Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter.
Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.
OCR for page 103
Pane! V
Observations and Policy Issues:
Agency Perspectives
INTRODUCTION
Charles W. Wessner
National Research Council
The purpose of the day's concluding panel, Dr. Wessner said, was to provide
SBIR program managers an opportunity to comment on the proceedings. He put
forward several questions:
· What have the managers found most helpful?
· What have they disagreed with most strongly?
· Are there features of their own programs they regard as key?
· Have they gained any new insights?
Arlene de Blanc
U.S. Department of Energy
Tensions with the SBIR Program
Ms. de Blanc introduced herself as one of three people who manage the SBIR
program at the Department of Energy (DoE) which at about $75 million annu-
ally is the fourth largest in the government. Ms. de Blanc said that the most
difficult problem she has seen in her 18 months with DoE's program is the ten-
sion between the goals of the agency program offices and the academic R&D
103
OCR for page 104
104
THE SMALL BUSINESS INNOVATION AND RESEARCH PROGRAM
community on the one hand and those of the SBIR program on the other. Invok-
ing a scene from Lewis Carroll's Through the Looking Glass, she recalled that
when Alice, fresh from stepping through the mirror, reacts to the White Queen's
disarray by tidying her up, the monarch is so impressed that she offers the young
girl a job. When the White Queen attempts to persuade the reluctant Alice to
accept by offering to pay her wages in jam, Alice replies: "I do not care for any
jam today, thank you." At this point, the White Queen becomes irate, telling
Alice: "You could not have it today anyway, because we have jam every other
day. We had jam yesterday and we have jam tomorrow, but never jam today."
This, declared Ms. de Blanc, parallels what she saw in the DoE research
community. The researchers were willing to recognize SBIR's past history of
substantial and very positive economic and social results "that's our 'jam
yesterday."' They were also willing to recognize that there would be future fruits
of commercialization in the form of spinoffs "jam tomorrow." But, they asked,
"where is the contribution to our research program today where's our 'jam
today'?"
Over more than a decade, Ms. de Blanc observed, DoE was not particularly
good at providing "jam today," having been focused on the other two days. As
evidence, she pointed to the recommendation of a process improvement team,
formed by the Department in response to discontent over the issue, that program
research offices be given the ability to select their own projects. Reading the
team' s report, she had been "dumbfounded" to learn that the department had for
years collected the SBIR "tax" from the research programs without permitting
them to select projects. In the past year and a half, however, program managers
have been able to select their own projects, with the result that the projects have
been much more relevant to their programs than had someone else selected them.
In addition, the program offices are virtually guaranteed to get back very close to
the total dollar amount that they put in.
"All of a sudden, we see less tension between the SBIR program and the
R&D community in DoE," she remarked. "All of a sudden, we see cooperation
and joint efforts between SBIR projects and other non-SBIR projects as programs
realize that they can further leverage their funds through partnerships with other
organizations that are similarly oriented." She then pointed to a first for the
department: a new partnership in carbon management under which three DoE
research offices fossil energy, biological research systems, and materials are
collaborating on one SBIR topic. "In order to get the 'jam today,"' she said, "we
have to make sure that these constituent communities have a real stake" in the
SBIR program.
Commercialization
Ms. de Blanc recalled Dr. Morgenthaler's suggestion that Phase II applica-
tions be evaluated for commercial potential. She noted that DoE has made such
OCR for page 105
PANEL VI
105
evaluations for 15 years, with sales, cost-sharing, and follow-on funding commit-
ments making up a good percentage of a proposal's score. But that also has been
a source of tension in the research community, which looks at research rather
than commercial potential. The department has therefore created a scoring struc-
ture under which commercial potential, although important, is not controlling.
"A research project that has no commercial potential can still make it through,"
she stated, "but it had better be very good."
Ms. de Blanc emphasized what she sees as the importance to SBIR of "match-
makers," without whom the program will be unable to "get all of [its] little mom
and pop groups to marry off their progeny." DoE, realizing that one size does not
fit all, this year has provided two very different matchmakers to address the needs
of projects that have gone through Phase I and Phase II and are now looking into
Phase III. She speculated that results of these efforts would be available in two
years' time. Finally, she promised that if Congress will define what SBIR is
supposed to be "whether it is high risk, low risk, high R&D risk, low R&D risk,
grant, contract, domestic, foreign, or all of these things together" then the pro-
gram managers will find a way to deliver "jam today."
Kenneth Gabriel
U.S. Army
The Opportunity to Expand SBIR's Impact
Pointing to SBIR's overall budget of $1.1 billion and to the fact that hun-
dreds of smaller organizations are represented by the agencies that participate in
it directly, Dr. Gabriel observed that the more latitude allowed to constituent
organizations, the more difficult it becomes to administer a program that is
explicitly focused on a given objective. In light of the divisions that separate
government, industry, and academia from one another, he suggested that the most
powerful benefit that the SBIR and Small Business Technology Transfer (STTR)
programs could deliver might be in bringing the academic world closer to
industry, both large and small. Large businesses can fulfill the infrastructural
requirements, and academic institutions offer knowledge. "I believe that the big-
gest opportunity we have," he said, "is to make SBIR and STTR available not
only to small business but to the entire ensemble of the marketplace."
