The Small Business Innovation Research Program An Assessment of the Department of Defense Fast Track Initiative (2000) / Chapter Skim
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Evaluation of the Department of Defense Small Business Innovation Research Program and the Fast Track Initiative: A Balanced Approach
Evaluation of the Department of Defense Small Business Innovation Research Program and the Fast Track Initiative: A Balanced Approach
Pages 211-250
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Small Business Innovation Research (SBIR) program and the Fast Track initiative.
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The Fast Track Initiative The 1996 Fast Track Initiative of DoD represents a continuation of the shift in emphasis in the SBIR award process toward commercial success. Under Fast Track firms with Phase I contracts which can interest outside investors in committing funds to further the development of the project increase their chances of obtaining Phase II funding and are eligible for bridge funding between Phase I and Phase II.
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The sample was drawn systematically. It includes all of the 1996 Fast Track projects and all of the BMDO Matching projects from 1992 to 1996 as well as a matched sample of regular Phase II projects.
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And the Fast Track Initiative was rated as more effective than the normal SBIR program by two thirds of the respondents. In the analysis of the survey results we divided the sample among the Fast Track projects, the BMDO Matching projects and the comparison group projects.
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Also, we found that projects in the Fast Track Initiative generally did very well both in measures of research outcomes and measures of commercial outcomes. Summary and Conclusions There are three major conclusions in this paper.
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· Contrary to our initial expectations, projects in the DoD Fast Track Initiative appear to produce research that is as good if not better than the research in the normal DoD SBIR program.
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In the seventh section, we combine the survey of technical monitors with a survey of firms. The combined survey allows us to do a balanced evaluation of the DoD SBIR program and the Fast Track Initiative, including information on both goals of the SBIR program.
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Current Phase I awards normally have a maximum of $100,000 and Phase II awards have a maximum $750,000, although these ceilings may be exceeded at the discretion of the program managers. Each agency establishes its own policies and priorities regarding the categories of projects funded by its SBIR program, receives and evaluates proposals, selects awardees for SBIR funds, and makes the appropriate payments.
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The Small Business Innovation Reauthorization Act of 1992 both raised the percentage of research expenditures dedicated to the SBIR program and increased the importance of the goal of commercializing SBIR projects. The goal of commercialization moved from being listed fourth in 1982 to second in 1992.
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The 1996 Fast Track Initiative of DoD represents a continuation of the shift in emphasis in the SBIR award process toward commercial success. Under Fast Track, firms with Phase I contracts that can interest outside investors in committing funds to further the development of the project increase their chances of obtaining Phase II funding and are eligible for bridge funding between Phase I and Phase II.
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He argues that a small firm that is successful in the competition for SBIR funds sends a signal of its capability to outside investors. In essence, to outside investors this certification indicates that winners of SBIR awards are less likely to produce R&D lemons.
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There is considerable evidence that frustration with unimaginative management leads to the creation of small high-technology firms by talented refugees from the laboratories of large businesses. As researchers started to do empirical work on the relationship between firm size and innovation, support for the views that large scale was necessary for innovation diminished.6 Writing in 1970, F
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THE FAST TRACK INITIATIVE Components of Fast Track The Fast Track Initiative has three components: First, a firm qualifies for Fast Track if it can link with outside investors who are willing to partially fund the Phase II research. The attraction for outside investors is that the SBIR program will match their investment.
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program ...." Taking the view that the SBIR program represents "public venture capital" focuses entirely on the commercialization goal and implies that all SBIR firms are growth-oriented with commercially viable products.8 There are two other types of firms that participate in the SBIR program. First, some successful small businesses have no desire to be big businesses.
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358) The point of this example is that Creare, no matter how many commercial successes it initiates, will always want to be a small engineering service firm.
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The third firm type, growth-oriented firms with not yet commercially viable products, represent riskier SBIR projects. In these firms, research is not sufficiently advanced to be able to demonstrate commercial potential to outside investors.
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It would be politically naive for those running the SBIR program to ignore the need for commercial success. Therefore, it is a challenge for agencies to balance short-run and long-run goals.
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A balanced evaluation of the Fast Track Initiative, one that accounts for both commercial and research success, will tell us how successful the Fast Track Initiative has been in filling that niche. As a final comment on the Fast Track Initiative, it is interesting that our interviews with DoD program managers uncovered several program innovations at the branch level that appear to be responses to Fast Track.
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This approach corrects a fundamental flaw in current evaluations, the fact that, exclusively, these evaluations have been separate evaluations of either commercial success or research success. Our independent contribution to a balanced evaluation is measurement of the quality and usefulness to the federal government of the research conducted by the SBIR firm; that is, we provide measures of research success.
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The sample was drawn systematically and it includes all of the 1996 Fast Track projects and all of the Ballistic Missile Defense Office (BMDO) matching projects from 1992 to 1996 as well as a matched sample of regular Phase II projects.
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Using data on evaluation scores for research proposals at the National Institutes of Health, opponents of the SBIR program have shown that funded SBIR awards have lower scores than do other research projects. For our sample, the mean value for the difference between the rating given to the research quality of the SBIR project and the rating given to other research is 0.025 with a standard deviation of 2.366 (n = 180~.
