2
SBIR Awards at the Department of Defense
This chapter addresses the number and distribution of SBIR (Small Business Innovation Research) awards made by the Department of Defense (DoD). It reviews Phase I and Phase II awards separately, and discusses each in terms of the distribution of awards by component, by state, and by company as well as describes the participation of women and minorities.
TIMEFRAME
To focus attention on the most recent data, the timeframe for analysis is the 10 years from fiscal year (FY) 2002 to FY2011 inclusive. This timeframe was selected because DoD reports two financial years for each award—the year in which the award was made and the year in which it was reported, which may be one or more years after the date of award. DoD’s published data are based on the financial year reported; therefore, to retain comparability, the committee utilized the financial year reported to determine the date of an award. However, because awards made in FY2012 and FY2013 may not yet appear in the financial year reported data, it seemed prudent to exclude partial data from those years. At the beginning of the timeframe, information about awards made before FY2002 has only limited value to policy assessment, because award procedures have changed substantially since that time (see Chapters 3 and 6).
DATA SOURCES
The analyses in this chapter are based on data provided directly by DoD. These data are not complete, and the quality of the data is, in some cases, uneven, especially as related to women and minority ownership of companies. In several cases, companies are recorded as woman- or minority-owned for one award but not for another, and considerable effort and multiple iterations were
required to acquire usable data.1 Although the quality of the data imposes limits to the committee’s analysis, these data are the only available primary source of data about SBIR awards at DoD. We have interpreted this data, accordingly, with the necessary caution.
PHASE I SBIR AWARDS
Number of Phase I SBIR Awards
The numbers of Phase I SBIR awards made by DoD are presented in Figure 2-1. Although declining slightly, award levels have remained largely constant at around 2,000 awards annually. The steady level of awards is also reflected in Phase II funding, which is summarized in Figure 2-2. DoD spent an average of $195 million per year on Phase I awards during the study period.
Phase I SBIR Awards by Component
The generally flat overall numbers do not reflect changes within the program, because different components changed their SBIR profile over time. Table 2-1 summarizes the number of Phase I awards by component over the study period.
FIGURE 2-1 Phase I SBIR awards at DoD, FY2002-2011.
SOURCE: DoD awards database.
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1Previous NRC reports have recommended that DoD improve the quality of its data collection. See National Research Council, An Assessment of the SBIR Program at the Department of Defense, C. W. Wessner, ed., Washington, DC: The National Academies Press, 2009.
FIGURE 2-2 Phase II SBIR awards at DoD, FY2002-2011.
SOURCE: DoD awards database.
TABLE 2-1 Phase I SBIR Awards by Component, FY2002-2011
Fiscal Year Reported | |||||||||||
Component | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | Total |
AF | 427 | 449 | 527 | 608 | 577 | 517 | 485 | 602 | 501 | 480 | 5,173 |
ARMY | 282 | 352 | 356 | 705 | 352 | 312 | 305 | 334 | 434 | 301 | 3,733 |
CBD | 34 | 25 | 27 | 21 | 17 | 19 | 14 | 31 | 21 | 16 | 225 |
DARPA | 120 | 90 | 155 | 74 | 25 | 108 | 108 | 288 | 107 | 68 | 1,143 |
DHP | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 49 | 49 |
DLA | 0 | 0 | 0 | 0 | 0 | 11 | 0 | 9 | 6 | 7 | 33 |
DMEA | 0 | 0 | 0 | 0 | 0 | 0 | 5 | 6 | 4 | 0 | 15 |
DTRA | 23 | 7 | 0 | 40 | 23 | 13 | 13 | 12 | 21 | 17 | 169 |
MDA | 522 | 454 | 315 | 240 | 174 | 165 | 159 | 150 | 126 | 122 | 2,427 |
NAVY | 578 | 550 | 585 | 466 | 446 | 567 | 566 | 414 | 675 | 582 | 5,429 |
NGA | 4 | 2 | 2 | 2 | 2 | 0 | 4 | 0 | 0 | 4 | 20 |
OSD | 128 | 156 | 83 | 163 | 197 | 242 | 155 | 161 | 144 | 160 | 1,589 |
SOCOM | 44 | 28 | 25 | 25 | 49 | 28 | 11 | 14 | 23 | 16 | 263 |
Total | 2,162 | 2,113 | 2,075 | 2,344 | 1,862 | 1,982 | 1,825 | 2,021 | 2,062 | 1,822 | 20,268 |
SOURCE: Data provided by DoD, August 2013.
Overall, Air Force (AF) and Navy accounted for more than half of all Phase I awards; together with Army and Missile Defense Agency (MDA), they
accounted for more than 80 percent of Phase I awards.2 Conversely, the Defense Health Program (DHP), Defense Logistics Agency (DLA), Defense Microelectronics Agency (DMEA), and the National Geospatial-Intelligence Agency (NGA) together accounted for 0.6 percent.3
There are some year-to-year variations. For example, the number of Navy awards decreased from 566 in FY2008 to 414 in FY2009 before rebounding to 675 in FY2010. The number of AF awards decreased from 517 in FY2007 to 485 in FY2008 before reaching 602 in FY2009. The number of DARPA awards grew sharply from 25 in 2006 to 288 in 2009 before declining again.
