An Assessment of the SBIR Program at the National Aeronautics and Space Administration (2009)

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3 Applications and Awards at NASA 3.1  INTRODUCTION This chapter outlines the information available on Small Business Innovation Research (SBIR) program applications and awards at NASA. The objective is to provide a quantitative overview of award patterns by looking at the data for SBIR Phase I and Phase II applications and awards both overall and broken down by state, by firms that have won multiple awards, and by demographics. 3.2  PHASE I APPLICATIONS Since 1997, NASA has attracted on average 2,224 proposals annually for Phase I awards. During this period, the number of applications fluctuated, de- clining from 1997-2001 and then rebounding sharply with the collapse of the VC-funded boom of 1999-2001 (see Figure 3-1). Over the nine years from 1997-2005, the average number of Phase I ap- plications was 2,223. The overall trend is slightly downward, despite the uptick in 2002-2003. 3.2.1  Phase I Awards The number of Phase I awards made by NASA has been trending steadily down since 1992, the start of the study period for this report (see Figure 3-2).   NASA maintains data on applications only since 1997. Accordingly, where we utilize applications data—for example, in the calculation of success rates for applications, our analysis will focus on 1997-2005. Where we are working only with awards data, our analysis will cover 1992-2005.   All data in this chapter were provided by NASA to the NRC, unless otherwise labeled. 42 

APPLICATIONS AND AWARDS AT NASA 43 3,000 Number of Phase I Proposals 2,500 2,000 1,500 1,000 500 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 Year FIGURE 3-1  Phase I proposals for 1997-2005. SOURCE: National Aeronautics and Space Administration. NASA Figure 3-1.eps Just under 300 Phase I awards are made annually, down from over 350 in 1993-1994. NASA sticks quite closely to its internal guidelines on award size—there is very limited variation: Only four awards are confirmed as being more than $70,000 since 1983, with one of more than $100,000. 450 400 350 Number of Phase I Awards 300 250 200 150 100 50 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Year FIGURE 3-2  NASA SBIR Phase I awards, 1992-2005. SOURCE: National Aeronautics and Space Administration. NASA Figure 3-2.eps 

44 SBIR AT THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION 3.2.2  Phase I Awards by State Like other agencies, NASA awards are widely dispersed, with the research hubs accounting for a significant number of awards. However, in light of recent state efforts to encourage more applicants from their states, it is also worth noting that some states—and not necessarily those expected—have companies that are significantly more successful in generating awards from applications. Table 3-1 shows that five states plus the Virgin Islands and Puerto Rico gen- erated 54 applications, with zero awards. In contrast, Mississippi, Arkansas, and Vermont all had success rates well above average (note that the sheer number of awards and applications from the major research states suggests that these will tend to fall near the median for the group as whole. TABLE 3-1  SBIR Phase I Application Success Rates by State, 1997-2005 Number Number Success Number Number Success of Phase I of Phase I Rate of Phase I of Phase I Rate State Applications Awards (%) State Applications Awards (%) MS 69 13 18.8 KY 16 2 12.5 AR 54 10 18.5 NY 571 69 12.1 VT 39 7 17.9 TX 1,062 128 12.1 NH 234 41 17.5 DE 86 10 11.6 WY 29 5 17.2 MN 246 28 11.4 MT 123 21 17.1 FL 659 73 11.1 CO 1,123 188 16.7 MI 380 42 11.1 LA 30 5 16.7 WV 37 4 10.8 WA 306 51 16.7 AZ 704 75 10.7 AL 694 111 16.0 ID 67 7 10.4 NM 402 64 15.9 HI 44 4 9.1 OR 259 41 15.8 GA 208 18 8.7 IA 38 6 15.8 NV 72 6 8.3 MA 2,395 376 15.7 IL 279 23 8.2 WI 320 50 15.6 KS 56 4 7.1 PA 426 66 15.5 ME 29 2 6.9 UT 155 23 14.8 DC 36 2 5.6 CT 334 49 14.7 SC 36 2 5.6 OH 744 106 14.2 OK 49 1 2.0 NJ 503 71 14.1 AK 13 0.0 MO 66 9 13.6 ND 4 0.0 IN 126 17 13.5 NE 4 0.0 VA 1,196 159 13.3 PR 2 0.0 TN 204 27 13.2 RI 19 0.0 NC 91 12 13.2 SD 10 0.0 CA 4,285 565 13.2 VI 2 0.0 MD 1,074 141 13.1 ALL 20,010 2,734 13.7 SOURCE: National Aeronautics and Space Administration. 

