Nurturing The Next Big Thing
USDOT is partnering with small businesses to foster new transportation technologies, products, and services through the Small Business Innovation Research program.
If you are a small business owner involved with innovative research and technology, or a Federal employee with a great idea for a highway engineering, manufacturing, or construction-related product that a small business could help develop and eventually commercialize, there is a Federal program you should know about.
It's called the Small Business Innovation Research (SBIR) program, and the U.S. Congress created it in 1982 to solve two problems. First, by reserving a percentage of Federal research and development (R&D) funds for small businesses, SBIR enables small companies to enter the marketplace and compete on a level similar to larger firms. Second, the program addresses the needs of Federal agencies to solve problems that require high-risk research with the potential to develop successful products for commercialization.
The small business community is home to many innovations. However, the risk and expense of conducting serious R&D efforts are often beyond the means of many small businesses. That's where the SBIR program comes in, providing funds for the critical startup and developmental stages and fostering innovation and entrepreneurship among small and/or socially and economically disadvantaged persons and businesses. The goal of SBIR-funded research is to be cost-effective, efficient, and beneficial for U.S. industries, creating technologies that might be either ignored by large companies as being too minor for them to be concerned with or not considered a high-profit opportunity.
"SBIR targets the small business entrepreneurial sector because it has the flexibility and agility that large businesses can lack and supports a niche market to address America's critical priorities," says Debra Elston, director of the Office of Corporate Research, Technology, and Innovation Management at the Federal Highway Administration (FHWA). "By encouraging private sector commercialization of innovative technologies, products, and services derived from Federal R&D funding, the SBIR program, in turn, can help stimulate the U.S. economy."
Since its enactment, the SBIR program has helped thousands of small businesses compete for Federal R&D awards. Together, these businesses' efforts have enhanced the Nation's defense, helped protect the environment, improved the safety of the transportation system, and made contributions in other areas as well. In the transportation arena, in particular, SBIR has funded research on projects ranging from traffic flow simulation models to a wireless, sensor-based incident detection warning system. The SBIR program has helped FHWA advance research and development practices, particularly in areas such as sensors, intelligent transportation systems, and green technologies.
Management and Administration
The SBIR program falls under the jurisdiction of the U.S. Small Business Administration (SBA), which sets the policy for the overall program. But it is funded and managed by 11 Federal agencies. The U.S. Department of Defense's (DOD) SBIR program is one of the largest. Other agencies with SBIR programs include the U.S. Department of Commerce, the U.S. Department of Energy, the U.S. Department of Health and Human Services, the U.S. Department of Transportation (USDOT), and the National Aeronautics and Space Administration (NASA).
The legislation that created the SBIR program mandates that these agencies, each of which has an R&D budget that exceeds $100 million, set aside a portion of those funds every year for the SBIR program. In the case of USDOT, the department set aside $9.6 million out of its fiscal year 2011 R&D budget for the program, with $6.2 million of that coming from FHWA's R&D budget. The overall USDOT program obligated $10.5 million in SBIR contracts in fiscal year 2011. The John A. Volpe National Transportation Systems Center (Volpe Center), part of the Research and Innovative Technology Administration (RITA), manages the SBIR program for USDOT. FHWA and the Volpe Center typically administer between 10 and 15 active phase I and II projects per year.
Some of these agencies have an advantage over others: They might be the main or only purchaser of the technologies, products, or services they enlist the small businesses to research and develop. In the cases of DOD and NASA, for instance, they purchase directly and use many of the products they solicit for R&D, as they are part of a very narrow industry field. Thus, the requesting agency has a specific need to fulfill, and a specific idea of what product it wants as a result of the SBIR project. In the end, if the small business is successful, there is a good chance that the agency will purchase the resulting product or innovation. To the contrary, in the case of USDOT, the products to be developed would likely be used by State and local departments of transportation (DOTs), because USDOT typically does not purchase many products or materials used directly in road construction.