Phase I SBIR Proposals and Success Rates
The number of high-quality proposals that DoD can attract depends on many factors, including opportunities for small businesses elsewhere and the state of the business cycle. That being said, the volume of Phase I applications is particularly important, because Phase I is the gateway into the program. Based on available data for 2011, the number of applications declined by 15 percent over the study period, peaking at 16,000 in FY2004 and reaching the lowest point of slightly more than 10,000 in FY2011 (see Figure 2-3).
FIGURE 2-3 SBIR Phase I applications received by DoD, FY2002-2011.
SOURCE: DoD awards and applications database.
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2Unless otherwise noted, all awards and applications data were provided directly by the DoD SBIR Program Manager.
3A full list of acronyms used in this report is provided in the Glossary, Appendix D.
As we note below, this overall decline in applications could result from a number of factors (DoD itself has not presented an explanation):
- Companies may be reluctant to compete for Phase I awards if they believe that the effort of applying is too high compared with the chance of entry into the SBIR program.
- Companies may regard the likelihood of long-term success via the Phase I/Phase II/Phase III pathway as being too remote to justify the effort; they may instead focus their efforts elsewhere.
- Efforts by DoD to make sure that topics are tightly linked to acquisitions needed may be reducing the number of more research-oriented applications
- Overly specific topics may exclude some companies from participating.
- Case study reviews of selected companies suggest that small business entrepreneurs increasingly see the need for a full pathway to commercial success before applying for Phase I funding.
- The erosion of award size in real terms may be having an effect (now addressed via reauthorization).
These and other factors at the component level may have affected application decisions. Figure 2-4 shows that the sharp decline from FY2004 to FY2005 was driven by a decline in applications to MDA and that after FY2007 the overall
FIGURE 2-4 Phase I SBIR applications by major awarding component, FY2002-2011.
SOURCE: DoD awards and applications database.
decline was driven by a decline in applications to AF from 4,769 in FY2007 to about 2,500 in each of FYs 2009-2011.
The success rate for Phase I applications remained relatively constant during the study period, at 14-16 percent (see Figure 2-5). DoD staff observes that awards to all qualified proposals are often not made due budget constraints.4 They believe that a 15 percent rate of success suggests that the awarded proposals are of high quality. However, this approach imposes an 85 percent failure rate—and each failed application involves costs for the applicant company. Weighing the costs and potential benefits of applying for SBIR, otherwise promising firms may forgo applying for an award.
Distribution of Phase I SBIR Awards by State
A number of factors affect the shares of SBIR awards by the states, including the overall population of the state, the strength of their science and engineering workforce, and their propensity to apply for SBIR awards. For FY2002-2011, five states collectively received 52 percent of Phase I awards, down slightly from the time period analyzed in the previous National Research Council (NRC) report on the DoD SBIR program.5Figure 2-6 shows state
FIGURE 2-5 Success rates for Phase I SBIR applications, FY2002-2011.
SOURCE: DoD awards and applications database.
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4Other potential reasons could include proposals that did not increase in quality over the years, and that fewer proposals were awarded to keep down management effort and costs.
5National Research Council, An Assessment of the SBIR program at the Department of Defense, op. cit., p. 56.
FIGURE 2-6 Phase I SBIR per million population, by percentage of scientists and engineers in the workforce.
SOURCES: DoD SBIR awards applications and awards database, and U.S. Census.
relatively success in receiving awards, normalized for population, charted against population size.6
Figure 2-6 shows that some states received more awards than their population would have suggested: Massachusetts more than six times; New Hampshire and Virginia more than three times; and New Mexico, Colorado, and Maryland more than two times. California received almost twice as many awards as its population would have suggested. Overall, 23 states received less than 50 percent of the Phase I awards that would have been proportionate to their population; conversely, 13 states received more than 100 percent of their proportionate share.
This suggests that population alone is not a useful predictor of SBIR awards. The Government Accountability Office (GAO) has noted that the distribution of SBIR awards tends to follow the general distribution of government science and engineering awards, which in turn tends to follow the distribution of science and engineering talent.7 Several indicators have been used to normalize state populations for these purposes. Figure 2-7 compares the distribution of a state’s science and engineering PhDs as a percentage of its
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6To more clearly illustrate differential award distribution, the Y-axis reflects not the share of awards, but the share of awards as a percentage of the state’s share of the U.S. population.
7Government Accountability Office, Federal Research: Evaluation of Small Business Innovation Research Can Be Strengthened, GAO/RCED-99-114, Washington, DC: Government Accountability Office, June 1999, p. 17.
workforce with the state’s percentage of Phase I awards. We would expect the existence of higher numbers of PhDs to broadly correlate with a higher share of awards. The trend line in Figure 2-7 to some extent supports this hypothesis, but the substantial variation suggests that many other factors play a role.
Given the pictures presented in these charts, it is not surprising that the success rates of applications from different states varied substantially (Table 2-2). DoD data indicate that for FY2007-2008, success rates varied from 26 percent in New Hampshire to zero percent in Puerto Rico, with eight states showing rates of less than 10 percent. The reasons for the variability are not clear, and are likely rooted in the complex differences in state industry focus, the locations of key firms, as well as other potential variables.
