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SBIR at NASA (2016)

Chapter: 7 Insights from Survey Responses and Case Studies

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Suggested Citation:"7 Insights from Survey Responses and Case Studies." National Academies of Sciences, Engineering, and Medicine. 2016. SBIR at NASA. Washington, DC: The National Academies Press. doi: 10.17226/21797.
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7

Insights from Survey Responses
1and Case Studies

This chapter reviews a range of impacts of the Small Business Innovation Research (SBIR) program based on written responses to open-ended questions solicited in the 2011 Survey and interviews with executives for the case studies. The survey process is described in Appendix A, and the survey instrument is provided in Appendix C. Data from the survey are used to support analysis throughout the report; this chapter draws from the written, open-ended responses to survey questions. Box 7-1 lists the case study firms, all of which were NASA SBIR award winners. Full case studies can be found in Appendix E. Companies selected for case studies are not intended to be statistically representative of NASA SBIR award winners or their award outcomes. Although the number of case studies completed as part of this study is limited, case studies of selected firms can offer qualitative evidence about experiences with the program of firms that have achieved some success and may have acquired some insights regarding how the SBIR program, particular aspects of the program, or the manner in which the company utilized the program may have contributed to that success. Interviewees were also asked to raise any problems and provide their own recommendations about how the program could be improved. Future research could benefit from a broader base of case study companies, including less successful companies, whose responses could provide a useful comparison.

This qualitative review provides needed context for the data discussed in Chapter 5 and aids understanding of the perspectives of award recipients as well as those who did not receive Phase II funding for what they considered to be a highly promising project.

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1 All direct quotations are, unless otherwise indicated, drawn from the case studies included as Appendix E. All survey responses are provided in boxes, and are drawn verbatim from responses to the 2011 Survey of NASA SBIR award recipients.

Suggested Citation:"7 Insights from Survey Responses and Case Studies." National Academies of Sciences, Engineering, and Medicine. 2016. SBIR at NASA. Washington, DC: The National Academies Press. doi: 10.17226/21797.
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The impacts of the SBIR program can be clustered into the following broad headings, which are discussed in turn, below:

  • Helping with company formation.
  • Providing critical early funding for projects and companies that are for various reasons not able to access other sources of funding.
  • Validating companies and projects that are subsequently able to raise outside money.
  • Funding new technology and product development.
  • Other impacts, including building partnerships with prime contractors and building human capital.
  • Supporting the agency mission at the National Aeronautics and Space Administration (NASA), including social impacts.

The chapter first draws on case study and survey data regarding program impacts and then summarizes program management issues raised by case study interviewees. Views summarized do not necessarily reflect the views of the committee.

Together, these sections provide the first wide-ranging publicly available feedback by program recipients of the NASA SBIR program.

Suggested Citation:"7 Insights from Survey Responses and Case Studies." National Academies of Sciences, Engineering, and Medicine. 2016. SBIR at NASA. Washington, DC: The National Academies Press. doi: 10.17226/21797.
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HELPING WITH COMPANY FORMATION

It is easy to forget that the SBIR program overall provides considerably more funding for very early-stage projects than the entire U.S. venture capital (VC) industry: in 2012, VCs provided $820 million for seed and startup projects compared with the overall spending of $2.13 billion by the SBIR program.2

Evidence from interviews and survey responses confirms that, for many companies, SBIR funding allows a company to get started. As one survey respondent noted, “The SBIR program is the sole reason for the existence of our company. Without the original Phase I wins in 2003, it would have been difficult for the founders to gather the resources to start a new company, which has grown from 4 to 26 full time employees in the interim.” (See this and other comments on company formation in Box 7-2.) Advanced Cooling Technologies won its first SBIR award in 2003, the year it was founded, and its president Dr. John Zuo, interviewed for a case study, said that SBIR was “very important to the company’s success during the early years, and continues to be important today.”

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2 PriceWaterHouseCoopers MoneyTree Survey, https://www.pwcmoneytree.com/MTPublic/ns/nav.jsp?page=historical, _accessed Jan 28 2014. See also http://www.sbir.gov/awards/annual-reports, accessed April 24, 2015.

Suggested Citation:"7 Insights from Survey Responses and Case Studies." National Academies of Sciences, Engineering, and Medicine. 2016. SBIR at NASA. Washington, DC: The National Academies Press. doi: 10.17226/21797.
×

PROVIDING CRITICAL EARLY FUNDING OF PROJECTS

Commercial funding from investors or lenders is often very difficult to find for small or newer companies with limited records, working to develop products that do not yet exist and hence have no existing market. These funding problems center on a number of issues, including access to early or seed funding and funding problems for projects that have very long lead times.

