Small Business Innovation Research: Information on Awards Made by
NIH and DoD in Fiscal Years 2001 through 2004 (14-APR-06,	 
GAO-06-565).							 
                                                                 
The Small Business Innovation Research (SBIR) program is a three 
phase program that increases the use of small businesses to meet 
federal research needs and encourages commercialization of this  
research. Venture capital is one source of funding to help	 
commercialize SBIR projects. To receive an award firms must meet 
ownership and other criteria and awards may exceed dollar	 
guidelines. In 2002, the Small Business Administration (SBA)	 
clarified that majority owners of firms that receive awards must 
be individuals rather than corporations. Since 2002, controversy 
has arisen over the extent to which venture capital firms may own
SBIR firms. GAO was asked to provide information on SBIR for	 
fiscal years 2001 - 2004. For NIH and DOD, we determined the (1) 
number and characteristics of awards, (2) number and		 
characteristics of awards above the guidelines, (3) changes in	 
award characteristics after 2002, and (4) factors agencies	 
consider, and data they collect on, SBIR awards. NIH, DOD, and	 
SBA provided technical comments that were incorporated, as	 
appropriate. DOD said our findings were not surprising in light  
of differences in the markets for SBIR projects. SBA said our	 
findings, though useful, may be misconstrued as suggesting a link
between venture capital investment and SBIR eligibility, when no 
such link exists.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-565 					        
    ACCNO:   A51617						        
  TITLE:     Small Business Innovation Research: Information on Awards
Made by NIH and DoD in Fiscal Years 2001 through 2004		 
     DATE:   04/14/2006 
  SUBJECT:   Awards						 
	     Eligibility criteria				 
	     Eligibility determinations 			 
	     Evaluation criteria				 
	     Financial analysis 				 
	     Research and development				 
	     Research programs					 
	     Small business					 
	     DOD Small Business Innovation Research		 
	     Program						 
                                                                 

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GAO-06-565

                 United States Government Accountability Office

Report to Congressional Requesters

GAO

April 2006

SMALL BUSINESS INNOVATION RESEARCH

  Information on Awards Made by NIH and DoD in Fiscal Years 2001 through 2004

The electronic version of this report was reposted April 21, 2006, to
correct the report cover title displayed in the previous version. The time
period "Fiscal Years 2002 through 2004" has now been corrected to read
"Fiscal Years 2001 through 2004."

                                       a

SMALL BUSINESS INNOVATION RESEARCH

Information on Awards Made by NIH and DoD in Fiscal Years 2001 through
2004

  What GAO Found

During fiscal years 2001-2004, the National Institutes of Health (NIH) and
Department of Defense (DoD) made 16,019 SBIR awards valued at $5.3
billion. GAO identified the following characteristics of these awards: (1)
most were concentrated in a few states; (2) a few agency component made
most of the awards; (3) award amounts ranged from well below the
guidelines to significantly above; (4) few awards were made to firms that
had received venture capital investment, NIH made more than DoD; and (5)
firms that received DoD SBIR awards were relatively small-sized.

Overall, from fiscal year 2001 through 2004, about half of NIH awards and
12 percent of DoD awards exceeded the guidelines, and most went to firms
that had not received venture capital investment. Awards above the
guidelines accounted for 70 percent of NIH's SBIR dollars and 23 percent
of DoD's. Agency officials said NIH and DoD made such awards generally to
fund relatively expensive research or to ensure high-quality results.
Awards above the guidelines to firms that had received venture capital
investment accounted for 18 percent of NIH's awards above the guidelines,
and about 8 percent of DoD's. At NIH, firms that had received venture
capital investment were more likely to receive the largest awards than
firms that had not. A similar relationship existed for DoD's phase I
awards but not for its phase II awards.

Since 2002, when SBA clarified SBIR ownership eligibility criteria, an
increasing number of awards have been made to small business firms that
had received venture capital investment; such firms have generally
received larger awards at NIH and, in the aggregate, a larger share of
NIH's and DoD's available SBIR funds. In addition, the average phase II
award amount to firms that had received venture capital investment
increased by over 70 percent, from about $860,000 in fiscal year 2001 to
about $1.5 million in fiscal year 2004. As a result, such firms attracted
a greater percentage of NIH's total SBIR dollars each year-about 21
percent on average in fiscal years 2003 and 2004, compared to an average
of about 14 percent in fiscal years 2001 and 2002. At DoD we found similar
trends, but to a somewhat lesser extent.

NIH, DoD, and SBA focus mainly on SBIR eligibility criteria relating to
ownership, for-profit status, and the number of employees when reviewing
applications. Although applicants self-certify that they meet these
criteria, both NIH and DoD make efforts to verify the accuracy of the
information prior to making an award. When agency officials are unable to
verify the accuracy of an applicant's information, they refer the matter
to SBA. Both agencies limit their data collection efforts largely to
information about the SBIR award itself, such as award size. Agencies are
not required to gather data on characteristics of the firms receiving the
awards, such as the presence of venture capital investment; as a result,
this information is currently not being collected.

                 United States Government Accountability Office

                                    Contents

Letter                                                                   1 
          Results in Brief                                                  4 
          Background                                                        8 
             Key Characteristics of NIH's and DoD's SBIR Awards for Fiscal 
                                                                     Years 
          2001 through 2004                                                12 
               Few Awards above the Guidelines Were Made to Firms That Had 
             Received Venture Capital Investment Although These Firms Tend 
          to Receive Larger Awards                                         21 
             SBA's Ownership Clarification Does Not Appear to Have Reduced 
              Program Participation by Firms That Had and Had Not Received 
          Venture Capital Investment                                       25 
            NIH, DoD, and SBA Focus Largely on Select Eligibility Criteria 
                                                                       and 
                       Collect Limited Data on SBIR Awardees               38 
          Agency Comments and Our Evaluations                              42 

Appendixes                                                              
                Appendix I: Scope and Methodology                          45 
               Appendix II: Detailed Information on SBIR Awards Made by       
                            NIH During Fiscal Years 2001 through 2004      48
              Appendix III: Detailed Information on SBIR Awards Made by       
                            DoD During Fiscal Years 2001 through 2004      59
              Appendix IV:  Comments from the Department of Defense        68 
                Appendix V: Comments from the Small Business               69 
                            Administration                                 
              Appendix VI:  GAO Contact and Staff Acknowledgments          71 

Tables Table 1: Total Number and Dollar Value of SBIR Awards Made by    
                   NIH and DoD During Fiscal Years 2001 - 2004             13 
          Table 2: Geographical Distribution of NIH's Total SBIR           
                   Applications, Awards, and Dollars Awarded for the Top   
                   10                                                      
                   States During Fiscal Years 2001 - 2004                  14 
          Table 3: Geographical Distribution of DoD's Phase I SBIR         
                   Applications and Total Awards and Dollars Awarded for   
                   the Top 10 States During Fiscal Years 2001 - 2004       15 
          Table 4: Total SBIR Awards and Dollars Awarded for Four Primary  
                   NIH Awarding Components During Fiscal Years 2001 -     
                   2004                                                    17 

                                    Contents

Table 5:    Total SBIR Awards and Dollars Awarded for Four Primary   
               DoD Awarding Components During Fiscal Years 2001 -
2004                                                                    18 
Table 6:    Total NIH SBIR Awards and Dollars Awarded to Firms That  
Had and Had Not Received Venture Capital Investment                  
During Fiscal Yeasr 2001 - 2004                                         19 
Table 7:    Total DoD SBIR Awards and Dollars Awarded to Firms       
              That Had and Had Not Received Venture Capital             
                Investment During Fiscal Years 2001 - 2004                 19 
Table 8: Total Number and Dollar Value of NIH and DoD SBIR           
                 Awards within and above the Guidelines Made During the 
Period Fiscal Years 2001 - 2004                                         22 
Table 9:    Percentage of NIH and DoD SBIR Awards within and above   
              the Guidelines to Firms that Had Received Venture Capital 
                Investment During Fiscal Years 2001 - 2004                 24 
Table 10: Number of Awardee Firms by Agency, and Venture Capital     
Investment Status for Fiscal Years 2001 through 2004                    28 
Table 11: Number of SBIR Awards by Agency, and Venture Capital       
               Investment Status of Awardee Firms for Fiscal Years 2001 
through 2004                                                            29 
Table 12: Average Award Amount by Agency, Venture Capital            
                 Investment Status of Awardee Firm, and Award Phase for 
Fiscal Years 2001 through 2004                                          29 
Table 13: Number of SBIR Awards above and within the Guidelines      
            by Agency and Venture Capital Investment Status of          
             Awardee Firm for Fiscal Years 2001 through 2004               30 
Table 14: Average Amount of SBIR Awards, above and within the        
Guidelines, by Agency and Venture Capital Investment                 
Status of Awardee Firm for Fiscal Years 2001 through                
2004                                                                    31 
Table 15: Share of Dollars Awarded by Agency and Venture Capital     
                Investment Status of Awardee Firm for Fiscal Years 2001 
through 2004                                                            32 
Table 16: Share of Dollars Awarded above and within the Guidelines   
            by Agency and Venture Capital Investment Status of          
             Awardee Firm for Fiscal Years 2001 through 2004               33 
Table 17: Geographical Distribution of NIH Dollars Awarded, Overall  
              and to Firms That Had Received Venture Capital            
Investment, Fiscal Years 2001-2002 Compared to Fiscal                
Years 2003-2004                                                         34 

Contents

Table 18: Geographical Distribution of DoD Dollars Awarded, Overall and to
Firms That Had Received Venture Capital Investment, Fiscal Years 2001-2002
Compared to Fiscal Years 2003-2004 35

Table 19: Dollars Awarded by Four Primary NIH Awarding Components, Overall
and to Firms that Had Received Venture Capital Investment, Fiscal Years
2001-2002 Compared to Fiscal Years 2003-2004 36

Table 20: Dollars Awarded by Four Primary DoD Awarding Components, Overall
and to Firms That Had Received Venture Capital Investment, Fiscal Years
2001-2002 Compared to Fiscal Years 2003-2004 37

Table 21: SBIR Budgets and Number of Applications Submitted by Agency for
Fiscal Years 2001 through 2004 38 Table 22: Percentage of Applications
Funded by Agency for Fiscal Years 2001 through 2004 38

Table 23: Geographical Distribution of NIH's Total SBIR Applications,
Awards, Dollars Awarded, Dollars to Firms That Had and Had Not Received
Venture Capital Investment, and Dollars to Awards within and above SBA's
Guidelines, Fiscal Years 2001 through 2004 48

Table 24: Component Distribution of NIH Awards, Dollars Awarded, Dollars
to Firms That Had and Had Not Received Venture Capital, and Dollars to
Awards within and above SBA's Guidelines, Fiscal Years 2001 through 2004
51

Table 25: Geographical Distribution of NIH Dollars Awarded, Overall and to
Firms That Had Received Venture Capital Investment, Fiscal Years 2001-2002
Compared to Fiscal Years 2003-2004 53

Table 26: Component Distribution of NIH Dollars Awarded, Overall and to
Firms That Had Received Venture Capital Investment, Fiscal Years 2001-2002
Compared to Fiscal Years 2003-2004 56

Table 27: Geographical Distribution of DoD's Phase I Applications, Total
Awards, Total Dollars Awarded, Dollars to Firms That Had and Had Not
Received Venture Capital Investment, and Dollars to Awards within and
above SBA's Guidelines, Fiscal Years 2001 through 2004 59

Table 28: Component Distribution of DoD Awards, Dollars Awarded, Dollars
to Firms That Had and Had Not Received Venture Capital, and Dollars to
Awards within and above SBA's Guidelines, Fiscal Years 2001 through 2004
63

Contents

                  Table 29: Geographical Distribution of DoD Dollars Awarded,
                       Overall and to Firms That Had Received Venture Capital
                        Investment, Fiscal Years 2001-2002 Compared to Fiscal
                               Years 2003-2004                             64 
          Table 30: Component Distribution of DoD Dollars Awarded, Overall 
                            and to Firms That Had Received Venture Capital 
                     Investment, Fiscal Years 2001-2002 Compared to Fiscal 
                    Years 2003-2004                                        67 
Figure Figure 1: General Selection Process for SBIR Awards at NIH and      
                    DoD                                                    11

                                 Abbreviations

DoD                     Department of Defense                              
IDI                     Innovation Development Institute                   
NIH                     National Institutes of Health                      
R&D                     research and development                           
SBA                     Small Business Administration                      
SBIR                                    Small Business Innovation Research 

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separately.

A

United States Government Accountability Office Washington, D.C. 20548

April 14, 2006

Congressional Requesters

As a competitor in the global economy, the United States relies heavily on
innovation through research and development (R&D). The potential of small
businesses to be sources of significant innovation led the Congress to
increase government funding for R&D projects and establish the Small
Business Innovation Research (SBIR) program. The Small Business Innovation
Development Act of 19821 established the SBIR program to, among other
things, stimulate technological innovation related to each participating
federal agency's goals and mission, use small businesses to meet federal
R&D needs, and increase private sector commercialization of innovations
derived from federal R&D. From its inception in fiscal year 1983, through
fiscal year 2004, the SBIR program has awarded over $17 billion to more
than 82,000 projects.

Every federal agency with an R&D budget of $100 million or more is
required to establish and operate a SBIR program funded by 2.5 percent of
that agency's budget for research conducted by others, called extramural
research. Participating agencies make awards and manage their own
programs, while the Small Business Administration (SBA) plays a central
administrative and oversight role. Of the federal agencies with SBIR
programs, two-the National Institutes of Health (NIH) in the Department of
Health and Human Services and the Department of Defense (DoD)- account for
the largest share of awards. NIH and DoD generally rely on the various
components within the agency, such as the institutes and centers within
NIH or the military and defense components within DoD, to help implement
the SBIR program and make funding decisions. The extent of participation
by awarding components differs in relation to their size, with larger
components issuing more awards than smaller ones.

SBIR is a three-phased program. During phase I, participating agencies
fund a proposed idea that appears to have commercial potential to more
fully investigate its scientific and technical merit and feasibility. In
phase II, participating agencies fund projects to further develop the
idea, again taking into account its commercial potential. Generally, phase
I and II awards may not exceed $100,000 and $750,000, respectively.
However, SBA has interpreted its statutory authority as providing it the
discretion to allow

1Pub. L. No. 97-219 (1982).

participating agencies to make larger awards above these guidelines when
appropriate. Funds for all SBIR awards are dispersed contingent upon the
awardee firm successfully achieving planned milestones. In phase III, SBIR
firms are expected to commercialize the resulting product or process, but
with no further SBIR funding. Funding for commercialization may come from
the private sector or from non-SBIR federal dollars. One source of private
sector funding available to SBIR firms to help commercialize SBIRsupported
projects is funding from venture capital firms. In return for their
investment in SBIR awardee firms, venture capital firms often receive a
share in the ownership of the firm and, ultimately, any profits that may
result when the project is commercialized.

