The National Research Council has given a "thumbs-up" to an effort by the Pentagon to accelerate research and development conducted on its behalf by small businesses, concluding that the program has encouraged the commercialization of new technologies. The Fast Track program should be continued and even expanded by the Department of Defense, concluded a 15-member committee from the Research Council in a report released in November. "The Fast Track initiative represents an innovative way of matching program objectives to an economy in which the rewards for rapid innovation are growing," says the report.
Small businesses are an important source of technological expertise for federal agencies. Under a 1982 law, government agencies are required to reserve a portion of their research-and-development contracts for small businesses. In 1998, that translated into $1.2 billion worth of contracts across the entire federal government. The Pentagon's small-business program is the largest in the federal government, amounting to $540 million in 1998, according to the Research Council's report.
Under the Small Business Innovation Research program, agencies provide funds for early R&D projects that are believed to have potential for commercialization. At the Pentagon, a business can apply for a Phase I contract, lasting six months and ranging between $60,000 and $10,000, to conduct research that would test the scientific, technical, and commercial feasibility of an idea. If the Phase I research is successful, the company can subsequently apply for a Phase II contract—which can last two years and range between $500,000 and $750,000—for further work on the concept, such as development of a prototype. After that, the project is expected to succeed on its own merits, with the firm pursuing it with funds from the private sector or with government contracts won outside the program.
Fast Track program
The Fast Track program, started in October 1995, aims at giving small-business projects a steady stream of funding and encouraging more-rapid commercialization. A business qualifies for Fast Track if it can assemble outside investors for its project before applying for a Phase I contract. If the Pentagon selects the project for a Phase I award, it commits to an expedited review of the company's application for a Phase II award and to provide the company with $30,000 to $50,000 of additional funds to bridge any gap between the Phase I and Phase II contracts.
The Research Council's committee surveyed 294 firms that participated in Fast Track and concluded that the Pentagon's strategy works. The survey found that Fast Track projects received five times more development funding than other projects, reflecting the facts that Fast Track was attracting companies with greater commercial viability and that the projects were better able to attract outside investment. "Fast Track is selecting projects that should succeed in commercialization, and it is apparently contributing to their success," wrote Peter J. Cahill, program manager at BRTRC Inc. (Fairfax VA) and member of the research team, in one section of the report.
The committee also conducted case studies of more than 50 companies that had received contracts—some under Fast Track and some not. They included several in the laser industry, such as QSource Inc. (East Hartford, CT), which developed a multiple-rectangular-discharge CO2 laser; Spectra Science Corp. (Providence, RI), which developed an electronic phosphor; and Picolight Inc. (Boulder, CO), which developed long-wavelength oxide vertical-cavity surface-emitting lasers.
The case studies illustrated the value of a Fast Track contract. Companies that received small-business awards not under Fast Track had six times as many interrupted projects as firms that had received Fast Track contracts. Researchers who conducted case studies about firms in the northeastern USA concluded that Fast Track projects required less time to commercialize than other projects, and another team of researchers who examined companies in the southeastern USA found that Fast Track companies developed commercialization strategies sooner than non-Fast Track companies.
The researchers did offer some suggestions for improving Fast Track, such as greater variety in the dollar amounts of contracts awarded under the program, which would reflect the diversity in the size of companies that apply for the contracts. And they recommended that the Pentagon's entire small-business program not be converted to the Fast Track approach. "To do so might put at risk other goals, such as research and concept development," the committee wrote.
But the overall conclusion was strong support for the small-business program, in general, and Fast Track, in particular. "Small business will continue to play a prominent role in the US economy and innovation system," the committee wrote. "Entrepreneurs and small businesses will be a vibrant source of innovation and job growth." But in the fast-paced world of business today, the researchers concluded, experiments such as Fast Track will be increasingly important.