Very early-stage funding is largely unavailable from commercial sources, especially in areas with limited markets and long timelines. As a result, the SBIR program provides crucial seed funding for projects that may otherwise have difficulty obtaining funding. As Mr. Anderson (Paragon) noted that SBIR provides seed funding to explore an idea. Paragon usually loses money on Phase I, and sometimes loses money on Phase II, so SBIR is a supplement to internal funding rather than being a profit center.3Box 7-3 provides survey responses on SBIR as a critical early funder.

Many survey respondents also noted that their research required the investment of considerable time and resources before it would become possible to reach the market. The ongoing support for longer-term projects was seen by many as a particularly important characteristic of NASA SBIR awards. (See Box 7-4 for related suvey comments.)

VALIDATING COMPANIES

SBIR funding can reduce the risk of projects to a level that investors are willing to accept. Risk is a key ingredient in private-sector funding algorithms: the higher the risk, the less likely funders are to invest (and the more equity they require). In addition, developing new high-tech products is an inherently risky business: the more innovative the product and the less developed the existing market, the greater the risk.

By funding the movement of projects along the technological development curve4, SBIR helps companies overcome technological risks. In some cases, SBIR funding helps lower project risk. But in others, SBIR funding allows companies to develop projects that otherwise would be too risky to contemplate. (See Box 7-5 for related survey comments.)

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3 Dr. MacCallum was a co-founder of Paragon Space Development Corporation and served as its chief executive officer for over 20 years. He is currently the chief technology officer for World View Enterprises.

4 This is the idea that a technology’s performance trajectory may be described as a curve, where performance is plotted against time, and where the curve may take an S-shape—evolving slowly in the beginning, at some point achieving more rapid advancement, such as when a breakthrough is achieved, and eventually slowing as the technology comes up against limits of what is at the time scientifically possible.

Suggested Citation:"7 Insights from Survey Responses and Case Studies." National Academies of Sciences, Engineering, and Medicine. 2016. SBIR at NASA. Washington, DC: The National Academies Press. doi: 10.17226/21797.
×

FUNDING TECHNOLOGY AND PRODUCT DEVELOPMENT

Many small companies have limited internal resources for research and development. Often, the SBIR program provides the funding needed to take an idea for an innovative product to the point at which it may enter the market or attract additional funding needed to do so. (See Box 7-6 for related survey comments.)

Suggested Citation:"7 Insights from Survey Responses and Case Studies." National Academies of Sciences, Engineering, and Medicine. 2016. SBIR at NASA. Washington, DC: The National Academies Press. doi: 10.17226/21797.
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Funding Core Technology Development

For many SBIR companies, the program funded development of the company’s core technology or at least its first commercially viable technology. In 2005, Advanced Cooling Technologies (ACT) won awards from NASA and the Department of Defense (DoD) to explore heat exchanger technologies.5 As

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5 NASA Phase I “Heat Pipe Heat Exchangers with Double Isolation Layers for Prevention of Interpath Leakage;” DoD Phase I “VCHP Heat Exchanger for Passive Thermal Management of a Fuel Cell Reforming Process.”

Suggested Citation:"7 Insights from Survey Responses and Case Studies." National Academies of Sciences, Engineering, and Medicine. 2016. SBIR at NASA. Washington, DC: The National Academies Press. doi: 10.17226/21797.
×

detailed in the case study, these technologies generated very promising results, and the company then undertook a market survey, which encouraged it to invest its own funding to accelerate development. The funding was used to develop and launch products aimed at addressing needs expressed by thermal control customers. At the same time, the company continued with its R&D through the end of the Phase II awards in 2006, and also invested in ISO 9001 certification, a key to successful market penetration.

The Constant and Variable Conductance Heat Pipe (CCHP and VCHP) products that emerged have generated millions of dollars in revenues for ACT.6

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6 According to ACT, “Variable conductance heat pipes (VCHPs) are used to achieve temperature control. This is accomplished by blocking a fraction of the condenser with a small amount of non-condensable gas. When the heat load or the condenser temperature increases, the heat pipe temperature tends to rise. The increased vapor pressure compresses the non-condensable gas, exposing more condenser area and as a result increases the heat pipe conductance. The opposite happens when the heat load or the condenser temperature decreases. The variation of the

Suggested Citation:"7 Insights from Survey Responses and Case Studies." National Academies of Sciences, Engineering, and Medicine. 2016. SBIR at NASA. Washington, DC: The National Academies Press. doi: 10.17226/21797.
×

At ZONA Technology, Mr. Chen observed that the SBIR program played a critical role in the development of the company, because SBIR funding from the Air Force and NASA supported development of the company’s first product, ZONA51. And at TSI, Dr. Gil Blankenship noted that the company transitioned toward a product-driven model, SBIR funded the research that led to both of the company’s core product lines—SARSAT search and rescue, and Trident ship-based monitoring. (See Box 7-7 for related survey responses.)

