DOD’s SBIR program shifts focus

Commercialization is the new driving force in technology funding

The Defense Department’s Small Business Innovation Research program enables firms to develop experimental technologies that meet military needs. By providing connections and cash, the program is an avenue for smaller companies to get involved in government information technology development.

But the increasing popularity of SBIR amid shrinking budgets is creating greater competition for a limited number of opportunities. Also, DOD’s emphasis on commercialization and quick deployment of SBIR technologies is changing the way companies use the program.

SBIR was developed to foster technological innovation by small businesses, said Christine Anderson, director of requirements for the Air Force Research Laboratory. The lab is the executive agent for the Air Force’s SBIR program. All DOD services have a version of the program, which is open to all small businesses, defined as companies having 500 or fewer employees.

SBIR funds programs through the research, development, testing and evaluation allocations of the services’ respective budgets. In the Air Force, for example, the program gets 2.5 percent of RDT&E money, which totaled about $312 million in fiscal 2006.

For emerging companies, the SBIR program is a central funding stream for new projects, reducing or eliminating the need for the companies to look for venture capital, said Joe Cuchiaro, president of Micro-RDC, a private research firm focusing on electronic circuits for military and aerospace applications.

Micro-RDC was founded last year and has been able to grow largely because of four SBIR contracts, he said. The company produces a structured ASIC circuit that achieves micro-electronic integration at low costs.

But “it’s getting harder and harder as a business to utilize SBIR funding,” Cuchiaro said, because government funds cover only the initial stages of development. So firms must constantly coordinate with prime contractors to make sure their research has near-term commercial applications, he added. That procedure ensures that private industry picks up funding where SBIR leaves off.

Emerging companies must provide detailed submissions, including plans for the commercialization of the technology, to get SBIR funding. But the increased focus on commercialization risks stifling a type of research commonly called sandbox, where various parties work together on technologies that may not have an obvious immediate use, Cuchiaro said.

More established companies use SBIR to offset their R&D costs, rather than depending on the program to pay the whole freight, said Chuck Brans, director of range, launch and flight systems at RT Logic, a space technology firm in Colorado Springs, Colo.

“SBIR we view as a bonus,” Brans said. RT Logic uses SBIR as additional R&D funding to compete with larger firms. “We’ve never relied on these SBIRs as a way of life,” he said.

RT Logic is using some SBIR funding as a tool to explore expansion opportunities. SBIR money is also funding development of RT Logic’s Programmable Satellite Transceiver, which will allow satellites to avoid jamming attacks by remotely changing their waveforms.

Prime integrators are increasingly seeking components from small firms because they can more easily adapt to changing technology needs and can deliver products at lower costs, Brans said. Taxpayers and military employees benefit from the increased competition, he added.

Brans said the greatest benefit of SBIR for RT Logic might be exposure of its technology. Government and prime integrators have an incentive to see that SBIR projects are implemented once they have been started.

Anderson said DOD’s increased focus on commercialization will continue. The 2006 Defense Authorization bill directed all DOD agencies to speed their SBIR products into commercial applications. Each service now has a Commercialization Pilot Program that concentrates on introducing SBIR technologies to the various agencies’ acquisition communities, she said.

To accelerate that commercialization, the Air Force will issue more than one solicitation a year, grant larger awards and shorten the cycle time between contract solicitations and awards, Anderson said.

The Air Force will also increase coordination among SBIRs, small businesses, prime integrators and the product centers that develop weapons systems. That approach will focus the program on those items that are needed quickly, especially manufacturing technologies, she added.

Nevertheless, the government never uses some SBIR-developed technologies. They go directly to the private market instead. For example, the Air Force SBIR program funded a lightweight, high-precision composite gimbal. It was developed for use in space but is now a component of cameras that televise National Football League games.

“That’s still a success for a small company, and that’s a good thing,” Anderson said.

How DOD cultivates innovative technologiesThe Small Business Innovation Research program has three phases. In Phase 1, an agency issues a solicitation for a needed technology and companies respond with their solutions. Under the Air Force’s SBIR program, one firm gets $100,000 to prove the feasibility of its concept within nine months.

If the Air Force is pleased with that initial work, the company may be invited to continue development.

In Phase 2, the company is given as much as $750,000 to fully develop the concept within a one- or two-year period. This includes building a prototype and developing a business plan to turn the early-stage product into a larger project.

If the Air Force considers the technology to be a critical need, it can award as much as $5 million for that second phase. About 61 percent of Phase 1 projects in the Air Force move to Phase 2. In Phase 3 — the commercialization phase — small firms are expected to secure funding from prime contractors that will integrate the technology into an existing project.

A corresponding initiative, called the Small Business Technology Transfer program, focuses on more basic research for technologies such as experimental aerospace materials and hypersonics. That program received about $36 million of the Air Force’s research, development, testing and evaluation budget in fiscal 2006.

— Josh Rogin

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