The Role of Entrepreneurs
The entrepreneurial engine being provided by small firms has the potential of
introducing new ideas into large corporations, while many growth ideas are being
spawned at research institutions like MIT and in the complex that surrounds it.
The efforts of the Army, Dr. Gabriel said, are in the direction of enhancing the
OCR for page 106
106
THE SMALL BUSINESS INNOVATION AND RESEARCH PROGRAM
participation of large businesses and academic institutions in developing tech-
nologies and in getting them successfully to the marketplace, so that small
business does not carry the burden of doing the entire work of innovation alone.
It should be possible to make the SBIR program much more suited to these pur-
poses than it is now; intellectual property rights are of concern if small businesses
are to interact with large businesses with the assurance that such legal issues as
transfer are covered.
Concluding, Dr. Gabriel named two crucial aspects of the Army's efforts:
· Technical merit. "We will fall on our sword on the technical merit" of an
award, he stated.
· Decentralization. To ensure the broadest possible participation in the
program, the Army allows final decisions on proposals to be made at its local
facilities, "at arm's length from the collusion and 'neighborhood culture' that
grows among the small businesses."
Robert Norwood
National Aeronautics and Space Administration
Dr. Norwood, who is responsible for SBIR at NASA as well as for the
agency's commercialization programs overall, agreed with Ms. Eskesen's com-
ments about the desirability of program officers' interacting with awarders. He
said, however, that the decline in levels of both personnel and funding in the
federal government makes it hard to see how SBIR would be able to support
activities comparable to those that venture capitalists or investment bankers take
in the process of due diligence to increase the chance of successful commercial-
ization.
Metrics
Dr. Norwood expressed doubt that any one measure of success could prove
useful for the SBIR programs of all 11 participating agencies, because their
approaches vary so widely. He cautioned against relying on "success stories" of
individual SBIR award recipients; doing so, he pointed out, assumes the validity
of a cause-and-effect link between program support and business success that has
not been well enough established to support an overall metric.
Increasing the Flow of Venture Capital
A potential route to improving the technology coming out of the program,
Dr. Norwood suggested, might lie in determining whether private resources such
as venture-capital funds can be brought in at an early stage of an SBIR project.
OCR for page 107
PANEL VI
107
This must be done in such a way that there is no intrusion on the awarding
agency's mission. He asked to hear from anyone in the audience who knew how
to accomplish this within the terms of the law.
To conclude, Dr. Norwood placed NASA's SBIR program in the context of
the agency's overall involvement with small business. Such activities come to
about $1 billion annually, with between $500 million and $700 million going to
firms in the high-technology sector.
Kesh Narayanan
National Science Foundation
Promising to enumerate the strengths, weaknesses, and opportunities associ-
ated with NSF' s SBIR efforts, Dr. Narayanan began by describing the program' s
external advisory board and naming three conference attendees who serve on it:
Terry Bibbens and Dan Hill of the Small Business Administration and Ann
Eskesen of the Innovative Development Institute. This body looks at the NSF
program in a very critical manner in the positive as well as the negative sense-
and program officials not only pay attention to its advice but implement its
recommendations.
Proposal Selection
Dr. Narayanan said that SBIR relies on the same method for proposal selec-
tion that is applied in all programs at NSF: external peer review. The fact that not
only program officers but members of the outside research community evaluate
the proposals helps ensure that proposals selected are of high quality. And the
outside reviewers, a very large percentage of whom are academics, have uni-
formly praised the quality of the proposals submitted. He observed that this is "at
odds with the general noise that you may hear about this gap between the aca-
demic community and small business." If there is a dichotomy, he said, it is
between science and engineering in the composition of the proposals received:
Although only 10 percent of NSF's activities are in engineering, that field's
portion of NSF's SBIR program is about 40 percent.
Weaknesses of SBIR
Dr. Narayanan acknowledged the perception within NSF that SBIR funding
amounts to a tax on R&D resources. A second weakness is the low volume of
proposals received by its STTR program, which mandates a partnership. And
although university involvement in NSF's SBIR program is, at 40 percent of
proposals, fairly high, there is room for improvement in this case as well: Much
OCR for page 108
108
THE SMALL BUSINESS INNOVATION AND RESEARCH PROGRAM
of the academic participation takes the form of faculty consulting, and actual
dollars invested remains low.