Non-Linear Development

Among the many responses received from the survey were a considerable number that illustrated the importance of what can be termed a “nonlinear” path for product development. Indeed, the path from idea to innovation to prototype to product to commercial success is rarely direct for small innovative firms. In many cases, firms must struggle to find the right fit between their technical ideas and market needs; often this requires re-engineering their products, adapting existing approaches, or even starting again after discovering that a core technical expectation was simply wrong.

For example, NASA SBIR awards have played a pivotal role in supporting both Continuum Dynamics and, indirectly, rotorcraft manufacturing in the United States. According to Dr. Bilanin, all U.S. manufacturers (and most

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conductance keeps the heat pipe operating temperature nearly constant over a wide range of heat inputs and condenser thermal environments.”

Suggested Citation:"7 Insights from Survey Responses and Case Studies." National Academies of Sciences, Engineering, and Medicine. 2016. SBIR at NASA. Washington, DC: The National Academies Press. doi: 10.17226/21797.
×

of those overseas) now utilize CDI rotorcraft software in the design and analysis of helicopters.

Expansion into New Markets

There is a blurred line between core products and new applications, which often involve core technologies being applied in new ways. Nonetheless, a number of interviewees and many survey respondents indicated that SBIR funding was being used to expand a company’s products and offerings beyond its first product and its core product.

One example of a firm working diligently to adapt its skills to new markets is Paragon Space Development Corporation. The company was formed to work on life support systems in space environments and continues to be a valued partner for many NASA projects. However, Paragon also developed the Paragon Dive System for the U.S. Navy, which protects divers working in contaminated waters. And more recently, Paragon was the technology (suit) provider for Alan Eustace’s dive from near space in October 2014 in which he broke the altitude record for human free fall.7

Other companies also use SBIR funding to explore new markets. Although SBIR has funded the development of ZONA’s core technologies, it has also, according to Mr. Chen, funded the innovation that drives growth for the company in the form of new technology that can be commercialized. In addition, at TSI, Dr. Blankenship said that SBIR funding supported the company’s push into new technologies and new markets such as air-driven technology for aircraft flaps.

Selling into NASA

The small size, long timeline, and specialized nature of NASA acquisitions provide formidable challenges for NASA SBIR companies. Typically, procurement contracts for SBIR-funded technologies at NASA are not large enough or sustained enough to support a viable business although, of course, even tightly targeted mission-oriented projects can do on occasion produce technologies with sometimes significant non-NASA market potential.

The lengthy time lags in NASA development cycles offer another challenge. The timeline between the start of a Phase II award and its insertion into the production phase of a NASA project (usually requiring a Technology Readiness Level (TRL) of 8 or 9)8can be over a decade.

During this long period, there is often insufficient funding to support further development of the technology. Although large companies are more

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7 For an account of providing the suit for the Eustace dive, see http://www.paragonsdc.com/stratex/.

8 Definitions of NASA Technology Readiness Levels are available at http://www.esto.nasa.gov/files/trl_definitions.pdf.

Suggested Citation:"7 Insights from Survey Responses and Case Studies." National Academies of Sciences, Engineering, and Medicine. 2016. SBIR at NASA. Washington, DC: The National Academies Press. doi: 10.17226/21797.
×

likely to have access to internal or external funding, SBIR companies are typically too small to do so.

Changes in NASA mission objectives during this long period of development can also be disastrous for SBIR projects. For example, Dr. Zuo of ACT said that an initial $1.2 million award from Glenn Research Center, although technically successful, was focused on a project that NASA subsequently cancelled.

Paragon has encountered certain problems in part because it has remained primarily a government contractor working for NASA. These funding sources provide low margins, which mean that when times become more difficult the company usually does not have a significant backlog of work or resource base to turn to. This makes it challenging to weather any kind of difficulties with government funding cycles.

Mr. Stottler of Stottler Henke identified what he sees as a systemic problem in the linkage between SBIR funding and the rest of the NASA budget process. Because SBIR-funded projects are not part of the standard budgeting process at the agency, there is typically minimal or zero follow-on funding even for maintenance. Good projects are therefore sometimes left to die.

OTHER COMPANY IMPACTS

Partnering with Primes

Some SBIR-recipient companies have made concerted efforts to work with NASA prime contractors. Dr. Haynes of IAI noted that SBIR awards were often the basis for technology capabilities that allowed the company to become involved in major projects as partners or major subcontractors to prime contractors. IAI has been included on major bid teams led by Raytheon, Honeywell, Northrop Grumman, and Lockheed Martin.