Phase I SBIR Awards by Company
Table 2-3 summarizes Phase I awards for the top 20 awardees during the study period. The top awardee, Physical Optics, received an average of 45 Phase I awards per year, 50 percent more than the next largest. Combined, the
FIGURE 2-7 SBIR Phase I awards by state and by state share of PhD scientists and engineers as a percentage of population.
NOTE: Two outliers have been excluded from this chart—Massachusetts, which has a far higher share of awards per population that other states, and Washington, DC, which has far more PhD scientists and engineers per capita than other jurisdictions. All states and DC are included in the reference table at the end of this chapter.
SOURCE: DoD data; National Science Foundation (NSF) Science and Engineering Indicators 2012, Table 8-34; U.S. Census.
top 20 awardees accounted for about 14 percent of Phase I awards and funding at DoD.8 Some of these companies, such as Foster-Miller, have been acquired or have reached the SBIR size limit and consequently no longer apply for awards. This table shows that the top 20 companies received about 14 percent of both Phase I awards and funding indicating a concentration of awards in fewer companies.
Phase I SBIR Award Demographics
Woman-owned Small Businesses (WOSB)
Congress mandated that the participation of women in the SBIR program be fostered and encouraged (Chapter 3 discusses additional evidence about female participation in the context of outcomes). The number of applications received from WOSBs remained largely flat over the study period (see Figure 2-8), even though the number of applications received from all companies declined. Overall, the number of awards to WOSBs remained constant, although with year-to-year variation, while the percentage of awards to WOSBs increased, especially after FY2008 (see Figure 2-9). Although overall numbers were relatively flat, there was considerable variation in the awards to WOSBs made by individual components (see Figure 2-10).
In reading this data, it is important to keep in mind the very large role played by three WOSBs: Physical Optics, Intelligent Automation, and CFD Research. All were wholly or in part founded by their female owners, who continue to play a major role at each, so they clearly meet the Small Business Administration (SBA) standard for WOSBs. Combined, they accounted for about 34 percent of all Phase I awards to WOSBs during the study period; in some years, they accounted for much more than 40 percent, as illustrated in Figure 2-11 (numbers dropped sharply in FY2011 for reasons not yet understood). The figure also shows that the number of Phase I awards made to the remaining companies remained largely flat (until FY2011, for which only partial data are likely yet available). More generally, the top 20 WOSB awardees accounted for about 5.4 percent of all Phase I awards and about 42 percent of awards to WOSBs (see Table 2-4).
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8DoD did not provide unique identifying information for companies, so these data were developed by normalizing company names. This process may not have been completely successful in avoiding duplicate entries, given the very large numbers of awards involved. It also does not account for mergers and acquisitions among these companies. Any errors would have the effect of reducing the degree of apparent concentration of awards.
TABLE 2-2 Phase I SBIR Awards and Applications by State, 2002-2011
State | Applications | Awards | Proposal-to-Award Percentage |
Total | Total | ||
AK | 38 | 3 | 7.89 |
AL | 1,769 | 275 | 15.55 |
AR | 135 | 25 | 18.52 |
AZ | 1,426 | 203 | 14.24 |
CA | 12,504 | 2,031 | 16.24 |
CO | 2,210 | 411 | 18.60 |
CT | 891 | 143 | 16.05 |
DC | 94 | 13 | 13.83 |
DE | 290 | 38 | 13.10 |
FL | 2,246 | 326 | 14.51 |
GA | 780 | 89 | 11.41 |
HI | 414 | 56 | 13.53 |
IA | 70 | 15 | 21.43 |
ID | 162 | 19 | 11.73 |
IL | 887 | 166 | 18.71 |
IN | 542 | 79 | 14.58 |
KS | 101 | 9 | 8.91 |
KY | 158 | 13 | 8.23 |
LA | 155 | 15 | 9.68 |
MA | 6,791 | 1,261 | 18.57 |
MD | 3,238 | 449 | 13.87 |
ME | 110 | 14 | 12.73 |
MI | 1,660 | 216 | 13.01 |
MN | 675 | 92 | 13.63 |
MO | 278 | 38 | 13.67 |
MS | 95 | 11 | 11.58 |
MT | 157 | 18 | 11.46 |
NC | 784 | 101 | 12.88 |
ND | 51 | 3 | 5.88 |
NE | 156 | 23 | 14.74 |
NH | 623 | 164 | 26.32 |
NJ | 1,650 | 240 | 14.55 |
NM | 809 | 135 | 16.69 |
NV | 225 | 30 | 13.33 |
NY | 2,323 | 434 | 18.68 |
OH | 2,550 | 432 | 16.94 |
OK | 192 | 16 | 8.33 |
OR | 355 | 58 | 16.34 |
PA | 2,111 | 389 | 18.43 |
PR | 5 | 0 | 0.00 |
RI | 201 | 36 | 17.91 |
SC | 177 | 21 | 11.86 |
SD | 47 | 3 | 6.38 |
TN | 347 | 54 | 15.56 |
State | Applications | Awards | Proposal-to-Award Percentage |
Total | Total | ||
TX | 3,031 | 418 | 13.79 |
UT | 329 | 43 | 13.07 |
VA | 4,893 | 820 | 16.76 |
VT | 133 | 21 | 15.79 |
WA | 848 | 151 | 17.81 |
WI | 316 | 48 | 15.19 |
WV | 149 | 15 | 10.07 |
WY | 60 | 10 | 16.67 |
SOURCE: DoD awards and applications database.