To qualify for SBIR awards, small business firms must meet certain SBIR
ownership and other eligibility criteria, such as being 51 percent or more
owned by individuals who are U.S. citizens or permanent resident aliens.2
Over the last several years, some controversy has arisen over whether SBIR
awards can be made to small businesses whose majority owners are venture
capital firms. In the fall of 2002, SBA provided additional clarification
of the ownership criteria but did not specifically address the role of
venture capital firms.3 In 2003, an SBA administrative law judge issued a
decision stating that venture capital firms could not be considered
"individuals" for the purpose of satisfying the ownership criteria for the
program. However, these events have raised concerns that small businesses
that are majority-owned by venture capital firms are being unfairly
excluded from participating in the SBIR program, and as a result,
important research is not being funded and conducted. Others contend that
small business firms that had not received venture capital investment are
being excluded from the program because they are unable to compete against
firms with venture capital investment that may, as a result of the venture
capital investment, have access to greater management expertise and
resources.

2Effective early 2005, the 51 percent ownership requirement was revised to
allow for majority ownership and control by another business concern or
joint venture which itself meets the 51 percent requirement. 13 C.F.R. S:
121.702(a).

3SBA's clarification took two forms: one was an updated Policy Directive
promulgated through the Federal Register and the second was additional
informal interpretive guidance provided by SBA's Office of General Counsel
in October of 2002. 67 Fed. Reg. 60072 (Sep. 24, 2002).

In this context, you asked us to review the SBIR awards NIH and DoD made
from fiscal year 2001 through 2004, including those made to firms whose
majority owners were venture capital firms, and the agencies' processes
for determining eligibility. Because information on the degree of venture
capital ownership is confidential and proprietary, and not available from
the public or private sources we contacted, we could not directly respond
to your inquiry. Instead, as agreed with your offices, this report
provides information on those small business firms that had received
venture capital investment at any time through fiscal year 2004, and also
received an SBIR award in fiscal year 2001 through fiscal year 2004.4
Specifically, we determined (1) the total number and key characteristics
of NIH's and DoD's phase I and phase II awards, including the geographic
location of awardee firms, agency component making the award, amount of
the award, presence of venture capital investment in the awardee firm, and
number of employees working for the SBIR firm and its affiliates; (2) the
number and key characteristics of NIH's and DoD's phase I and phase II
awards that were above the guidelines, including the reasons the awards
exceeded the guidelines; (3) changes, if any, in award characteristics,
for awards above and below the guidelines, that occurred following SBA's
clarification of-and ruling on-the ownership criteria regarding venture
capital ownership; and (4) the factors NIH, DoD, and SBA consider when
determining eligibility for SBIR awards, and the data these agencies
collect about SBIR awardees and applicants.

To conduct our work, we interviewed NIH, DoD, and SBA officials about
their procedures and any changes that occurred from fiscal years 2001
through 2004. We reviewed agency documentation on awards, award selection
and funding, eligibility determinations, and the data elements that are
collected during the eligibility process. We also interviewed officials
from organizations that represent venture capital investors and
biotechnology firms to obtain their views on the SBIR program and venture
capital investment.

To determine the total number of phase I and phase II awards and the key
characteristics of these awards, we obtained data from NIH and DoD for all
SBIR awards made during fiscal years 2001 through 2004. These data

4Ninety-three percent of the firms in our study that had received an SBIR
award and venture capital investment first received venture capital
investment between 1990 and 2004. The remaining 7 percent first received
venture capital investment before 1990. The data also do not indicate the
length of time venture capital investment remained in the awardee firm.

Page 3 GAO-06-565 Small Business Innovation Research

                                Results in Brief

included award amounts projected at the time the award was made as well as
additional funding and supplemental amounts issued subsequent to the
award, which allowed us to provide information on awards that originated
in fiscal years 2003 and 2004 but which may not be completed until 2005 or
later. As a result, our data differ from information provided in agency
reports on the amounts distributed in any specific fiscal year. We also
obtained data from two private sector firms, Innovation Development
Institute (IDI) and Dow Jones-Venture One, to determine which awardee
firms received venture capital investment before receiving an SBIR award
between fiscal years 2001 and 2004. Initially, we selected IDI because its
database included information that supplemented agency data on SBIR
awardee firms. IDI's database included information on venture capital
investments in SBIR awardee firms that was compiled from published
information such as company press releases. Subsequently, we obtained data
from Dow Jones-Venture One to help corroborate, and supplement as
necessary, the IDI data. We selected Dow Jones-Venture One because its
database on venture capital investment is compiled and updated with
information from both venture capital investors and the firms that receive
the investment. These data do not indicate the length of time venture
capital investment remained in the awardee firm. We interviewed key
officials at IDI and Dow Jones-Venture One about their databases. We
assessed the reliability of relevant fields in the databases and found
them sufficient for our review.

To assess any differences that occurred following SBA's October 2002
clarification of ownership criteria and its May 2003 decision related to
venture capital ownership in SBIR firms, we compared NIH and DoD data on
awards made from October 1, 2000, through September 30, 2002, with data on
awards made from October 1, 2002, through September 30, 2004. We used the
combined data set to compare NIH and DoD awards from the two time periods
in terms of the key characteristics described above. See appendix I for
more details about our scope and methodology. We conducted our work in
accordance with generally accepted government auditing standards.

During fiscal years 2001-2004, NIH and DoD made a total of 16,019 SBIR
awards valued at $5.3 billion. We identified the following key
characteristics of these awards:

o  Most of the awards were concentrated in a few states. Firms in
California and Massachusetts submitted about a third of all the

Page 4 GAO-06-565 Small Business Innovation Research

applications and received about a third of all SBIR awards, totaling

about a third of all dollars awarded.

     o A small number of awarding components in NIH and DoD made most of the
       awards. At NIH, four awarding components issued about half of the
       awards, while the other 19 participating institutes and centers issued
       the remainder. Similarly, at DoD, four awarding components issued over
       80 percent of the SBIR awards, while the other six participating
       components issued the remainder.
     o Award amounts ranged from well below the guidelines to significantly
       above the guidelines. At NIH, phase I awards averaged $162,537 and
       ranged from $61,750 to $1.7 million; phase II awards averaged $934,643
       and ranged from $150,593 to about $6.5 million. At DoD, phase I awards
       averaged $89,504 and ranged from $36,595 to $449,000; phase II awards
       averaged $771,362 and ranged from $69,997 to about $4.4 million.
     o The percentage of awards to firms that had received venture capital
       investment was relatively small at both agencies, but was larger at
       NIH than at DoD. Specifically, about 17 percent of the NIH awards-
       accounting for 18 percent of the dollars NIH awarded to SBIR firms-
       and 7 percent of the DoD awards-accounting for 7 percent of the
       dollars DoD awarded-went to firms that had received venture capital
       investment. Awards to firms that had received venture capital
       investment were generally concentrated in the same states and in the
       same award-making agency components as for all of the awards.
     o The firms that received DoD SBIR awards were, on average, relatively
       small-sized firms. Specifically, half of the firms had 20 employees or
       fewer. SBIR awardee firms that had also received venture capital
       investment were, on average, about 30 percent larger than firms that
       had not. Comparable information on firm size was not available for
       NIH.

Overall, about 50 percent of NIH awards and 12 percent of DoD awards
exceeded SBIR guidelines, and most went to firms that had not received
venture capital investment. Awards above the guidelines accounted for 70
percent of the dollars NIH awarded to SBIR firms and 23 percent of DoD's.
At NIH, phase I awards above the guidelines ranged from just over $100,000
to $1.7 million, although most awards were $595,000 or less. Similarly,
NIH's phase II awards above the guidelines ranged from slightly above
$750,000 to $6.5 million, but most were $2.1 million or less. According to
NIH officials responsible for the SBIR program, awards above the
guidelines generally are made for projects in selected technology areas
(such as biotechnology) that may be relatively more expensive to complete.
At DoD, phase I awards above the guidelines ranged from just over $100,000
to about $448,796, although most of the awards were $142,000 or less.
Similarly, DoD's phase II awards above the guidelines ranged from about
$750,000 to $4.4 million, although most were $2.0 million or less. At DoD,
the two main reasons awards exceeded the guidelines were because (1) the
agency had determined that additional funds were needed to ensure a
high-quality investigation of the proposed idea, or (2) the amount
exceeding the guidelines included non-SBIR funds. With regard to the
number of awards that exceeded the guidelines and were made to firms that
had received venture capital investment, we determined that 18 percent of
awards above the guidelines at NIH and about 8 percent of awards above the
guidelines at DoD went to such firms. However, at NIH we found that firms
that had received venture capital investment were more likely than firms
that had not received such investment to receive the largest awards. For
example, firms that had received venture capital investment were about six
times more likely to receive phase II awards greater than $2.5 million,
which accounted for about 7 percent of NIH's phase II dollars. A similar
relationship existed for DoD's phase I awards but not for its phase II
awards. While the data, overall, indicate a relationship between firms
that had received venture capital investment and high award amounts, by
themselves they do not indicate whether the presence of venture capital
was the reason these firms received such large awards.

Since 2002, when SBA clarified SBIR ownership eligibility criteria, an
increasing number of awards have been made to small business firms that
received venture capital investment; such firms have generally received
larger awards at NIH and, in the aggregate, a larger share of NIH's and
DoD's available SBIR funds. For example, the number of firms that received
venture capital investment and also received SBIR awards from NIH steadily
increased from 106 in fiscal year 2001 to 150 in fiscal year 2004. The
number of awards these firms received also increased from 155 to 249.
Moreover, the average phase II award amount to firms that had received
venture capital investment increased by over 70 percent, from $861,488 in
fiscal year 2001 to about $1.5 million in fiscal year 2004. Consequently,
such firms attracted a greater percentage of NIH's total SBIR dollars each
year-about 21 percent on average in fiscal years 2003 and 2004, compared
to an average of about 14 percent in fiscal years 2001 and 2002. At DoD we
found similar trends, but to a somewhat lesser extent.

NIH, DoD, and SBA focus primarily on criteria relating to ownership,
forprofit status, and number of employees to determine a firm's
eligibility for the SBIR program. Although applicants self-certify that
they meet these criteria, both NIH and DoD perform certain actions to try
and verify the accuracy of the information submitted by applicants prior
to making an award. For example, both agencies frequently contact
potentially successful applicants and may require additional
documentation. When agency officials are unable to ensure the accuracy of
an applicant's information, they refer the matter to SBA. After SBA makes
an eligibility determination, it makes information about the firms it
finds ineligible publicly available on its Web site, but does not always
indicate that the determination was for SBIR purposes. We also found that
NIH and DoD take different approaches to retaining and sharing information
on firms found ineligible. In 2003, NIH began to retain information
centrally on firms it found ineligible and made the information available
to all of its agency components that make SBIR awards. In contrast, DoD
retains information on firms it finds ineligible in individual contract
files and shares the information electronically with awarding components
but does not retain the data in a centralized resource. With regard to
data collected by the agencies, we determined that each agency limits its
data collection efforts largely to information about the SBIR award
itself, such as award size and location of the principal investigator.
Agencies do not gather data on characteristics of the firms receiving the
awards, such as the presence of venture capital investment or the extent
of venture capital ownership. Nor do the agencies systematically gather
data on the industry represented by the applicant.

In commenting on our report, NIH, DoD, and SBA provided technical comments
that we incorporated, as appropriate. DoD agreed that because data on
ownership are not publicly available, it is not possible to determine the
extent to which venture capital firms own SBIR awardee firms. Moreover,
DoD did not find the results of our analysis surprising in light of
differences in markets for research supported by NIH and DoD. SBA noted
that while the information may be useful, it could be misconstrued as
suggesting a link between the presence of venture capital investment and
SBIR ownership criteria when such a link does not exist. While we
understand SBA's concern, we believe the report clearly states that we
used venture capital investment as a proxy for venture capital ownership
because ownership data are proprietary and confidential. We also
explicitly note in the report that no causal link can be inferred from the
data.

  Background

Of the eleven agencies that currently have SBIR programs, two-NIH and
DoD-account for the largest share of awards.5 Large agencies, such as NIH
and DoD, generally rely on the various components within the agency such
as the 23 participating institutes and centers within NIH and the 10
participating military and defense components within DoD, to help
implement the SBIR program and make funding decisions.6 Agencies decide
what type of research to fund, solicit and review applications for
technical and scientific merit, verify that the applicant meets
eligibility criteria, select which projects to fund, and decide the size
of the award. Awards can be made to successful applicants in the form of
grants, contracts, or cooperative agreements.7 SBA plays a key
administrative and oversight role, such as issuing policy directives and
annual reports for the program and monitoring agencies' annual funding
allocations. Once an award has been issued, awarding agency staff monitor
the progress of work on the project.

The Small Business Innovation Development Act of 1982 established a
three-phased structure for the SBIR program. During phase I, participating
agencies fund a proposed idea that appears to have commercial potential to
more fully investigate its scientific and technical merit and feasibility.
Work on the phase I project is generally not to exceed 6 months. During
phase II, participating agencies fund projects to further develop the
idea, generally over a 2-year period, again taking into account its
commercial potential. During phase III, firms are expected to
commercialize the resulting product or process using other federal or
private sector funds, but with no further SBIR funding. Unlike phases I
and II, phase III has no general limits in time or dollar amounts. In
addition to phase I and II awards, NIH and DoD also make awards through a
streamlined process-known as fast track-for

5The nine other participating agencies are the Departments of Agriculture,
Commerce, Education, Energy, Homeland Security, and Transportation; the
Environmental Protection Agency, the National Aeronautics and Space
Administration, and the National Science Foundation.

6The names of two DoD components changed during the period of our
review-fiscal years 2001 through 2004. Specifically, the Ballistic Missile
Defense Organization became the Missile Defense Agency in 2002, the
National Imagery and Mapping Agency became the National
Geospatial-Intelligence Agency in 2003.