APPLICATIONS AND AWARDS AT NASA 45 The fact that success rates vary so substantially indicates that state economic development and innovation agencies may wish to address the quality of appli- cants that they support, as well as the quantity. NASA is—substantially more than other SBIR agencies such as NIH and NSF—a widely dispersed agency, with 12 research centers recommending SBIR topics and applications for approval from NASA Headquarters. (See Chapter 5, Program Management, for details.) And NASA centers are also the managers of specific SBIR projects within their areas of technical leadership. Consequently, some states have clearly benefited from the presence of these centers, in terms of their ability to generate SBIR awards among local firms. In Alabama, for ex- ample, home of NASA’s Marshall Space Flight Center in Huntsville, NASA made 111 Phase I awards from 1997-2005; NIH—with an SBIR program five times the size—made 67, and NSF 34. Using the standard NRC metric for award aggregation by states, the top five Phase I states received 2,381 awards from 1992-2005, or 52.5 percent of all awards. The bottom 15 states received 64 awards, or 1.41 percent of all awards. Alaska, the Virgin Islands, and Puerto Rico received no Phase I awards. 3.2.3  Phase I Awards by Company 3.2.3.1  Multiple-award Winners Overall, 41 companies received at least ten Phase I awards 1997-2005. Orbital Technologies was the most prolific winner, with 40, equivalent to 4.4 awards per year. Four firms received at least 30 awards. (See Table 3-2.) The top 20 winners, however, made up only 16.5 percent of all Phase I awards. Overall, the top twenty winners averaged 22.6 Phase I awards over 9 years— an average of 2.4 Phase I awards per year. Some of these firms were much more successful than others in translating applications into awards. For example, GNC made 310 applications during this period—a success rate of 6 percent. Foster-Miller made only 73 applications—a success rate of 40 percent. Given the substantial amount of agency effort involved in evaluation applications, it does appear that the agency may wish to evaluate application rates further, with a view to perhaps discussing poor quality applica- tions with some companies. 3.2.3.2  New Applicants The numbers of new applicants and new winners attracted into the program is an important measure of program openness. NASA maintains records on whether a firm is a first-time applicant to the NASA SBIR program. Data in Figure 3-3 indicate that on average about 19 percent of NASA ap- plicants are applying to NASA for the first time. The data also indicate that after 

46 SBIR AT THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION TABLE 3-2  Top 20 Multiple NASA SBIR Winners, 1997-2005 Company Name Number of Phase I Awards Orbital Technologies 40 Corporation Intelligent Automation, Inc. 37 Physical Optics Corporation 32 Creare, Inc. 31 Foster-Miller, Inc. 29 Lynntech, Inc. 27 Physical Sciences, Inc. 26 Pioneer Astronautics 25 Los Gatos Research 20 American GNC Corporation 19 Luna Innovations, Inc 19 TDA Research, Inc. 19 MER Corporation 18 Umpqua Research Company 18 Southwest Sciences, Inc. 17 Ultramet 15 Stottler Henke Associates, Inc. 15 Eltron Research, Inc 15 Triton Systems, Inc. 15 Continuum Dynamics, Inc. 15 Total (top 20 winners) 452 Percent of all Phase I Awards 16.5 SOURCE: National Aeronautics and Space Administration. 40 Percent of All Phase I Applications 35 30 25 20 15 10 5 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 Average Year FIGURE 3-3  First-time applications to the NASA SBIR program. NASA Figure 3-3.eps SOURCE: National Aeronautics and Space Administration. 

APPLICATIONS AND AWARDS AT NASA 47 an uptick in new applicants in 2002-2003, the share of new applicants in overall applications is now trending back down toward the level that prevailed before 2002 (around 14 percent). While the circumstances of each agency are different and the pool of avail- able firms from which applications must come are also different, it is worth noting that this figure is on the low side compared to other agencies. NASA management may wish to consider whether more outreach efforts are needed. 3.2.4  Phase I Applications and Awards: Woman- and Minority-owned Firms Support for woman- and minority-owned firms is one of the four primary objectives for the SBIR program set by the Congress. This section examines data related to applications and awards by these demographics. 3.2.4.1  Application Shares and Trends A key step in providing such support lies in the attraction of sufficient appli- cations for funding from these demographic groups. Figure 3-4 shows application trends for 1997-2005 by demographics. The chart indicates that the share of all applications from woman- and minority-owned firms has remained remarkably stable at NASA, barely varying from the mean of 26.5 percent of all awards. 30 Percent of All Phase I Applications 25 20 15 10 Woman-owned Firms 5 Minority-owned Firms Either 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 Year FIGURE 3-4  Shares of Phase I applications, by demographic group, 1997-2005. SOURCE: National Aeronautics and Space Administration. NASA Figure 3-4.eps 