Recent Research Topics
An ongoing SBIR project with a small business located in Idaho is developing a prototype for solar road panels. The idea is to create a driving surface built out of solar panels that collect the sun's energy and generate electricity. This project has sparked much interest and discussion among the transportation and alternative energy communities.
The call for topics issued in October 2011 solicited proposals for projects ranging from applications to improve the accuracy of real-time global positioning to development of a coating that would be painted or placed over concrete barriers to minimize friction and reduce the likelihood of rollover during collisions.
USDOT will publish its latest call for topics on April 2, 2012. For details, visit www.volpe.dot.gov/sbir/current.html.
For Federal research staff interested in submitting a topic for an SBIR program solicitation or finding out more about the program, please contact Leisa Moniz, USDOT SBIR program director, at firstname.lastname@example.org.
How SBIR Works
SBIR is a competitive, three-phased program. In phase I, SBIR awards up to $150,000 to a small business to determine the technical and scientific merit and feasibility of a proposed research idea. After successful completion of phase I, a panel of experts decides whether to confer a phase II invitation, the award for which can amount to $1 million, to further develop the idea. In most cases, phase II involves creating a working prototype of the proposed product, taking into account its commercial potential. Once the business develops a successful prototype, it then seeks non-SBIR funding for phase III to commercialize the resulting product or process (or, in some cases, the business can complete phase III with non-SBIR Federal funds).
Each candidate submitting a proposal must qualify as a small business at the time of award and meet all eligibility requirements established by SBA, and each must meet all of the following criteria at the time of phase I and II awards:
- The business must be organized for profit with a place of business located in the United States.
- At least 51 percent of the business must be owned and controlled by one or more individuals who are citizens of, or permanent resident aliens in, the United States. Or at least 51 percent must be owned and controlled by another for-profit firm that is at least 51 percent owned and controlled by one or more individuals who are citizens of, or permanent resident aliens in, the United States.
- The business can have no more than 500 employees, including affiliates.
Solicitations take place twice a year. Typically, FHWA begins collecting and assessing proposed topics in January and July of each year, and selected topics are published in early April and early October. Qualifying small businesses interested in submitting proposals can find out about the proposed topics at the Volpe Center's Web site, www.volpe.dot.gov/sbir. Federal researchers interested in submitting topics can email their SBIR program manager.
A Case Study: Migma Systems
To illustrate how the program works, consider the case of Migma Systems, a recent recipient of an SBIR award from FHWA. While trying to come up with a solution to prevent collisions involving vehicles and pedestrians, a researcher at FHWA's Turner-Fairbank Highway Research Center submitted an SBIR topic (essentially a request for proposals) for small businesses to propose ideas for how they would tackle the problem of vehicle-pedestrian collisions. The problem statement was written broadly enough to allow for several companies to come up with different innovative solutions, yet narrowly enough to solicit responses keyed to solving the specific problem.
Once the solicitation was released, the Volpe Center collected and, with the help of a panel of experts in this topic area, evaluated nearly a dozen proposals. Ultimately, FHWA chose Migma Systems to receive a $100,000 award to research the feasibility of creating a prototype of a stereo (twin) camera system that would detect pedestrians in a crosswalk day and night. (For details on this project, see "Detecting Pedestrians" in the September/October 2009 issue of Public Roads.)
Once the company demonstrated the feasibility of its technology, FHWA approved and the Volpe Center awarded a phase II contract, this time for $500,000, for the company to produce and test several prototypes. (Had the company not been able to prove the feasibility of this technology by the end of phase I, no phase II award would have been recommended.) Next, the company installed and is now testing this technology at five intersections and four midblock locations in Manchester, NH; Portland, ME; Somerville, MA; and Tucson, AZ. So far, the results are promising: the system has detected more than 99 percent of pedestrians in the crosswalks.
Even though some State DOT officials agree that this technology sounds promising, the next steps will likely be the most challenging for the company. Until now, it has received funding, technical support, and guidance for this research from USDOT. However, once the phase II study is completed in June 2012, the company will need to secure non-SBIR funding to move into phase III, or commercialization. In this case, the company was able to find partners and currently is performing final testing before full-scale commercialization.
