SBIR at the Department of Defense (2014) / Chapter Skim
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5 Insights from Case Studies and Extended Survey Responses
5 Insights from Case Studies and Extended Survey Responses
Pages 134-169
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From page 134... ...
Together, the case studies and excerpts of comments from the surveys provide a broader qualitative understanding of the program, particularly from the user's perspective, and are thus an essential part of the information gathered by the committee to assess whether the DoD SBIR program is meeting all four of its legislative goals.2 The qualitative analysis in this chapter is divided into five broad sections: the effects of the SBIR program on the companies; its impact on company missions; other SBIR Congressional objectives; comments and concerns about the SBIR award process and implementation at DoD; and ideas from the companies for improvements. 1 The 2011 survey covered DoD Phase I and Phase II SBIR recipients with awards 1999-2008.
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From page 135... ...
The case studies, presented in full in Appendix F of this report and highlighted in this chapter, have been verified by the companies that they feature and they have explicitly permitted their use and identification in this report. COMPANY EFFECTS SBIR awards can affect companies in a number of powerful ways, ranging from providing the support and sometimes impetus for company formation (e.g., TRX)
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From page 136... ...
CA M Optemax MD W Powdermet and MesoCoat OH Qualcomm CA Texas Research International TX TRX Systems MD W Daniel H Wagner Associates VA NOTE: Demographic describes the company as majority-owned by women or minorities; these data are drawn from DoD awards data, and reflect company selfcertification Completed case studies are provided in Appendix F
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From page 137... ...
Carole Teolis had been a principal investigator for awards at a previous company. For a better known company, iRobot, SBIR funding for early-stage investments in multiple technologies provided the key to eventual success.
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From page 138... ...
Jacobus likened her company's strategy to farming -- some years are better than others, but no project ever really dies, in contrast to the prune-and-focus approach of the venture model. Box 5-3 Non-Linear Innovation -- Survey Respondents Comments "The SBIR funding provided ‘seed money' to initiate development of high-risk technology that is now finding potential application in areas not anticipated when the project was originally proposed." "It funded advanced diesel engine technology developments usable in subsequent commercial and military business contracts." "Pre 9-11, [our company]
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From page 139... ...
Similarly, SBIR funding was critical for building technical capabilities at MesoCoat and Powdermet, sister companies focused on nanotech-based powders and cladding. The SBIR program funded the hiring of PhD scientists before market sales existed and was essential to maintaining a critical mass for R&D, without which Powdermet would have no substantial technology platform.
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From page 140... ...
to survive the general downtown in technology in the early and mid 2000s." "The influx of research money helped to keep the company going in a very rough time." "The SBIR funding helped retain several key, technical folks employed for several years and helped the company stay afloat in difficult financial times." "We worked on this SBIR during the dot com bust.…We lost almost all of our other business and may have gone out of business if we had not had this Phase II SBIR." Timing Effects The survival and growth of a small business is to some extent serendipitous. Because of a general lack of financial cushion and the relatively high fixed cost of staff and facilities, single contracts can make or break small SBIR companies.
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From page 141... ...
SBIR funding came at a pivotal time in the company's development. According to Irwin Jacobs, founder and CEO at the time, "This funding allowed us to pursue several innovative programs that otherwise would not have been possible." In his Senate testimony, Dr.
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From page 142... ...
[I] t is extremely difficult to secure VC or other private investment." "DoD and NASA SBIR funding provided opportunities and resources for high risk R&D activities.…[I]
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Without the program, all contacts with DoD would have to be channeled through prime contractors. As a result, small businesses would lose the opportunity to connect directly with customers, and acquisitions would lose direct access to the flexibility and technical capacity of innovative small firms.
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From page 144... ...
DOD affiliation was very good." Even though OKSI could acquire non-SBIR DoD contracts, the program was still invaluable to the company when entering technical areas that were otherwise dominated by either large prime contractors or universities. For example, OKSI undertook a number of non-SBIR contracts with MDA, for whom it developed sensors for many different kinds of missions, in most cases acting as its own prime contractor.
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From page 145... ...
Several companies observed that SBIR funding was an important validator both for investors and for strategic partners. SBIR funding was catalytic for Powerdermet.
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From page 146... ...
According to CEO Carol Politi, support from SBIR awards, a Maryland TEDCO grant, and an NSF Phase IIB award provided critical early funding to deliver proof of concept. NSF support in particular was, according to Ms.
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From page 147... ...
NCTI announced a major strategic partnership with Du Pont to develop products utilizing NCTI's unique materials and processes, as well as partnerships with Lockheed Martin on the NASA Juno project and Northrup Grumman on AFRL SBIR contracts. Over the past 35 years, NEAR developed an extended collection of clients in the United States, which includes almost all of the prime contractors working in aerospace.
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From page 148... ...
Mr. Proctor further observed, "The primes would never voluntarily put a small business subcontractor in the critical path of a major project." Navsys entered a period of severe crisis in 2007, following SBIR awards that led to its technology using GPS to improve the targeting of "smart bombs." The company expanded to 50 employees in anticipation of a Phase III contract, but Air Force instead awarded the contract (and the technology)
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From page 149... ...
This Phase III barrier made it much more difficult for companies to lessen their dependence on SBIR funding. After receiving a Phase III award, OKSI was eventually frozen out by Army's decision to work directly with the primes.
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From page 150... ...
