DTIC ADA499302: DoD Small Business Innovation Research Program

8.2 MB·English

by  Defense Technical Information Center

Report No. D-2009-048 January 30, 2009

DoD Small Business Innovation Research Program
Report Documentation Page Form Approved
OMB No. 0704-0188
Public reporting burden for the collection of information is estimated to average 1 hour per response, including the time for reviewing instructions, searching existing data sources, gathering and
maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information,
including suggestions for reducing this burden, to Washington Headquarters Services, Directorate for Information Operations and Reports, 1215 Jefferson Davis Highway, Suite 1204, Arlington
VA 22202-4302. Respondents should be aware that notwithstanding any other provision of law, no person shall be subject to a penalty for failing to comply with a collection of information if it

does not display a currently valid OMB control number.
1. REPORT DATE 3. DATES COVERED
30 JAN 2009 2. REPORT TYPE 00-00-2009 to 00-00-2009
4. TITLE AND SUBTITLE 5a. CONTRACT NUMBER
DoD Small Business Innovation Research Program
5b. GRANT NUMBER
5c. PROGRAM ELEMENT NUMBER
6. AUTHOR(S) 5d. PROJECT NUMBER
5e. TASK NUMBER
5f. WORK UNIT NUMBER
7. PERFORMING ORGANIZATION NAME(S) AND ADDRESS(ES) 8. PERFORMING ORGANIZATION
Department of Defense Inspector General,ODIG-AUD,400 Army Navy REPORT NUMBER
Drive,Arlington,VA,22202-4704
9. SPONSORING/MONITORING AGENCY NAME(S) AND ADDRESS(ES) 10. SPONSOR/MONITOR’S ACRONYM(S)
11. SPONSOR/MONITOR’S REPORT
NUMBER(S)
12. DISTRIBUTION/AVAILABILITY STATEMENT
Approved for public release; distribution unlimited
13. SUPPLEMENTARY NOTES
14. ABSTRACT

15. SUBJECT TERMS
16. SECURITY CLASSIFICATION OF: 17. LIMITATION OF 18. NUMBER 19a. NAME OF
ABSTRACT OF PAGES RESPONSIBLE PERSON
a. REPORT b. ABSTRACT c. THIS PAGE Same as 86
unclassified unclassified unclassified Report (SAR)
Standard Form 298 (Rev. 8-98)
Prescribed by ANSI Std Z39-18
Additional Information and Copies
To obtain additional copies of this report, visit the Web site of the Department of Defense
Inspector General at http://www.dogig.mil/audit/reports or contact the Secondary Reports
Distribution Unit at [phone] (DSN 664-8937) or fax [phone].
Suggestions for Audits
To suggest ideas for or to request future audits, contact the Office of the Deputy Inspector General
for Auditing at [phone] (DSN 664-9142) or fax [phone]. Ideas and requests can
also be mailed to:

ODIG-AUD (ATTN: Audit Suggestions)
Department of Defense Inspector General
400 Army Navy Drive (Room 801)
Arlington, VA 22202-4704