Phase II B Funding
In many cases, after a successful phase II project, small business firms still need to perform additional R&D before their innovations are ready for implementation by State DOTs or other end users. Until recently, USDOT did not provide much guidance or funding to cover the transition from R&D to commercialization. For this reason, USDOT now is piloting an SBIR phase II B program that provides select phase II awardees with a one-time bridge award to accelerate commercialization of their innovations.
"There is a large gap between producing an innovative product and actually being able to get the innovation to market, and the phase II B program will provide the funding to bridge that gap," says USDOT SBIR Program Director Leisa Moniz.
By creating SBIR phase II B, an intermediary step between phases II and III, the Federal Government now can provide some level of funding to help cover additional testing that might be required to ready a technology, product, or service for commercialization. This new step also allows for assistance in evaluating the market and the feasibility for commercialization and profitability. In 2011, FHWA became the first agency within USDOT to implement this new SBA initiative and award a phase II B contract.
Challenges Facing Federal Agencies
As noted earlier, many projects end after phase I if the company is unable to produce the research results it originally expected. Even if phase II funding is awarded and the project is completed, commercialization of an SBIR innovation can continue to pose an ongoing challenge.
FHWA cannot promote the product once it is developed after a phase II award. Although FHWA can evaluate classes of products and develop guidelines and standards, endorsement of specific products could be construed as favoritism toward a specific company or provide an unfair competitive advantage. However, some nongovernmental entities such as the American Association of State Highway and Transportation Officials (AASHTO) do evaluate proprietary products and make the results available to the public. State DOTs also can test and evaluate products, and publish a list of approved highway construction products in their specific State.
Further still, even when a company does achieve commercialization of its product, tracking that success is difficult for the Federal agency that supported the research. This happens because once the phase II final report is completed, the small business's reporting requirements end. For this reason, measuring the long-term impact and overall success rate of the SBIR program is problematic, particularly for USDOT, as the Department does not purchase the products resulting from its SBIR projects. However, staff at the Volpe Center is collecting data to track the success of SBIR product commercialization.
Several other factors add to the challenges for the agencies operating SBIR programs. First, there is a high risk element. Because of the size of these companies, the possibility of them going out of business is quite high. According to SBA, only 7 out of 10 new firms survive at least 2 years, and only a quarter stay in business 15 years or more. Further, many of the firms that submit SBIR proposals are startups; in many cases, there is no history of business ventures or previous research to hint at the likelihood of future success. Unlike larger, well-established companies, small businesses often do not have a track record of previous successes.
Another challenging element comes from the fact that some of these small businesses consist of two or three researchers who are scientists or engineers, or experts in their fields of research, yet they might not have much expertise in other areas. That is, they may know how to invent new things and how to innovate but lack skills in other key areas such as financial management, market research, marketing, and dealing with government contracting policies and procedures.
"The SBIR program, by its nature, involves researchers who are not familiar with the U.S. Government's R&D processes," says David Gibson, a researcher with FHWA who oversees several SBIR projects, including Migma Systems' study. "They need a lot more guidance than other contractors. Contracting officers from the Volpe Center and research engineers from FHWA have to be very involved, have a lot of patience, and offer a lot of support to small businesses."
The small businesses often appreciate the Federal involvement, personal attention, and advice. "The Volpe Center's contracting officer has been very helpful ... and provided valuable suggestions," says Bo Ling, a principal at Migma Systems.
Other Programs and Resources For Small Businesses
The SBIR program is a resource for small business owners interested in developing solutions for Federal agencies. But what if you are a small business that already has a patented technology that you want to improve, manufacture, or commercialize? SBIR funds cannot be used for these purposes, as awards for phase II or III can be made only for projects that began as phase I SBIR research. However, other resources are available for small business owners to help them market their products.