IAI has made a strategic shift toward commercialization through partnerships, beyond its existing business model as a contract research company largely focused on SBIR, by developing close relations with a number of prime contractors. In many cases, IAI has become a part of the bid team for major contracts. In others, primes have picked up what IAI calls “productized services,” packages of technology and related service contracts, for integration into larger projects. Prime customers include BAE Systems, Honeywell, Northrop Grumman, Boeing, and Raytheon.9

Capacity Building—Human Capital

SBIR funding can be used in part to provide small companies with necessary equipment, but interviews and survey responses show that the human

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9 TecFusion™ is an attempt to systematically bring SBCs together with primes after Phase II is completed.

Suggested Citation:"7 Insights from Survey Responses and Case Studies." National Academies of Sciences, Engineering, and Medicine. 2016. SBIR at NASA. Washington, DC: The National Academies Press. doi: 10.17226/21797.
×

capital effects can be more important. Most directly, SBIR funding allows companies to hire staff, typically approximately two to four full-time staff at the PhD level for a Phase II project. SBIR funding has other capacity building effects as well. According to one survey respondent, “During the actual work phases the principal investigator (PI) and co-workers communicated with other colleagues in the field which facilitated various aspects of the project while providing industrial training to PI. In fact this PI has gone on to start another company drawing on what was learned from the NASA SBIR program.”

SUPPORTING THE AGENCY MISSION

Building Innovative Technologies Needed by NASA

Evidence from cases strongly supports the view that the SBIR program provides important technologies that are taken up by NASA and could perhaps not be acquired by other mechanisms.

Honeybee has, according to Irene Yachbes, its director of technology development, provided technologies used by NASA for on-Mars missions:

  • The Rock Abrasion Tool (RAT) was the first machine to access rock interiors on another planet. Designed, developed, and operated by Honeybee Robotics as a part of NASA’s 2003 Mars Exploration project, the RAT uses grinding wheels of diamond dust and resin to gently abrade the surface of Martian rocks (see Box 7-9).10

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10 For more on Honeybee’s technologies used for on-Mars missions, see http://marsrover.nasa.gov/mission/spacecraft_instru_rat.html.

Suggested Citation:"7 Insights from Survey Responses and Case Studies." National Academies of Sciences, Engineering, and Medicine. 2016. SBIR at NASA. Washington, DC: The National Academies Press. doi: 10.17226/21797.
×
  • The Icy Soil Acquisition Device (ISAD) flew on NASA’s 2007 Phoenix Mission. The ISAD (sometimes called the Phoenix Scoop) is both a soil scoop and a precision ice-sampling tool integrated on the end of the robotic arm of the Phoenix lander.11 The ISAD was used to dig into the surface surrounding the lander and to acquire icy soil samples. These samples were then delivered to science instruments for examination. According to Ms. Yachbes, Honeybee designed, built, and tested the ISAD in only 14 months in response to an urgent request from NASA for improved methods of gathering samples from very icy soil targets. This development was possible in part because Honeybee maintains the facilities and expertise for preparing and testing tools utilizing simulated Mars soil under simulated Mars temperatures.

These highly specialized capabilities have been developed by Honeybee in the course of more than 100 projects for NASA, serving the needs of nine NASA Centers.

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11 For more on the ISAD, see http://phoenix.lpl.arizona.edu/index.php.

Suggested Citation:"7 Insights from Survey Responses and Case Studies." National Academies of Sciences, Engineering, and Medicine. 2016. SBIR at NASA. Washington, DC: The National Academies Press. doi: 10.17226/21797.
×

Many other companies had similar (although perhaps not such dramatic stories) about the technologies developed for NASA. According to Dr. Bilanin, all U.S. manufacturers (and most of those overseas) now utilize CDI rotorcraft software in the design and analysis of helicopters.

Other companies have developed a consistent relationship with NASA that allows them to become a go-to source of high-end technical expertise. Paragon, for example, has been involved in a number of ground-breaking scientific and technical efforts (see Box 7-10).

Working with NASA Centers and Commercial Partners

NASA Centers are important research enterprises in their own right. They often maintain unique technical facilities (such as the wind tunnel at Glenn Research Center) and have a highly qualified staff of engineers and scientists. Over time, some SBIR companies are able to develop important ongoing relationships with NASA Centers, which serve both parties well.

