Small Business Research Programs:

Agencies Need to Take Steps to Assess Progress Toward Commercializing Technologies

GAO-18-207: Published: Jan 31, 2018. Publicly Released: Jan 31, 2018.

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John Neumann
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Under two federal programs, agencies have awarded $46 billion to small businesses to develop and commercialize innovative technologies. The Small Business Administration and participating agencies set two benchmarks to assess the recipient's progress and eligibility for future awards. For example, small businesses must meet a certain amount of sales, investments, or patents resulting from their efforts.

However, we found data problems that prevented the agencies from accurately measuring businesses against these benchmarks.

We made several recommendations to SBA and agencies, including the need to improve data reliability.

 

Photo of the Small Business Administration building and sign.

Photo of the Small Business Administration building and sign.

Additional Materials:

Contact:

John Neumann
(202) 512-3841
neumannj@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

What GAO Found

Data challenges have limited the Small Business Administration's (SBA) and the 11 participating federal agencies' efforts to assess businesses against two benchmarks—the Transition Rate Benchmark and the Commercialization Benchmark—of the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs.

Transition Rate Benchmark. Small businesses that received more than 20 awards for the first phase of the programs in the past 5 fiscal years—excluding the most recent fiscal year—must have received an average of 1 award for the second phase of the programs for every 4 first phase awards. Since 2014, SBA and the agencies participating in the programs have regularly assessed small businesses against this benchmark. From 2014 through 2017, SBA determined that 4 to 7 businesses did not meet the benchmark each year. SBA officials provided GAO guidance on how to enter data into the programs' awards database they said is available to agencies, but GAO found evidence that suggests agencies are not fully utilizing it. For example, GAO found that the database used to perform the assessments contained inaccurate and incomplete data, such as about 2,700 businesses with multiple records with different spellings of their names and more than 1,400 instances in which a unique identification number had errors, such as an incorrect number of digits, all zeros, or hyphens. Thus, it could be difficult to determine which small businesses should be subject to the benchmark.

Commercialization Benchmark. Small businesses that received more than 15 awards for the second phase of the programs in the past 10 fiscal years—excluding the most recent 2 fiscal years—must have received a certain amount of sales, investments, or patents resulting from their efforts. SBA and participating agencies have assessed small businesses against this benchmark only once, in 2014, and identified 12 businesses that did not meet the benchmark. This is, in part, due to challenges in collecting and verifying the accuracy of the data that small businesses report and that are needed to implement the benchmark, according to officials from SBA and several agencies. For example, agency officials told GAO that some needed data, such as for reported sales, are not consistently applicable across agencies or projects. The Small Business Act and policy directives provide flexibility in how the agencies can implement the benchmark. Working together to implement it as designed or revise it so that it can be implemented could allow the agencies to fulfill statutory requirements.

SBA and the participating agencies have provided inconsistent information to small businesses about the consequence of not meeting the benchmarks. SBA and the agencies agreed to change how the consequence of not meeting the benchmarks was to be implemented, starting in 2017, from ineligibility to receive certain awards to ineligibility to submit certain proposals. However, as of November 2017, some agencies had not updated this information in their project solicitations. Furthermore, SBA has not updated this information in its policy directives. Without consistent information, businesses may be confused about their eligibility to submit proposals or receive awards and could invest time developing and submitting proposals when they are not eligible to do so.

Why GAO Did This Study

Through the SBIR and STTR programs, federal agencies have awarded about 162,000 contracts and grants totaling $46 billion to small businesses to help them develop and commercialize new technologies. Eleven federal agencies participate in the SBIR program, and 5 agencies also participate in the STTR program. Each program has three phases, which take projects from initial feasibility studies through commercialization activities. SBA oversees both programs.

In response to the 2011 reauthorization of the programs, SBA and the participating agencies developed benchmarks to measure small businesses' progress in developing and commercializing technologies. GAO was asked to review SBA's and the agencies' efforts related to these benchmarks. This report examines the extent to which SBA and the participating agencies have implemented these benchmarks, including assessing businesses against them and establishing the consequence of not meeting them. GAO analyzed award data and interviewed officials from SBA and the 11 participating agencies.

What GAO Recommends

GAO is making 11 recommendations to SBA and other agencies to take actions to improve implementation of the benchmarks, including improving the reliability of award data; implementing or revising the Commercialization Benchmark; and updating information about the consequence of not meeting the benchmarks. SBA and these agencies agreed with GAO's recommendations.

For more information, contact John Neumann at (202) 512-3841 or neumannj@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: SBA agreed with the recommendation. As of May 2019, SBA officials said they have been working with participating agencies to improve the reliability of the SBIR and STTR award data, including discussing data issues, reviewing the agencies' internal reporting processes, and checking the data internally.

    Recommendation: The Director of the Office of Investment and Innovation within SBA should work with participating agencies to improve the reliability of its SBIR and STTR award data (Recommendation 1).

    Agency Affected: Small Business Administration

  2. Status: Open

    Comments: SBA agreed with the recommendation. As of May 2019, SBA officials said they have been working with participating agencies to determine a feasible way to implement the Commercialization Benchmark. According to SBA officials, SBA is leading an interagency Commercialization Working Group with participating agency officials and has implemented a commercialization reporting tool on the SBIR.gov site. Agency officials participating in the interagency working group have identified challenges with a single model for the benchmark and are working to resolve the issues.