7At DoD, which almost exclusively uses contracts to make awards,
contracting officials are responsible for ensuring that evaluations are
based solely on the factors specified in the solicitation and that all
requirements of law, executive orders, regulations, and all other
applicable procedures-including clearances and approvals-have been met.

projects with high commercial potential.8 Both agencies use an expedited
review process for fast track applications. However each agency operates
its program differently. For example, to qualify for DoD's fast track
awards, firms that have received phase I awards must obtain commitments
for outside funding that DoD will match while NIH's program considers
information on phases I and II simultaneously and does not involve
matching funds. In addition, the two agencies account for their fast track
awards differently. NIH maintains data on fast track awards separately
from its data on phase I and II awards. At DoD, fast track awards are
included in the phase I and phase II awards data. Funding for fast track
awards, which comprise a small portion of each agency's SBIR awards, are
not subject to specific dollar limits. Funds for all awards are dispersed
contingent upon the awarded firm successfully achieving planned
milestones.

Receipt of a phase II award is contingent upon successful completion of a
phase I award. Firms may receive phase II awards from the same agency that
funded their phase I award or from a different participating agency.
Successful commercialization during phase III may immediately follow
completion of the phase II project, or may not occur for several years, or
much later; drug development and medical products and processes that
require extensive testing and federal regulatory approval before marketing
fall into this final category.

Funding for commercialization may come from the private sector or from
non-SBIR federal sources. Venture capital firms that typically invest in
new or existing firms with the potential for above-average growth are one
source of private sector funding available to small businesses that would
like to commercialize their SBIR-supported projects. Venture capital firms
may seek to invest in small businesses that have received SBIR awards
because, in exchange for their venture capital, they receive an ownership
stake in the business and, ultimately, a share of any potential profits
that result when the SBIR-supported project is commercialized.

Generally, phase I and phase II awards may not exceed $100,000 and
$750,000, respectively. SBA has interpreted its statutory authority as
providing it with discretion to allow agencies to make awards above these

8While the fast track process is not explicitly provided for in the SBIR
statute or Policy Directive, NIH and DoD have developed the process as one
way to help ensure seamless funding between phase I and phase II.

Page 9 GAO-06-565 Small Business Innovation Research

guidelines, when appropriate, if they provide written justification to SBA
after doing so. For example, in 2001, SBA granted NIH a waiver that
allowed it to routinely make awards above the guidelines for unusually
expensive research, such as medical treatment and drug research.
Similarly, DoD makes awards above the guidelines on a case-by-case basis
according to certain criteria, such as whether the cost was determined to
be reasonable and necessary to ensure a high-quality product.

To compete for SBIR awards, firms must meet size, ownership, and other
eligibility criteria.9 For example, eligible firms must (1) be organized
as forprofit firms that operate primarily within, or contribute
significantly to, the

U.S. economy; (2) be 51 percent or more owned by individuals who are U.S.
citizens or permanent resident aliens; and (3) have, with their
affiliates, no more than 500 employees.10 Under current law, applicants
self-certify their eligibility and face potential criminal and civil
penalties for misrepresenting the status of their firm in order to obtain
an SBIR award. Although firms may receive multiple phase I and II SBIR
awards for different projects- either from the same or from different
participating agencies-firms may not receive multiple awards for work that
is essentially the same.

NIH and DoD follow similar procedures to select applicants and determine
their eligibility for an SBIR award. (See fig. 1.) Specifically, each
agency consults its various awarding components to develop research topics
that further the agency's mission, and periodically announces SBIR project
opportunities through a solicitation to seek funding for research on those
topics. Before the date applications are due, both agencies encourage
potential applicants to contact agency staff to discuss any questions they
may have, including questions about their eligibility. As of December
2005, both agencies require applicants to file electronically, and to
register with the Central Contractor Register database. Submitted
applications are

9The Small Business Act states that a small business must be
"independently owned and operated," must not be "dominant in its field,"
and that the definition of small business can vary by industry. Over the
years, SBA has established and revised numerical definitions, called size
standards, which are almost always stated in terms of either the number of
employees or average annual receipts of a firm. For SBIR, SBA established
a size standard all participating agencies must use that is stated in
terms of the number of employees in the firm.

10Effective early 2005, the 51 percent ownership requirement was revised
to allow for majority ownership and control by another business concern or
joint venture which itself meets the 51 percent requirement. 13 C.F.R. S:
121.702(a).

reviewed internally for administrative completeness, and those that do not
comply with the requirements may be rejected or take longer to review.

       Figure 1: General Selection Process for SBIR Awards at NIH and DoD

Source: GAO.

Note: This chart reflects the general process at NIH and DoD. Because
agencies and their awarding components' processes differ to some extent,
not all awarding components execute each step in the same manner.

At NIH, appropriately completed applications are assigned to a scientific
review group and a potential funding component to undergo a two-step
external peer review. The scientific review groups evaluate each
application for scientific and technical merit, and commercial potential;
assign scores; and subject meritorious applications to a second review.
The National Advisory Council or the board of the awarding component then
evaluates the applications for scientific merit, factoring in the
scientific review groups' scores and relevance to the awarding component's
mission and goals, and recommends applications to be funded. The members
of the scientific review groups and the National Advisory Council or the
board of the awarding component are nonfederal scientists, physicians, and
engineers who are recognized authorities in their field. In contrast, at
DoD, after an application has been forwarded to the appropriate awarding
component, internal agency staff review the scientific and technical merit
and the commercial potential of the application, and make decisions about
which ones to fund.

Once officials at each awarding component decide which of the meritorious
applications to fund, both NIH and DoD largely rely on information that
the applicant provides and certifies as accurate to determine eligibility,
although each agency makes some effort to independently corroborate the
self-certified information. To help conserve limited staff resources and
provide a more timely determination, both NIH

  Key Characteristics of NIH's and DoD's SBIR Awards for Fiscal Years 2001
  through 2004

and DoD verify the eligibility of only those firms that submit
applications deemed meritorious by their review process.

In recent years, the ownership criteria have come under increased
scrutiny, particularly with regard to majority ownership of SBIR awardee
firms by venture capital firms. Specifically, in 2001, an SBA
administrative law judge issued a decision clarifying that the terms
"individuals" and "citizens" in the SBIR criteria meant only natural
persons, not entities such as corporations. Subsequently, in the fall of
2002, SBA both revised its SBIR policy directive and provided additional
informal clarification to participating agencies regarding the ownership
criteria, but did not specifically address the role of venture capital
firms or other corporations. Then in 2003, the same SBA administrative law
judge issued a decision stating that venture capital firms could not be
considered individuals for the purpose of satisfying the ownership
criteria for the program.

During fiscal years 2001 - 2004, NIH and DoD made a total of 16,019 SBIR
awards valued at $5.3 billion. This section discusses the following key
characteristics that we identified for these awards: (1) total number and
value of the awards made, (2) geographical distribution of the awards
made, (3) agency components making the awards, and (4) size of firms
receiving the awards. In addition, this section provides detailed
information on the key characteristics of those awards that were made to
firms that had received venture capital investment.

Total Number and Value of From fiscal year 2001 through 2004, NIH and DoD
issued a combined total of 11,146 phase I awards, totaling about $1.3
billion, and 4,675 phase II

    NIH's and DoD's SBIR

Awards for Fiscal Years awards, totaling about $3.8 billion. As shown in
table 1, during fiscal years 2001 - 2004, DoD made twice as many awards as
NIH totaling over $3.2

    2001 through 2004 billion.

Table 1: Total Number and Dollar Value of SBIR Awards Made by NIH and DoD During
                            Fiscal Years 2001 - 2004

(Dollars in millions)
        Phase I awards       Phase II awards    Fast track awards      Dollar 
                                                                     value of 
Agency Number Dollar      Number   Dollar    Number Dollar      all awards 
                 value                 value           value       
NIH     3,580        $582  1,283   $1,199       198        $211     $1,992 
DoD     7,566        $677  3,392   $2,616         a           a     $3,294 
Total  11,146   $1,259     4,675   $3,816       198        $211     $5,286 

Source: GAO analysis of NIH and DoD data.

aDoD includes the number and full anticipated dollar value of its fast
track awards in its data on phase I and phase II awards.

Notes:

(1)
           The dollar value of NIH's phase I and II awards includes
           anticipated funding throughout the life of the project. The dollar
           value of fast track awards includes total dollars allotted to the
           projects through the end of fiscal year 2005 and does not include
           anticipated funding for projects that will continue after fiscal
           year 2005.

(2)
           DoD's award amounts include both SBIR dollars and additional
           non-SBIR dollars from awarding components.

However, NIH awards were, on average, larger than the DoD awards. We found
the following at NIH:

     o Phase I awards averaged $162,537, with a median of $100,658, and
       ranged from $61,750 to $1.7 million, with about 90 percent falling
       between $96,000 and $489,000.
     o Phase II awards averaged $934,643, with a median of $763,719, and
       ranged from $150,593 to about $6.5 million, with about 90 percent
       falling between $542,000 and $1.8 million.
          * Fast track awards averaged $1.1 million, with a median of
            $850,000, and ranged from $96,514 to $9.6 million, with about 90
            percent falling between $173,000 and $2.5 million.
          * In contrast, at DoD, we found the following:
     o Phase I awards averaged $89,504, with a median of $99,000, and ranged
       from $36,595 to $449,000, with about 90 percent falling between
       $68,000 and $120,000.

    Geographical Distribution of NIH's and DoD's SBIR Awards for Fiscal Years
    2001 through 2004

o  Phase II awards averaged $771,362, with a median of $747,622, and
ranged from $69,997 to about $4.4 million, with about 90 percent falling
between $450,000 and $1.2 million.

While a firm in every state received at least one SBIR award from both NIH
and DoD, a small number of states accounted for most of the awards.
Specifically, about 70 percent of all SBIR awards and dollars awarded went
to firms in 10 states, although the states differed between NIH and DoD.
Moreover, firms in these states also submitted about 70 percent of the
phase I and II applications at NIH, and phase I applications at DoD. DoD
does not maintain comparable information on phase II applications by
state. For example, at NIH and DoD, small businesses from California and
Massachusetts submitted about a third of the applications and received
about a third of the awards and a third of the dollars awarded. Tables 2
and 3 provide information on the geographical distribution of NIH's and
DoD's total SBIR applications and awards for the top 10 states for fiscal
years 2001 through 2004; detailed information on the distribution of
applications, awards, and awarded dollars among all states is presented in
appendix II for NIH and appendix III for DoD.

Table 2: Geographical Distribution of NIH's Total SBIR Applications,
Awards, and Dollars Awarded for the Top 10 States During Fiscal Years 2001
- 2004

(Dollars in millions)
                 Total applications -  Total awards - Total dollars awarded - 
                           number and      number and              number and 
State                   percentage      percentage              percentage 
California                   3,918             988                    $395 
                                (21%)           (20%)                   (20%) 
Massachusetts                2,364             707                    $285 
                                (12%)           (14%)                   (14%) 
Maryland                     1,224             327                    $142 
                                 (6%)            (6%)                    (7%) 
New York                       830             216                    $118 
                                 (4%)            (4%)                    (6%) 
Texas                          906             213                     $81 
                                 (5%)            (4%)                    (4%) 
Pennsylvania                   725             212                     $81 
                                 (4%)            (4%)                    (4%) 

(Continued From Previous Page)
(Dollars in millions)
                 Total applications -  Total awards - Total dollars awarded - 
                           number and      number and              number and 
State                   percentage      percentage              percentage 
Washington                     646             195                     $80 
                                 (3%)            (4%)                    (4%) 
Virginia                       728             167                     $66 
                                 (4%)            (3%)                    (3%) 
Ohio                           584             181                     $59 
                                 (3%)            (4%)                    (3%) 
New Jersey                     507             136                     $57 
                                 (3%)            (3%)                    (3%) 
Subtotal                    12,432           3,342                  $1,364 
                                (66%)           (66%)                   (68%) 
Other states                 6,516           1,719                    $629 
                                (34%)           (34%)                   (32%) 
Total                      18,948a           5,061                  $1,992 
                               (100%)          (100%)                  (100%) 

Source: GAO analysis of NIH data.

aAlso included in this total are three applications submitted by firms in
Puerto Rico, none of which were funded.

Table 3: Geographical Distribution of DoD's Phase I SBIR Applications and Total
Awards and Dollars Awarded for the Top 10 States During Fiscal Years 2001 - 2004

(Dollars in millions)
                Phase I applications - Total awards - Total dollars awarded - 
                            number and     number and              number and 
State                    percentage     percentage              percentage 
California                   10,584          2,433                    $741 
                                 (21%)          (22%)                   (23%) 
Massachusetts                 6,173          1,568                    $483 
                                 (12%)          (14%)                   (15%) 
Virginia                      3,787            825                    $245 
                                  (7%)           (8%)                    (7%) 
Ohio                          2,022            485                    $163 
                                  (4%)           (4%)                    (5%) 
Colorado                      1,956            543                    $160 
                                  (4%)           (5%)                    (5%) 
Maryland                      2,594            543                    $152 
                                  (5%)           (5%)                    (5%) 
Pennsylvania                  1,840            440                    $132 
                                  (4%)           (4%)                    (4%) 
Page 15                      GAO-06-565 Small Business Innovation Research

    NIH and DoD Agency Components Making SBIR Awards for Fiscal Years 2001
    through 2004

(Continued From Previous Page)
(Dollars in millions)
                Phase I applications - Total awards - Total dollars awarded - 
                            number and     number and              number and 
State                    percentage     percentage              percentage 
New York                      1,946            423                    $126 
                                  (4%)           (4%)                    (4%) 
Texas                         2,619            447                    $125 
                                  (5%)           (4%)                    (4%) 
New Jersey                    1,644            305                     $88 
                                  (3%)           (3%)                    (3%) 
Subtotal                     35,165          8,012                  $2,414 
                                 (69%)          (73%)                   (73%) 
Other states                 15,610          2,946                    $880 
                                 (31%)          (27%)                   (27%) 
Total                       50,775a         10,958                  $3,294 
                                (100%)         (100%)                  (100%) 

Source: GAO analysis of DoD data.

aAlso included in this total are six phase I applications submitted by
firms in Puerto Rico to DoD, none of which were funded.

Note: DoD's award amounts include both SBIR dollars and additional
non-SBIR dollars from awarding components.

At both NIH and DoD a small number of awarding components accounted for
most of the SBIR awards and dollars awarded. Specifically, 4 of NIH's 23
participating institutes and centers accounted for about half of the SBIR
awards and dollars. The National Cancer Institute had the largest share at
NIH, accounting for almost 20 percent of the SBIR awards and dollars.
Table 4 shows the total SBIR awards and dollars associated with these four
NIH awarding components. For information on the distribution of SBIR
awards and dollars among all participating NIH components, see appendix

II.

