SBIR AND THE PHASE III CHALLENGE OF COMMERCIALIZATION
REPORT OF A SYMPOSIUM
CHARLES W. WESSNER, EDITOR
THE NATIONAL ACADEMIES PRESS
Washington, D.C.
www.nap.edu
THE NATIONAL ACADEMIES PRESS
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NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance.
This study was supported by Contract/Grant No. DASW01-02C-0039 between the National Academy of Sciences and the U.S. Department of Defense, N01-OD-4-2139 (Task Order #99) between the National Academy of Sciences and the U.S. Department of Health & Human Services, NASW-03003 between the National Academy of Sciences and the National Aeronautics and Space Administration, DE-AC02-02ER12259 between the National Academy of Sciences and the U.S. Department of Energy, and DMI-0221736 between the National Academy of Sciences and the National Science Foundation. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the views of the organizations or agencies that provided support for the project.
International Standard Book Number-13: 978-0-309-10341-1
International Standard Book Number-10: 0-309-10341-X
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THE NATIONAL ACADEMIES
Advisers to the Nation on Science, Engineering, and Medicine
The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Ralph J. Cicerone is president of the National Academy of Sciences.
The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Wm. A. Wulf is president of the National Academy of Engineering.
The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the Institute of Medicine.
The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Ralph J. Cicerone and Dr. Wm. A. Wulf are chair and vice chair, respectively, of the National Research Council.
Committee on Capitalizing on Science, Technology, and Innovation: An Assessment of the Small Business Innovation Research Program*
Chair Jacques S. Gansler Roger C. Lipitz Chair in Public Policy and Private Enterprise
School of Public Policy University of Maryland
David Audretsch Ameritech Chair of Economic Development Director of the Institute for Development Strategies
Indiana University
Gene Banucci Chairman and CEO
Advanced Technology Materials, Inc.
Jon Baron Director
Coalition for Evidence-Based Policy
Michael Borrus Founding General Partner
X/Seed Capital
Gail Cassell Vice President,
Scientific Affairs Distinguished Research Fellow Eli Lilly and Company
Elizabeth Downing CEO
3D Technology Laboratories
Kenneth Flamm Dean Rusk Chair in International Affairs
Lyndon B. Johnson School of Public Affairs University of Texas at Austin
M. Christina Gabriel Program Director,
Innovation Economy The Heinz Endowments
Trevor O. Jones Chairman and CEO
BIOMEC, Inc.
Charles Kolb President
Aerodyne Research, Inc.
Henry Linsert, Jr. Chairman and CEO
Martek Biosciences Corporation
W. Clark McFadden Partner
Dewey Ballantine
Duncan T. Moore Kingslake Professor of Optical Engineering
University of Rochester
Kent Murphy Chairman and CEO
Luna Innovations
Linda F. Powers Managing Director
Toucan Capital Corporation
Tyrone Taylor Director,
Washington Relations West Virginia High Technology Consortium Foundation
Charles Trimble CEO (ret)
Trimble Navigation
Patrick Windham President
Windham Consulting
PROJECT STAFF
Charles W. Wessner Study Director
McAlister T. Clabaugh Program Associate
David E. Dierksheide Program Officer
Paul Fowler Senior Research Associate
Jeffrey C. McCullough Program Associate
Sujai J. Shivakumar Senior Program Officer
RESEARCH TEAM
Zoltan Acs
University of Baltimore
Alan Anderson Consultant
Philip A. Auerswald
George Mason University
Robert-Allen Baker
Vital Strategies, LLC
Robert Berger
Grant Black
University of Indiana South Bend
Peter Cahill
BRTRC, Inc.
Dirk Czarnitzki
University of Leuven
Julie Ann Elston
Oregon State University
Irwin Feller
American Association for the Advancement of Science
David H. Finifter
The College of William and Mary
Michael Fogarty
University of Portland
Robin Gaster
North Atlantic Research
Nicholas Karvonides
Albert N. Link
University of North Carolina
Rosalie Reugg
TIA Consulting
Donald Siegel
University of California at Riverside
Paula E. Stephan
Georgia State University
Andrew Toole
Rutgers University
Nicholas Vonortas
George Washington University
POLICY AND GLOBAL AFFAIRS
Ad hoc Oversight Board for Capitalizing on Science, Technology, and Innovation: An Assessment of the Small Business Innovation Research Program
Robert M. White, Chair University Professor Emeritus
Electrical and Computer Engineering Carnegie Mellon University
Anita K. Jones Lawrence R. Quarles Professor of Engineering and Applied Science
School of Engineering and Applied Science University of Virginia
Mark B. Myers Visiting Professor of Management
The Wharton School University of Pennsylvania
Contents
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Opening Remarks |
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Introduction |
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Meeting Mission Needs |
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Moderator: Bill Greenwalt, Senate Committee on Armed Services |
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Concluding Remarks |
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Preface
Today’s knowledge economy is driven in large part by the nation’s capacity to innovate. One of the defining features of the U.S. economy is a high level of entrepreneurial activity. Entrepreneurs in the United States see opportunities and are willing and able to take on risk to bring new welfare-enhancing, wealth-generating technologies to the market. Yet, while innovation in areas such as genomics, bioinformatics, and nanotechnology present new opportunities, converting these ideas into innovations for the market involves substantial challenges.1 The American capacity for innovation can be strengthened by addressing the challenges faced by entrepreneurs. Public-private partnerships are one means to help entrepreneurs bring new ideas to market.2
The Small Business Innovation Research (SBIR) program is one of the largest examples of U.S. public-private partnerships. Founded in 1982, SBIR was designed to encourage small business to develop new processes and products and to provide quality research in support of the many missions of the U.S. government. By including qualified small businesses in the nation’s R&D effort, SBIR grants and contracts are intended to stimulate innovative new technologies to help agencies meet the specific research and development needs of the nation in
many areas, including health, the environment, and national defense. The SBIR program is today the largest of the government’s efforts to draw on the inventiveness of small, high-technology firms, with a budget of $1.85 billion for 2005.3
THE NATIONAL RESEARCH COUNCIL ASSESSMENT OF SBIR
As the SBIR program approached its twentieth year of operation, the U.S. Congress asked the National Research Council (NRC) to conduct a “comprehensive study of how the SBIR program has stimulated technological innovation and used small businesses to meet federal research and development needs” and make recommendations on improvements to the program. HR 5667 directs the NRC to evaluate the quality of SBIR research and evaluate the SBIR program’s value to the mission of the agencies that administer it. It calls for an assessment of the extent to which SBIR projects achieve some measure of commercialization, as well as an evaluation of the program’s overall economic and non-economic benefits. It also calls for additional analysis as required to support specific recommendations on areas such as measuring outcomes to enhance agency strategy and performance, increasing Federal procurement of technologies produced by small business, and overall improvements to the SBIR program.