TABLE 2-3 Top 20 DoD Phase I SBIR/STTR Award Recipients, FY2002-2011
Company Name | Number of Awards | Amount (Dollars) |
Physical Optics | 451 | 42,652,863 |
Intelligent Automation | 297 | 27,904,077 |
Luna Innovations | 232 | 21,917,054 |
Physical Sciences | 227 | 21,364,799 |
Charles River Analytics | 210 | 21,005,630 |
Creare | 193 | 18,935,632 |
CFD Research | 165 | 15,730,878 |
Aptima | 163 | 16,007,675 |
Triton Systems | 153 | 14,407,979 |
Toyon Research | 124 | 12,153,649 |
Agiltron | 124 | 11,743,975 |
Lynntech | 117 | 11,061,313 |
Impact Technologies | 115 | 11,483,998 |
Infoscitex | 115 | 10,984,018 |
Foster-Miller | 107 | 9,424,013 |
Texas Research Institute Austin | 106 | 9,558,590 |
Progeny Systems | 96 | 8,278,168 |
Nanosonic | 90 | 8,739,854 |
Materials & Electrochemical Research | 90 | 8,235,150 |
TDA Research | 89 | 8,256,214 |
KaZak Composites | 87 | 7,397,216 |
Total (20 top companies) | 3,351 | 317,242,745 |
All Phase I awards | 23,224 | 2,222,884,156 |
Top 20 companies (percent of total) | 14.4% | 14.3% |
NOTE: For the purposes of assessing company involvement in the program, the table includes both SBIR and STTR awards.
SOURCE: DoD awards database.
FIGURE 2-8 Phase I SBIR applications from woman-owned small businesses
(WOSB), FY2002-2011.
SOURCE: DoD awards and applications database.
FIGURE 2-9 Phase I SBIR awards and award share for woman-owned small
businesses (WOSB), FY2002-2011.
SOURCE: Data from DoD awards and applications database.
FIGURE 2-10 Phase I SBIR awards to woman-owned small businesses (WOSB) by component, FY2002-2011.
SOURCE: DoD awards and applications database.
FIGURE 2-11 Distribution of Phase I SBIR awards among woman-owned small businesses (WOSB), FY2002-2011.
SOURCE: DoD awards and applications database.
TABLE 2-4 Top 20 WOSB SBIR/STTR Awardees, FY2002-2011
Company Name | Number of Awards | Total Amount Awarded (Dollars) |
Physical Optics | 325 | 30,767,174 |
Intelligent Automation | 269 | 25,067,179 |
CFD Research | 107 | 10,219,627 |
Cybernet Systems | 63 | 6,107,428 |
First RF | 52 | 5,209,574 |
21st Century Technologies | 43 | 4,201,388 |
Navsys | 38 | 3,663,344 |
Technology Assessment & Transfer | 37 | 3,402,382 |
Composite Technology Development | 35 | 3,145,330 |
UES Technologies | 35 | 3,361,153 |
21st Century Systems | 32 | 3,033,488 |
Touchstone Research Laboratory Ltd. | 32 | 2,698,160 |
Williams-Pyro | 31 | 2,718,785 |
Ridgetop Group | 26 | 2,601,288 |
Polaris Sensor Technologies | 25 | 2,452,270 |
Pikewerks | 23 | 2,283,363 |
New Span Opto-Technology | 22 | 1,945,801 |
MP Technologies | 21 | 2,004,461 |
Nu-Trek | 21 | 2,038,348 |
Management Sciences | 21 | 2,019,714 |
Top 20 WOSBs—total | 1,258 | 118,940,257 |
All WOSBs—total | 2,963 | 282,087,120 |
All Phase I awards FY2002-2011 | 23,224 | 2,222,884,156 |
Top 20 WOSBs (percent of total) | 5.4% | 5.4% |
All WOSBs (percent of total) | 12.8% | 12.7% |
SOURCE: Data provided by DoD.
Minority-owned Small Businesses
The number of Phase I applications by MOSBs declined steadily from a peak of more than 2,300 in FY2004 to a little more than 1,000 in FY2011 (see Figure 2-12). This decline mirrors the overall decline in applications experienced at DoD during the study period (see Figure 2-13).
Figure 2-14 summarizes awards to MOSBs by the different components (excluding components that provided less than 100 awards total to MOSBs). There was substantial variation over time, in particular at Army, as well as a long-term decline at MDA.
FIGURE 2-12 Phase I SBIR applications from minority-owned small businesses (MOSB), FY2002-2011.
SOURCE: DoD awards and applications database.
FIGURE 2-13 Phase I SBIR applications by minority-owned small businesses (MOSB) and Other Companies, FY2002-2011.
SOURCE: DoD awards and applications database.
FIGURE 2-14 Phase I SBIR awards to minority-owned small businesses (MOSB) by component, FY2002-2011.
NOTE: DoD data for WOSB and MOSB are intrinsically inaccurate. Each record reports which boxes the company checked when applying, and agency staff acknowledge that companies sometimes fail to check an appropriate box. In addition, companies do move
in and out of WOSB and MOSB status as they grow.