Table 4: Total SBIR Awards and Dollars Awarded for Four Primary NIH
Awarding Components During Fiscal Years 2001 - 2004

(Dollars in millions)                          
                                                                Total dollars
                                                  Total awards -    awarded - 
                                                      number and   number and 
Awarding component                                 percentage   percentage 
National Cancer Institute                                 945         $347 
                                                           (19%)        (17%) 
National Institute of Allergy and Infectious              618         $276 
Diseases                                                (12%)        (14%) 
National Heart, Lung, and Blood Institute                 597         $236 
                                                           (12%)        (12%) 
National Institute of General Medical Sciences            390         $151 
                                                            (8%)         (8%) 
Subtotal                                                2,550       $1,011 
                                                           (50%)        (51%) 
Remaining 19 institutes and centers                     2,511         $982 
                                                           (50%)        (49%) 
Total                                                   5,061       $1,992 
                                                          (100%)       (100%) 

Source: GAO analysis of NIH data.

Similarly, four of DoD's ten awarding components accounted for more than
80 percent of the SBIR awards and dollars awarded, with the Air Force and
the Army together accounting for 43 percent of awards and just over half
of the dollars. Table 5 shows the total SBIR awards and dollars awarded
associated with these four DoD awarding components. For more information
on the distribution of SBIR awards and awarded dollars among all
participating DoD components, see appendix III.

    Characteristics of NIH and DoD SBIR Awards Made to Firms that Had Received
    Venture Capital Investment

Table 5: Total SBIR Awards and Dollars Awarded for Four Primary DoD
Awarding Components During Fiscal Years 2001 - 2004

(Dollars in millions)    
                                Total awards - number Total dollars awarded - 
Awarding component                  and percentage   number and percentage 
Air Force                                    2,783                  $1,018 
                                                (25%)                   (31%) 
Army                                         2,003                    $683 
                                                (18%)                   (21%) 
Navy                                         2,548                    $619 
                                                (23%)                   (19%) 
Missile Defense Agency                       1,912                    $483 
                                                (17%)                   (15%) 
Subtotal                                     9,246                  $2,803 
                                                (84%)                   (85%) 
Remaining six awarding                       1,712                    $490 
components                                   (16%)                   (15%) 
Total                                       10,958                  $3,294 
                                               (100%)                  (100%) 

Source: GAO analysis of DoD data.

Note: DoD's award amounts include both SBIR dollars and additional
non-SBIR dollars from awarding components.

Firms that had received venture capital investment received a relatively
small percentage of the NIH and DoD SBIR awards, although they received a
somewhat larger percentage of awards from NIH than DoD.11 As shown in
table 6, at NIH, firms that had received venture capital investment
received about 18 and 14 percent of the phase I and II awards,
respectively, accounting for about 18 percent of the agency's total SBIR
dollars.

11Ninety-three percent of the firms in our study that had received an SBIR
award and venture capital investment first received venture capital
investment between 1990 and 2004, while the remaining 7 percent first
received venture capital investment before 1990. The data do not indicate
the length of time the venture capital investment remained in the awardee
firm.

Page 18 GAO-06-565 Small Business Innovation Research

Table 6: Total NIH SBIR Awards and Dollars Awarded to Firms That Had and
Had Not Received Venture Capital Investment During Fiscal Yeasr 2001 -
2004

(Dollars in millions)
              Phase I awards    Phase II awards        Fast track awards     Total awards
                     Dollars               Dollars               Dollars               Dollars
                    awarded               awarded        Number awarded                awarded 
         Number and      and Number and        and          and      and Number and        and 
       percentage percentage percentage percentage percentage percentage percentage percentage
Firms that    627       $112        183       $212         34        $32        844       $356
had                                                                                 
received    (18%)      (19%)      (14%)      (18%)      (17%)      (15%)      (17%)      (18%)
venture                                                                             
capital                                                                             
investment                                                                          
Firms that  2,953       $470      1,100       $988        164       $179      4,217     $1,637
had not                                                                             
received    (82%)      (81%)      (86%)      (82%)      (83%)      (85%)      (83%)      (82%)
venture                                                                             
capital                                                                             
investment                                                                          
Total       3,580       $582      1,283     $1,199        198       $211      5,061     $1,992
           (100%)     (100%)     (100%)     (100%)     (100%)     (100%)     (100%)     (100%)

Source: GAO analysis of NIH, Dow Jones, and IDI data.

As shown in table 7, at DoD about 7 percent of phase I and II awards were
made to firms that had received venture capital investment. These awards
accounted for about 7 percent of the dollars DoD awarded to SBIR firms.

Table 7: Total DoD SBIR Awards and Dollars Awarded to Firms That Had and
Had Not Received Venture Capital Investment During Fiscal Years 2001 -
2004

(Dollars in millions)
                   Phase I awards    Phase II awards        Total awards
                                    Number      Dollars 
       Number and Dollars awarded      and awarded and     Number and Dollars
                                                                      awarded
           percentage and         percentage percentage percentage        and 
                      percentage                                   percentage 
Firms that                                                                 
had            517         $47        230       $172        747       $218
received                                                        
venture       (7%)        (7%)       (7%)       (7%)       (7%)       (7%) 
capital                                                         
investment                                                      
Firms that                                                                 
had not      7,049        $630      3,162     $2,445     10,211     $3,075
received                                                        
venture      (93%)       (93%)      (93%)      (93%)      (93%)      (93%) 
capital                                                         
investment                                                      
Total        7,566        $677      3,392     $2,616     10,958     $3,294 
               (100%)      (100%)     (100%)     (100%)     (100%)     (100%) 

Source: GAO analysis of DoD, Dow Jones, and IDI data.

Note: DoD's award amounts include both SBIR dollars and additional
non-SBIR dollars from awarding components.

    Size of SBIR Firms That Received Awards from DoD

Awards to firms that had received venture capital investment were
generally concentrated in the same states and in the same agency
components as for all SBIR awards. At NIH, the 10 states that accounted
for close to 70 percent of the total SBIR dollars also accounted for about
77 percent of the dollars to firms that had received venture capital
investment. Likewise, at NIH, the four awarding components that issued
about half of the SBIR dollars also accounted for 73 percent of the
dollars to firms that had received venture capital investment. At DoD, the
10 states that accounted for 73 percent of the total dollars awarded to
SBIR firms also accounted for about 70 percent of the dollars to firms
that had received venture capital investment. In addition, the four
awarding components that issued 85 percent of the dollars also issued 82
percent of the dollars to firms that had received venture capital
investment.

In contrast, awards to firms that had not received venture capital
investment were more widely distributed, although small businesses in
every state received at least one SBIR award from NIH and DoD.
Specifically, we found that in 17 states, none of the firms that had
received SBIR awards from NIH had received venture capital investment. For
example, awardee firms in Nebraska, Vermont, and Delaware each accounted
for less than 1 percent of NIH's SBIR dollars, and none of the firms in
these states had received venture capital investment. For DoD, we found
that in 21 states, none of the firms that had received SBIR awards had
received venture capital investment. For example, awardee firms in Nevada,
Tennessee, and Rhode Island each accounted for about 1 percent or less of
the dollars DoD awarded, and none of the firms in these states had
received venture capital investment. Detailed information on the
geographical distribution of applications, awards, and dollars awarded to
firms that had received venture capital investment is presented in
appendix II for NIH and appendix III for DoD.

The firms that received DoD SBIR awards were, on average, relatively
small-sized firms. Half of the firms had 20 or fewer employees, as
reported by awardees at the time they applied for SBIR awards. DoD SBIR
awardee firms that had received venture capital investment were also
small-sized, on average, but about 30 percent larger than firms that had
not received such investment. We could not determine the size of SBIR
awardee firms for NIH, because the agency does not maintain comparable
information on the number of employees at awardee firms.

  Few Awards above the Guidelines Were Made to Firms That Had Received Venture
  Capital Investment Although These Firms Tend to Receive Larger Awards

While about half of NIH awards and 12 percent of DoD awards were above the
guidelines, less than 20 percent of such awards at NIH and about 8 percent
at DoD went to firms that had received venture capital investment.
However, at NIH, we found that firms that had received venture capital
investment were more likely than firms that had not received such
investment to receive the largest awards. A similar relationship existed
for DoD's phase I awards but not for its phase II awards. While the data,
overall, indicate a relationship between firms that had received venture
capital investment and high award amounts, they do not indicate whether
the presence of venture capital investment was the reason the firms
received an SBIR award. Awards above the guidelines were generally
concentrated in the same states and made by the same awarding agency
components as were awards that were within the guidelines.

    Number and Value of NIH and DoD SBIR Awards That Were above the Guidelines

From fiscal years 2001 through 2004, 2,674 of the 5,061 SBIR awards made
by NIH exceeded the guidelines. These awards totaled about $1.4 billion
and accounted for 70 percent of NIH's SBIR dollars. During the same time
period, 1,302 of the 10,958 SBIR awards made by DoD exceeded the
guidelines. These awards totaled $743 million and accounted for 23 percent
of the dollars DoD awarded. Table 8 shows the total number and dollar
value of the SBIR awards made by NIH and DoD during fiscal years 2001 -
2004 that were both within and above the guidelines.12

12The percentage of DoD awards that exceeded SBA's guidelines due to SBIR
funds alone may be lower than 12 percent because awarding components may
add non-SBIR program funds to individual awards. DoD does not account for
these funds in a way that allowed us to separate program from SBIR
dollars.

Page 21 GAO-06-565 Small Business Innovation Research

Table 8: Total Number and Dollar Value of NIH and DoD SBIR Awards within
and above the Guidelines Made During the Period Fiscal Years 2001 - 2004

(Dollars in 
millions)   
                                          NIH DoD                             
                                            Within the Above the guidelines - 
                        guidelines - number Above the guidelines - Within the 
                                                      guidelines - number and 
                   and percentage number and percentage number and percentage 
                                                                   percentage 

Phase I

Number of awards               1,738       1,842       6,826           740 
                                  (49%)       (51%)       (90%)         (10%) 
Dollar value of awards         $171        $411        $587            $91 
                                  (29%)       (71%)       (87%)         (13%) 
Phase II                                                        
Number of awards                549         734        2,830           562 
                                  (43%)       (57%)       (83%)         (17%) 
Dollar value of awards         $376        $823       $1,964          $653 
                                  (31%)       (69%)       (75%)         (25%) 
Fast track                                                      
Number of awards                100         98           a               a 
                                  (51%)       (49%)                
Dollar value of awards          $59        $152          a               a 
                                  (28%)       (72%)                

Total                                        
Number of awards                 2,387                   2,674 9,656 1,302 
                                    (47%)                   (53%) (88%) (12%) 
Dollar value of awards            $606                  $1,386 $2,550 $743 
                                    (30%)                   (70%) (77%) (23%) 

Source: GAO analysis of NIH and DoD data.

aAll DoD fast track awards are included with DoD's phase I and phase II
awards.

Note: Almost all of DoD's phase I awards above the guidelines are
attributable to the Army's effort to provide funding for the transition
from phase I to phase II. However, the amount above the guidelines
generally reduces subsequent phase II award amounts.

At NIH we found the following:

     o Phase I awards that exceeded the guidelines averaged $223,106, with a
       median of $153,138, and ranged from just over $100,000 to $1.7
       million, but about 90 percent were $595,000 or less.
     o Phase II awards above the guidelines averaged $1.1 million, with a
       median of $924,914, and ranged from just over $750,000 to $6.5
       million, but about 90 percent were $2.1 million or less.
     o Fast track awards above the guidelines averaged $1.5 million, with a
       median of $1,151,979, and ranged from just over $850,000 to $9.6
       million, but about 90 percent were $3.4 million or less.

Although NIH does not retain data centrally on the reason individual
projects exceeded the SBA guidelines, it generally makes such awards for
research in specific fields, such as biotechnology, that is relatively
costly to conduct. In 2001, SBA granted NIH a waiver that allows the
agency to issue awards that exceed the guidelines without reporting data
on individual projects. In the waiver, SBA recognized that NIH routinely
issues awards for particularly expensive technologies. During the review
process, external peer reviewers also assess the reasonableness of cost
estimates before agency officials make awards above the guidelines.

At DoD, we found the following:

     o Phase I awards that exceeded the guidelines averaged $122,312, with a
       median of $119,911, and ranged from just over $100,000 to $448,796,
       but about 90 percent were $142,000 or less.
     o Phase II awards above the guidelines averaged $1.2 million, with a
       median of $1 million, and ranged from just over $750,000 to $4.4
       million, but about 90 percent were $2.0 million or less.

At DoD, the two main reasons awards exceeded the guidelines were that

(1) extra funds were needed to ensure a high-quality investigation of a
proposed idea and (2) the amount above the guidelines included non-SBIR
program funds. These non-SBIR funds, called mission funds, are not
included in DoD's calculation of its 2.5 percent obligation to fund the
SBIR program. For example, a DoD component, such as the Army, Navy, or Air
Force, may add mission funds to a SBIR project if it decides that the
project may help support its programmatic goals. Moreover, it is DoD's
policy to encourage its awarding components to match these and other
non-SBIR dollars with SBIR dollars. At DoD, about half of phase II awards
above the guidelines have received mission funds from awarding components.

    Extent to Which NIH and DoD SBIR Awards above the Guidelines Were Made to
    Firms That Had Received Venture Capital Investment

At both NIH and DoD, most of the awards that exceeded the guidelines went
to firms that had not received venture capital investment. As shown in
table 9, only 18 percent of awards above the guidelines at NIH and only
about 8 percent of awards above the guidelines at DoD went to firms that
had received venture capital investment.

Table 9: Percentage of NIH and DoD SBIR Awards within and above the
Guidelines to Firms that Had Received Venture Capital Investment During
Fiscal Years 2001 - 2004

                   NIH                                   DoD 
     Awards within the Awards above the    Awards within the Awards above the 
          guidelines -     guidelines -         guidelines -     guidelines - 
percentage to firms    percentage to  percentage to firms    percentage to 
     that had received   firms that had    that had received   firms that had 
       venture capital received venture      venture capital received venture 
            investment          capital           investment          capital 
                             investment                            investment 
Phase I          16               19                    7                9 
Phase II         12               16                    7                6 
Fast track       18               16                    a                a 
Total            15               18                    7                8 

Source: GAO analysis of NIH, DoD, Dow Jones, and IDI data.

aAll DoD fast track awards are included with DoD's phase I and phase II
awards.

