$500 million for DoD SBIR Phase III?

On Friday of last week, the House Armed Services Committee reported its version of the FY2011 Defense Authorization bill to the House floor.  If passed the bill would authorize $500 million for a Department of Defense Rapid Innovation Program. 

What's really interesting for SBIR companies in all this, is that thecommittee report accompanying the bill makes it clear that the Committee expects DoD to give SBIR Phase II projects priority consideration in this program.  The committee report faults several major DoD acquisition programs for cost overruns, schedule delays and under-performance.  It also notes that the SBIR program has been a great source of transformational technologies, but expresses concern about DoD’s “dismal record of success inserting such technologies into major defense acquisition programs and into the commercial market, despite the many transition organizations, processes, and initiatives designed to do just that.” 

Could this new program be a significant source of funding DoD SBIR Phase IIIs?  Perhaps, but two things still need to happen to make that a reality.  First, the provision establishing the program must be included in the final version of the defense authorization bill, which means the bill first must pass through the House and then Senate must agree to the provision as well.  Second, the actual funding for the program would have to be included in a separate bill, the defense appropriations bill. 

One encouraging sign is that the chairman of the House Defense Appropriations Subcommittee, Norm Dicks of Washington, indicated his support for creating a similar program in a press conference back in March.   

The full text of the committee’s report language on the Rapid Innovation Program is provided below and can also be found on-line at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_reports&docid=f:hr491.111.pdf, pages 355-57. 

Department of Defense Rapid Innovation Program

The committee notes that several major acquisition programs under the purview of the Department of Defense (DOD) have been plagued by cost growth, schedule delays, and under-performance.  The Department often emphasizes transformation and reform in its acquisition policies and procedures, however, the trend to poor program performance continues. The committee recognizes that transformation combined with a smart acquisition process should result in affordable and interoperable weapon systems and platforms.   Open architecture systems are an example of a transformational technology that has resulted in cost savings or avoidance to the Department.

A great source for transformational technologies and ideas is the small business community which harbors many of the nation’s innovative thinkers and creative minds. Not only are small businesses vital to our economy, the committee considers them a vital source for developing innovative and cost-saving technologies in areas of military need. The Department has had success leveraging this source, primarily through the Small Business and Innovative Research (SBIR) Phase I and Phase II awards. The committee remains concerned though over the dismal record of success inserting such technologies into major defense acquisition programs and into the commercial market, despite the many transition organizations, processes, and initiatives designed to do just that. The Defense Science Board stated, in their July 2009 report titled ‘‘Fulfillment of Urgent Operational Needs,’’ that ‘‘the Department of Defense lacks the ability to rapidly field new capabilities to the warfighter in a systematic and effective way.’’

The committee notes that SBIR Phase III awards, funded by non-SBIR sources, are intended to help move SBIR-funded projects to the marketplace or into a program of record. The committee remains troubled that the Department has not effectively capitalized on the successes of SBIR Phase I and II innovations.  Findings from the National Research Council and the Department of Defense indicate that a lack of stable funding and lack of a transition path are significant inhibitors. To address these inhibitors, the committee notes the precedent set by Navy Program Executive Office Submarine (PEO SUBS), during fiscal years 2008 through 2010, who undertook an effort to solve this problem using funding for the insertion of technologies developed by small businesses. Funding was made available to small business projects identified in program acquisition plans for high-risk/high-reward component technology development for inclusion in the procurement process. The committee notes that there are other examples of funding that has allowed for expedited small business awards that met program of record interoperability and affordability goals. The committee notes the National Research Council’s 2009 report, titled ‘‘An Assessment of the SBIR Program at the Department of Defense,’’ states that SBIR ‘‘Phase III transitions at PEO SUBS account for approximately 86 percent of all Navy Phase III contracts, and Navy in turn accounts for 70 percent of all DOD Phase III contracts.’’ The committee applauds the efforts of the Navy and encourages the acquisition community within the Department of Defense to expand its work on improving the transition of small business research and development ideas. 

The committee has included a provision, section 1054, in this title that would establish the Department of Defense Rapid Innovation Program. The committee has also included $500.0 million in title XV of this Act to fund the program. In executing this program, the committee urges the Secretary of Defense, working through the Undersecretary of Defense for Acquisition, Technology, and Logistics (USD AT&L), to:erDte Mar 15 2

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(1) Develop and implement a competitive program designed to stimulate innovative technologies; reduce lifecycle costs; address technical risks; improve the timeliness and thoroughness of test and evaluation outcomes; and rapidly insert such products into military systems that meet critical national security needs, such as, but not limited to: force protection, sensors, complex data handling, advanced communications, advanced materials, nano-manufacturing, chemical/biological standoff detection, language translation, and cyber security; 

(2) Develop and implement clear goals and metrics for the program that would enhance the insertion or commercialization success of those technologies identified in paragraph (1);

(3) Evaluate and prioritize projects based on the following:

(a) Phase II Small Business Innovation Research (SBIR) projects;

(b) Non-SBIR projects that support ACAT I–IA, II, III and IV programs;

(c) Projects executed by the defense laboratories and the test and evaluation community;

(d) Projects cost-shared with state, local, or other government funds; and

(e) Issue annual solicitations from the military departments, the defense agencies, and the U.S. Special Operations Command applications for funding;

(4) Fund projects proposed by the PEOs or Program Managers that are determined most likely to be fielded or commercialized within three years;

(5) Ensure technology transition decisions are localized as much as possible between the program manager, the acquisition manager, and the user;

(6) The amount for each project under this program would nominally not exceed $3,000,000, but projects with a cost greater than that would be evaluated on a case-by-case basis approved by the USD AT&L; and

(7) Selected projects would be funded for no more than two years, except on a case-by-case basis approved by the USD AT&L.

The committee further notes that section 1054 would explicitly provide that nothing in section 1054 shall be interpreted to require any official of the Department of Defense to provide funding to any earmark as defined pursuant to House Rule XXI, clause 9 or any congressionally directed spending item as defined pursuant to Senate Rule XLIV, paragraph 5. The committee notes that no bill or report language located anywhere else in this report or in this Act should be interpreted to require the use of funding from the Department of Defense Rapid Innovation Program for any earmark as so defined.