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).

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.

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.

FIGURE 3-2 Phase I Awards at DoD: Mean award size, FY1992–2003.

SOURCE: DoD awards database.

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