Suggested Citation:"7 Insights from Survey Responses and Case Studies." National Academies of Sciences, Engineering, and Medicine. 2016. SBIR at NASA. Washington, DC: The National Academies Press. doi: 10.17226/21797.
×

For example, Dr. Bilanin (CDI) noted CDI had built a long standing and durable relationship with some NASA centers, in some cases reaching back more than 30 years. The company’s collaborative work with NASA/Ames had numerous benefits for the company—including a steady flow of work, access to NASA tools and testing—but also for NASA, where CDI had consistently delivered the tools needed to solve NASA-defined problems. In addition, the Center had helped to link CDI to the industry groups and companies that came to Ames to use NASA facilities. (See Box 7-11 for an example.) This linkage was especially helpful in the early years of CDI.

These soft linkages are important: they reflect the two-way flow of knowledge between the public and private sectors, facilitated to an important degree by publications afforded by SBIR contracts.

Companies that are successful in working with the NASA SBIR program tend to be able to serve more than one Center. For example, Intelligent Automation has developed relationships with NASA-Ames (related to Air Traffic Management (ATM) systems), NASA-Goddard (related to Airborne

Suggested Citation:"7 Insights from Survey Responses and Case Studies." National Academies of Sciences, Engineering, and Medicine. 2016. SBIR at NASA. Washington, DC: The National Academies Press. doi: 10.17226/21797.
×

SAR radar for biomass measurement), NASA Langley and NASA Glenn (related to ATM and UAS systems).

Specialized Capabilities

Although SBIR companies are small, they may have developed specialized capacities that are uniquely useful to meeting agency mission needs. For example, Honeybee’s facilities include small-scale mechanical and electrical test equipment calibrated in conformance with MIL-STD-45662 and ISO 17025. Equipment includes a FARO GagePlus articulated-arm coordinate measuring machine for precise measurement of large or complex parts, optical comparators and microscopes, digital micrometers, gages, precision balances, etc. The Quality Control room also features ultrasonic cleaning equipment for parts processing and secure storage in preparation for flight.

Paragon became part of the team working on the replacement for the shuttle starting in the late 1990s and soon became involved in the Orion program and more generally in space capsule life support design. The company has worked successfully in these fields for more than 17 years. Even today, it is deeply involved in work on the next generation of space suits and on a capsule for moon operations, both for NASA.

Four software systems built by Stottler Henke have been listed in Spinoff, NASA’s showcase of successful spin-off technologies. In 2006, NASA released a Hallmarks of Success video12 that showcases innovative scheduling and training technologies that Stottler Henke developed for NASA. One of these systems, the Automated Manifest Planner (AMP), “automatically makes scheduling decisions based on knowledge input by expert schedulers.”13 It “automatically schedules long-term space shuttle processing operations and sets launch dates at Kennedy Space Center.”14 It was designed using Artificial Intelligence (AI) “techniques, allowing expert shuttle schedulers to input their knowledge to create a working automatic scheduling system.”15

More generally, evidence from the survey indicates that in many cases the NASA SBIR program does support innovative technologies that could not otherwise be funded (see Box 7-12).

Social Impacts

Not all outcomes from SBIR have substantial commercial impacts, but they can still be important (see Box 7-13). For example, CDI used SBIR awards

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12 For more on NASA’s Hallmarks of Success video, see http://www.stottlerhenke.com/company/nasa_hallmarks.htm.

13 National Aeronautics and Space Administration SBIR website, <http://sbir.gsfc.nasa.gov>.

14 Ibid.

15 Ibid.

Suggested Citation:"7 Insights from Survey Responses and Case Studies." National Academies of Sciences, Engineering, and Medicine. 2016. SBIR at NASA. Washington, DC: The National Academies Press. doi: 10.17226/21797.
×

from NASA/Glenn in 1988 and 1993 to fund development of software that predicts turbomachinery flutter, subsequently adapted for use by New Jersey pharmaceutical companies and the Washington Public Power Supply System.

In addition, some companies appear to see the diffusion of knowledge as an aspect of marketing. Mr. Anderson (Paragon) said that publication in peer-reviewed journals is a part of maintaining his company’s competitiveness: “We often publish, because it shows our quality and sometimes scares off the competition when they know how far ahead you are.” Paragon’s strategy is to create intellectual property (IP) cover using patents and then to publish. This strategy seems to have helped Paragon during the review process. Similarly, the Stottler Henke website lists more than 100 published academic papers.

Rapid Response

The SBIR program is in some circumstances able to develop needed technologies much faster than standard procurement for NASA and DoD (see Box 7-14). For example, Stottler Henke sees its role, in some respects, as performing closely specified research for NASA and DoD, plugging gaps and

Suggested Citation:"7 Insights from Survey Responses and Case Studies." National Academies of Sciences, Engineering, and Medicine. 2016. SBIR at NASA. Washington, DC: The National Academies Press. doi: 10.17226/21797.
×
Suggested Citation:"7 Insights from Survey Responses and Case Studies." National Academies of Sciences, Engineering, and Medicine. 2016. SBIR at NASA. Washington, DC: The National Academies Press. doi: 10.17226/21797.
×

meeting rapid turn-around requirements, while the agencies use the SBIR program to fund this work. Mr. Stottler observed that Phase II awards to his company usually result in operational software, rather than the preliminary prototypes often delivered at the end of Phase II in other (non-software) sectors.