Note: DoD's award amounts include both SBIR dollars and additional
non-SBIR dollars from awarding components.

While firms that had received venture capital investment received a small
share of the total SBIR awards, these firms were generally more likely
than firms that had not received such investment to receive the largest
awards from NIH. Specifically, firms that had received venture capital
were twice as likely as firms that had not received such investment to
receive phase II awards from NIH greater than $1 million, which accounted
for about 37 percent of NIH's phase II dollars; these firms were about six
times more likely to receive phase II awards greater than $2.5 million,
which accounted for about 7 percent of the phase II dollars.

Similarly, for DoD phase I awards, we found that firms that had received
venture capital investment were more likely to receive awards above the
guidelines than firms that had not received such investment. However, this
relationship did not hold true for DoD's phase II awards. We found that
phase II awardee firms that had received venture capital were less likely
to receive large awards than firms that had not received such investment.

  SBA's Ownership Clarification Does Not Appear to Have Reduced Program
  Participation by Firms That Had and Had Not Received Venture Capital
  Investment

While the data, overall, indicate a relationship between firms that
received venture capital investment and high award amounts, by themselves
the data do not indicate whether the presence of venture capital was the
reason these firms received such large awards. Many factors can influence
the willingness of venture capital firms to invest funds in small
businesses.

NIH and DoD awards that exceeded SBA's guidelines were generally
concentrated in the same states and in the same agency components as were
all SBIR awards. At NIH, the 10 states that received close to 70 percent
of the total SBIR dollars also received 72 percent of the dollars for
awards above the guidelines. Likewise, at NIH, the four components that
awarded about half of the SBIR program dollars accounted for 54 percent of
the awards above the guidelines. At DoD, the 10 states that received 73
percent of the total dollars awarded also received about 74 percent of the
awards above the guidelines. In addition, the four DoD agency components
that awarded 85 percent of the dollars also awarded about 89 percent of
the awards above the guidelines. Detailed information on the geographical
and agency component distribution for awards that were above the
guidelines, as well as awards that were within the guidelines, and their
associated dollars is presented in appendix II for NIH and appendix III
for DoD.

During fiscal years 2001 - 2004, participation in NIH's and DoD's SBIR
programs substantially increased for both types of firms-those that had,
and those that had not, received venture capital investment. However, we
did observe the following differences in the awards made by NIH and DoD
over the 4-year period including the 2 years before and the 2 years after
SBA provided additional clarification of the ownership criteria in October
2002:

     o Overall participation in the SBIR program by firms that had received,
       and that had not received, venture capital investment increased.
       However, firms that had received venture capital investment were added
       to the program at a significantly higher rate than those that had not.
       For example, at NIH, over the 4-year period, we noted that
       participation by firms that had received venture capital investment
       grew at a rate of 42 percent, compared to 19 percent for those that
       had not received this type of investment.
          * The total number of awards made by NIH and DoD to both types of
            firms in the 2 years after the clarification was greater than the
            number of awards made before the clarification. However, the rate
            at which
          * awards were made to firms that had received venture capital
            investment was significantly greater than the rate at which
            awards were made to firms that had not received venture capital
            investment. For example, over the 4-year period, the number of
            awards that DoD made to firms that had received venture capital
            investment increased by 167 percent, compared to a 65 percent
            increase in awards to firms that had not. More specifically, the
            number of awards to firms that had received venture capital
            increased from 270 in the 2 years before the clarification to 477
            in the 2 years after. Whereas, awards to firms that had not
            received venture capital increased from 4,154 in the 2 years
            before the clarification to 6,057 in the 2 years after.
     o For firms that had and had not received venture capital investment,
       the average dollar value of awards generally increased at NIH, but
       decreased or remained about the same at DoD over this 4-year period.
       For example, at NIH, although both types of firms received
       increasingly larger phase II awards between fiscal years 2001 and
       2004, the awards to firms that had received venture capital investment
       were substantially larger than those to firms that had not received
       this kind of investment. Specifically, in the 2 years before the
       clarification, phase II awards to firms that had received venture
       capital investment averaged about $885,000 compared to over $1.3
       million in the 2 years following, while awards to firms that had not
       received venture capital averaged less than $860,000 before the
       clarification compared to less than $950,000 after the clarification.
     o The number of awards that were above the guidelines increased
       significantly at NIH after the clarification but decreased at DoD. For
       example, from 2001 to 2004, the number of awards above the guidelines
       increased by 45 percent at NIH from about 600, on average, in the 2
       years before the clarification to about 730, on average, in the 2
       years after. In contrast, at DoD, these awards decreased by 26
       percent, from about 351 on average, in the 2 years before the
       clarification to about 300, on average, in the 2 years after the
       clarification.
          * Firms that had received venture capital investment received an
            increasing share of total dollars awarded at both NIH and DoD
            although the change at DoD was significantly less. For example,
            at NIH, in the 2 years prior to the clarification, firms that had
            received venture capital investment were awarded about 14 percent
            of total SBIR program funds, and in the 2 years following the
            clarification this share had increased to about 22 percent. At
            DoD, firms that had received venture capital
          * investment received 6 percent, on average, of the dollars awarded
            in the 2 years before the clarification and 7 percent, on
            average, in the 2 years following the clarification.
     o At both NIH and DoD, 10 states accounted for the majority of dollars
       awarded both before and after the clarification. However, the
       concentration of NIH's dollars awarded to firms that had received
       venture capital investment increased somewhat in the 10 states
       following the clarification, while the concentration of DoD's dollars
       awarded to such firms in the 10 states decreased somewhat.
     o Four agency components generally accounted for the majority of dollars
       awarded and dollars awarded to firms that had received venture capital
       investment both before and after the clarification. At both NIH and
       DoD, the concentration of the dollars awarded by the four agency
       components to firms that had received venture capital investment
       increased following the clarification but to a lesser extent at DoD.
     o Finally, the number of applications received by both NIH and DoD
       continued to increase following the SBA clarification. Both agencies
       experienced a significant growth in the number of applications
       received in the 2 years after the clarification compared to the 2
       years preceding the clarification. For example, at DoD, the total
       number of applications in fiscal years 2001 and 2002 was 22,139 and
       the total number of applications received in fiscal years 2003 and
       2004 was 33,922. According to officials responsible for the SBIR
       program at NIH and DoD, the quality of the applications for SBIR
       awards increased or remained the same during the 4-year period.
       However, because the number of applications received increased at a
       faster rate than the agencies' SBIR budgets, the percentage of the
       applications funded by NIH and DoD has generally decreased.

Tables 10 through 22 provide detailed data for NIH's and DoD's SBIR awards
broken out by fiscal year from 2001 to 2004.

        Table 10: Number of Awardee Firms by Agency, and Venture Capital
              Investment Status for Fiscal Years 2001 through 2004

                                                                   Percentage
                Fiscal year Fiscal year Fiscal year Fiscal year increase from 
                       2001        2002        2003        2004          2001 
NIH                                                          
Number of firms that had                                     
received venture capital                                     
and an                                                       
SBIR award           106         145         146         150            42 
Number of firms that                                         
had not received                                             
venture capital but                                          
had received an SBIR 668         715         675         797            19 
award                                                        
NIH total            773         859         820         946            22 

DoD                                                         
Number of firms that had received venture capital           
and a                                                       
SBIR award                                         42  69       95 100 138 
Number of firms that had not received venture               
capital but                                                 
had received a SBIR award                         932 1,151 1,407 1,377 48 
DoD total                                         972 1,220 1,500 1,476 52 

Source: GAO analysis of NIH, DoD, Dow Jones, and IDI data.

Note: Subtotals do not add to totals because a small number of firms
received SBIR awards in the same fiscal year, both before and after they
received venture capital investment.

Table 11: Number of SBIR Awards by Agency, and Venture Capital Investment
Status of Awardee Firms for Fiscal Years 2001 through 2004

                                                                   Percentage
Fiscal year     Fiscal year     Fiscal year     Fiscal year       increase 
            2001            2002             2003           2004    from 2001 

Awards to firms that had received venture                                  
capital investment NIH                           155   219   221   249  61
Awards to firms that had not received venture                              
capital investment                              1,009 1,060  980  1,168 16
NIH total                                       1,164 1,279 1,201 1,417 22 

DoD                                                         
Awards to firms that had received venture                   
capital                                                     
investment                                       98    172     215 262 167 
Awards to firms that had not received venture               
capital investment                              1,830 2,324 3,042 3,015 65 
DoD total                                       1,928 2,496 3,257 3,277 70 

           Source: GAO analysis of NIH, DoD, Dow Jones, and IDI data.

Table 12: Average Award Amount by Agency, Venture Capital Investment
Status of Awardee Firm, and Award Phase for Fiscal Years 2001 through 2004

                   Fiscal year Fiscal year Fiscal year Fiscal year Percentage 
                          2001        2002        2003        2004     change 
NIH SBIR awards to firms                                        
that had received venture                                       
capital investment                                              
Phase I             168,190     159,548     169,038     212,241         26 
Phase II            861,488     907,879   1,262,073  1,475,188          71 
Fast track          783,884     977,551   1,064,922     833,293          6 
NIH awards to                                                   
firms that had                                                  
not received                                                    
venture                                                         
capital                                                         
investment                                                      
Phase I             136,463     147,481     166,400     181,051         33 
Phase II            837,487     871,835     908,577     985,544         18 
Fast track        1,051,212  1,456,464    1,168,800     766,553        -27 
DoD SBIR awards                                                 
to firms that had                                               
received venture                                                
capital                                                         
investment                                                      
Phase I              91,032      90,192      89,814      91,520          1 
Phase II            795,780     855,745     739,721     679,724        -15 
DoD awards to                                                   
firms that had                                                  
not received                                                    
venture                                                         
capital                                                         
investment                                                      

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(Continued From Previous Page)
             Fiscal year  Fiscal year   Fiscal year  Fiscal year   Percentage 
                    2001          2002          2003         2004      change 
Phase I        90,278        88,907        87,891       91,143           1 
Phase II      831,144       809,933       764,919      725,277         -13 

Source: GAO analysis of NIH, DoD, Dow Jones, and IDI data.

Note: DoD's award amounts include both SBIR dollars and additional
non-SBIR dollars from awarding components.

Table 13: Number of SBIR Awards above and within the Guidelines by Agency
and Venture Capital Investment Status of Awardee Firm for Fiscal Years
2001 through 2004

                    Fiscal year  Fiscal year   Fiscal year Fiscal  Percentage
                                                            year   
                           2001           2002        2003    2004     change
NIH awards above the guidelines             
Awards to firms that had received venture   
capital investment                79  119         125        162       105
Awards to firms that                        
had not received                            
venture                                     
capital investment               484  531         518          656      36 
Subtotal - awards above          563  650         643          818      45 
the guidelines                                                         
NIH awards within the                       
guidelines                                  
Awards to firms that                        
had received venture                        
capital investment                76  100          96            87     14 
Awards to firms that                        
had not received                            
venture                                     
capital investment           525    529         462        512          -2
Subtotal - awards            601    629         558        599   Less than
within the guidelines                                                   -1
NIH total                  1,164   1,279       1,201     1,417          22
DoD awards above the                        
guidelines                                  
Awards to firms that                        
had received venture                        
capital investment                  22  34         25           19     -14
Awards to firms that                        
had not received                            
venture                                     
capital investment               320  326         323         233      -27
Subtotal - awards above          342  360         348         252      -26
the guidelines                                                       
DoD awards within the                       
guidelines                                  
Awards to firms that                        
had received venture                        
capital investment                76  138         190        243       220
Awards to firms that                        
had not received                            
venture                                     
capital investment         1,510   1,998       2,719         2,782      84 
Subtotal - awards          1,586   2,136       2,909         3,025      91 
within the guidelines                                                  
DoD total                  1,928   2,496       3,257         3,277      70 
                           Source: GAO         
                           analysis of NIH,    
                           DoD, Dow Jones, and 
                           IDI data.           

             Page 30 GAO-06-565 Small Business Innovation Research

Note: DoD's award amounts include both SBIR dollars and additional
non-SBIR dollars from awarding components.

Table 14: Average Amount of SBIR Awards, above and within the Guidelines,
by Agency and Venture Capital Investment Status of Awardee Firm for Fiscal
Years 2001 through 2004

Agency,       Fiscal year Fiscal year Fiscal year Fiscal year   Percentage 
investment           2001        2002        2003        2004    change 21 
status, and       227,867     214,623     234,256     275,301 
award phase                                                   
NIH SBIR                                                      
awards to                                                     
firms that                                                    
had received                                                  
venture                                                       
capital                                                       
investment                                                    
Awards above                                                  
the                                                           
guidelines                                                    
Phase I                                                       
Phase II        1,061,762   1,034,901  1,503,443   1,830,112            72 
Fast track        858,545   2,098,561  1,360,918   1,234,942            44 
Awards within                                                 
the                                                           
guidelines                                                    
Phase I            99,151      99,033      98,803   98,542              -1 
Phase II          680,288     653,835   693,131     632,244             -7 
Fast track        765,218     529,147   472,932     431,644            -44 
NIH SBIR                                                      
awards to                                                     
firms that                                                    
had not                                                       
received                                                      
venture                                                       
capital                                                       
investment                                                    
Awards above                                                  
the                                                           
guidelines                                                    
Phase I           181,217     200,314   230,007     248,623             37 
Phase II          976,319   1,040,435  1,076,773   1,148,833            18 
Fast track      1,147,764   2,068,788  1,781,892   1,195,005             4 
Awards within                                                 
the                                                           
guidelines                                                    
Phase I            98,640      98,267      98,167   97,899              -1 
Phase II          694,630     681,442   682,759     693,059    Less than 1 
Fast track        729,372     555,988   683,436     546,206            -25 
DoD SBIR                                                      
awards to                                                     
firms that                                                    
had received                                                  
venture                                                       
capital                                                       
investment                                                    
Awards above                                                  
the                                                           
guidelines                                                    
Phase I           123,356     126,304   144,474     120,128             -3 
Phase II        1,090,605   1,186,847   993,327    1,349,711            24 
Awards within                                                 
the                                                           
guidelines                                                    
Phase I            82,628      82,767      83,080   88,548               7 
Phase II          693,726     727,577   700,705     657,140             -5 
DoD SBIR                                                      
awards to                                                     
firms that                                                    
had not                                                       
received                                                      
venture                                                       
capital                                                       
investment                                                    
Awards above                                                  
the                                                           
guidelines                                                    
Phase I           119,844     123,022   123,061     119,903    Less than 1 

             Page 31 GAO-06-565 Small Business Innovation Research

(Continued From Previous Page)
Agency,                                                                    
investment     Fiscal year Fiscal year Fiscal year Fiscal year  Percentage
status, and                                                    
award                                                          
phase                 2001        2002        2003    2004          change 
Phase II         1,182,723   1,131,501  1,168,355   1,175,187           -1 
Awards within                                                  
the guidelines                                                 
Phase I             86,446      85,005      84,403   88,551              2 
Phase II           689,116     706,179   693,342     692,485   Less than 1 

Source: GAO analysis of NIH, DoD, Dow Jones, and IDI data.