Acronyms
DARPA Defense Advanced Research Projects Agency
DFARS Defense Federal Acquisition Regulation Supplement
GAO Government Accountability Office
IG Inspector General
OUSD Office of the Under Secretary of Defense for Acquisition, Technology,
and Logistics
RDT&E Research, Development, Test, and Evaluation
SBA U.S. Small Business Administration
SBIR Small Business Innovation Research
STTR Small Business Technology Transfer
INSPECTOR GENERAL
DEPARTMENT OF DEFENSE
400 ARMY NAVY DRIVE
ARLINGTON, VIRGINIA 22202-4704
January 30, 2009
MEMORANDUM FOR UNDER SECRETARY OF DEFENSE FOR ACQUISITION,
TECHNOLOGY, AND LOGISTICS
DIRECTOR, ACQUISITION RESOURCES AND ANALYSIS
ASSISTANT SECRETARY OF THE NAVY (RESEARCH,
DEVELOPMENT, AND ACQUISITION)
NAVAL INSPECTOR GENERAL
ASSISTANT SECRETA R Y OF THE AIR FORCE (FINANCIAL
MANAGEMENT AND COMPTROLLER)
AUDITOR GENERAL, DEPARMENT OF THE ARMY
DIRECTOR, DEFENSE ADVANCED RESEARCH PROJECTS
AGENCY
SUBJECT: Report on the DoD Small Business Innovation Research Program
(Report No. D-2009-048)
We are providing this report for review and comment. We considered comments fl'om the Office
of the Under Secretary of Defense for Acquisition, Technology, and Logistics; the Assistant
Secretary of the Navy (Research, Development, and Acquisition); and the Director, Defense
Advanced Research Projects Agency when preparing the final report.
DoD Directive 7650.3 requires that all recommendations be resolved promptly. We received
comments from the Under Secretary of Defense and the Assistant Secretary of the Navy to
recommendations made in a draft ofthis report. Client comments to Recommendation A.2. were
fully responsive. Client comments to all other recommendations were partially responsive. In
response to the client comments, we revised Recommendations A.I. and B.I.a. Therefore, we
request additional comments from the Under Secretary of Defense to Recommendations A.I.,
A.3., A.4., B.i.a., and B.I.b.; and from the Assistant Secretary of the Navy for Recommenda
tion B.2. by March 2, 2009.
Please provide comments that conform to the requirements of DoD Directive 7650.3. Ifpossible,
send comments in electronic format (Adobe Acrobat file only) to [email protected]. Copies
of the comments must have the actual signature of the authorizing official for your organization.
We cannot accept the I Signed I symbol in place of the actual signature. If you arrange to send
classified comments electronically, you must send them over the SECRET Internet Protocol
Router Network (SIPRNET).
We appreciate the courtesies extended to the staff. Questions should be directed to Richard B.
Jolliffe at 703604-9201. If you desire, we will provide a formal briefing on the results.
Ric 1ard B. Jolliffe
Assistant Inspector General
Acquisition and Contract Management

Report No. D-2009-048 (Project No. D2006-D000AB-0215.000) January 30, 2009
Results in Brief: DoD Small Business
Innovation Research Program
 Establish supplemental funding to
What We Did
administer the SBIR program.
Evaluated whether Military Departments and  Designate SBIR internal champions
the Defense Advanced Research Projects within acquisition program offices.
Agency (DARPA) effectively used the Small
 Require SBIR contracting personnel to
Business Innovation Research (SBIR) program
record Phase III contracting actions in
for research and development projects to meet
DoD and Federal databases.
DoD requirements and whether projects
developed for the SBIR program resulted in  Limit the length and cumulative award
products for commercial or military markets. amounts of Phase II contracts.
What We Found  Require that any additional non-SBIR-
funded work, not applicable to a Phase II
 Army, Navy, Air Force, and DARPA
basic contract under SBA policy
used different methodologies to track
guidelines, not be funded as part of the
and report SBIR commercialization.
Phase II contract.
 Inconsistent approaches to reporting
The Assistant Secretary of the Navy (Research,
Phase III contracting actions may have
Development, and Acquisition) should establish
led to underreporting of SBIR successes.
controls to monitor compliance with standards
 Underreported SBIR successes may for periods of performance and cumulative
affect future congressional decisions to award amounts.
reauthorize the Federal SBIR program
Client Comments and Our
and diminish the role that small
businesses play in early-stage research Response
and development with DoD activities.
The Under Secretary partially agreed with
 27 of 34 contracts reviewed extended the recommendations stating that a DoD Directive
period of performance by an average of governing the SBIR program would be issued
24 months beyond the U.S. Small by December 2009. The new Directive would
Business Administration (SBA) include a requirement to designate SBIR
24-month recommended period of liaisons, make SBIR codes required fields in the
performance. Federal Procurement Data System-Next
Generation, incorporate SBIR program award
 Managers exceeded SBA recommended
guidelines, require annual reporting, and
funding by a total of $16.4 million on 21
encourage use of Phase III contracts to track
of 34 contracts reviewed.
program activity and the direct uptake of SBIR
technology. The Assistant Secretary of the
 DoD, Army, Air Force, and DARPA
Navy agreed to establish controls to monitor
internal controls were not adequate for
compliance with standards for periods of
ensuring that SBIR program offices
performance and cumulative award amounts.
managed SBIR Phase II contracts
Although not required to comment, the Director,
according to the SBA policy guidelines.
DARPA generally disagreed with the findings.