According to Ms. Yachbes, Honeybee designed, built, and tested the Icy Soil Acquisition Device (ISAD) in only 14 months in response to an urgent request from NASA for improved methods of gathering samples from very icy soil targets. This development was possible in part because Honeybee maintains the facilities and expertise for preparing and testing tools utilizing simulated Mars soil under simulated Mars temperatures.

ISSUES IN PROGRAM MANAGEMENT

Solicitation Topics

Mr. Stottler of Stottler Henke observed that the topics developed by NASA originated in two distinct sets of locations. SBIR topics supported by operational groups with clear needs and objectives were often successful and usually generated the necessary follow-up funding. SBIR topics sponsored by research-oriented components within NASA, often not connected to end users, were less likely to find useful take-up within the agency.

Mr. Stottler also observed that the NASA topics did not change very much year-to-year. Continuity, however, had costs as well as benefits for the companies.

In Mr. Stottler’s view, annual solicitations are no longer sufficient. Technology and requirements move too rapidly, and given the topic-driven nature of the process at NASA promising approaches could wait 2 years or more before an appropriate topic became available. Mr. Anderson (Paragon) supported bi-annual solicitations as in many other agencies. In his view, the current approach imposed substantial application burdens on NASA-centric companies, especially those where senior staff time was limited.

More generally, Dr. Jacobus (Cybernet) said that he saw the SBIR program as serving two distinctly different mission needs. In part, the SBIR program is aimed at providing specific technologies needed for use within NASA (somewhat like the DoD SBIR program). At the same time, the SBIR program also supports the forward-thinking emphasis within NASA on highly innovative research. In his view, NASA should strongly consider formally separating these objectives into two distinct solicitations, much as NIH has different solicitations for contracts and grants. Such an approach would avoid confusion in the selection process and would allow NASA to identify its needs more effectively.

Suggested Citation:"7 Insights from Survey Responses and Case Studies." National Academies of Sciences, Engineering, and Medicine. 2016. SBIR at NASA. Washington, DC: The National Academies Press. doi: 10.17226/21797.
×

Application Procedures

In general, companies had few specific complaints about the application process for NASA SBIR awards. Mr. Stottler (Stottler Henke) strongly approved of the DoD pre-solicitation period, during which agency representatives are available for discussion. He would like to see similar “communications windows” opened during the solicitation process at other agencies, particularly NASA. Similarly, Mr. Chen (ZONA) said that he wanted to see NASA adopt the DoD “talk time” approach, in which program managers would be made available for discussion and feedback for a set period after initial publication of the solicitation. Several other company representatives made similar comments.

Some company representatives noted that applications were much more likely to be successful if the company showed preliminary work of its own in the Phase I application. ZONA makes a practice of doing so in a conscious effort to improve success rates. Mr. Chen (ZONA) suggested that this was especially important when the proposed project was highly innovative. For example, ZONA did significant proof-of-concept work on the Dry Wind Tunnel before even applying for a Phase I SBIR award.

Application Review and Award Selection

The SBIR review process is an operational challenge at any agency. It is always difficult to assemble the hundreds of competent reviewers required for an effective review process. Overall, interviewed executives believed that the quality of technical review at NASA is very good. However, others thought the review process was flawed in several ways:

  • Commercial reviews are often handled by scientists who have no expertise in commercial assessment. (Mr. Grimmer, Eltron).
  • Reviewer can misunderstand the technology. Mr. Grimmer (Eltron) noted a lack of technical expertise among reviewers as a concern. Other companies (e.g., Stottler Henke) observed that there was a considerable random element in proposal review. Mr. Stottler said that the quality of reviews could be considerably improved if applicants were encouraged to provide the agencies with feedback about reviewers.
  • Real-time feedback and review. Mr. Grimmer (Eltron) strongly believes that using new technologies to permit real-time rebuttal of reviews is needed.

More generally, several company representatives indicated that there is an appetite among the recipient base for mechanisms that would help to address inappropriate or inexplicable rejections. Two such mechanisms are resubmission

Suggested Citation:"7 Insights from Survey Responses and Case Studies." National Academies of Sciences, Engineering, and Medicine. 2016. SBIR at NASA. Washington, DC: The National Academies Press. doi: 10.17226/21797.
×

and rebuttal. Companies such as Paragon see substantial value in allowing applicants to improve their applications in response to review.

