Pentagon seeks reauthorization, expansion of small business funding

WASHINGTON ― The Pentagon is pursuing the reauthorization and expansion for programs meant to boost small business participation in defense research, set to expire Sept. 30, a lead official said Wednesday.

Even as the Biden administration wants to boost small businesses in the defense-industrial base, as an economic and innovation engine, both the Small Business Innovation Research and Small Business Technology Transfer programs are due to run out.

Among the Pentagon’s legislative proposals for the annual defense policy bill, it wants to raise the ceiling for SBIR Phase II awards from $1.5 million to $5 million, said the undersecretary of defense for research and engineering, Heidi Shyu, who oversees SBIR.

“I have specifically requested that I have a higher dollar amount within SBIR so I can have the ability to fund multiple tranches of SBIR,” Shyu said Wednesday at an event hosted by the National Defense Industrial Association. “Right now, if you hit the $1.5 million ceiling and you didn’t finish developing your prototype, you’re kind of screwed. That’s a stupid thing to do.”

SBIR has been extended and reauthorized several times since its initial enactment 40 years ago. In 2016, it and the STTR program were extended through Sept. 30, 2022, by the fiscal 2017 National Defense Authorization Act.

By and large, SBIR has three phases, but the Pentagon is asking Congress to authorize a pilot program for the Pentagon to award a third tranche of Phase II funding. That dovetails with Shyu’s previous public comments that, to help bring technologies to fruition, she would like Congress to form a Phase IIa, Phase IIb and Phase IIc.

Shyu’s comments Wednesday came after she hosted a roundtable with the CEOs of 11 small companies last week, part of a larger effort where she is “opening up my calendar to engage with more small business CEOs ― once again, to hear their perspectives and provide a Q&A session for them.”

Shyu also teased that she will announce a new coordinator for small businesses and said her office is revamping its website so it’s more user-friendly for companies seeking business with the Defense Department. The online changes are expected within days.

“One thing that drove me nuts, talking to small companies, I realized that DoD’s this giant fortress. They don’t know where the door is,” Shyu said. “I wanted to create this R&E website so that they’re able to navigate through this maze.”

Mike Brown, the director of the Defense Innovation Unit, which transitions commercial technologies to the Pentagon, said the department’s efforts to work with new entrants would be more successful if it stopped dictating contract requirements and instead issued problem statements, as DIU does. He said the push for Pentagon officials and Capitol Hill to embrace efforts at innovation are not met with the right amount of urgency.

“Honestly, we’re not seeing enough improvement. We are evangelizing. I think we’re raising awareness of the issues, but now we’re not seeing enough uptake,” Brown said Wednesday at the C4ISRNET Conference. “We’re in a tech race with China. And if we don’t fix this, our defense capabilities are going to be significantly eroded relative to how fast they’re moving.”

The comments come weeks after the Biden administration released a report aimed at promoting competition in the defense-industrial base. One recommendation was to lower barriers for small businesses, which shrunk in the defense-industrial base by more than 40% over the last decade.

The Pentagon’s Office of Small Business Programs is also readying the DoD’s first small business strategy since 2019.

The Pentagon’s incoming undersecretary of defense for acquisition and sustainment, Bill LaPlante, said during his confirmation hearing that the Pentagon needs to help small businesses, which could in turn spark competition and innovation within the large primes.

“We want the widest amount of competition possible,” LaPlante said last month. “If in fact there’s a new entrant, small business or a startup that can do your job, you will be competitive with them, and it’s going to drive better behavior.”

C4ISRNet