Note: DoD's award amounts include both SBIR dollars and additional
non-SBIR dollars from awarding components.

Table 15: Share of Dollars Awarded by Agency and Venture Capital
Investment Status of Awardee Firm for Fiscal Years 2001 through 2004

(Dollars in millions)             
                              Fiscal year Fiscal year Fiscal year Fiscal year 
                                     2001        2002        2003        2004 
NIH                                                            
Awards to firms that had received                              
venture capital                                                
Total dollars awarded              $57         $72         $99        $127 
Percentage of dollars               14          14          20          22 
Awards to firms that had not                                   
received venture capital                                       
Total dollars awarded             $358        $438        $394        $447 
Percentage of dollars               86          86          80          78 
Total dollars awarded by NIH      $415        $510        $493        $574 

DoD                                                       
Awards to firms that had received venture capital         
Total dollars awarded                                 $34      $48 $58 $78 
Percent of dollars                                      5            7 7 7 
Awards to firms that had not received venture             
capital                                                   
Total dollars awarded                                $636   $653 $811 $975 
Percent of dollars                                     95         93 93 93 
Total dollars awarded by DoD                         $670 $701 $869 $1,053 

           Source: GAO analysis of NIH, DoD, Dow Jones, and IDI data.

Table 16: Share of Dollars Awarded above and within the Guidelines by
Agency and Venture Capital Investment Status of Awardee Firm for Fiscal
Years 2001 through 2004

(Dollars in millions)             
                              Fiscal year Fiscal year Fiscal year Fiscal year 
                                     2001        2002        2003        2004 
NIH SBIR awards to firms that had                              
received venture capital                                       
Awards above the guidelines                                    
Total dollars awarded              $34         $52         $80        $108 
Percentage of total dollars          8          10          16          19 
awarded                                                        
Awards within the guidelines                                   
Total dollars awarded              $22         $20         $19         $19 
Percentage of total dollars          5           4           4           3 
awarded                                                        
NIH SBIR awards to firms that had                              
not received venture capital                                   
Awards above the guidelines                                    
Total dollars awarded             $220        $293        $271        $327 
Percentage of total dollars         53          57          55          57 
awarded                                                        
Awards within the guidelines                                   
Total dollars awarded             $138        $145        $123        $120 
Percentage of total dollars         33          29          25          21 
awarded                                                        
Total dollars awarded by NIH      $415        $510        $493        $574 
DoD SBIR awards to firms that had                              
received venture capital                                       
Awards above the guidelines                                    
Total dollars awarded              $11         $17         $10          $6 
Percentage of total dollars          2           2           1           1 
awarded                                                        
Awards within the guidelines                                   
Total dollars awarded              $22         $31         $48         $72 
Percentage of total dollars          3           4           6           7 
awarded                                                        
DoD SBIR awards to firms that had                              
not received venture capital                                   
Awards above the guidelines                                    
Total dollars awarded             $233        $192        $166        $107 
Percentage of total dollars         35          27          19          10 
awarded                                                        
Awards within the guidelines                                   
Total dollars awarded             $404        $461        $645        $868 
Percentage of total dollars         60          66          74          82 
awarded                                                        
Total dollars awarded by DoD      $670        $701        $869      $1,053 

Source: GAO analysis of NIH, DoD, Dow Jones, and IDI data.

Note: DoD's award amounts include both SBIR dollars and additional
non-SBIR dollars from awarding components.

Page 33 GAO-06-565 Small Business Innovation Research

Table 17: Geographical Distribution of NIH Dollars Awarded, Overall and to
Firms That Had Received Venture Capital Investment, Fiscal Years 2001-2002
Compared to Fiscal Years 2003-2004

(Dollars in millions)
              Fiscal years 2001-2002               Fiscal years 2003-2004
                       Dollars awarded to firms      Dollars awarded to firms
                      that had received venture     that had received venture
                                capital         Dollars               capital 
        Dollars awarded - total investment -    awarded -        investment - 
                                total           total                   total 
State         and percentage  and percentage and percentage and percentage 
California              $176             $52           $219            $80 
                          (19%)           (41%)          (21%)          (35%) 
Massachusetts           $142              $9           $142            $20 
                          (15%)            (7%)          (13%)           (9%) 
Maryland                 $65              $3            $77            $20 
                           (7%)            (2%)           (7%)           (9%) 
New York                 $47             $10            $71            $28 
                           (5%)            (8%)           (7%)          (12%) 
Texas                    $26              $5            $55             $6 
                           (3%)            (4%)           (5%)           (3%) 
Pennsylvania             $38              $5            $43             $6 
                           (4%)            (4%)           (4%)           (3%) 
Washington               $40              $7            $39            $10 
                           (4%)            (6%)           (4%)           (4%) 
Virginia                 $28              $2            $38             $2 
                           (3%)            (1%)           (4%)           (1%) 
Ohio                     $32              $2            $27             $1 
                           (3%)            (2%)           (3%)           (1%) 
New Jersey               $31              $2            $26             $3 
                           (3%)            (1%)           (2%)           (1%) 
Subtotal                $626             $97           $737           $176 
                          (68%)           (76%)          (69%)          (78%) 
Other states            $299             $32           $330            $51 
                          (32%)           (24%)           (31)          (22%) 
Total                   $925            $129         $1,068           $227 
                         (100%)          (100%)         (100%)         (100%) 

Source: GAO analysis of NIH, Dow Jones, and IDI data.

Note: Totals and percentages may not add because of rounding.

Table 18: Geographical Distribution of DoD Dollars Awarded, Overall and to
Firms That Had Received Venture Capital Investment, Fiscal Years 2001-2002
Compared to Fiscal Years 2003-2004

(Dollars in millions)
              Fiscal years 2001-2002               Fiscal years 2003-2004
                       Dollars awarded to firms      Dollars awarded to firms
                      that had received venture     that had received venture
                                capital         Dollars               capital 
        Dollars awarded - total investment -    awarded -        investment - 
                                total           total                   total 
State         and percentage  and percentage and percentage and percentage 
California              $320             $28           $421            $40 
                          (23%)           (34%)          (22%)          (29%) 
Massachusetts           $204              $2           $279            $15 
                          (15%)            (2%)          (15%)          (11%) 
Virginia                $115              $7           $130             $5 
                           (8%)            (9%)           (7%)           (4%) 
Ohio                     $72              $0            $90             $1 
                           (5%)             (0)           (5%)           (1%) 
Colorado                 $68              $8            $92             $6 
                           (5%)            (9%)           (5%)           (4%) 
Maryland                 $57              $2            $94             $5 
                           (4%)            (3%)           (5%)           (3%) 
Pennsylvania             $54              $1            $78             $1 
                           (4%)            (1%)           (4%)  (Less than 1) 
New York                 $47              $3            $80            $10 
                           (3%)            (4%)           (4%)           (8%) 
Texas                    $47              $3            $78             $3 
                           (3%)            (3%)           (4%)           (2%) 
New Jersey               $40              $5            $48             $7 
                           (3%)            (6%)           (2%)           (5%) 
Subtotal              $1,025             $58         $1,389            $93 
                          (75%)           (71%)          (72%)          (68%) 
Other states            $347             $24           $533            $43 
                          (25%)           (29%)          (28%)          (32%) 
Total                 $1,371             $82         $1,922           $136 
                         (100%)          (100%)         (100%)         (100%) 

Source: GAO analysis of DoD, Dow Jones, and IDI data.

Notes:

(1)
           Totals and percentages may not add because of rounding.

(2)
           DoD's award amounts include both SBIR dollars and additional
           non-SBIR dollars from awarding components.

Table 19: Dollars Awarded by Four Primary NIH Awarding Components, Overall
and to Firms that Had Received Venture Capital Investment, Fiscal Years
2001-2002 Compared to Fiscal Years 2003-2004

(Dollars in millions)
              Fiscal years 2001-2002               Fiscal years 2003-2004
                       Dollars awarded to firms      Dollars awarded to firms
                      that had received venture     that had received venture
                  Dollars        capital        Dollars               capital
Awarding       awarded -      investment -   awarded -        investment -
                  total          total          total                   total
component      and percentage and percentage and percentage and percentage
National                 $156            $27           $192            $53
Cancer                                                      
Institute               (17%)          (21%)          (18%)          (23%)
National                 $103            $38           $173            $82
Institute of                                                
Allergy and             (11%)          (29%)          (16%)          (36%)
Infectious                                   
Diseases                                     
National                $115             $10          $121             $18 
Heart,                                                              
Lung, and              (12%)            (8%)         (11%)            (8%) 
Blood                                                               
Institute                                    
National               $75               $14          $76              $19 
Institute of                                                        
General                (8%)            (11%)          (7%)            (8%) 
Medical                                                             
Sciences                                     
Subtotal               $449              $89         $562             $172
                         (49%)            (69%)        (53%)            (76%)
Remaining 19           $476              $40         $506              $55
institutes and        (51%)            (31%)        (47%)            (24%)
centers                                      
Total                $925               $129      $1,068              $227
                       (100%)            (100%)      (100%)            (100%)

Source: GAO analysis of NIH, Dow Jones, and IDI data.

Note: Totals and percentages may not add because of rounding.

Table 20: Dollars Awarded by Four Primary DoD Awarding Components, Overall
and to Firms That Had Received Venture Capital Investment, Fiscal Years
2001-2002 Compared to Fiscal Years 2003-2004

(Dollars in millions)
              Fiscal years 2001-2002               Fiscal years 2003-2004
                       Dollars awarded to firms      Dollars awarded to firms
                      that had received venture     that had received venture
                  Dollars        capital        Dollars               capital
Awarding       awarded -      investment -   awarded -        investment -
                  total          total          total                   total
component      and percentage and percentage and percentage and percentage
Air Force                $479            $22           $539            $31
                           (35%)          (27%)          (28%)          (22%)
Army                     $286            $20           $398            $41
                           (21%)          (24%)          (21%)          (30%)
Navy                     $267            $12           $352            $21
                           (19%)          (14%)          (18%)          (15%)
Missile                  $144            $12           $339            $20
Defense                                                     
Agency                  (10%)          (14%)          (18%)          (14%)
Subtotal               $1,176            $66         $1,628           $112
                           (86%)          (80%)          (85%)          (82%)
Remaining six            $196            $16           $295            $24
awarding                (14%)          (20%)          (15%)          (18%)
components                                   
Total                $1,371              $82       $1,922             $136 
                        (100%)           (100%)       (100%)           (100%) 

Source: GAO analysis of DoD, Dow Jones, and IDI data.

Notes:

(1)
           Totals and percentages may not add because of rounding.

(2)
           DoD's award amounts include both SBIR dollars and additional
           non-SBIR dollars from awarding components.

Table 21: SBIR Budgets and Number of Applications Submitted by Agency for
                         Fiscal Years 2001 through 2004

(Dollars in millions)
                                                                   Percentage
                                                            increase - fiscal
                                                              years 2001-2002
           Fiscal year Fiscal  Fiscal     Fiscal  Fiscal  Fiscal    compared  
                       year    years      year    year    years     to fiscal 
Agency         2001    2002  2001-2002    2003    2004 2003-2004     years 
                                                                    2003-2004 
NIH - total    $402    $471       $873    $525    $566    $1,091        25 
SBIR budget                                                      
NIH - total   3,601   4,049      7,650   5,176   6,122    11,298        48 
applications                                                     
submitted                                                        
DoD - total    $638    $779     $1,417    $895  $1,016    $1,911        35 
SBIR budget                                                      
DoD - total   8,225  13,914     22,139  16,520  17,402    33,922        53 
applications                                                     
submitted                                                        

Source: GAO analysis of NIH and DoD data.

Note: Data for DoD are from the agency's fiscal year reports, which
coincide more closely with the calendar year.

     Table 22: Percentage of Applications Funded by Agency for Fiscal Years
                               2001 through 2004

Agency          Fiscal year    Fiscal year    Fiscal year      Fiscal year 
                       2001           2002           2003                2004 
NIH total                 34%            32%            27%            22% 
NIH phase I               30%            28%            24%            20% 
NIH phase II              53%            49%            44%            38% 
NIH fast track            30%            29%            22%            18% 
DoD total                 24%            20%            19%            19% 
DoD phase I               18%            17%            14%            13% 
DoD phase II              75%            63%            73%            68% 

  NIH, DoD, and SBA Focus Largely on Select Eligibility Criteria and Collect
  Limited Data on SBIR Awardees

                   Source: GAO analysis of NIH and DoD data.

NIH, DoD and SBA focus primarily on criteria relating to ownership,
forprofit status, and the number of employees to determine a firm's
eligibility for the SBIR program and take steps to verify eligibility
information provided by applicants. When NIH or DoD officials are unable
to ensure the accuracy of an applicant's information, they refer the
matter to SBA. After SBA makes an eligibility determination, it makes
information about the firms it finds ineligible available on its Web site,
but does not always indicate that the determination was for SBIR purposes.
NIH makes information on ineligible firms centrally available to
participating agency components while DoD does not. Each agency limits its
data collection efforts largely to information about the SBIR award
itself, such as award size and location of the principal investigator, and
does not collect information on certain characteristics of the firms
receiving the awards, such as the presence of venture capital investment.