48 SBIR AT THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION 3.2.4.2  Phase I Awards, by Demographics Figure 3-5 shows Phase I awards by demographics, 1992-2005. Data on Phase I awards show little change in the award shares to woman- and minority- owned firms, which have moved narrowly between 20 percent and 25 percent of all awards since 1992. Minority firms continue to receive a larger share of Phase I awards than woman-owned firms, but the gap between the two groups is narrowing. 3.2.4.3  Phase I Success Rates by Demographic Group This section concludes by reviewing the relative success rates of minority- owned, woman-owned and other firms within the NASA SBIR program. These success rates—defined as the ratio of contracts to applications in percentage terms—are described in Figure 3-6. The chart indicates that there has been rela- tively little change in success rates for any group, except for the spike for “other” applicants in 2001. Overall, success rates for woman and minority-owned firms are signifi- cantly lower than for applications from other firms—averaging 11.0 percent and 10.9 percent respectively compared with 14.9 percent of all other firms. NASA might wish to examine the sources of this disparity in more detail in subsequent research. Woman-owned Firms 30 Minority-owned Firms Either Percent of All Phase I Awards 25 20 15 10 5 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Year FIGURE 3-5  NASA SBIR Phase I awards, by demographic group, 1992-2005. NASA Figure 3-5.eps SOURCE: National Aeronautics and Space Administration. 

APPLICATIONS AND AWARDS AT NASA 49 Neither 25 Woman-owned Firms Minority-owned Firms Percent of Phase I Proposals 20 That Are Funded 15 10 5 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 Year FIGURE 3-6  NASA SBIR Phase I success rate, by demographic group, 1997-2005. SOURCE: National Aeronautics and Space Administration. NASA Figure 3-6.eps 3.3  PHASE II AWARDS As with Phase I, the number of Phase II awards made by NASA has re- mained relatively constant, as indicated in Figure 3-7. From 1997 onwards, the number of awards has fluctuated within the range from 125-155. Average award size has stayed close to the agency guidelines, as indicated in Figure 3-8. The increase in 1993 reflected changes in the enabling legislation. However, the decrease in 2004 is as yet unexplained. 250 Number of Phase II Awards 200 150 100 50 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Year FIGURE 3-7  NASA SBIR Phase II awards, 1992-2004. NASA Figure 3-7.eps SOURCE: National Aeronautics and Space Administration. 

50 SBIR AT THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION Average Phase II Award Size (Dollars) 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2003 2004 Year FIGURE 3-8  NASA SBIR Phase II average award size, 1992-2001; 2003-2004. NOTE: Data for 2002 not available. Figure 3-8.eps NASA SOURCE: National Aeronautics and Space Administration. 3.3.1  Phase II Awards by State Patterns of award by state follow the pattern for Phase I quite closely, al- though as Table 3-3 shows, the “conversion rate” for states vary widely. As with Phase I, states with NASA research centers are likely to generate more awards (e.g., Alabama, Maryland). 3.3.2  Phase II Awards by Company Between 1992 and 2004, NASA awarded a total of 1,924 Phase II awards to 903 different companies. Most firms received just one or at most two awards; a few however were more successful, as Table 3-4 indicates. Creare, the top award winner, received 36 Phase II awards during this period—an average of 2.76 awards per year. The top 20 Phase II award winners collectively received 327 Phase II awards, accounting for 17 percent of all awards made by NASA during this period. NASA has not provided data on new Phase II winners.   The conversion rate is the rate at which Phase I awards are converted to Phase II. It is a useful indicator of average progress toward commercialization. 

