The Small Business Research and Development Enhancement Act of 1992 reauthorized the SBIR program through fiscal year 2000. It Appears That Agencies Are Adhering to Statutory Funding Requirements; However, the Definition of Extramural R&D on Which the Funding Levels Are Based May Not Be Consistently Applied

The agencies’ SBIR officials reported that they have adhered to the act’s requirement of not using SBIR funds to pay for the administrative costs of the program, such as salaries and support services used in processing awards. The program officials also believe that they are adhering to the statutory requirement to fund the program at 2.5 percent of agencies’ extramural research budget. Some of the officials expressed concern because they believe that agencies are using different interpretations of the “extramural budget” definition. This may lead to incorrect calculations of their extramural research budgets. Only Two of the Agencies We Reviewed Have Conducted Audits of Their Extramural Budgets

Of the five agencies we reviewed, only two have recently audited their extramural R&D budgets. NSF estimated that these unallowable costs totaled over $100 million. Application Review Process and Current Funding Cycles Are Not Adversely Affecting Recipients’ Financial Status or the Commercialization of Projects

Most of the SBIR officials we interviewed believed that neither the application review process nor current funding cycles are having an adverse effect on award recipients’ financial status or their ability to commercialize their projects. SBIR officials did say that some recipients had said that any interruption in funding awards, for whatever reason, affects them negatively. As a result, most of the participating SBIR agencies have established special programs and/or processes in an effort to mitigate any adverse effect(s) caused by funding gaps. Overall, 515 responses, or 35 percent, indicated that their projects had resulted in sales of products or processes, while 691, or 47 percent, had received additional developmental funding. Multiple-Award Recipients Commercialize at Rates Similar to Those of Non-Multiple-Award Recipients

Using SBA’s data, we identified phase I award recipients who had received 15 or more phase II awards in the preceding 5 years. Solicitations Rarely Result in Single-Proposals

When an agency funds research for a given solicitation topic where only one proposal was received, it may appear that there was a lack of competition. All of the Agencies Promote Program Participation by Women-Owned and Socially and Economically Disadvantaged Small Businesses

One of the purposes of the 1992 act was to improve the federal government’s dissemination of information concerning the SBIR program, particularly with regard to program participation by women-owned small businesses and by socially and economically disadvantaged small businesses. For example, our 1991 survey found that 4.6 percent of the respondents reported licensing agreements with foreign firms and that 6 percent reported marketing agreements with foreign firms. U.S. General Accounting Office P.O.
Why GAO Did This Study

GAO discussed its review of the Small Business Innovation Research (SBIR) program.

What GAO Found

GAO noted that: (1) it appears that agencies have adhered to the Small Business Research and Development Enhancement Act's funding requirements; (2) agency program officials reported that they are not using SBIR funds to pay for administrative costs of the program such as salaries and support services used to process awards; (3) the program officials also believe that they are adhering to the statutory requirement to fund the program at 2.5 percent of agencies' extramural research budget; (4) however, some officials believe that agencies are using different interpretations of the extramural budget definition, which may lead to incorrect calculations of their extramural research budgets; (5) of the five agencies that GAO reviewed, only two--the National Science Foundation (NSF) and the National Aeronautics and Space Administration--have conducted audits of their extramural budgets; (6) in 1997, the Office of Inspector General at NSF conducted an audit of the agency's extramural budget and found that it contained over $100 million of unallowable costs such as training and overhead; (7) while most of the SBIR officials GAO interviewed said that neither the application review process nor current funding cycles have had an adverse effect on award recipients' financial status or ability to commercialize, some recipients have said that any interruption in funding awards, for whatever reason, affects them negatively; (8) in response to these concerns over the continuity of funding, most of the participating SBIR agencies have established programs to minimize funding gaps; (9) companies responding to GAO's and the Department of Defense's surveys of award recipients reported that approximately 50 percent of their projects had sales of products or services related to the research or received additional developmental funding after receiving SBIR funding; (10) GAO found that the number of companies receiving multiple awards, which GAO defined as those phase I award recipients that also received 15 or more phase II awards in the proceeding 5 years, had grown from 10 companies in 1989 to 17 in 1996; (11) GAO found that agencies rarely fund research for a given solicitation topic where only one proposal was received; (12) of the five agencies that GAO examined, all reported engaging in activities to foster the participation of women-owned or socially and economically disadvantaged small businesses; and (13) GAO found little evidence of foreign firms, or U.S. firms with substantial foreign ownership interests, benefiting from technology or products developed as a direct result of SBIR-funded research.