Why It Matters

Federal agencies issued $4.4 billion in small-business research awards in fiscal 2024, but incomplete data leave them unable to fully assess whether those investments are producing commercial results, according to Small Business Research Programs: Better Data Could Improve Insight into Companies' Success, a Government Accountability Office (GAO) report published Sept. 29. Small businesses submitted required commercialization data for less than half of their prior awards, limiting lawmakers' and agencies' ability to evaluate the programs' economic outcomes.

The Big Picture

The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs were designed in part to drive economic growth by helping small companies that might otherwise struggle to secure capital for research and development, with 11 federal agencies participating and SBA overseeing the programs, issuing guidance and reporting to Congress. In fiscal 2024, the most recent data available at the time of review, those 11 agencies issued $4.4 billion in SBIR and STTR awards, split almost equally between "open topics," where agencies define broad areas of interest and small businesses propose potential agency needs and solutions, and "conventional topics," where agencies specify the problems they want solved. Open-topic funding has produced innovations such as space vehicles that repair satellites, illustrating the potential benefits of giving small businesses greater latitude to define problems and solutions.

Congress began requiring the Department of Defense (DOD) to release open-topic solicitations in fiscal 2023, and the SBIR and STTR Extension Act of 2022, in connection with that requirement, included a provision for GAO to review open topics in the programs, with this report being the fourth in that series.

At specific milestones, small businesses must report to SBA on commercial activity resulting from past awards, and SBA maintains that information in a statutorily required database. But GAO found that not all agencies clearly communicate those reporting requirements to applicants or ensure that required reports were submitted. As a result, data are incomplete, limiting SBA's ability to evaluate commercialization outcomes for open- and conventional-topic awards.

Even if compliance improved, SBA officials said they would not consider the commercialization data sufficiently reliable without validation and verification. They identified options to increase reliability, including incorporating data from other sources such as Internal Revenue Service revenue figures or obtaining additional resources to validate submissions. Statutory changes would be needed to change what commercialization data SBA collects. Reliable data could give decision makers clearer insight into outcomes for open- and conventional-topic awards and the overall economic return on federal research and development investment.

Broader Context

GAO analyzed data from all 11 participating agencies and SBA covering more than 6,000 awards issued in fiscal 2024, examined the commercialization database for awards issued in fiscal 2019 through fiscal 2024, reviewed statutory requirements and interviewed officials from SBA and the participating agencies, as well as representatives from 20 randomly selected small businesses that received SBIR or STTR awards.

GAO made 14 recommendations, all of which are listed as open, and the agencies agreed with the recommendations.

Thirteen recommendations went to seven participating agencies and NOAA, covering clearer communication of commercialization reporting requirements to applicants and checks on whether applicants adhere to them. The Department of Education, Department of Homeland Security, Department of Transportation, NASA and National Science Foundation each received two recommendations. The Department of Health and Human Services, the Environmental Protection Agency, and the National Oceanic and Atmospheric Administration each received one.

The Bottom Line

The 14th recommendation directs SBA to submit a legislative proposal to Congress or pursue other actions to strengthen the reliability of commercialization data.

Track the status of these recommendations and related legislation at Legis1.com.

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