Summary

The National Aeronautics and Space Administration (NASA) asked the National Academies of Sciences, Engineering, and Medicine (the National Academies) to conduct a review of NASA’s Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, in accordance with a legislative mandate. The committee convened by the National Academies to conduct this review produced this report on the committee’s detailed examination of the operations of and outcomes stemming from these programs.

Drawing on published research and existing data, the committee analyzed (1) the contribution of SBIR/STTR awardees to NASA’s research and development (R&D) and other mission needs; (2) broad innovation impacts associated with these programs; (3) collaborations between small businesses and research institutions associated with the STTR program, including any barriers to or opportunities for such collaborations; and (4) the effectiveness of NASA’s SBIR/STTR outreach, application, and selection processes.

Although NASA’s SBIR/STTR programs represent just 4 percent of total federal SBIR/STTR spending (the majority of which is accounted for by the Department of Defense and National Institutes of Health), the committee found that these programs are effective at supporting early-stage research by small businesses that is further matured through follow-on funding from NASA or other federal agencies, consistent with the programs’ goal of using small businesses to meet federal R&D needs. Technologies developed by a subset of these firms are ultimately incorporated into mission-critical systems or subsystems. NASA SBIR/STTR participation is associated with some increase in access to external capital after an initial award; however, this modest increase indicates that access to private financing is not the primary pathway through which NASA SBIR/STTR firms generate value.

The committee found that NASA closely aligns its SBIR and STTR solicitations with the agency’s mission and technology needs, and small businesses that participate in the programs have contributed to the success of NASA missions, including the Mars rover. At the same time, the award sizes may limit the programs’ impact. Award sizes are well below the statutory maximums allowed under Small Business Administration guidance, and these relatively small award sizes may be reducing the potential pool of applicants. The average initial amount of venture funding for space-oriented start-up companies is much larger than a NASA Phase I award. Still, NASA’s SBIR/STTR programs are

implemented in a relatively standardized manner, with similar award sizes and structures across directorates and centers, and in many ways benefit from this standardized approach. Across NASA, SBIR/STTR projects begin at similar early-stage Technology Readiness Levels, progressing to midrange levels by the end of the first phase of SBIR/STTR funding, consistent with the programs’ role in supporting early-stage technology development within NASA’s broader research and technology portfolio.

The committee’s analysis of STTR awards indicated that collaborations between small businesses and research institutions are concentrated among a relatively small set of research-intensive universities, particularly those with established capabilities in aerospace and related engineering fields. New potential partner institutions may find it costly to create and approve the legal agreements required for such partnerships, a hurdle that inhibits collaborations between small businesses and smaller universities that do not usually contract with the federal government.

NASA has recently reorganized its SBIR/STTR programmatic structure to ensure that small businesses can navigate the processes involved, that SBIR/STTR awards generate broader innovation benefits, and that those benefits can be tracked and measured. The restructuring centralizes some of the backend operations of the award processes so as to eliminate redundant roles, centralize support services for NASA-wide personnel, and enable better tracking of awards and outcomes. The new programmatic structure is designed to facilitate communication across NASA directorates and centers, each of which has unique R&D needs.

NASA’s outreach capacity has been substantially affected by a number of factors, including impacts of the COVID-19 pandemic and limited funding for outreach and travel. At the same time, NASA has undertaken some process and outreach experimentation, including reduced-paperwork application requirements; presolicitation market-scouting gatherings; and training sessions associated with its experimental Ignite program, which is focused on technologies with strong commercial pull—including commercial markets outside of NASA.

From the 34 findings resulting from its review, the committee developed 16 recommendations, listed in full in Boxes S-1 and S-2, respectively. The remainder of this summary presents an overview of the review and highlights eight findings and six recommendations related to the effectiveness of NASA’s overall SBIR/STTR operations, the rapidly growing commercial space sector, and metrics for assessing technology advancement and impact resulting from the programs.

KEY FINDINGS AND RECOMMENDATIONS

The committee’s key findings and recommendations can be broadly categorized as addressing the three areas noted above: program effectiveness, the rapid growth of the commercial space sector, and the measurement of technology advancement and impact.

Program Effectiveness

The first four key findings address the programs’ effectiveness, including whether they serve as a gateway for small businesses to engage with NASA’s broader R&D and contracting activities. While the committee found that NASA’s SBIR and STTR programs are an on-ramp for many firms seeking to participate in NASA-related R&D and technology development, they are not the only entry point into the broader NASA R&D ecosystem. At the same time, the committee found that the programs’ organizational structure, including the recent reorganization, has been effective at helping small businesses meet NASA’s mission-driven technology needs, and that NASA SBIR/STTR awardees tend to attract a substantial amount of additional, non-SBIR/STTR funding from NASA. Additionally, the programs support a heterogeneous population of small businesses, some of which pursue growth-oriented strategies that involve attracting private capital. Firms that receive NASA SBIR/STTR funding are more likely to subsequently attract private capital than those that apply but do not receive the awards, indicating that receipt of an award signals technical merit to other funders.