Some agencies already address the issue of reviewers who misunderstand key elements of the proposal. The U.S. Department for Agriculture, for example, already uses a system whereby the program officer emails the company a list of up to 10 questions arising from review. This gives the company an opportunity to make its case in more detail and to clear away misunderstandings.

Interviewees had other comments and suggestions: Dr. Lowrance (Princeton Scientific Instruments) was concerned about reviewer comments that addressed commercialization plans in the context of Phase I proposals. He believed that reviewers focus on this in part to avoid addressing technical issues elsewhere that they may not feel qualified to judge. He recommended that the importance of the Phase I commercialization plan in selection decisions be sharply reduced or that the need for such a plan be eliminated altogether at this stage.

Funding Gaps and Issues

The 2011 Survey indicated that funding gaps between Phase I and Phase II remain an issue for many companies. Stottler Henke’s representative said that the company experienced significant Phase I-Phase II gaps with NASA awards, which would have been damaging absent other work. Mr. Stottler observed that the key is for the company to find ways to retain existing project staff, paying for them from other sources during the gap period.

Paragon has also encountered problems in part because it has remained primarily a government contractor working for NASA. The SBIR program (and other government contracts) provides low profit margins, so when times become more difficult the company usually does not have a significant financial base to turn to. This makes it difficult to weather difficulties with government funding cycles.

Paragon noted that, overall, DoD’s funding structure works much better for Paragon than NASA’s. NASA funds Phase II awards steadily in small amounts over 2 years, so that all Phase II projects must take 2 years even if they could be completed more rapidly. Some of Paragon’s DoD awards ran much faster—one recent Phase II award was in fact completed in 9 months. It could therefore be argued that the NASA approach represents a flawed contracting model. It provides a fixed fee (until recently $350,000 per year for 2 years), payable month by month, based on invoices indicating work completed. Effectively, it is a time and materials contract, but one with a fixed fee and an annual funding cap. Recipient companies must account for every hour of work—so any acceleration would increase risk. Paragon would much prefer payment for milestones accomplished. This is the approach adopted by NASA under Space Act agreements, under which a $1.4 million contract received by Paragon in 2010 is milestone-based.

Suggested Citation:"7 Insights from Survey Responses and Case Studies." National Academies of Sciences, Engineering, and Medicine. 2016. SBIR at NASA. Washington, DC: The National Academies Press. doi: 10.17226/21797.
×

This more effective approach has also been adopted more recently by Navy in particular, and Paragon sees it as a very positive development. Phase II could be a much more flexible mechanism, with some funding held back to make additional investments in successful projects. In general, one size does not fit all, and flexibility is critical. In addition, Paragon suggested that NASA could adopt the Navy model for providing Phase I-II bridging funds.

Ms. Yachbes of Honeybee supports the DoD concept of bridge funding and would recommend it to NASA. The company also supported the notion of a 9-month Phase I, because some necessary work simply takes longer than 6 months, especially because in reality the timeline is even shorter, because Phase II preparation must begin well before the proposal is due and usually depends on Phase I results.

Funding Levels

Several interviewees commented on the funding levels for awards.

Dr. Zuo of ACT said that he was strongly opposed to increases in the size of awards if there was not additional funding available to pay for the increase. He argued that in funding early-stage research, it would be important for NASA to hedge its bets and to ensure that research funding is not overly concentrated, because it was not possible to determine in advance which projects would in the end be successful. He was convinced that a reduction in the number of awards—even if each received increased funding—would result in reduced outcomes. He also believed that this concentration of resources would favor certain companies. Mr. Stottler of Stottler Henke was opposed to increasing the size of Phase I and Phase II awards. He believed that high-quality work can be accomplished at existing award levels and did not believe that a tradeoff of fewer but larger awards would be positive, while Mr. Chen of ZONA agreed that current funding levels were appropriate and that fewer awards would be counterproductive.

Mr. Anderson of Paragon observed that more variability in funding size would be an improvement; there were projects that need more than the standard award, and others that could be done with less. Overall, he thought that funding levels should be increased even if that means fewer awards. He noted that this would encourage NASA to focus more clearly on its top priorities, which would in turn lead to better connections between SBIR and Phase III opportunities.

On the other hand, a number of company representatives said that current funding levels were too low. Mr. Grimmer of Eltron said that materials technology requires far greater investment than a SBIR grant can provide.

Referencing the increase in Phase I award size allowed under 2011 reauthorization, Mr. Davis of Honeybee explained that “The increase in Phase 1 award amounts is particularly important because it allows a more thorough evaluation of a technology’s value and feasibility. As a result our Phase 2 proposal quality is higher and Phase 2 programs are better positioned for success.”