Officials at NIH, DoD, and SBA told us that they focus largely on three
SBIR criteria in their eligibility reviews-ownership, size in terms of the
number of employees, and for-profit status of SBIR applicants. However,
they also stated that they consider information on the full range of
criteria, such as whether the principal investigator is employed primarily
by the applying firm, and the extent to which work on the project will be
performed by others.13 Both NIH and DoD rely on applicants to self-certify
that they meet all of the SBIR program's eligibility requirements as part
of their SBIR applications. At NIH, applicants certify they meet the
eligibility criteria by completing a verification statement when NIH
notifies them that their application has been selected for funding but
prior to NIH making the award. The verification statement requires
applicants to respond to a series of questions to certify they meet SBA's
eligibility criteria relating to forprofit status, ownership, number of
employees, where the work will be performed, and the primary employment of
the principal investigator, among others. NIH also refers applicants to
its notice of SBIR funding opportunities, known as a solicitation, for
more detail on SBA's eligibility requirements. NIH will not issue an award
until it receives and accepts the applicant's responses to the
verification statement. At DoD, the cover sheet for each SBIR application
requires applicants to certify they meet SBA's eligibility criteria. The
cover sheet also refers applicants to DoD's solicitation that details the
requirements. As with NIH, DoD will not fund applications if the questions
on the cover sheet are not answered. Both NIH and DoD warn applicants of
the civil and criminal penalties for making false, fictitious, or
fraudulent statements. In addition to the eligibility criteria provided in
the agency's solicitations, NIH and DoD support periodic conferences
during which potential applicants can learn about SBIR eligibility
criteria, and both agencies post eligibility requirements on their Web
sites.

13SBA guidance states that awardees must perform at least two-thirds of
the research and analysis effort on phase I projects and half of the work
on phase II projects, although the agency may approve deviations from this
guidance.

Page 39 GAO-06-565 Small Business Innovation Research

Although agencies rely largely on applicants to self-certify that they
meet the SBIR program's eligibility criteria, both NIH and DoD make
additional efforts to ensure the accuracy of the information provided by
applicants prior to making an award. At NIH, officials in participating
institutes and centers conduct Web searches, check press releases, and may
request documentation from applicants to verify information on their
eligibility status, including, but not limited to, information on
ownership, size, principal investigators, board members, location, e-mail
addresses, and affiliations with other firms. In addition, NIH officials
search published information on such features as venture capital
investments, and whether the applicant has been purchased by another
company or changed its name, as well as internal information on whether
NIH has received other grant applications from the applicant. NIH
officials review this information, among other things, to identify
potential concerns regarding the applicant's eligibility status. For
example, an ".edu" e-mail extension could indicate that the principlal
investigator is primarily employed by a university rather than by the
applicant, as required by SBIR criteria. If no concerns arise, NIH deems
the company eligible. However, when concerns cannot be resolved, NIH
officials contact the applicant to ask a standard list of questions.
Currently, the list of questions varies by institute and center, but
according to NIH officials, the agency is in the process of creating a
uniform list of eligibility questions to be used throughout NIH. NIH
officials also told us that it has incorporated eligibility training into
the curriculum for its SBIR staff.

At DoD, prior to making an award, officials check the information
applicants provided in the application cover sheet for consistency with
the eligibility information applicants entered into the Central Contractor
Registration database that is required for all applications, and the
Online Representations and Certifications Application system that is
required for phase II applications. According to DoD officials, most
discrepancies between information on the cover sheets and in the databases
occur because the applicant was purchased by another company, the e-mail
addresses have changed, or the principal investigator appears to be a
fulltime employee of an educational institution. To resolve discrepancies,
DoD officials may choose to contact the applicant, or search on the Web
for information. Typically, officials told us, DoD awarding components
work with firms to answer their eligibility questions and help ensure that
they prepare the necessary documentation properly. In addition, DoD
encourages self-policing by applicants by posting the names of recent SBIR
awardees on its Web site so that competitors can raise any eligibility
concerns they may have. However, Office of Naval Research officials said
competing firms seldom raise concerns, usually only one per year, and that
typically the concern is related to whether the awardee firm has been
purchased by another company.

When officials at either NIH or DoD have unresolved concerns about the
accuracy of an applicant's eligibility information, they refer the matter
to SBA to make an eligibility determination.14 Upon receipt of a letter
from the agency detailing its concerns, SBA officials contact the
applicant, ask them to re-certify their eligibility status, and may
request additional documentation on the criteria of concern. For example,
SBA officials may request articles of incorporation and information on the
distribution of ownership to determine whether the applicant was at least
51 percent owned by qualified individuals. Upon making a determination of
eligibility, SBA then notifies the official at the inquiring agency, and
the applicant, of its decision. Further, SBA makes the information about
firms it finds ineligible publicly available on its Web site so that all
participating agencies and the public can access the information. However,
SBA does not currently require its eligibility officials to include
information on the Web site identifying whether or not the determination
was for SBIR purposes. An SBA official told us the agency plans to include
such information on its Web site more systematically before the end of
fiscal year 2006.

NIH and DoD take different approaches to retaining and sharing information
on firms found ineligible by SBA. At NIH, when SBA notifies the referring
agency official that it has deemed an SBIR applicant as ineligible, the
official notes the determination in the applicant's file. However,
according to NIH officials, in response to the May 2003 SBA decision, NIH
also began centrally tracking firms SBA found ineligible, as well as firms
that self-selected themselves as ineligible and withdrew their
applications at some point in the review process. The agency makes this
information available to all of its institutes and centers that make SBIR
awards. In addition, agency officials told us that, if during the
eligibility review process, a firm was determined to be ineligible for an
SBIR award, NIH advises the applicant to be recertified by SBA before
applying for additional awards. In contrast, DoD retains information on
firms determined to be ineligible in the applicants' files and does not
have a centralized process to share the information across DoD awarding
components. However, DoD officials said it is common practice for awarding
components to share such information electronically.

14SBA refers to these eligibility determinations as "size determinations."

  Agency Comments and Our Evaluations

For the most part, NIH and DoD limit their data collection efforts largely
to information about the SBIR awards they make. Key information the
agencies track includes the phase, date, and amount of the award; the
geographic location of the awardee firm and principal investigator; and
contact information. Currently, the agencies do not maintain detailed data
on (1) applicants that the agencies decided not to select for funding, (2)
the reasons applicants were not selected for funding, and (3)
characteristics of the firms receiving the awards, such as the presence of
venture capital investment or the extent of ownership by venture capital
firms or otherentities.15 Moreover, neither NIH nor DoD systematically
categorizes SBIR projects by the industry represented or by the specific
type of research, such as whether the research is for a process or product
or whether the research is for software or therapeutic devices. However,
both agencies categorize projects by the general research topics listed in
each agency's solicitation.

We provided NIH, DoD, and SBA with a draft of this report for their review
and comment. NIH only provided technical comments that we have
incorporated, as appropriate. DoD agreed that because data on ownership
are not publicly available, it is not possible to determine the extent to
which venture capital firms own SBIR awardee firms. Moreover, DoD did not
find the results of our analysis surprising in light of differences in
markets for SBIR projects supported by NIH and DoD. SBA noted in its
comments that while the information in the report may be useful, it could
be misconstrued as suggesting a link between the presence of venture
capital investment and SBIR ownership criteria when such a link does not
exist. While we understand SBA's concern, we believe that our report
clearly states that we used venture capital investment as a proxy for
venture capital ownership because ownership data are proprietary and
confidential or not readily available. We also explicitly note in the
report that no causal link can be inferred from the data. Both DoD and SBA
also provided technical comments that we incorporated, as appropriate. The
comments from DoD and SBA are included in this report as appendixes IV and
V, respectively.

15Awardee firms will be asked to provide information on venture capital
investment associated with specific SBIR projects as part of efforts to
build a government database that includes information on commercialization
of SBIR projects, among other things.

Page 42 GAO-06-565 Small Business Innovation Research

We are sending copies of this report to the Director of the National
Institutes of Health, the Secretary of Defense, the Administrator of the
Small Business Administration, and other interested parties. We will make
copies available to others upon request. In addition, this report will be
available, at no charge, on GAO's Web site at http://www.gao.gov.

If you or your staff have any questions about this report, please contact
me at (202) 512-3841 or [email protected]. Contact points for our Offices of
Congressional Relations and Public affairs may be found on the last page
of this report. Key contributors to this report are listed in appendix VI.

Anu K. Mittal Director, Natural Resources and Environment

List of Requesters

The Honorable John F. Kerry Ranking Member Committee on Small Business
and Entrepreneurship  United States Senate

The Honorable Edward M. Kennedy Ranking Minority Member Committee on
Health, Education, Labor and Pensions United States Senate

The Honorable Michael B. Enzi Chairman Committee on Health, Education,
Labor and Pensions United States Senate

The Honorable Olympia J. Snowe Chair Committee on Small Business and
Entrepreneurship  United States Senate

The Honorable Donald A. Manzullo Chairman Committee on Small Business 
House of Representatives

Appendix I

Scope and Methodology

In conducting our work, we interviewed officials at the National
Institutes of Health (NIH), the Department of Defense (DoD), and the Small
Business Administration (SBA) about their procedures in place, and any
changes that occurred during the time period of our review-fiscal years
2001 through 2004. We reviewed agency documentation on awards, award
selection and funding, eligibility determinations, and the data elements
that are collected during the eligibility process. We also interviewed
officials from organizations that represent venture capital investors and
biotechnology firms to obtain their views on the Small Business Innovation
Research (SBIR) program and venture capital investment.

To determine the total number and key characteristics of SBIR awards, we
obtained data from NIH and DoD for all awards made during fiscal years
2001 - 2004. Specifically, we asked for funding data on all SBIR awards
that originated in fiscal years 2001 through 2004 and excluded data on
funding to awards that originated before and after our time frame. These
data included award amounts projected at the time the award was made and
supplemental amounts issued subsequent to the award. We compared these
data to data on funds actually issued to awardee firms to ensure that the
projections were reasonable. We based our analysis on the projected
amounts combined with supplemental funds, which allowed us to provide
information on awards that originated in fiscal years 2003 and 2004 but
which may not be completed until 2005 or later. However, for NIH fast
track awards, we based our analysis on the actual dollars NIH spent on the
award as of September 30, 2005. We did not analyze awards NIH made as
contracts, which were a small portion of NIH's awards, because certain
data elements essential for our analysis were not available. We
interviewed key officials at NIH and DoD about their databases. We
assessed the reliability of relevant fields in the agencies' databases and
found them sufficient for our review. Our assessment included tests of the
data itself as well as reviews of internal quality control procedures. We
used analytic software to identify the following key characteristics of
awards made by NIH and DoD: the number of firms receiving these awards;
geographic location of these firms; agency components making the awards;
the amounts of the awards; and for DoD, the number of employees working
for the SBIR firms and their affiliates.

We also obtained data from two private sector firms, the Innovation
Development Institute (IDI) and Dow Jones-Venture One. Initially, we
selected IDI because its database included information that supplemented

Appendix I Scope and Methodology

agency data on SBIR awardee firms. IDI's database included information on
venture capital investments in SBIR awardee firms that was compiled from
published information such as company press releases. Subsequently, we
obtained data from Dow Jones-Venture One to help corroborate, and
supplement as necessary, the IDI data. We selected Dow Jones-Venture One
because its database on venture capital investment is compiled and updated
with information from both venture capital investors and the firms that
receive the investment. We interviewed key officials at IDI and Dow
Jones-Venture One about their databases. We assessed the reliability of
relevant fields in the databases and found them sufficient for our review.
Our assessment included tests of the data itself as well as reviews of
internal quality control procedures.

We combined data from NIH and DoD with data from the private sector
sources to identify firms that had received venture capital investment at
any time before they received an SBIR award in our time frame. In a small
number of cases, the venture capital investment occurred as early as 1980,
although most occurred in or after 1990. Specifically, at both agencies
combined, 93 percent of SBIR firms first received venture capital
investment between 1990 and 2004, 6 percent first received investment
between 1985 and 1989, and 1 percent first received investment earlier
than 1985. The private sector data did not include information on whether
the venture capital investment was still present in the firm at the time
of the SBIR award, or whether the venture capital firms were majority
owners. We used analytic software to determine the number of awards made,
the amounts of the awards, the percentage of applications receiving
awards, and how the awards were distributed geographically. Similarly, to
identify the number of phase I and phase II awards that were above the
guidelines and their key characteristics, we used analytic software on the
agency data and the combined data to identify firms that had received
venture capital investment by the time they received an SBIR award above
the guidelines in our time frame.

In our analyses, we express differences in the likelihoods of receiving
awards that exceeded SBA's guidelines by using odds ratios. An odds ratio
is generally defined as the ratio of odds of an event occurring in one
group

Appendix I Scope and Methodology

compared to the odds of it occurring in another group.1 In our analyses,
the event of interest was receiving an award that exceeded SBA's
guidelines versus one that did not. We computed odds ratios to indicate
the difference between firms that had and firms that had not received
venture capital investment in the likelihood of receiving awards that (1)
exceeded SBA's guidelines at all, and (2) exceeded the guidelines by large
amounts. For example, the odds that a firm that had received venture
capital investment received an NIH phase II award above $1 million were
.499 while the odds that a firm that had not received venture capital
investment received such an award were .244. Therefore, the ratio of those
two odds was 2.045 (.499 / .244), indicating that firms that had received
venture capital investment were 2.045 times (about 2 times) more likely to
receive phase II awards over $1 million than firms that had not received
such investment.

To assess any differences that occurred to awards both above and below the
guidelines following SBA's October 2002 additional clarification of the
SBIR ownership criteria and its May 2003 decision that addressed ownership
of SBIR firms by venture capital firms, we compared NIH and DoD data on
awards made from October 1, 2000, through September 30, 2002, with data on
awards made from October 1, 2002, through September 30, 2004. We used the
combined data set to compare NIH and DoD awards from the two time periods
in terms of the key characteristics described above. We conducted our work
in accordance with generally accepted government auditing standards.

1Odds are generally defined as the probability of being in one group
divided by the probability of not being in the group. For example, 33.3
percent of the NIH phase II awards that went to firms that had received
venture capital investment exceeded $1 million. So, the probability that
firms that had received venture capital investment received phase II
awards that exceeded $1 million was .333, and the odds that such firms
received these large awards were .499 (.333/.667).