Finding 2-3: NASA’s SBIR/STTR programs are an important entry mechanism among the multiple pathways by which small businesses engage with the agency.

Finding 4-1: The organizational structure and related processes of NASA’s SBIR/STTR programs facilitate the advancement of NASA’s mission and key priorities.

Finding 6-1: NASA’s SBIR/STTR programs have served as an effective and strategic mechanism for developing and advancing technologies that are critical to the agency’s missions and priorities.

Finding 6-4: NASA SBIR/STTR awardees tend to attract significant non-SBIR/STTR funding from NASA, at a ratio of more than 3:1.

Overall, the committee recommends that the new organizational program structure be maintained. At the same time, the committee acknowledges that some of the program processes and procedures could be simplified, and that some of the best practices from NASA’s experimental Ignite program could be adopted more widely. The committee also notes that some of the program contracting processes are cumbersome and that additional training and contracting flexibility might help relieve some of that burden. These observations are consistent with requirements in the recent reauthorization that federal agencies establish training activities to help transition SBIR/STTR-funded technologies into Phase III awards and to simplify and standardize procedures and contracts for the SBIR/STTR programs.

Recommendation 4-1: NASA’s Small Business Innovation Research and Small Business Technology Transfer program leaders should institutionalize the new organizational structure, complete process cycles without midcourse changes, and leverage the new structure as a foundation for ongoing improvements in program processes, data tracking, and postaward support.

Recommendation 4-2: NASA’s Small Business Innovation Research (SBIR) and Small Business Technology Transfer Program Office should apply more generally the best practices from the SBIR Ignite program. These practices include a strong external focus, external input into topic selection and outreach to new applicants, and streamlined application processes.

Recommendation 4-5: NASA’s Small Business Innovation Research/Small Business Technology Transfer (SBIR/STTR) Program Office should develop training modules, including refresher training, for technical monitors, subtopics managers, reviewers, and other SBIR/STTR personnel as needed. In addition, because of the concern that reviewers are overburdened, the NASA administrator should provide clear incentives for participating in the review process—for example, by including this participation as a significant strength during annual performance appraisals or providing a project code to cover time spent refereeing.

Recommendation 4-8: The NASA administrator should establish a pilot program to explore ways of strengthening and/or formalizing the process of transitioning Small Business Innovation Research/Small Business Technology Transfer (SBIR/STTR) technologies from Phase II to NASA-funded Phase III development of mission-critical components or subsystems, which might include SBIR/STTR-funded firms subcontracting to NASA and Department of Defense prime contractors.

Rapidly Growing Commercial Space Sector

While NASA SBIR/STTR–funded firms have been effective at meeting NASA mission needs, the committee recognizes that the U.S. space sector has undergone a significant transformation, marked by the rapid growth of the commercial space sector. Whereas NASA historically operated at the center of a largely government-directed system of space exploration and technology development, recent years have seen the emergence of a more decentralized and commercially oriented ecosystem in which private firms play an increasingly prominent role in both developing and executing space-based activities. The

resulting “New Space” sector includes both established aerospace firms and a growing set of entrepreneurial and venture-backed companies. Firms such as SpaceX and Blue Origin have played a leading role in developing launch capabilities and supporting infrastructure, while a broader ecosystem of firms has emerged to exploit new opportunities associated with space-based data, services, and applications. Venture capital investment in the sector has increased substantially, supporting the entry of hundreds of start-ups. Importantly, this emerging commercial space sector includes many firms in the United States, as well as firms and institutions around the world. That is not to say that NASA has not played a role in New Space—many of the innovations in the space sector arise from inventions created by traditional aerospace companies (rather than start-ups and venture capital–backed firms). In addition, the contributions of SBIR/STTR-funded small businesses to those innovations are often difficult to identify because NASA (and other federal agencies) does not always collect data on subcontracting by SBIR/STTR-funded firms or designate additional support for firms to continue their SBIR/STTR-funded work as Phase IIIs.

These developments reflect a broader shift from a centralized, government-led model of space activity toward a more distributed system in which private firms increasingly shape both the pace and direction of innovation. While some successful companies, such as Made In Space, have started with NASA SBIR/STTR funding, the committee’s analysis revealed that relative to other private firms, SBIR/STTR awardees are less well connected to the private venture capital needed to operate at scale in the commercial space sector. The goals of the programs include both using small businesses to meet federal R&D needs and increasing private-sector commercialization of federally funded innovations; these goals may be in conflict, especially given the small size of NASA’s SBIR/STTR programs relative to other federal agencies’ programs and the capital requirements needed to produce scalable innovations in the commercial space industry. The following findings address the burgeoning commercial space sector and serve as the basis for a recommendation to facilitate these space-sector start-ups through the SBIR/STTR programs.