Small Business Technology Transfer (STTR). This SBA program is similar to SBIR, but it requires small businesses to collaborate formally with a research institution to develop their innovations. Although FHWA does not have any opportunities available within the STTR program, opportunities in other agencies may be available that extend into the transportation area. For more information, visit www.sbir.gov/about/about-sttr.
Manufacturing Extension Partnership (MEP). The National Institute of Standards and Technology's MEP is a public-private partnership that partners Federal and State agencies, associations, and universities to provide a wide variety of services -- from market assessment to productivity improvements to long-term growth strategies -- to small and mid-sized manufacturers. Small businesses that already have a product ready or almost ready for manufacturing and commercialization can contact their State's MEP office to learn how to access these services. For more information, visit www.nist.gov/mep/about.cfm.
Innovations Deserving Exploratory Analysis (IDEA). The Transportation Research Board's IDEA program accepts proposals to fund research into "promising but unproven innovations" related to highways and other transportation modes. For more information, visit www.trb.org/LTPPProgram/Public/AboutIDEA.aspx.
FHWA Resources. The Highways for LIFE Technology Partnerships Program assists industry in moving late-stage prototypes closer to commercialization. More information is available at www.fhwa.dot.gov/hfl/tech.cfm. FHWA usually publishes requests for proposals and other funding opportunities at www.fbo.gov and www.grants.gov. Also, FHWA developed a guide to submitting unsolicited proposals, and the document is available online at www.fhwa.dot.gov/aaa/gtup.htm. FHWA welcomes proposal submissions from any small business owners with innovative approaches to enhance, benefit, or provide valuable input to the agency's research and development mission.
Minimizing the Risks
Many SBIR projects advance the state of the practice. Others result in successful commercialization of innovations. And although some projects may not continue past phase I, they can spark curiosity or interest from other researchers or disciplines, or at least provide a learning experience.
To minimize the level of risk involved and maximize the probability of project success, Federal staffers try to ask the hard questions upfront. Who will be manufacturing the product? Who will be using it? What other similar technologies exist currently in the marketplace? How many employees would you need to complete the project? These are the sorts of questions that small business partners might not think about if they are too entrenched in the details of their actual inventions and innovations. But these questions nonetheless are critical to positioning a new product for successful commercialization -- and making the best use of the government's research dollars.
A Useful Tool
Despite the challenges, there is broad consensus among Federal researchers that the SBIR program is a great way to engage small businesses to achieve national goals and spark interest in innovations and new technologies. "SBIR is a useful tool for doing research to create products that can be valuable to the traveling public," says FHWA's Gibson.
Small businesses involved in SBIR projects also report positive experiences. Nicolas Gagarin, president of Starodub, Inc., who is involved in the first SBIR phase II B project that FHWA has approved, recognizes the contribution of the agency's staff. "There was synergy among all involved," he says. "The proposed concept was tested during phase I. Having met the threshold for proof of success for phase I set by the FHWA reviewers, phase II is an opportunity to proceed from proof of concept to building the actual prototype. We recently received a phase II B award for commercialization, and, as part of the work plan, we are getting ready to do field demonstrations for State DOTs and the Federal Lands Highway divisions."
The Starodub project that was awarded a phase II B contract involved commercializing a ground-penetrating radar that can be used as a nondestructive evaluation method to locate buried loop detectors in pavements. This innovative technology has a large number of potential applications in multiple transportation areas aside from highway pavements, including rail and airports.
By participating in the SBIR program, Federal researchers can find solutions to existing problems and fill technological needs, while empowering small businesses to gain a foothold in the marketplace.
Lucia Olivera is a senior legislative and budget analyst in FHWA's Office of Research, Development, and Technology, located at the Turner-Fairbank Highway Research Center. Before joining FHWA in 2009, she worked for the American Road & Transportation Builders Association, the U.S. Chamber of Commerce, and the Joint Economic Committee of Congress. Olivera obtained her B.S. in management information systems from Southern Utah University and her M.S. in applied economics from Johns Hopkins University.