCE: DoD awards database.
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Naturally, Phase II awards are further concentrated within states. However, the zip code with the largest number of Phase II awards received only 1.6 percent of Phase I awards, and 1.5 percent of Phase IIs. Overall, the top 10 zip codes accounted for 11.2 percent of both Phase I and Phase II awards. This contrasts with NIH, where the top zip code accounted for 19.9 percent of Phase I awards, and the top 10 zip codes for 13.6 percent. Science and engineering talent in the disciplines relevant to DoD appear to be more widely distributed than that in the life sciences.26
3.3.4
Phase II—Awards by Component
Like Phase I, Phase II awards are concentrated in the major components of DoD—Army, Navy, Air Force, MDA, and DARPA (see Table 3-12).
As shown by Figure 3-10, Army, Navy, Air Force, and MDA account for 83 percent of Phase II awards on average since FY2000: The remaining 17 percent is largely accounted for by DARPA.
These percentages vary somewhat over time, although that has stabilized at about 85 percent since 2002 (see Figure 3-11).
3.4
WOMAN- AND MINORITY-OWNED FIRMS
One of the stated objectives of the SBIR program is to expand opportunities for women and minorities in the federal S&T contracting process. One way to measure program performance in this area is to review the share of awards being made to woman- and minority-owned firms.
While Phase I awards to woman-owned firms have continued to increase as a percentage of all Phase I awards, the percentage of Phase I awards being made to minority-owned firms has declined quite substantially since the mid-1990s. The percentage fell below 10 percent for the first time in 2004.
DoD data suggest that the decline in Phase I award shares for minority-owned firms is reflected in Phase II, although there was in fact an uptick in the percentage of awards to minority-owned firms in FY2005. (See Figure 3-12.)
These data also indicate that both woman- and minority-owned firms are converting Phase I awards into Phase II at a rate very close to that of all award winners. On average, their share of all Phase II awards is 0.3 percent higher than their share of Phase I awards. This suggests that the overall quality of Phase I awards from woman- and minority-owned firms is comparable to that of all firms, in that these awards appear equally deserving of the substantially greater investment required from the agency at Phase II.
Further analysis of applications data is required to determine whether the declining Phase I awards rate for minority-owned firms reflects a declining share
26
Data from DoD awards database and NIH IMPAC database respectively.
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TABLE 3-12 Phase II Awards, by Agency and Component
Year
Number of Phase II Awards
Total
AF
ARMY
MDA/BMDO
NAVY
CBD
DARPA
DSWA/DTRA
NGA
NIMA
OSD
SOCOM
1992
110
172
46
52
0
41
12
0
0
0
0
433
1993
199
123
60
120
0
83
6
0
0
0
0
591
1994
152
78
23
107
0
43
3
0
0
0
0
406
1995
191
131
34
127
0
84
6
0
0
0
2
575
1996
217
100
36
156
0
78
3
0
0
16
5
611
1997
221
113
51
164
0
57
6
0
0
23
3
638
1998
243
111
69
136
0
71
7
0
0
33
2
672
1999
212
105
43
107
6
44
7
0
0
37
7
568
2000
195
112
56
186
8
45
5
1
0
13
5
626
2001
221
180
59
136
7
53
6
3
0
29
8
702
2002
233
124
28
170
11
47
6
1
0
36
5
661
2003
234
323
184
193
10
66
3
1
0
50
14
1,078
2004
317
273
211
212
11
75
3
2
0
60
9
1,173
2005
339
123
102
290
7
80
4
1
0
38
14
998
Total
3,084
2,068
1,002
2,156
60
867
77
9
0
335
74
9,732
SOURCE: DoD awards database.
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FIGURE 3-10 Distribution of Phase II awards by component, FY2000–2005 (annual average percent).
SOURCE: DoD awards database.
of applications, the rejection rate that is increasingly greater than that for all other applicants, or whether the rate of increase in awards is growing faster than number of minority firms.
Finally, a note on data. NRC research has determined that the DoD applications database is a poor source of information on the woman/minority status of the approximately 15,000 entries for a given year. The data come directly from the proposals, but firms are sometimes inaccurate in what they enter for ownership status. In FY2005 we identified 53 firms that listed minority or woman ownership on some, but not all of the proposals they submitted. Looking across years, firms were identified that showed woman ownership some years, then no status, then woman ownership again. One firm that had about ten proposals annually listed itself as minority-owned, then several years of no special ownership, then woman-owned. After awards are made and moved to a separate database table, DoD works to correct some obvious errors in the demographic status.
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FIGURE 3-11 Percentage share of all Phase II awards for the four largest components, 1992–2005.
SOURCE: DoD awards database.
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FIGURE 3-12 Phase II awards to woman- and minority-owned firms.
SOURCE: DoD awards database.