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. 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. Agencies are currently using various techniques to foster commercialization, although there is little or no empirical evidence suggesting how successful particular techniques have been. This analysis shows that the multiple-award recipients and the non-multiple-award recipients are commercializing at comparable rates. According to both surveys, multiple-award recipients receive additional developmental funding at higher rates than the non-multiple-award recipients. 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. SBIR Programs Promote the Critical Technologies

Most of the SBIR agency officials we interviewed stated that they use the two listings of critical technologies as identified by DOD and the National Critical Technologies Panel in developing their respective research topics. The other agencies believed that the research being conducted falls within one of the two lists. Geographic Distribution of SBIR Awards

A recent SBA study stated that one-third of the states received 85 percent of all SBIR awards and SBIR funds.
Why GAO Did This Study

GAO discussed the Small Business Innovation Research (SBIR) program, focusing on: (1) agencies' adherence to statutory funding requirements; (2) agencies' audits of extramural (external) research and development (R&D) budgets; (3) the effect of the application review process and funding cycles on award recipients; (4) the extent of companies' project activity after receiving SBIR funding and agencies' techniques to foster commercialization; (5) the number of multiple award recipients and the extent of project activity after receiving SBIR funding; (6) the occurrence of funding for single proposal awards; (7) participation by women-owned business and socially and economically disadvantaged business; (8) SBIR's promotion of the critical technologies; (9) the extent foreign firms benefit from SBIR results; and (10) the geographical distribution of SBIR awards.

What GAO Found

GAO noted that: (1) 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; (3) program officials believe that they are adhering to the statutory requirement to fund the program at 2.5 percent of agencies' extramural budget; (4) some officials believe that agencies are using different interpretations of the extramural budget definition, which may lead to incorrect calculations; (5) of the five agencies reviewed, only two have conducted audits of their extramural budgets; (6) while most SBIR officials 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 affects them negatively; (7) most participating SBIR agencies have established programs to minimize funding gaps; (8) companies reported that approximately 50 percent of their projects had sales of products or services related to research or received additional developmental funding after receiving SBIR funding; (9) the agencies identified various techniques to foster the commercialization of SBIR-funded technologies; (10) the number of companies receiving multiple awards had grown from 10 companies in 1989 to 17 in 1996; (11) multiple-award recipients and non-multiple-award recipients commercialized at almost identical rates; (12) agencies rarely fund research for a given solicitation topic where only one proposal was received; (13) of the five agencies examined, all reported engaging in activities to foster the participation of women-owned or socially and economically disadvantaged small businesses; (14) all agencies' SBIR officials believed that the listings of critical technologies are used in developing their respective research topics or that the research being conducted falls within one of the two lists; (15) little evidence of foreign firms benefiting from technology or products developed as a direct result of SBIR-funded research; (16) a Small Business Administration study reported that one-third of the states received 85 percent of all SBIR awards and funds; and (17) previous studies of SBIR have linked the concentration of awards to local characteristics.