Title III Certification One of the case study companies reached an unusual milestone: NCTI, was designated as firms that have developed technologies regarded as "critical to the national security." For NCTI, a successful Phase I demonstration showed that large-format CNT sheets can meet the functional requirements of EMI shielding and can also withstand the industrial stresses involved in pre-pregging, a process that prepares the material for direct insertion into aircraft manufacturing systems. As a result, Ashton Carter, Under Secretary of Defense for Acquisition, designated the research as a "critical SBIR program," which in turn led to a Phase II award from Air Force of more than $4.5 million in 2010.7 Innovative Products for Military Use SBIR projects often address particular technical problems for the sponsoring agencies -- sometimes problems that may have only limited sales potential but are of considerable value.
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From page 151... ...
GI-Eye is currently the most important commercial product developed by Navsys, which received more than $500,000 in licensing revenue from this product in FY2010. Commercialization Although much of the impact of commercialization is best captured through data generated from the survey and from an analysis of agency data, its full impact is sometimes not easily captured.
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From page 152... ...
Cybernet is currently building its sixth ATACS system for the Army. This rapid delivery was made possible in part by the SBIR compete clause, which permitted Army to sole source the contract to Cybernet based on the competition for the previous SBIR award.
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CHAPTER 5 153 Box 5-10 Innovations -- Survey Respondents Comments "The materials and design program is part of a long term transformation in body armor systems." "We developed a new technique…currently being further developed for measuring velocities in aircraft exhausts." "Chemistry developed during Phase II is being licensed to carbon fiber manufacturers and has been applied to the development of repair primers for composite aircraft and other composite applications." "Our technology has saved tens of millions of dollars for DoD. Our fault tolerant architecture is the basis for the ship control architecture for the Virginia Class sub fleet and will be used to upgrade the other sub programs." "SBIR funding enabled Q-Track to complete development of a breakthrough real-time location system technology: Near-Field Electromagnetic Ranging." Giner is providing a core technology for all Navy Virginia-class submarines.
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From page 154... ...
Originally developed for Air Force, it is according to Microcosm the most widely used book in astronautics. It includes substantial work directly relevant to low-cost space mission engineering provided by Microcosm personnel.
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From page 155... ...
CHAPTER 5 155 recently become important, in part because software's life cycle is so short that patenting is rarely the best way to protect its value. Other companies have also made extensive use of patenting to protect their intellectual property: Giner has more than 100 U.S.
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From page 156... ...
An ATC engineer wishing to apply for SBIR funding first needs to make the case internally that the project will result in commercial sales, and then writes the proposal, which is valuable training in and of itself. If ATC wins an award, then the engineer is asked to run the project.
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From page 157... ...
Topics Dr. Gat from OKSI observed that many DoD topics came from research labs rather than from acquisition programs, especially for Army, which tended to create significant gaps between topic authors and acquisitions programs.
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From page 158... ...
experienced extended difficulties with Air Force over data rights, when -- according to the company and the SBA -- it was 15 SBIR Technical Data rights are defined as "the rights an SBIR awardee obtains in data generated during the performance of any SBIR Phase I, Phase II, or Phase III award that an awardee delivers to the Government during or upon completion of a Federally-funded project, and to which the government receives a license." SBA, SBIR Policy Directive, February 24, 2014.
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From page 159... ...
According to Dr. Wertz and other interviewees across California, DCAA has applied extremely harsh regulatory practices to SBIR companies, with the effect of severely impacting SBIR-winning businesses: 1)
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From page 160... ...
Many COs had little understanding of the SBIR program, and rules regarding SBIR Phase III awards were almost universally ignored. Payment Structures A number of company representatives identified payment processes and structures as problems.
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From page 161... ...
stated that SBIR awards were being made to established larger companies that could provide more and better data and offer the lowest risk, rather than to the most creative and innovative companies. Although Powdermet continued to win awards to apply its technology to DoD projects, its sister company MesoCoat was not able to break in, despite having more long-term commercial potential and more innovative technology.
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From page 162... ...
A lower number of projects suggested a much lower success rate than for regular Phase II SBIR awards. Success rates matter to companies: TRI was interested in the CPP but decided that the opportunities in this area were not a good fit in part because of the anticipated level of competition.
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From page 163... ...
However, TPOCs can sometimes stand between the company and the ultimate customer, which NEAR experienced with Navy. This made it difficult to pursue Phase III opportunities effectively.
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From page 164... ...
3 companies received more than 500 SBIR awards (from all agencies) and more than $100 million in SBIR funding $ per award data indicate that some firms were much more efficient than others in transitioning between Phase I and Phase II 17 National Research Council, An Assessment of the SBIR Program at the Department of Defense, C
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From page 165... ...
Dr. De Luis considered this connection to be so critical that he believed a small percentage of SBIR funding should be taken from the company and applied to the TPOC budget for travel and monitoring purposes.
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From page 166... ...
2) The SBIR legislation could be adjusted to permit the use of 5 percent of the company's SBIR funding by the TPOC to manage the award, including travel to the company site, which would support deeper engagement.
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From page 167... ...
Dr. Jacobus also said that agencies should allocate some SBIR funding via the prime, that is, allow the primes some input into the development of topics and the selection of awards.
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From page 168... ...
suggested that all SBIR awards be treated as fixed price contract, which would address the difficulties involved in pricing labor and would reduce uncertainty for recipients. He noted that in effect most SBIR Phase II awards were treated as though they were fixed cost, without the concurrent benefits.
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From page 169... ...
Irwin Jacobs Founder Janet Jackson Marketing Manager Texas Research International (TRI) Michael Dingus VP and Technical Director
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