Suggested Citation:"7 Insights from Survey Responses and Case Studies." National Academies of Sciences, Engineering, and Medicine. 2016. SBIR at NASA. Washington, DC: The National Academies Press. doi: 10.17226/21797.
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Overall, this wide range of views suggests that the award size should be tailored to the technologies and sectors at hand; what is sufficient for projects with low capital need and short cycles is not appropriate for sectors with heavy capital needs and very long cycles: software is not materials science, and providing the same amount of funding for both seems inappropriate.

Reduced Desirability of SBIR Awards

The desirability of SBIR funding appears to be declining, especially among companies that have access to other sources of funding. The number of Phase I applications has been declining at all agencies in recent years.

Mr. Grimmer, CEO of Eltron Research, which before pivoting from SBIR was a highly successful winner of SBIR awards from multiple agencies) provided several reasons why his company moved away from reliance on SBIR funding:

  • Noncommercial focus. Mr. Grimmer noted that SBIR projects were not aligned with commercial strategy, and research to address SBIR topics could not easily be adapted to the commercial opportunities available to the company.
  • Long timeline. SBIR takes a considerable amount of time—at a minimum, 3 years between topic release and the end of Phase II—according to Mr. Grimmer. That is a long time for a company trying to become more commercial.
  • Rigidity. Eltron didn’t find it possible to expand beyond its existing primary technical base using SBIR funding.

Other Issues

Interviewees raised a number of additional issues and concerns in relation to the NASA SBIR program. Some of these are described below:

  • Multiple annual application deadlines. Although some company representatives endorsed the need for multiple deadlines, others did not. Ms. Yachbes of Honeybee, for example, said that the single annual application worked well for her company.
  • Speed to market. Mr. Grimmer of Eltron noted that SBIR funds projects on a fixed schedule. In the private sector, promising projects attract more money faster to speed development. Therefore, the SBIR timeline slows development even after funding.
  • Partnership and business development funding. Ms. Yachbes of Honeybee would like to see the program help her company to develop better relations with NASA’s prime contractors. This occurred with Lockheed Martin in the context of the Orion mission (now cancelled), but in general there could be more support in this area, she said.
Suggested Citation:"7 Insights from Survey Responses and Case Studies." National Academies of Sciences, Engineering, and Medicine. 2016. SBIR at NASA. Washington, DC: The National Academies Press. doi: 10.17226/21797.
×
  • Contracting. NASA SBIR contracting is handled at the office level. Mr. Chen of ZONA noted that this makes it impossible to develop ongoing relationships with individual contracting officers
  • ITAR. Mr. Chen of ZONA said that NASA solicitations (unlike those at DoD) do not clearly indicate which topics are subject to International Traffic in Arms (ITAR) regulations. Consequently, companies spend time and resources to gain permissions they may not require.
  • Focused funding on smaller firms. Although some agency staff said that it was important to ensure that funding goes to firms that have a good chance of commercializing their technology, Dr. Blankenship of TSI recommended that NASA focus its funding on smaller companies that have few other resources. He said that larger small companies (those with more than 100 employees, for example) are in less need of SBIR awards, which should be focused primarily on micro-businesses (those with less than 10 employees) and then on smaller and mid-size small companies. He believed that these larger small companies do not require SBIR funding to the same degree.
Suggested Citation:"7 Insights from Survey Responses and Case Studies." National Academies of Sciences, Engineering, and Medicine. 2016. SBIR at NASA. Washington, DC: The National Academies Press. doi: 10.17226/21797.
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Next: 8 Findings and Recommendations »
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The Small Business Innovation Research (SBIR) program is one of the largest examples of U.S. public-private partnerships, and was established in 1982 to encourage small businesses to develop new processes and products and to provide quality research in support of the U.S. government’s many missions. The U.S. Congress tasked the National Research Council with undertaking a comprehensive study of how the SBIR program has stimulated technological innovation and used small businesses to meet federal research and development needs, and with recommending further improvements to the program. In the first round of this study, an ad hoc committee prepared a series of reports from 2004 to 2009 on the SBIR program at the five agencies responsible for 96 percent of the program’s operations -- including NASA. In a follow-up to the first round, NASA requested from the Academies an assessment focused on operational questions in order to identify further improvements to the program.

Public-private partnerships like SBIR are particularly important since 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 assume risk to bring new welfare-enhancing, wealth-generating technologies to the market. Yet, although discoveries in various fields present new opportunities, converting these discoveries into innovations for the market involves substantial challenges. The American capacity for innovation can be strengthened by addressing the challenges faced by entrepreneurs.

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