SOURCE: DoD awards and applications database.
As with WOSBs (and indeed all awards), awards were concentrated in specific companies. Table 2-5 shows that the top 20 MOSB awardees accounted for about 2.4 percent of all awards and 28 percent of MOSB awards.
PHASE II SBIR AWARDS
To a considerable extent, the pattern of Phase II awards closely follows that for Phase I, which is not surprising because receipt of a Phase I award is a prerequisite for receipt of a Phase II award.
Number and Size of Phase II SBIR Awards
The overall number of Phase II awards exhibits no substantial long-term trend over the study period at about 1,000 awards annually (see Figure 2-15). Although the number of awards was flat, overall spending on Phase II declined fairly steadily from a peak of about $1.1 billion in FY2004 to about $720 million in FY2011 (see Figure 2-16).
TABLE 2-5 Phase I SBIR/STTR Awards to MOSBs, FY2002-2011
Company Name | Number of Awards | Total SBIR Phase I Funding (Dollars) |
Scientific Systems | 56 | 5,422,967 |
Agiltron | 46 | 4,431,760 |
Cybernet Systems | 44 | 4,267,507 |
Nextgen Aeronautics | 38 | 3,769,054 |
Scientific Systems | 38 | 3,365,891 |
Aerius Photonics | 36 | 3,547,566 |
Agave Biosystems | 35 | 3,297,911 |
Intelligent Systems Technology | 29 | 2,867,371 |
American GNC | 27 | 2,474,936 |
Edaptive Computing | 25 | 2,438,248 |
Materials Modification | 23 | 1,887,015 |
SVT Electronics | 23 | 1,944,899 |
Hypercomp | 22 | 2,407,524 |
Acellent Technologies | 21 | 2,006,690 |
Datasoft | 19 | 1,609,881 |
Wright Materials Research | 18 | 1,649,791 |
Ceramatec | 17 | 1,585,321 |
Composite Technology Development | 17 | 1,486,037 |
Genex Technologies | 16 | 1,497,975 |
Applied Technology | 15 | 1,362,104 |
Top 20 MOSBs | 565 | 53,320,448 |
All MOSBs | 2,003 | 187,202,401 |
All Phase I awards | 23,224 | 2,222,884,156 |
Top 20 MOSBs (percent of total awards) | 2.4% | 2.4% |
Top 20 MOSBs (percent of MOSB awards) | 28.2% | 28.5% |
SOURCE: DoD awards and applications database.
As with all agencies, SBA policy guidance does provide DoD with some flexibility to fund Phase II awards beyond the standard amounts. Table 2-6 shows, however, that this flexibility has been rarely used: about 10 percent of awards were $2 million or more, and about 1 percent were $4 million or more. AF and Navy together accounted for more than two-thirds of the larger awards (see Table 2-7).
FIGURE 2-15 Number of Phase II SBIR awards, FY2002-2011.
SOURCE: DoD awards and applications database.
FIGURE 2-16 Phase II SBIR funding, FY2002-2011.
SOURCE: DoD awards and applications database.
TABLE 2-6 Size of Phase II SBIR Awards, 2002-2011
Number of Awards | Percentage of Total | |
>$750,000 and <$1M | 1,153 | 41.6 |
>$1M-$2M | 1,346 | 48.6 |
>$2M-$3M | 179 | 6.5 |
>$3M-$4M | 61 | 2.2 |
>$4M-$5M | 19 | 0.7 |
>$5M | 13 | 0.5 |
2,771 | 100.0 |
SOURCE: DoD awards and applications database. Phase II.5 awards are not included in this dataset.
Phase II SBIR Awards by Component
As with Phase I, overall awards were dominated by the Services, each of which averaged more than 200 awards per year during the study period, far more than other components. Of the other components, only MDA averaged more than 100 (but experienced a steady decline to 67 in FY2011) (see Figure 2-17). Among the Services, the number of Air Force awards declined somewhat after FY2008, while those for Navy increased after FY2009.
Phase II SBIR Applications and Success Rates
Until fairly recently, Phase II applications required an invitation from DoD, so only projects deemed appropriate for Phase II by the Technical Point of Contact (TPOC) and the decision-making officers at the various components were eligible for Phase II funding. Reauthorization legislation now instructs all agencies to permit all Phase I participants to apply for Phase II funding.
TABLE 2-7 Distribution of Phase II SBIR Larger Than $2 Million, by Component
Component | Number of Awards >$2M | Percentage of Awards >$2M |
AF | 103 | 38.0 |
ARMY | 40 | 14.8 |
DARPA | 14 | 5.2 |
MDA | 25 | 9.2 |
NAVY | 80 | 29.5 |
OSD | 5 | 1.8 |
SOCOM | 4 | 1.5 |
271 | 100.0 |
SOURCE: DoD awards database.
FIGURE 2-17 Phase II SBIR awards, by component, FY2002-2011.
SOURCE: DoD awards and applications database.
Overall, the number of Phase II applications reflects the general distribution of funding and awards by component (see Figure 2-18), remaining fairly stable after the downturn in FY2002. Success rates in being awarded a Phase II contract varied substantially by year, from a peak of about 77 percent in 2006 to a low of about 54 percent in 2011 (see Figure 2-19).