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In comparison to a dollar spent in your research unit/office on other R&D projects, did a dollar spent on this SBIR project: a. yield more benefits for your agency's mission than the average dollar spent on other contracts sponsored by your research unit/office.
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This result suggests that Fast Track has a good reputation among those technical monitors who have been involved with it. It is unfortunate that the sample size is so low for this question.
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We interpret these results as saying that there is no bias in the ratings of research quality or mission benefits from an ownership effect. Fast Track and BMDO Matching The sample used in this study was designed to study Fast Track.
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Two-thirds of the 51 COTRs who had direct experience with Fast Track rated it as "more effective than the normal SBIR program." Though none of the differences is statistically significant, generally the results in Table 4 are consistent with this assessment. The average Research Quality of Fast Track projects is highest and the percentage of "no, not useful" in the rating of the Usefulness of Research is lowest for the Fast Track projects.
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Either of these results would suggest that the DoD SBIR program needs to change its project selection to improve the overall quality of the research. If, however, there is not a statistically significant relationship, the overall
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The three measures of research success (1) research quality, (2)
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There is no evidence that the research outputs of the SBIR program have been compromised by the emphasis on commercial success from the Fast Track Initiative. COMBINING MEASURES OF RESEARCH AND COMMERCIAL SUCCESS In this section, we combine the results from our survey of COTRs with the results from a survey of firms conducted by Peter Cahill of BRTRC.
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For research success we will use Question 5 from the COTR survey: 5. Has the research conducted for this SBIR contract affected the way that your research unit/office conducts research or the type of research your research unit/office obtains in other contracts?
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Though none of the differences in proportions are statistically significant, the results for Fast Track are mixed. Fast Track projects are slightly underrepresented in Category B
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The BMDO Matching sample has mixed results, overrepresented in Group B and slightly underrepresented in Group N None of the results for Fast Track or the BMDO Matching is statistically significant.
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results for the Fast Track Initiative, and (4) suggestions for future research.
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We gathered information on Fast Track in two ways. We asked the technical monitors who had experience with the Fast Track Initiative for a direct evaluation and, in the analysis of our results, we separated the sample to see if performance by Fast Track projects differed from performance by the comparison groups.
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Although perhaps unexpected, the lack of any reduction in research success may result from the fact that Fast Track projects have larger research budgets. One of the clear advantages of the Fast Track Initiative is that it attracts funds to the federal R&D effort.
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1992. SBIR and Commercialization: Hearing Before the Subcommittee on Technology and Competitiveness of the House Committee on Science, Space, and Technology, on the Small Business Innovation Research [SBIR]
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33 -.6613 73 18 52 >50 Emp. 31 -.2419 77 29 48 Fast Track 31 .5862 84 29 48 92 Award 16 -.5625 63 19 56 93 Award 21 .5000 86 33 43 94 Award 30 -.5000 60 20 27 95 Award 33 .0156 73 48 30 96 Award 63 .2756 77 31 49 Computers 31 -.1207 71 26 42 Electronics 83 .3063 70 36 42 Materials 12 -1.6667 58 8 58 Mechanical 9 .6111 78 44 22 Energy Cons.
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from other projects a categorical variable equal to one if the project was an Air Force funded project a categorical variable equal to one if the project was an Army funded project a categorical variable equal to one if the project was a BMDO funded project a categorical variable equal to one if the project was a DARPA funded project a categorical variable equal to one if the project was a DSWA funded project a categorical variable equal to one if the project was a Navy funded project a categorical variable equal to one if the project was an OSD project a categorical variable equal to one if the project was a Fast Track project a categorical variable equal to one if the project was a BMDO Matching a rating on a scale of 1 to 10 for the aualitv of the SBIR Project project age of the project computed as 97 minus the fiscal year for the project older projects will have larger values. size of the SBIR firm measured as the number of employees experience in the SBIR program measured as the number of prior Phase II awards for the firm a categorical variable for those projects for which the COTR was involved with defining or generating the topic and was involved with the firm before the Phase I Proposal COMPUTER a categorical variable equal to one if the topic area was Computers ELECTRON a categorical variable equal to one if the topic area was Electronics MATERIAL a categorical variable equal to one if the topic area was Materials VEHICLES a categorical variable equal to one if the topic area was Mechanical Performance of Vehicles, Weapons, or Facilities ENERGY a categorical variable equal to one if the topic area was Energy Conservation and Use ENVIRON a categorical variable equal to one if the topic area was Environment and Natural Resources LIFE SCIENCES a categorical variable equal to one if the topic area was Life Sciences
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OSD -.0116 -.0158 -.0397 -.1143 -.0736 -.0736 -.1262 -.0766 -.0253 -.0560 1.000 (12) Fast Track .0967 -.0202 .1156 -.0043 -.1087 .3841 -.1700 .
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(0.05) Fast Track .2108 .4113 .6739 .6526 -.3007 -.3426 (0.43)
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