APPLICATIONS AND AWARDS AT NASA 51 TABLE 3-3  NASA SBIR Phase I to Phase II Conversion Rate, by State, 1997-2004 Number Number of Number Number of of Phase I Phase II of Phase I Phase II Awards, Awards, Conversion Awards, Awards, Conversion State 1997-2005 1997-2004 Rate (%) State 1997-2005 1997-2004 Rate (%) AL 111 45 40.5 ND n/a AR 10 4 40.0 NE n/a AZ 75 28 37.3 NH 41 24 58.5 CA 565 237 41.9 NJ 71 30 42.3 CO 188 78 41.5 NM 64 28 43.8 CT 49 24 49.0 NV 6 2 33.3 DC 2 0.0 NY 69 24 34.8 DE 10 3 30.0 OH 106 34 32.1 FL 73 26 35.6 OK 1 1 100.0 GA 18 4 22.2 OR 41 18 43.9 HI 4 3 75.0 PA 66 29 43.9 IA 6 4 66.7 PR n/a ID 7 3 42.9 RI n/a IL 23 9 39.1 SC 2 0.0 IN 17 8 47.1 SD n/a KS 4 3 75.0 TN 27 10 37.0 KY 2 1 50.0 TX 128 50 39.1 LA 5 2 40.0 UT 23 9 39.1 MA 376 150 39.9 VA 159 65 40.9 MD 141 58 41.1 VI n/a ME 2 1 50.0 VT 7 5 71.4 MI 42 15 35.7 WA 51 24 47.1 MN 28 10 35.7 WI 50 20 40.0 MO 9 3 33.3 WV 4 3 75.0 MS 13 6 46.2 WY 5 3 60.0 MT 21 11 52.4 Total 1,813 738 40.7 NC 12 2 16.7 NOTE: N/A means not applicable. SOURCE: National Aeronautics and Space Administration. 3.3.3  Phase II Applications and Awards: Woman- and Minority-owned Firms 3.3.3.1  Phase II Applications Shares and Trends Applications from woman- and minority-owned firms have remained rela- tively static over time at NASA, as Figure 3-9 shows. Overall, woman-owned firms have made somewhat fewer applications than minority-owned firms. Over- all, woman- and minority-owned firms account for a slightly smaller percentage of applications—22.2 percent, compared to 26.5 percent for Phase I. 

52 SBIR AT THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION TABLE 3-4  Top 20 SBIR Phase II Award Winners for NASA, 1997-2004 Company Name Number of Phase II Awards Creare, Inc. 36 Orbital Technologies Corporation 26 Foster-Miller, Inc. 23 Physical Optics Corporation 21 Lynntech, Inc. 21 Intelligent Automation, Inc. 21 Ultramet 19 Physical Sciences, Inc. 18 Triton Systems, Inc. 15 CFD Research Corp 14 TDA Research, Inc. 14 Materials & Electrochemical Research 12 Stottler Henke Associates, Inc. 12 Coherent Technologies, Inc. 12 Nielsen Engineering & Research, Inc. 11 Umpqua Research Company 11 Composite Optics, Incorporated 11 Accurate Automation Corporation 10 Los Gatos Research 10 Eltron Research, Inc 10 Total (top 20) 327 Percent of all NASA Phase II Awards 17.0 Total Firms with Phase II Awards 903 Total Phase II Awards (all firms) 1,924 SOURCE: National Aeronautics and Space Administration. 3.3.3.2  Phase II Awards, by Demographics Overall, woman- and minority-owned firms receive about 20 percent of NASA Phase II awards. This is slightly down from the end of the 1990s, as Fig- ure 3-10 indicates. And since 2001, the share of awards going to minority-owned firms has consistently exceeded that going to woman-owned firms. These data also indicate that Phase II awards by demographics closely track results from Phase I. 3.3.3.3  Phase II Success Rates, by Demographic Group Figure 3-11 describes the respective success rates for the different demo- graphic groups. These data indicate that there is general upward trend in success rates, and that success rates for woman- and minority-owned firms is generally in line with those for other firms. 

APPLICATIONS AND AWARDS AT NASA 53 Woman-owned Firms 30 Minority-owned Firms Either Percent of All Phase II Applications 25 20 15 10 5 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 Year FIGURE 3-9  NASA SBIR Phase II applications, by demographics, 1997-2005. SOURCE: National Aeronautics and Space Administration. NASA Figure 3-9.eps Woman-owned Firms 30 Minority-owned Firms Either 25 Percent of All Phase II Awards 20 15 10 5 0 1997 1998 1999 2000 2001 2002 2003 2004 Year FIGURE 3-10  NASA SBIR Phase II awards, by demographic group, 1997-2004. NASA Figure 3-10.eps SOURCE: National Aeronautics and Space Administration. 

54 SBIR AT THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION 70 Phase II Awards as a Percentage of Applications 60 50 40 30 Woman-owned Firms 20 Minority-owned Firms Neither 10 0 1997 1998 1999 2000 2001 2002 2003 2004 Year FIGURE 3-11  NASA SBIR Phase II success rates, by demographics, 1997-2004. SOURCE: National Aeronautics and Space Administration. NASA Figure 3-11.eps