It is important to note that the NRC Committee assessing the SBIR program was not asked to consider if SBIR should exist or not—Congress has affirmatively decided this question on three occasions.4 Rather, the Committee was charged with providing an empirically based assessment of the program’s operations, achievements, and challenges to improve public understanding of the program and to develop recommendations to enhance the program’s effectiveness.
With regard to the program’s effectiveness, it became apparent in the course of the Academies’ review that the Phase III element of the SBIR program would benefit from further examination. This need seemed particularly apparent for the agencies most often involved in the procurement of technologies developed using SBIR awards. Some in the SBIR community believe that this phase of the program could be improved. Some agencies seem to have adopted effective means of managing the Phase III transition. And in the course of the study, the prime contractors responsible for major systems at the Department of Defense (DoD) and the National Aeronautics and Space Administration (NASA) have shown greater interest in the SBIR program, seeing it increasingly as a wellspring of innovative technologies.
3 |
U.S. Small Business Administration TechNet Data Base, <http://tech-net.sba.gov/>, Accessed on July 25, 2006. |
4 |
These are the 1982 Small Business Development Act and the subsequent multi-year reauthorizations of the SBIR program in 1992 and 2000. |
To capture these various perspectives, the Academies convened the conference on “SBIR and the Phase III Challenge of Commercialization” on June 14, 2005. The meeting focused on the commercialization of SBIR-funded innovations at DoD and NASA, where commercialization often takes the form of agency acquisition. It was held under the leadership of Jacques Gansler, vice president for research at the University of Maryland and former Under Secretary of Defense for Acquisition, Technology and Logistics.
A unique feature of the conference is that it brought together, for the first time, the program managers, small business leaders, and prime contractor personnel involved in commercializing the results of SBIR awards through procurement at the DoD and NASA. These participants identified the challenges as well as highlighted existing and evolving best practices among successful cases in the third (or commercialization) phase of the SBIR program. This conference, summarized in this report, covered a rich variety of topics though, given the one-day timeframe of the meeting and the richness of the subject, did not (and indeed could not) cover the many possible issues associated with the program. The conference and this report do have the virtue of focusing on a key element of the SBIR program—the Phase III transition.5
ACKNOWLEDGMENTS
On behalf of the National Academies, we express our appreciation and recognition for the insights, experiences, and perspectives made available by the participants in the conference.
A number of individuals deserve recognition for their contributions to the preparation of the conference and this report. These include Ken Jacobson, Robin Gaster, Sujai Shivakumar, McAlister Clabaugh, and David Dierksheide. Without their collective efforts, amidst many other competing priorities, it would not have been possible to prepare this report in the required period.
NATIONAL RESEARCH COUNCIL REVIEW
This report has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the National Academies’ Report Review Committee. The purpose of
this independent review is to provide candid and critical comments that will assist the institution in making its published report as sound as possible and to ensure that the report meets institutional standards for quality and objectivity. The review comments and draft manuscript remain confidential to protect the integrity of the process.
We wish to thank the following individuals for their review of this report: Robert Archibald, College of William and Mary; Robert Genco, State University of New York at Buffalo; Jere Glover, Small Business Technology Coalition; and Richard Hendel, The Boeing Company.
Although the reviewers listed above have provided many constructive comments and suggestions, they were not asked to endorse the content of the report, nor did they see the final draft before its release. The review of this report was overseen by Robert White, Carnegie Mellon University, appointed by the National Academies, he was responsible for making certain that an independent examination of this report was carried out in accordance with institutional procedures and that all review comments were carefully considered. Responsibility for the final content of this report rests entirely with the authors and the institution.
STRUCTURE
Following this preface, the report’s introduction describes the challenges of early stage finance in the United States and the SBIR program as well as the particular challenges of procurement for DoD and NASA. It also summarizes the key issues from the conference. The final Proceedings section of this volume provides a detailed compilation of the presentations and discussion remarks of the various speakers at the conference.
Jacques S. Gansler |
Charles W. Wessner |