What We Recommend
We request that the Under Secretary of Defense
The Under Secretary of Defense for for Acquisition, Technology, and Logistics; and
Acquisition, Technology, and Logistics should: the Assistant Secretary of the Navy (Research,
Development, and Acquisition) provide further
 Mandate adherence to a consistent
comments in response to this report. Please see
methodology for identifying and
the table on the back of this page.
reporting SBIR projects transitioning to
Phase III commercialization.
i
Report No. D-2009-048 (Project No. D2006-D000AB-0215.000) January 30, 2009
Recommendations Table
Client Recommendations No Additional Comments
Requiring Comment Required
Under Secretary of Defense for A.1., A.3., A.4., B.1.a., A.2.
Acquisition, Technology, and B.1.b.
Logistics

Assistant Secretary of the Navy B.2.
(Research, Development, and
Acquisition)

Please provide comments by March 2, 2009.

i i
Table of Contents

Results in Brief i

Introduction 1

Objectives 1
Review of Internal Controls 1
Background 1

Finding A. Reporting Small Business Innovation Research Commercial
Success 4

Recommendations, Client Comments, and Our Response 12

Finding B. Small Business Innovation Research Phase II Contract
Management 18

Recommendations, Client Comments, and Our Response 25

Appendices

A. Scope and Methodology 30
Prior Coverage 31
B. Small Business Innovation Research Phase II Project Duration
and Funding 33
C. Summary of Client Comments and Our Response 35

Client Comments

Under Secretary of Defense for Acquisition, Technology, and Logistics 51
Department of the Navy 59
Defense Advanced Research Projects Agency 66

Introduction
Objectives
Our overall audit objective was to determine whether DoD is effectively managing the
Small Business Innovation Research (SBIR) program. Specifically, we determined
whether Defense agencies and Military Departments are effectively using the SBIR
program for research and development projects to meet DoD requirements and whether
the projects developed for the SBIR program result in products for commercial or
military markets.
Review of Internal Controls
We identified internal control weaknesses for the Office of the Under Secretary of
Defense for Acquisition, Technology, and Logistics; the Army; the Air Force; and the
Defense Advanced Research Projects Agency (DARPA) as defined by DoD Instruction
5010.40, “Managers’ Internal Control (MIC) Program Procedures,” January 4, 2006.
DoD officials did not establish adequate internal controls for ensuring that SBIR program
offices managed SBIR Phase II contracts according to the SBA Federal guidelines on
period of performance and cumulative funding amounts. Implementing
Recommendations B.1.a. and B.1.b. will improve contract management and
administration procedures for the DoD SBIR program. Improving these procedures will
result in more effective transitions of SBIR projects to meet DoD requirements.

We will provide a copy of this report to the senior officials responsible for internal
controls in the Office of the Under Secretary of Defense for Acquisition, Technology,
and Logistics; the Department of the Army; the Air Force; and DARPA.
Background
The SBIR program was established under Public Law 97-219, “Small Business
Innovation Development Act of 1982,” July 22, 1982, and reauthorized through
September 30, 2008, by the Public Law 106-554, Title I, “Small Business
Reauthorization Act of 2000,” December 21, 2000. The U.S. Small Business
Administration (SBA) is the coordinating agency for the SBIR program. The SBA
maintains overall Federal policy for SBIR and directs 11 Federal agencies’1
implementation of SBIR, reviews their progress, and reports annually to Congress on the
program’s operation. As required by Public Law, the SBA is responsible for ensuring
that the 11 Federal agencies reserve a portion of their overall research and development
extramural budget for award to small businesses.

1The 11 Federal agencies participating in the SBIR program are the Department of Agriculture, Department
of Commerce, Department of Defense, Department of Education, Department of Energy, Department of
Health and Human Services, Department of Homeland Security, Department of Transportation,
Environmental Protection Agency, National Aeronautics and Space Administration, and the National
Science Foundation.
1