    Recommendation: The Director of the Office of Investment and Innovation within SBA should work with participating agencies to implement the Commercialization Benchmark or, if that is not feasible, revise the benchmark so that it can be implemented (Recommendation 2).

    Agency Affected: Small Business Administration

  3. Status: Closed - Implemented

    Comments: SBA agreed with the recommendation. SBA's April 2019 update to the SBIR and STTR policy directives--effective May 2019--revised the consequence of not meeting the benchmarks to state that the small business would be ineligible to submit a proposal for a new award, consistent with how the consequence of the benchmark has been implemented.

    Recommendation: The Director of the Office of Investment and Innovation within SBA should update the SBIR and STTR policy directives to accurately reflect how the consequence of the benchmarks is to be implemented (Recommendation 3).

    Agency Affected: Small Business Administration

  4. Status: Closed - Implemented

    Comments: The Department of Commerce's National Oceanic and Atmospheric Administration (NOAA) agreed with the recommendation. In November 2018, NOAA issued a new project solicitation for the SBIR program that accurately reflected how the consequence of not meeting the benchmarks is to be implemented.

    Recommendation: The SBIR Program Manager of the Department of Commerce's National Oceanic and Atmospheric Administration should update the agency's SBIR project solicitation to accurately reflect how the consequence of not meeting the benchmarks is to be implemented (Recommendation 4).

    Agency Affected: Department of Commerce: National Oceanic and Atmospheric Administration

  5. Status: Closed - Implemented

    Comments: The Department of Defense (DOD) agreed with the recommendation. In its April 2018 SBIR and STTR solicitations, DOD revised the consequences of not meeting the benchmarks to state that companies that do not meet the benchmarks are not eligible to submit a proposal for one year, consistent with how the consequence of the benchmark has been implemented.

    Recommendation: The SBIR Program Administrator within the Department of Defense should update the agency's SBIR and STTR project solicitations to accurately reflect how the consequence of not meeting the benchmarks is to be implemented (Recommendation 5).

    Agency Affected: Department of Defense

  6. Status: Closed - Implemented

    Comments: The Department of Education agreed with the recommendation. In December 2017, after we sent the draft report for comment, the Department of Education issued a new project solicitation that contained language that accurately reflected how the consequence of not meeting the benchmarks is to be implemented.

    Recommendation: The SBIR Program Manager within the Department of Education should update the agency's SBIR project solicitation to accurately reflect how the consequence of not meeting the benchmarks is to be implemented (Recommendation 6).

    Agency Affected: Department of Education

  7. Status: Closed - Implemented

    Comments: The Department of Energy agreed with the recommendation. In November 2017, the Department of Energy issued a new project solicitation for the SBIR and STTR programs that accurately reflected how the consequence of not meeting the benchmarks is to be implemented.

    Recommendation: The SBIR Program Manager within the Department of Energy should update the agency's combined SBIR and STTR project solicitation to accurately reflect how the consequence of not meeting the benchmarks is to be implemented (Recommendation 7).

    Agency Affected: Department of Energy

  8. Status: Closed - Implemented

    Comments: The Department of Health and Human Services agreed with the recommendation. In January 2018, the Department of Health and Human Services issued new project solicitations for the SBIR and STTR programs that accurately reflected how the consequence of not meeting the benchmarks is to be implemented.

    Recommendation: The SBIR/STTR Program Coordinator within the Department of Health and Human Services should update the agency's SBIR and STTR project solicitations to accurately reflect how the consequence of not meeting the benchmarks is to be implemented (Recommendation 8).

    Agency Affected: Department of Health and Human Services

  9. Status: Closed - Implemented

    Comments: The Department of Homeland Security agreed with the recommendation. In December 2017, after we provided the draft report for comment, the Department of Homeland Security issued a new project solicitation that accurately reflected how the consequence of not meeting the benchmarks is to be implemented.

    Recommendation: The SBIR Program Director within the Department of Homeland Security should update the agency's SBIR project solicitation to accurately reflect how the consequence of not meeting the benchmarks is to be implemented (Recommendation 9).

    Agency Affected: Department of Homeland Security

  10. Status: Closed - Implemented

    Comments: The Environmental Protection Agency (EPA) agreed with the recommendation. EPA's fiscal year 2019 SBIR project solicitation, issued June 13, 2018, included updated language related to the benchmarks. The solicitation referred applicants to SBA's website on the performance benchmarks for information on the consequence of not meeting the benchmarks. The cited website reflects the current consequence of not meeting the benchmarks.

    Recommendation: The SBIR Program Manager within the Environmental Protection Agency should update the agency's SBIR project solicitation to accurately reflect how the consequence of not meeting the benchmarks is to be implemented (Recommendation 10).

    Agency Affected: Environmental Protection Agency

  11. Status: Closed - Implemented

    Comments: The National Science Foundation (NSF) agreed with the recommendation. In September 2018, NSF issued new project solicitations for the SBIR and STTR programs that accurately reflected how the consequence of not meeting the benchmarks is to be implemented.

    Recommendation: The SBIR and STTR Program Manager within the National Science Foundation should update the agency's SBIR and STTR project solicitations to accurately reflect how the consequence of not meeting the benchmarks is to be implemented (Recommendation 11).

    Agency Affected: National Science Foundation

 

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