Dr. Narayanan attempted to build the NSF and academic communities' in-
volvement in the agency's SBIR program by reminding reviewers that, as the
ones who selected the projects, they share in their successes. Making the SBIR
program subject to the Government Performance and Results Act offers another
opportunity for building inclusiveness among the academic, NSF, and small busi-
ness communities. Finally, as Rita Colwell, nominated to succeed Neal Lane as
director of NSF, has had extensive experience with SBIR, he foresees significant
gains for the agency's program.
John Williams
U.S. Navy
The Need for Flexibility in SBIR
Mr. Williams began by warning against the imposition of government-wide
rules that would standardize SBIR, arguing that the program's flexibility allows it
to respond to the specific agencies' needs. He stressed that, because SBIR funds
are derived from a "tax" on an agency's R&D budget, their disbursement should
be geared toward benefiting that agency's research program directly. But this
principle may become obscured: Whereas the emphasis of the Navy's SBIR pro-
gram is on development of products the service itself will buy rather than those
whose primary market is the private sector, the term "commercialization" is often
taken to refer mainly to the latter even, at times by the Navy's own evaluators.
"We need to do a better job of training people," Mr. Williams admitted, but he
nonetheless argued that agencies in general should keep in mind "where the
money is coming from" when deciding how to spend it.
Measures of Success
Similarly, the program's success will be measured differently by different
agencies. Setting a specific time within which products must be commercialized
as a measure of SBIR success would be a mistake, Mr. Williams suggested. A
Defense Department agency, for example, may need to get a program into its
budget before it is able to buy a technology, something which may not be true
across the federal government. He also reminded the audience that, when R&D
proves that an idea is not technically feasible, this can be valid R&D. But it may
be "viewed as a negative" in evaluating the success of a program. He also urged
caution in obliging program managers to spend a great deal of time measuring the
impact of their activities, saying that this would impinge on their ability to work
with companies and technical monitors. This may loom even larger as R&D
OCR for page 109
PANEL VI
109
budgets decline, leaving "less and less money [that would allow] program man-
agers from the government to work with the technical officers of the companies."
Returning to commercialization, Mr. Williams observed that many who
evaluate SBIR proposals for the government agencies are far more qualified to
judge technologies than business plans. Of the companies he has reviewed, "many
are very strong technically but have not thought out how they are going to do
their marketing plans." He suggested that pointing firms toward economic devel-
opment groups in their areas might help them acquire better tools for crafting
marketing plans. But he warned that the problem of finding a government evalu-
ator skilled in reviewing such material might remain.
DISCUSSION
Working with the States
Brian Belanger of the Advanced Technology Program at the National Insti-
tute of Standards and Technology observed that state economic development
agencies now have "very aggressive" programs to help high-technology firms
with commercialization. He asked whether the state agencies' role in working
with companies is growing. Dan Hill of the Small Business Administration
responded by noting that a group he co-chairs under the U.S. Innovation Partner-
ship a joint effort of the White House, the National Governors Association, and
the U.S. Department of Commerce is looking into how the SBIR program might
be leveraged with state and local resources, including the public partnerships that
have been formed in many states.
"My personal view is that we in Washington tend to think we have all the
answers," said Mr. Hill, who also serves, along with Dr. Davis, on the National
Science and Technology Council's Subcommittee on Innovation Partnerships.
"In fact, we really do not. What we need to do is to get better at listening to the
states, learning what's hot in the technology fields, getting ideas from them on
what they are supporting, and then working together to leverage those dollars.
And that's what we are trying to do in our groups."
Agency-Awardee Interactions
Mark Crawford, a reporter with New Technology Week, asked Dr. Norwood,
who had mentioned not having enough funding to travel to SBIR applicant and
awardee firms, whether he had the latitude to require them to visit him at NASA
headquarters. Dr. Norwood stated that because the administration of SBIR must
be funded out of other R&D management accounts, such spending takes away
from other activities, a fact that imposes limits on it. Second, as NASA's many
SBIR Phase II awarders are spread across the country, the problem of keeping in
touch with them is in itself daunting. He has observed that venture-capital com
OCR for page 110
110
THE SMALL BUSINESS INNOVATION AND RESEARCH PROGRAM
panics tend to fund a "well-defined set" of firms that is generally limited to a
particular geographic "sphere in which they have some influence-perhaps a tech-
nology region like Silicon Valley." In this way, they are able to have access to
their companies on a daily basis; he questioned, however, whether this approach
offers a practicable solution for an agency with a widespread constituency.
Responding to the same question, Ms. de Blanc noted that the DoE's travel
budget is included in its personnel budget, which has shrunk with the extensive
reductions in force of the past two years. "We have to prioritize travel funds with
exquisite discretion," she said. "It gets down to what are you going to do go out
and review an entire national laboratory or four SBIR projects" of the 350 that the
department is funding? Increasing the size of individual SBIR grants is under
consideration, which in some areas would make it more reasonable to devote
funds to personal oversight of the projects. Nevertheless, DoE prefers that grant
recipients' use their funding for research rather than spending it on trips to meet
program officials.
Representative terms from entire chapter:
business innovation
