Manufacturing Technology Program

Small Business Innovation Research Program

DoD’s SBIR program funds early-stage R&D projects at small technology companies—projects that serve a DoD need and have the potential for commercialization in the private sector and/or military markets. The program, funded at approximately $773 million in FY 2002, is part of a larger ($1.5 billion) federal SBIR program administered by 10 federal agencies.

The Small Business Innovation Research Program Act of 2000⁴³ extended the SBIR program’s authorization to September 30, 2008. According to Congress’s findings reported in this act, “the SBIR program made the cost-effective and unique research and development capabilities possessed by the small businesses of the nation available to federal agencies and departments,” and “the innovative goods and services developed by small businesses that participated in the SBIR program have produced innovations of critical importance in a wide variety of high-technology fields, including biology, medicine, education, and defense.”⁴⁴

Congress further states “the SBIR program is a catalyst in the promotion of research and development, the commercialization of innovative technology, the development of new products and services, and the continued excellence of this nation’s high-technology industries….The continuation of the SBIR program will provide expanded opportunities for one of the nation’s vital resources, it’s small businesses, will foster invention, research, and technology, will create jobs, and will increase this nation’s competitiveness in international markets.”⁴⁵

As part of its SBIR program, the DoD issues an SBIR solicitation twice a year, describing its R&D needs and inviting R&D proposals from small companies (i.e., firms organized for profit with 500 or fewer employees, including all affiliated firms). Companies apply first for a six-month Phase I award of $60,000 to $100,000 to test the scientific, technical, and commercial merit and feasibility of a particular concept. If Phase I proves successful, the company may be invited to apply for a two-year Phase II award of $500,000 to $750,000 to further develop the concept, usually to the prototype stage. Proposals are judged competitively on the basis of scientific, technical, and commercial merit. Following the completion of Phase II, companies are expected to obtain further funding from the private sector and/or non-SBIR government sources (in “Phase III”) to develop the concept into a product for sale in private sector and/or military markets.

Participation in the Program

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  American owned and independently operated,
  
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  For-profit, and
  
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  The principal researcher employed by small business.
  

Following the submission of proposals, agencies make SBIR awards based on small business qualification, degree of innovation, technical merit, and future market potential. Small businesses that receive awards or grants then begin the three-phase program.

Appendix C describes a number of successes achieved by small business participants in the SBIR program. For more information on the program, visit http://www.sba.gov/sbir/indexsbir-sttr.html.

DoD Challenge Program

In some cases, prime contractors resist the adoption of outside technologies or seek to bring subsystem work in-house, even when there are more capable and innovative sources outside the firm. This finding is consistent with the results of a 1997 Defense Science Board study, which found that the DoD’s prime contractors often have economic incentives to use in-house suppliers in ways that are at odds with the Department’s interest in fostering innovation and technology insertion.

In this respect, Defense procurement markets differ significantly from competitive commercial markets, where there are competitive pressures to bring innovative new technologies into a program throughout development and production, and to outsource when stronger capabilities exist outside the firm.

While this plan was not fully developed, Congress provided $12.5 million for the Challenge Program FY 2002, with plans for an additional $25 million for FY 2003, which suggests continued congressional interest. However, the new Challenge Program is focused on SBIR technology Phase III implementation. PMs should be on the lookout for opportunities for their programs by tracking Phase II SBIR successes. PMs can request funding from the Challenge Program to assist with the implementation into their programs.

Participation in the Program

In the insertion plan, the offeror would need to describe how it planned to implement the following practices, encouraged to foster sub-tier competition and technology insertion from commercial firms:

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  Competitive sourcing of subsystem development and production. Specifically, for the 10 largest subsystems and any other subsystems that offer significant opportunities for technology insertion, the offeror would be required to state (1) which of these subsystems would be awarded to another firm that already has been selected through a competitive process, and (2) which of these subsystems the offeror would award to a source that would be selected in the future through a competitive process.
  
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  Adaptability of the acquisition program and its subsystems, through such features as open system architecture, to enable a wide array of competing approaches to the subsystems’ design and production.
  
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  Technology upgrade cycles, to foster the insertion of new, cost-saving and performance-enhancing technologies into the acquisition program and its subsystems through the course of the contract.
  
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  Subcontracting of the RDT&E effort to small technology companies, which are a particularly potent source of innovation and are effective vehicles for technology insertion. Specifically, the offeror would be required to state the total amount of RDT&E funding provided under the contract that it planned to outsource to small business.