Want To Scale Innovation at the DOD? Strengthen the SBIR Program

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Though a popular option for startups, the Small Business Innovation Research program still faces a valley of death challenge from pilot to program of record.

Secretary of Defense Lloyd Austin’s recent remarks at the Reagan National Defense Forum made it clear he intends to drive the DOD to ramp up its efforts in tapping America’s innovation base as it works towards achieving integrated deterrence against China. 

In particular, Secretary Austin wants to “double down on our Small Business Innovation Research program”, which is emerging as a preferred resource for gaining accelerated access to cutting-edge commercial technology through phased R&D and pilot programs. 

Defense leaders are bogged down by legacy systems and worried about countering increasingly technologically advanced adversaries. Many hope that focusing on SBIR contracting will help the DOD leap closer to the speed of relevancy—something especially critical to successfully implementing JADC2 and digital transformation priorities. 

On the industry side, tech start-ups previously reluctant to pursue work with the DOD due to it’s traditionally slow and expensive acquisition timeline, now see SBIRs as a path of least resistance to gaining essential sources of revenue. 

Not only are SBIRs an opportunity to develop dual-use products with non-dilutive funding, they also serve as a launching point to grow and compete in the federal market. SBIRs serve as a hunting license for start-ups who can leverage them to avoid the typical “full and open competition” process. 

They are also highly attractive for start-ups because they are exclusively for small businesses, unlike Other Transaction Authorities which are primarily awarded to large government contractors. 

Despite its advantages and increasing popularity, SBIR recipients are not immune to the valley of death plaguing novel technologies’ transition from initial funding to program of record. An unfortunate phenomenon leaving defense officials stuck with outdated technology and small businesses hampered from achieving their potential growth. 

As such, Secretary Austin’s pledge to “double down” should include meaningful improvements to the SBIR program, particularly centered on speed and scale. Here are four suggestions:

Create Financial Flexibility

The DOD should be able to use up to 10% of its SBIR funds to match Phase III awards—which extends or completes an effort made under an earlier SBIR contract. SBIR-backed technologies often struggle to get past the pilot stage of the program in large part because of limited funding opportunities and significant competition amongst firms—including large defense vendors—for highly sought after end-of-year money. Expanding the pot of available funds to Phase III awards would drastically help reduce the barriers to scaling innovative technologies.

Tackle the Culture of Risk Aversion 

Current and former DOD leaders have all acknowledged that the Pentagon’s fear of acquisition failure is curbing its comparative advantage. Therefore, defense leaders should prioritize innovation training and incentivizing contracting officers to help them become more familiar and comfortable with expedited contracting vehicles like SBIRs.

Increase Solution Information Sharing 

Defense officials often pursue duplicative efforts, wasting time and resources, because they lack the ability to determine if someone else has already discovered and validated a solution to the same problem. 

In line with Undersecretary of Defense for Research and Engineering Heidi Shyu’s effort to create a database overviewing all DOD innovation initiatives, the DOD should create a searchable database of SBIR backed technologies to help accelerate the mass adoption of proven tech solutions and de-duplicate efforts. 

Stay Open to the Art of the Possible

The “Open Topic SBIR” pilot currently championed by the Air Force should be expanded to all other military agencies and services. This approach allows industry to share technology solutions that defense officials may not have known existed or thought to look for. Expanding this pilot would help keep the DOD on the cutting edge and help draw in new vendors to grow the defense innovation base. 

While these four suggestions won’t solve the valley of death problem or ensure top priorities like JADC2 are achieved, they can help the DOD better attract and adopt much needed yet still often elusive cutting-edge commercial technology. 

Terry Rydz is the senior engagement manager at Dcode