FIGURE 2-18 Phase II SBIR applications by component, FY2002-2011.
SOURCE: DoD awards and applications database.
FIGURE 2-19 Success rate for Phase II SBIR applications, FY2002-2011.
SOURCE: DoD awards and applications database.
Distribution of Phase II SBIR Awards by State
As with Phase I awards, companies in some states have a consistently stronger record in receiving Phase II awards. Again, however, the success rates should be normalized against both the size of the state population and the availability of scientific and engineering talent in the state workforce. The scatter chart in Figure 2-20 shows a positive correlation between scientific talent and award shares, when the success rate is normalized for the population.
As states have recognized the benefits of receiving SBIR awards, many have started Phase 0 programs to encourage applications.9 Some even provide matching funds for Phase I and pay for application preparation.
Evidence suggests that the average quality of applications varies widely: success rates for Phase I differ by state, as does the percentage of Phase I awards that are successfully converted to Phase II awards. Table 2-8 shows the top five and bottom five states as measured by conversion success.10
Phase II SBIR Awards by Company
Given that receipt of a Phase I award is a requirement for receipt of a Phase II award, it is not surprising to see many of the same company names on
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9E.g. New York State, <http://www.nydirectedenergy.org/programs/sbir.cfm>; Florida <http://www.enterpriseflorida.com/small-business/sbirsttr-phase-0-pilot-program/>, South Carolina <http://www.scepscoridea.org/Funding/Phase-0.html>.
10The complete table is provided at the end of this chapter.
FIGURE 2-20 Phase II SBIR awards by state population and percentage of scientists and engineers in state workforce.
NOTE: Two outliers have been excluded from this chart—Massachusetts, which has a far higher share of awards per population and Washington, DC, which has far more PhD scientists and engineers per capita than other jurisdictions. The exclusion was to permit readers to view the distribution of the remaining states more clearly. All states and DC are included in the reference table at the end of this chapter.
SOURCE: DoD data; National Science Board, Science and Engineering Indicators 2012, NSB 12-01, Arlington, VA: National Science Foundation, 2012, Table 8-34; U.S. Census.
the list of top 25 Phase II award recipients at DoD. What is, however, quite striking is the extent to which these companies rely for Phase II success on the sheer volume of Phase I awards that they win: the conversion rate from Phase I to Phase II is lower than the average for all awards for every one of the top 25 awardees except Trident Systems. This is a somewhat troubling finding, because it suggests that the most prolific award recipients at DoD are on average generating Phase I results that are less worthy of further funding than the average Phase II proposal. Both Physical Optics and Intelligent Automation—the top two awardees—show conversion rates that are far below the average.
Phase II SBIR Award Demographics
Woman-owned Small Businesses
As with SBIR Phase I, the number of Phase II applications received from WOSBs remained largely flat across the study period, averaging 12.5
TABLE 2-8 Phase I to Phase II Conversion Success Rate Top and Bottom 5 States 2002-2011
State | Phase 1-Phase 2 Conversion Success Rate (Percent) |
Maine | 205.0 |
Nevada | 202.8 |
Arkansas | 185.1 |
Louisiana | 185.1 |
Tennessee | 158.7 |
Kansas | 38.5 |
Delaware | 36.1 |
North Dakota | 35.3 |
South Dakota | 26.4 |
Kentucky | 14.4 |
NOTE: Conversion success rate is the percentage Phase I awards that convert to Phase II, as a percentage of the average of all states.
SOURCE: DoD awards and applications database.
percent of applications annually (compared to 15.9 percent of Phase I applications) (see Figure 2-21). This stable level of applications is largely matched by a stable level of Phase II awards to WOSBs. The share of Phase II awards to WOSBs remained flat at about 14 percent after FY2005 (see Figure 2-22).
Minority-owned Small Businesses
The basic data for SBIR Phase II awards to MOSBs reveal very low levels of awards throughout the study period, with a sharp decline in more recent years (see Figure 2-23). On average, MOSBs accounted for 7.8 percent of Phase II SBIR awards, with a peak of 11.5 percent in 2008 to a known low of 6 percent in 2010. According to DoD’s data contractor, some inconsistencies remain in the recording of WOSB and MOSB awards at DoD, and the data for 2011 in particular are currently being revised. In part, this decline reflects a decline in the number of Phase II applications by MOSBs (see Figure 2-24).
Figure 2-25 compares Phase II application and award rates for MOSBs. Overall, rates are closely aligned: across the entire study period, MOSBs submitted 7.8 percent of the applications and received 7.9 percent of the awards.11 These results suggest that efforts to expand the number of Phase II awards to MOSBs should focus on encouraging more applications.
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11DoD awards and applications databases.
