Business research

Small Business Research Programs: Most Agencies Met Spending Requirements, But DOD and EPA Need to Improve Data Reporting

What the GAO found

Data submitted to the Small Business Administration (SBA) indicates that most agencies participating in the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs met spending requirements for fiscal year 2015. Nine of 11 agencies participating in the programs the SBIR program and 4 of the 5 agencies participating in the STTR program have submitted the required data on extramural research or research and development (R&D) obligations – which are generally conducted by non-federal employees outside the federal facilities – required to determine if they have met the expenditure conditions. Of the agencies that submitted required bond data, 8 of 9 met SBIR spending requirements and all 4 met STTR spending requirements for fiscal year 2015. GAO could not determine compliance from 2 agencies – the Department of Defense (DOD) and the Environmental Protection Agency (EPA) – because these agencies did not submit the required bond data. Officials from most agencies, including the DOD and EPA, have identified difficulties in using data on extramural R&D obligations to calculate spending needs and determine compliance. A task force of several participating agencies plans to come up with an alternative methodology for calculating spending needs, according to an agency official involved in leading the effort. Until the DOD and the EPA find ways to provide obligation data or until the calculation methodology is changed, these 2 agencies will not know if they have met the expenditure requirements, which which limits the reporting of such information by the SBA to Congress.

Agencies inconsistently met certain requirements to report to the SBA on their methodologies for calculating their extramural R&D budgets in fiscal year 2015, and SBA officials said they were taking steps to expedite required SBA reporting to Congress. Five of the 11 agencies submitted their required methodological reports on time. Most agencies provided detailed information in these reports, but they did not consistently provide all the required information. Regarding the SBA’s own reporting requirements, as of May 2017, the SBA had not submitted its report for fiscal year 2015. The GAO has already made recommendations to the SBA to address these issues, and the SBA is implementing them.

GAO analysis shows that basing SBIR and STTR spending requirements on an agency’s total R&D budget authority rather than its extramural R&D obligations for fiscal year 2015 would have increased spending needs and the number of agencies required to participate in the programs. Officials from each of the participating organizations have identified the pros and cons of this potential change. For example, agency officials identified more rewards for small businesses as a benefit, but several agency officials also said such a change could limit resources for other R&D programs.

Total administrative expenses for the SBIR and STTR programs for fiscal year 2015 are unknown, but 9 agencies participating in an administrative pilot program – which allows agencies to fund new administrative activities – reported spending approximately $33.9 million for these activities for this year. Agencies are not required to and generally do not track their total administrative costs, so GAO could not determine total expenditures.

Why GAO Did This Study

Through the SBIR and STTR programs, federal agencies have awarded contracts and grants totaling approximately $44 billion to small businesses to develop and commercialize innovative technologies. The Small Business Act requires agencies with extramural R&D obligations that meet certain thresholds — $100 million for SBIR and $1 billion for STTR — to dedicate a percentage of those funds to programs. Agencies must report their activities to the SBA and, in turn, the SBA must report to Congress.

The 2011 program reauthorization includes a provision for GAO to review agency compliance with SBIR and STTR spending and reporting requirements and other aspects of the program. This report examines, for fiscal year 2015, (1) the extent to which participating agencies met spending requirements, (2) the extent to which agencies and the SBA met certain reporting requirements, (3) the potential effects of base expenditure requirements on total R&D budget authority rather than extramural R&D obligations, and (4) what is known of the amounts spent by agencies to administer the programs. GAO reviewed agency spending data and reports and interviewed program managers from the SBA and the 11 participating agencies.