Finding 2-4: The rapid expansion of the commercial space sector presents both opportunities and challenges for NASA’s SBIR/STTR programs, as new sources of private-sector funding and commercial demand complement—rather than replace—NASA’s mission-driven innovation system.

Finding 6-7: Relative to other private firms, NASA SBIR/STTR awardees tend to be less well connected to private venture capital prior to their engagement with the SBIR/STTR programs, suggesting that these firms may be more interested in serving the agency’s mission than in expanding the scale of their sales or operations.

Finding 6-8: NASA SBIR/STTR awardees tend to attract some form of publicly reported private capital (but not a higher level of venture capital) after receiving their first NASA SBIR/STTR award.

Recommendation 6-2: NASA should consider a range of strategies for how best to accelerate and support the emerging set of start-ups and scale-ups in the commercial space sector. The agency’s Small Business Innovation Research and Small Business Technology Transfer programs should continue to play a key role in facilitating the advancement of technologies and components important to this emerging sector, while recognizing that the capital and scaling opportunities required for certain technologies require the involvement of other programs and/or private-sector initiatives.

Measurement of Technology Advancement and Impact

The committee’s final set of key findings and recommendations concerns how to assess whether a given technology is sufficiently mature for incorporation into a mission, especially in a system characterized by distributed innovation and mission-specific integration needs. NASA addresses this challenge with Technology Readiness Levels (TRLs), a standardized framework for evaluating the maturity of technologies as they progress from basic principles to operational deployment. TRLs provide a common language across mission directorates, centers, and external partners for assessing technological progress and readiness for integration. While not determinative on their own—since ultimate deployment depends on mission timing, system-level integration, and programmatic priorities—TRLs offer a systematic means of gauging whether a component, instrument, or subsystem has reached a threshold consistent with potential mission use. In this way, TRLs play an important coordinating role within NASA’s innovation system, enabling the agency to manage technological uncertainty and align distributed development efforts with mission requirements.

NASA’s Technology Portfolio Management System (TechPort) aids in understanding the progress and impact of technologies supported by the agency’s SBIR/STTR awards by providing information on NASA’s technology development through a web-based portal. For outside users, TechPort provides information on NASA-funded projects, including a detailed description of each project; its primary technology area; anticipated benefits to NASA, the commercial space industry, and other government agencies; the responsible mission directorate; the name and location of the lead organization being funded; key partners to the lead organization; project contacts; and the TRL at the start of the project, currently, and as estimated for the end of the project.

Importantly, TechPort provides user-friendly access to information linking NASA’s contracts and grants to its technology development and missions. NASA and external users can thereby understand the links between NASA’s technology investments and its strategy for filling any technology gaps. This

capability is unique among those agencies that offer SBIR/STTR awards. Because TechPort contains data on changes in the technology readiness of projects, it is a useful mechanism for tracking NASA’s progress on a variety of technologies. Providing links between SBIR/STTR awards and Phase III awards (which should include subcontracting by SBIR/STTR-funded small businesses to larger companies) would facilitate understanding of how awardees have advanced NASA’s technology needs.

Finding 3-5: NASA’s TechPort provides a unique capability for NASA and the wider research community to demonstrate how the agency’s technology investments align with its strategy for filling technology gaps. By linking SBIR/STTR awards to mission directorates and tracking changes in projects’ TRLs, TechPort establishes a foundation for systematic portfolio-level assessment of technology progression.

Recommendation 3-2: NASA should build on the strengths of the Technology Portfolio Management System (TechPort) for use in portfolio management and evaluation. To improve its ability to provide a systematic analysis of progress in technology readiness and transition pathways across mission directorates, TechPort should link firms funded by the Small Business Innovation Research/Small Business Technology Transfer programs to Phase III awards and include all NASA research and development and procurement grants and contracts, not just a subset of its smaller awards.

FINAL THOUGHTS

NASA’s SBIR/STTR programs advance the agency’s mission-driven technology needs, and NASA has created an infrastructure for measuring and documenting these advances. At the same time, NASA missions typically involve limited quantities of highly specialized systems, often produced for a single mission or a small number of deployments. As a result, procurement is frequently one-off or small batch in nature and does not involve sustained, large-scale production. The primary value of participation in NASA’s innovation system therefore lies less in large procurement contracts and more in contributing critical components, capabilities, or technologies to mission systems. This distinction has important implications for firms—particularly small businesses—whose engagement with NASA is often part of a broader portfolio spanning multiple agencies and commercial markets. NASA’s SBIR/STTR programs can expand the set of technological options available to the agency and maintain alignment with mission objectives, with the caveat that these new options are closely related to the capability base of SBIR/STTR firms.