TABLE 2-9 Top 25 Phase II SBIR/STTR Awardees FY2002-2011
Company Name | Number of Awards (Percent) | Phase I-Phase II Conversion |
Physical Optics | 166 | 36.8 |
Intelligent Automation | 104 | 35.0 |
Physical Sciences | 103 | 45.4 |
Creare | 95 | 49.2 |
Luna Innovations | 93 | 40.1 |
Charles River Analytics | 92 | 43.8 |
Aptima | 89 | 54.6 |
Triton Systems | 80 | 52.3 |
CFD Research | 75 | 45.5 |
Impact Technologies | 74 | 64.3 |
Toyon Research | 50 | 40.3 |
Progeny Systems | 50 | 52.1 |
Technology Service | 47 | 61.0 |
Lynntech | 46 | 39.3 |
Agiltron | 45 | 36.3 |
Infoscitex | 43 | 37.4 |
Nanosonic | 41 | 45.6 |
Trident Systems | 39 | 88.6 |
Spectral Sciences | 39 | 60.9 |
Texas Research Institute Austin | 39 | 36.8 |
Knowledge Based Systems | 39 | 60.9 |
AlphaTech | 38 | 55.9 |
TDA Research | 38 | 42.7 |
Foster-Miller | 35 | 32.7 |
Metrolaser | 32 | 62.7 |
KaZak Composites | 32 | 36.8 |
Median (top 26) | 45.4 | |
Average (all awards) | 64.7 |
NOTE: For the purpose of analyzing company involvement, SBIR and STTR data have been combined in this table. 26 companies are included, as 2 companies were awarded 32 Phase II awards.
SOURCE: DoD awards database.
FIGURE 2-21 Phase II SBIR applications by woman-owned small businesses (WOSB), FY2002-2011.
SOURCE: DoD awards and applications database.
FIGURE 2-22 Woman-owned small business (WOSB) shares of Phase I and Phase II SBIR awards, FY2002-2011.
SOURCE: DoD awards database; DoD SBIR website, accessed August 15, 2013. <http://www.acq.osd.mil/osbp/sbir/>.
FIGURE 2-23 Phase II SBIR awards to minority-owned small businesses (MOSB), FY2002-2011.
SOURCE: DoD awards and applications database.
FIGURE 2-24 Phase II SBIR applications by minority-owned small businesses (MOSB), FY2002-2011.
SOURCE: DoD awards and applications database.
FIGURE 2-25 Phase II SBIR minority-owned small businesses (MOSB) share of awards and applications, FY2002-2011.
SOURCE: DoD awards and applications database.
NEW PARTICIPANTS IN THE DOD SBIR PROGRAM
DoD provided a count of companies receiving their first award in any given year. Tables 2-10 and 2-11 show the numbers of companies entering each phase for the first time, for SBIR and STTR combined,12 as well as their representation of all companies receiving an award that year.
It is not surprising that both tables show a decline over time in the number of new companies in the program. This may be explained by changes in the national rate of small company formation, which has declined over the period.13 In addition, the number of companies with program experience continues to grow, and the pool of qualified companies that have not received an award may not be increasing, at least not at a rate sufficient to maintain the percentage.
It is worth noting that new companies receive a higher percentage of Phase II awards than Phase I, which suggests that the quality of proposals from new companies is higher. This in turn suggests that selection criteria for Phase I might be overly weighted to companies with previous experience, although the
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12DoD provided combined records for new SBIR and STTR entrants.
13Kaufmann Foundation, BDS Brief “Number of New Firms Continues to Slide, According to New Census Bureau Data,” 5/2/2012, <http://www.kauffman.org/newsroom/2012/05/number-of-new-firms-continues-to-slide-according-to-new-census-bureau-data>.
TABLE 2-10 Companies Receiving Phase I SBIR Award for First Time, by Fiscal Year
Fiscal Year Reported | Number of 1st Phase I SBIR/STTR | Percentage of All Companies |
2002 | 495 | 34.5 |
2003 | 404 | 25.7 |
2004 | 436 | 26.8 |
2005 | 475 | 26.9 |
2006 | 317 | 19.4 |
2007 | 320 | 22.1 |
2008 | 277 | 19.3 |
2009 | 299 | 20.0 |
2010 | 315 | 20.4 |
2011 | 277 | 20.6 |
SOURCE: DoD special tabulation.
absence of application data about new entrants means that whether the lower Phase I percentage reflects fewer applications or fewer awards cannot be determined. It is worth noting that the companies winning the most Phase I awards almost uniformly had below average Phase II conversion rates, as discussed above.
TABLE 2-11 Companies Receiving Phase II SBIR Award for First Time, by Fiscal Year
Fiscal Year Reported | Number of 1st Phase II SBIR/STTR | Percentage of All Companies |
2002 | 170 | 36.0 |
2003 | 304 | 40.3 |
2004 | 299 | 36.1 |
2005 | 260 | 33.7 |
2006 | 310 | 35.7 |
2007 | 175 | 26.8 |
2008 | 223 | 29.8 |
2009 | 183 | 27.0 |
2010 | 202 | 26.5 |
2011 | 158 | 25.2 |
SOURCE: DoD special tabulation
ANNEX
STATE TABLES
The state tables in this annex show relationships between awards, state populations, and the incidence in scientists and engineers in the workforce. There is a positive correlation between the latter and the number of awards, normalized for state population.
