from a peak of 5,129 in FY2003, to 4,208 in FY2005, a decline of 18 percent (see Figure 3-1).

This overall decline primarily reflects a reduction in the number of Phase I awards at NIH (down 38 percent), NASA (down 4.8 percent), and DoE (down 19.8 percent). Since the number of Phase II awards has increased by 16.1 percent over the past few years (2002-2005), agencies appear to be making a shift in emphasis away from Phase I and toward Phase II.

The growth and then decline in the number of Phase I awards are not directly reflected in the amounts spent by the agencies on Phase I. Funding levels for Phase I peaked in 2004, and funding committed to Phase I has fallen by only 8.6 percent (see Figure 3-2). This suggests that while the number of awards has been falling, the size of awards has been growing. And this is in fact the case (see Figure 3-3).

The decline in award size from 1999 to 2001 may be related to the introduction of Phase I options at DoD, which reduced the size of “standard” awards to $70,000 in most cases. The sharp increase in award size from 2001-2004 (up 56 percent in three years) has been driven by changes at the two largest programs.

At DoD, average award size increased from $71,056 to $90,508 (up 27 percent). At HHS (the home agency of NIH), average award size increased from

FIGURE 3-1 Total Phase I awards, 1992-2005.

FIGURE 3-1 Total Phase I awards, 1992-2005.

NOTE: This is a correction of the prepublication version released on July 27, 2007.

SOURCE: U.S. Small Business Administration, Tech-Net Database.

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