SBIR Gateway
Comments on Pending SBA Policy Directive
In Opposition to the SBA Policy Directive
Jim & Gail Greenwood
Greenwood Consulting

The following is a letter from Jim & Gail Greenwood to Yvette Dennis and Janis Coughlin of the Office of Management and Budget (OMB). It is reprinted here with their permission. The Greenwoods are speaking on their own behalf and are not representing any government agency or organization.

July 8, 2002

Dear Ms. Dennis & Ms. Coughlin:

We understand that you are the contact persons at OMB for a proposed Policy Directive (PD) from the Office of Technology at the U.S. Small Business Administration (SBA) regarding the proposed requirement that applicants for Small Business Innovation Research (SBIR) grants and contracts must receive a waiver from SBA to use "government owned, contractor operated" (GOCO) federal facilities as subcontractors on their SBIR projects. We are strongly opposed to the proposed policy directive.

Our objections are based on several reasons. First, the proposed PD is contrary to the long standing Congressional intent that the Federal Laboratories and other Federal government agencies and installations will promote technology transfer, particularly with small firms. SBIR is a primary means for the GOCOs to accomplish this, as it provides a means for small firms to fund necessary work at the Federal Laboratories. The proposed PD will have a dampening effect on these efforts, both because it introduces an uncertainty that the small company will want to avoid and it sends a message to the small business community that the Federal government really does not favor their interaction with Federal Labs because they are making the process more difficult. This also sends a similar message to SBIR reviewers that proposals including GOCOs are somehow inferior or suspect relative to other SBIR proposals.

Second, the proposed PD will handle concerns about GOCOs unnecessarily being involved in SBIR projects through a waiver system that requires the SBIR applicant to file a request after they receive notification of an SBIR award. This adds additional burden to already meager resources at SBA's Office of Technology, and adds a cloud of uncertainty to any SBIR applicant who now has to wonder whether SBA will approve a proposed subcontract--and the uncertainty of what they will do if the subcontract is not approved. Why would I, as an SBIR applicant, go to all the effort of preparing an SBIR proposal that hinges on using a resource only available at a GOCO when I don't know whether SBA will grant a waiver or not? We respectfully suggest that this issue could better be handled with a PD that directs all SBIR awarding agencies to not coerce small businesses into subcontracting with GOCOs, which would seem to accomplish the desired result without the burden on SBA resources.

Third, we understand that this PD is proposed based on the comments of "a few" persons who claimed they "may" be coerced into using a GOCO. Given that the SBIR program is 20 years old and has made approximately 50,000 awards in that time, is such an onerous, waiver-based approach warranted based on the concerns of a "few" persons who think they "may" be coerced? We would be pleased to provide testimonials from more than "a few" persons who have eagerly sought relationships with GOCOs, knowing that the resources at those Federal Installations were important if not critical to the success of their SBIR projects. In fact, a more common complaint has been that the GOCOs are not aggressive enough in working with SBIR applicants--won't the proposed PD further dampen the likelihood that GOCOs will make themselves and their Federally-funded resources available? The PD seems to ignore these important issues in favor of addressing the concerns of "a few" persons who think they "may" see a problem.

Fourth, the proposed PD does not appear to address the long standing problems of one SBIR agency not working with GOCOs associated with another agency. The former SBIR Executive for the Department of Defense, for example, announced at a National SBIR Conference several years ago that he would not allow any DOD SBIR projects to include Department of Energy GOCOs. Isn't this a bias that is contrary to the best interests of the United States, the Federal Government, and the SBIR program? Then why is it not addressed in this PD?

Fifth, the PD also ignores an on going bias in many of the SBIR awarding agencies against Federal Laboratories and in favor of universities. Some SBIR agencies use proposal reviewers, for example, that are almost exclusively from universities, and therefore introduce a bias in favor of universities into the selection process. If the PD is going to comprehensively address issues related to SBIR contracts to non-profit entities, why does it not address this long-standing bias and problem in the program? Certainly with the large fraction of many university R&D budgets that come from the Federal government, a PD that also addresses this bias should be considered.

Sixth, the PD does not seem to address inconsistencies seen recently in how SBIR awarding agencies are treating the use of GOCOs. For example, NASA's most recent SBIR solicitation says that GOCOs can be used but no SBIR funds can be paid to them. This seems completely inconsistent with the PD that says GOCOs can't be used unless approved, but if a waiver is granted then SBIR funds can be used to pay them.

Seventh, we do not favor the proposed PD because it in part duplicates what the GOCOs already are required to do. If you ask any technology transfer official of a DOE GOCO, they will clearly and bluntly tell you that they cannot provide resources that are reasonably available through the private sector. Why, then, is this required as part of the justification for a waiver? Enough resources are already dedicated to GOCOs jumping through existing hoops to ensure they are not in competition with the private sector without a PD that requires that they go through another one.

Finally, we object to the proposed PD because its existence and content has not been adequately disseminated to those who will be affected by its provisions, namely the GOCOs and SBIR applicants who believe GOCOs provide important resources for their projects. We heard rumors approximately 45 days ago that "Federal labs can't be SBIR subcontractors anymore," but questions directed at a number of reliable potential sources of information yielded no further insight. It was not until a memorandum from DOE's SBIR Program Manager was summarized in the June 28th issue of the SBIR-ALERT newsletter that we were made aware of the proposed PD. We know of representatives of only two of the dozens of GOCOs who at this time are aware of the proposed PD, yet we understand from the SBIR-ALERT newsletter that OMB's comment period ends today. How can a PD, written in response to the complaints of "a few" persons who "may" see a problem, possibly reflect the best interests of the SBIR program when it has been so inadequately publicized and discussed?

In summary, the proposed PD requiring that an SBIR applicant receive a waiver before they be allowed to subcontract to a GOCO is seriously flawed. We believe its enactment is not only unnecessary, but would likely do more damage than good, and would not address many long standing issues related to subcontracting portions of SBIR awards to non-profits like GOCOs and universities.

Thank you for your consideration of our comments. --Gail & Jim Greenwood