TABLE ANNEX 2-1 Phase I SBIR/STTR Awards by State, State Population, and Scientists and Engineers in State Workforce
State | State Population in Millions (2012) | Percentage of Scientists and Engineers in State Workforce (2008) | Number of Phase I SBIR Awards (2002-2011) | Number of Phase I Awards per Million in Population |
AK | 0.7 | 0.36 | 10 | 14.1 |
AL | 4.8 | 0.29 | 663 | 138.7 |
AR | 2.9 | 0.18 | 40 | 13.7 |
AZ | 6.4 | 0.30 | 492 | 77.0 |
CA | 37.3 | 0.57 | 4,786 | 128.5 |
CO | 5.0 | 0.50 | 1,025 | 203.8 |
CT | 3.6 | 0.60 | 321 | 89.8 |
DE | 18.8 | 0.79 | 83 | 92.4 |
FL | 9.7 | 0.22 | 676 | 36.0 |
GA | 1.4 | 0.30 | 238 | 24.6 |
HI | 3.0 | 0.52 | 102 | 75.0 |
IA | 1.6 | 0.32 | 40 | 13.1 |
ID | 12.8 | 0.39 | 50 | 31.9 |
IL | 6.5 | 0.39 | 365 | 28.4 |
IN | 2.9 | 0.34 | 169 | 26.1 |
KS | 4.3 | 0.30 | 36 | 12.6 |
KY | 4.5 | 0.25 | 32 | 7.4 |
LA | 6.5 | 0.26 | 45 | 9.9 |
MA | 5.8 | 1.07 | 3,148 | 480.8 |
MD | 1.3 | 0.97 | 1,117 | 193.5 |
ME | 9.9 | 0.35 | 60 | 45.2 |
MI | 5.3 | 0.37 | 516 | 52.2 |
MN | 6.0 | 0.45 | 241 | 45.4 |
MO | 3.0 | 0.35 | 103 | 17.2 |
MS | 1.0 | 0.27 | 33 | 11.1 |
MT | 9.5 | 0.43 | 59 | 59.6 |
State | State Population in Millions (2012) | Percentage of Scientists and Engineers in State Workforce (2008) | Number of Phase I SBIR Awards (2002-2011) | Number of Phase I Awards per Million in Population |
NC | 0.7 | 0.47 | 226 | 23.7 |
ND | 1.8 | 0.37 | 7 | 10.4 |
NE | 1.3 | 0.29 | 33 | 18.1 |
NH | 8.8 | 0.40 | 329 | 249.9 |
NJ | 2.1 | 0.50 | 607 | 69.0 |
NM | 2.7 | 0.86 | 351 | 170.5 |
NV | 19.4 | 0.22 | 75 | 27.8 |
NY | 11.5 | 0.54 | 1,002 | 51.7 |
OH | 3.8 | 0.37 | 1,038 | 90.0 |
OK | 3.8 | 0.27 | 84 | 22.4 |
OR | 12.7 | 0.48 | 144 | 37.6 |
PA | 3.7 | 0.49 | 912 | 71.8 |
RI | 1.1 | 0.53 | 75 | 71.3 |
SC | 4.6 | 0.32 | 72 | 15.6 |
SD | 0.8 | 0.30 | 10 | 12.3 |
TN | 6.3 | 0.35 | 112 | 17.6 |
TX | 25.1 | 0.36 | 1,051 | 41.8 |
UT | 2.8 | 0.42 | 135 | 48.8 |
VA | 8.0 | 0.54 | 1,868 | 233.5 |
VT | 0.6 | 0.53 | 45 | 71.9 |
WA | 6.7 | 0.54 | 367 | 54.6 |
WI | 5.7 | 0.34 | 102 | 17.9 |
WV | 1.9 | 0.26 | 68 | 36.7 |
WY | 0.6 | 0.24 | 25 | 44.4 |
NOTE: For purposes of analyzing state participation in the program, SBIR and STTR awards data were combined.
SOURCE: DoD awards database; NSF Science and Engineering Indicators 2012, table 8-34; U.S. Census.
TABLE ANNEX 2-2 Phase I-Phase II Conversion Success Rate, by State (1999-2012)
State | Phase I-Phase II Conversion Success Rate (Percent) |
ME | 205.0 |
NV | 202.8 |
AR | 185.1 |
LA | 185.1 |
TN | 158.7 |
MN | 143.1 |
ID | 142.8 |
NH | 141.3 |
PA | 126.3 |
WA | 126.1 |
VT | 125.6 |
CA | 115.0 |
DC | 114.6 |
MT | 112.4 |
NY | 111.7 |
CO | 110.6 |
MI | 110.1 |
OH | 109.5 |
HI | 108.4 |
AL | 108.4 |
OR | 107.5 |
FL | 106.5 |
NJ | 103.2 |
VA | 103.0 |
WV | 102.9 |
MD | 95.2 |
MA | 90.8 |
MS | 89.9 |
TX | 89.9 |
CT | 86.6 |
UT | 85.4 |
OK | 83.8 |
IN | 83.3 |
RI | 81.6 |
AZ | 75.9 |
NC | 75.3 |
NM | 72.4 |
State | Phase I-Phase II Conversion Success Rate (Percent) |
WI | 68.8 |
IA | 63.5 |
IL | 61.3 |
SC | 60.5 |
MO | 59.9 |
GA | 58.7 |
WY | 57.3 |
NE | 48.5 |
KS | 38.5 |
DE | 36.1 |
ND | 35.3 |
SD | 26.4 |
KY | 14.4 |
AK | n/a |
NOTE: For purposes of analyzing state participation in the program, SBIR and STTR awards data were combined.
SOURCE: DoD awards database.