Page 47 GAO-06-565 Small Business Innovation Research

Appendix II

Detailed Information on SBIR Awards Made by NIH During Fiscal Years 2001 through
2004

     Table 23: Geographical Distribution of NIH's Total SBIR Applications,
    Awards, Dollars Awarded, Dollars to Firms That Had and Had Not Received
    Venture Capital Investment, and Dollars to Awards within and above SBA's
                   Guidelines, Fiscal Years 2001 through 2004

(Dollars in                                                              
millions)                                                                
                                                   Dollars to            
                                        Dollars to firms that            
                                                   had                   
                                        firms that        not Dollars to Dollars to
                                        had          received            
                                          received    venture awards         awards
                                                              within          above
            Total                 Total    venture    capital SBA's      SBA's
applications -               dollars    capital investment guidelines guidelines
       number and Total         awarded investment   - number - number   - number
                  awards -   number and   - number        and and        and 
                  number and                   and                       
State percentage  percentage percentage percentage percentage percentage percentage
California 3,918  988        $395       $132       $263       $93        $302
                (21%)     (20%)      (20%)      (37%)      (16%)     (15%)    (22%) 
Massachusetts   2,364      707        $285       $30        $255      $83      $202 
                (12%)     (14%)      (14%)       (8%)      (16%)     (14%)    (15%) 
Maryland        1,224      327        $142       $23        $119      $30      $111 
                (6%)       (6%)       (7%)       (7%)       (7%)      (5%)     (8%) 
New York         830       216        $118       $37        $81       $27       $92 
                (4%)       (4%)       (6%)      (11%)       (5%)      (4%)     (7%) 
Texas            906       213        $81        $11        $70       $23       $58 
                (5%)       (4%)       (4%)       (3%)       (4%)      (4%)     (4%) 
Pennsylvania     725       212        $81        $11        $70       $24       $57 
                (4%)       (4%)       (4%)       (3%)       (4%)      (4%)     (4%) 
Washington       646       195        $80        $17        $63       $37       $43 
                (3%)       (4%)       (4%)       (5%)       (4%)      (6%)     (3%) 
Virginia         728       167        $66         $3        $63       $21       $45 
                (4%)       (3%)       (3%)       (1%)       (4%)      (3%)     (3%) 
Ohio             584       181        $59         $3        $55       $19       $40 
                (3%)       (4%)       (3%)       (1%)       (3%)      (3%)     (3%) 
New Jersey       507       136        $57         $5        $52       $16       $41 
                (3%)       (3%)       (3%)       (1%)       (3%)      (3%)     (3%) 
North            484       127        $56         $4        $53       $15       $42 
Carolina                                                                     
                (3%)       (3%)       (3%)       (1%)       (3%)      (2%)     (3%) 
Wisconsin        295       103        $45        $11        $35       $10       $35 
                (2%)       (2%)       (2%)       (3%)       (2%)      (2%)     (3%) 
Oregon           297       112        $43         $3        $40       $17       $26 
                (2%)       (2%)       (2%)       (1%)       (2%)      (3%)     (2%) 
Michigan         450       110        $41         $3        $38       $15       $25 
                (2%)       (2%)       (2%)       (1%)       (2%)      (3%)     (2%) 
Colorado         430       127        $39         $4        $35       $20       $19 
                (2%)       (3%)       (2%)       (1%)       (2%)      (3%)     (1%) 
Illinois         528       109        $38         $6        $31       $12       $25 
                (3%)       (2%)       (2%)       (2%)       (2%)      (2%)     (2%) 

             Page 48 GAO-06-565 Small Business Innovation Research

Appendix II Detailed Information on SBIR Awards Made by NIH During Fiscal
Years 2001 through 2004

                         (Continued From Previous Page)

             Page 49 GAO-06-565 Small Business Innovation Research

(Dollars in                                                              
millions)                                                                
                                                   Dollars to            
                                      Dollars to firms that              
                                                 had                     
                                      firms that not received Dollars to Dollars to 
                                      had                                
                                        received      venture awards         awards 
                                                              within          above 
          Total                 Total    venture      capital SBA's      SBA's      
 applications -               dollars    capital investment - guidelines guidelines 
     number and Total         awarded investment   number and - number   - number   
                awards -   number and   - number              and        and        
                number and                   and                         
State           percentage percentage percentage percentage   percentage percentage 
percentage      90         $31        $1         $31          $13        $19        
Minnesota 336                                                            
             (2%)   (2%)          (2%) (Less        (2%)        (2%)           (1%)
                                       than                          
                                       1%)                           
Connecticut   256     77           $26    $4         $22          $8            $18
             (1%)   (2%)          (1%)  (1%)        (1%)        (1%)           (1%)
Arizona       219     60           $26    $3         $23         $12            $14
             (1%)   (1%)          (1%)  (1%)        (1%)        (2%)           (1%)
Florida       393     81           $23    $1         $23         $11            $13
             (2%)   (2%)          (1%) (Less        (1%)        (2%)           (1%)
                                       than                          
                                       1%)                           
Utah          267     72           $21    $1         $19         $13             $8
             (1%)   (1%)          (1%) (Less        (1%)        (2%)           (1%)
                                       than                          
                                       1%)                           
New           168     58           $20    $1         $19         $11             $9
Hampshire                                                            
             (1%)   (1%)          (1%) (Less        (1%)        (2%)           (1%)
                                       than                          
                                       1%)                           
Georgia       209     51           $20    $6         $14          $5            $15
             (1%)   (1%)          (1%)  (2%)        (1%)        (1%)           (1%)
Indiana       170     44           $18    $4         $13          $4            $13
             (1%)   (1%)          (1%)  (1%)        (1%)        (1%)           (1%)
District of   123     42           $16    $0         $16          $5            $12
Columbia     (1%)   (1%)          (1%)  (0%)        (1%)        (1%)           (1%)
Rhode         115     37           $16    $1         $14          $3            $12
Island                                                               
             (1%)   (1%)          (1%) (Less        (1%)        (1%)           (1%)
                                       than                          
                                       1%)                           
Hawaii         45     13           $14   $13          $1   Less than            $14
                                                                  $1 
              (Less than          (1%)  (4%) (Less than  (Less than            (1%)
               1%) (Less                     1%)         1%)         
                than 1%)                                             
Missouri      188     43           $13    $2         $11          $9             $4
             (1%)   (1%)          (1%)  (1%)        (1%)        (2%) (Less than 1%)
Alabama       127     36           $12    $2         $10          $5             $7
             (1%)   (1%)          (1%)  (1%)        (1%)        (1%)           (1%)
South         110     33           $12    $4          $7          $3             $8
Carolina                                                             
             (1%)   (1%)          (1%)  (1%) (Less than         (1%)           (1%)
                                             1%)                     
New Mexico    137     37           $11    $1         $10          $5             $6
             (1%)   (1%)          (1%) (Less        (1%)        (1%) (Less than 1%)
                                       than                          
                                       1%)                           
Iowa           81     20            $9    $1          $8          $2             $7
              (Less than (Less than    (Less (Less than  (Less than            (1%)
               1%) (Less 1%)           than  1%)         1%)         
                than 1%)               1%)                           
Oklahoma          78  19            $9    $3          $6          $3             $6
              (Less than (Less than          (Less than  (Less than      
               1%) (Less 1%)            (1%) 1%)         1%)         (Less than 1%)
                than 1%)                                             

Appendix II Detailed Information on SBIR Awards Made by NIH During Fiscal
Years 2001 through 2004

                         (Continued From Previous Page)

             Page 50 GAO-06-565 Small Business Innovation Research

(Dollars in millions)                                                          
                                                         Dollars to            
                                            Dollars to firms that              
                                                       had                     
                                            firms that not received Dollars to Dollars to 
                                            had                                
                                              received      venture awards         awards 
                                                                    within          above 
 Total applications -                 Total    venture      capital SBA's      SBA's      
           number and               dollars    capital investment - guidelines guidelines 
                      Total         awarded investment   number and - number   - number   
                      awards -   number and   - number              and        and        
                      number and                   and                         
State percentage      percentage percentage percentage percentage   percentage percentage 
Tennessee 151         28         $9         Less than  $8           $3         $5         
                                            $1                                 
             (1%)       (1%) (Less than 1%)  (Less        (1%)        (1%) (Less than 1%)
                                             than                          
                                             1%)                           
Kentucky      120         21              $8    $2          $7          $3             $5
             (1%) (Less than (Less than 1%)  (Less (Less than         (1%) (Less than 1%)
                  1%)                        than  1%)                     
                                             1%)                           
Nebraska       44         16              $8    $0          $8          $2             $6
            (Less (Less than (Less than 1%)   (0%) (Less than  (Less than  (Less than 1%)
             than 1%)                              1%)         1%)         
              1%)                                                          
Vermont        64         20              $7    $0          $7          $3             $5
            (Less (Less than (Less than 1%)   (0%) (Less than  (Less than  (Less than 1%)
             than 1%)                              1%)         1%)         
              1%)                                                          
Delaware      115         22              $6    $0          $6          $3             $3
             (1%) (Less than (Less than 1%)   (0%) (Less than         (1%) (Less than 1%)
                  1%)                              1%)                     
Kansas         66         19              $5    $0          $5          $3             $2
            (Less (Less than (Less than 1%)   (0%) (Less than         (1%) (Less than 1%)
             than 1%)                              1%)                     
              1%)                                                          
Montana        66         12              $4    $0          $4          $1             $3
            (Less (Less than (Less than 1%)   (0%) (Less than  (Less than  (Less than 1%)
             than 1%)                              1%)         1%)         
              1%)                                                          
Nevada         49         12              $4    $0          $4          $4   Less than $1
            (Less (Less than (Less than 1%)   (0%) (Less than         (1%) (Less than 1%)
             than 1%)                              1%)                     
              1%)                                                          
Maine          55         13              $4    $0          $4          $2             $2
            (Less (Less than (Less than 1%)   (0%) (Less than  (Less than  (Less than 1%)
             than 1%)                              1%)         1%)         
              1%)                                                          
Wyoming        19          8              $3    $0          $3          $2             $1
            (Less (Less than (Less than 1%)   (0%) (Less than  (Less than  (Less than 1%)
             than 1%)                              1%)         1%)         
              1%)                                                          
Arkansas       47         10              $2    $0          $2          $1             $1
            (Less (Less than (Less than 1%)   (0%) (Less than  (Less than  (Less than 1%)
             than 1%)                              1%)         1%)         
              1%)                                                          
North          27          7              $2    $0          $2          $1             $1
Dakota                                                                     
            (Less (Less than (Less than 1%)   (0%) (Less than  (Less than  (Less than 1%)
             than 1%)                              1%)         1%)         
              1%)                                                          
Louisiana      75          9              $2    $0          $2          $1             $1
            (Less (Less than (Less than 1%)   (0%) (Less than  (Less than  (Less than 1%)
             than 1%)                              1%)         1%)         
              1%)                                                          
South          35          4              $2    $0          $2          $1             $1
Dakota                                                                     
            (Less (Less than (Less than 1%)   (0%) (Less than  (Less than  (Less than 1%)
             than 1%)                              1%)         1%)         
              1%)                                                          
Idaho          28          8              $1    $0          $1          $1   Less than $1
            (Less (Less than (Less than 1%)   (0%) (Less than  (Less than  (Less than 1%)
             than 1%)                              1%)         1%)         
              1%)                                                          
Mississippi    18          6              $1    $0          $1   Less than             $1
                                                                        $1 
            (Less (Less than (Less than 1%)   (0%) (Less than  (Less than  (Less than 1%)
             than 1%)                              1%)         1%)         
              1%)                                                          
Alaska         11          2    Less than $1    $0   Less than   Less than   Less than $1
                                                            $1          $1 
            (Less (Less than (Less than 1%)   (0%) (Less than  (Less than  (Less than 1%)
             than 1%)                              1%)         1%)         
              1%)                                                          
West           17          1    Less than $1    $0   Less than   Less than             $0
Virginia                                                    $1          $1 
            (Less (Less than (Less than 1%)   (0%) (Less than  (Less than            (0%)
             than 1%)                              1%)         1%)         
              1%)                                                          

Appendix II Detailed Information on SBIR Awards Made by NIH During Fiscal Years
                               2001 through 2004

                         (Continued From Previous Page)

 (Dollars in                                                         
 millions)                                                           
                                               Dollars to            
                                    Dollars to firms that            
                                               had                   
                                    firms that        not Dollars to Dollars to 
                                    had          received            
                                      received    venture awards         awards 
                                                          within          above 
        Total                 Total    venture    capital SBA's      SBA's      
 applications               dollars    capital investment guidelines guidelines 
 - number and Total         awarded investment   - number - number   - number   
              awards -   number and   - number        and and        and        
              number and                   and                       
 State        percentage percentage percentage percentage percentage percentage 
 percentage                                                          

Total 18,948a 5,061 $1,992 $356 $1,637 $606 $1,386 (100%) (100%) (100%)
(100%) (100%) (100%) (100%)

Source: GAO analysis of NIH, Dow Jones, and IDI data.

aAlso included in this total are three applications submitted to NIH by
firms in Puerto Rico, none of which were funded.

Note: Percentages and totals may not add because of rounding.

Table 24: Component Distribution of NIH Awards, Dollars Awarded, Dollars
to Firms That Had and Had Not Received Venture Capital, and Dollars to
Awards within and above SBA's Guidelines, Fiscal Years 2001 through 2004

 (Dollars in millions)
                                               Dollars to Dollars to Dollars to 
                           Dollars to firms         firms            
                          that had received  that had not awards         awards 
                                                          within          above 
                             Total venture capital        SBA's      SBA's      
                           dollars investment - number    guidelines guidelines 
                         awarded - and received venture   - number   - number   
 Total awards - number      number capital investment -   and        and        
 and                           and number and                        
 Awarding     percentage percentage percentage percentage percentage percentage 
 component                                                           
 National            945       $347    $80           $267        $83       $264 
 Cancer                                                              
 Institute         (19%)      (17%)   (23%)         (16%)      (14%)      (19%) 
 National            618       $276    $120          $156        $52       $224 
 Institute of                                                        
 Allergy and       (12%)      (14%)   (34%)         (10%)       (9%)      (16%) 
 Infectious                                                          
 Diseases                                                            
 National            597      $236        $28        $209        $78       $159 
 Heart, Lung,                                                        
 and Blood         (12%)     (12%)        (8%)      (13%)      (13%)      (11%) 
 Institute                                                           
 National            390      $151        $33        $118        $51       $100 
 Institute of                                                        
 General            (8%)      (8%)        (9%)       (7%)       (8%)       (7%) 
 Medical                                                             
 Sciences                                                            
 National            335      $142         $18       $123        $36       $106 
 Institute of                                                        
 Diabetes and       (7%)      (7%)         (5%)      (8%)       (6%)       (8%) 
 Digestive                                                           
 and Kidney                                                          
 Diseases                                                            
 National            289      $111          $21       $90        $36        $75 
 Institute of                                                        
 Neurological       (6%)      (6%)          (6%)     (5%)       (6%)       (5%) 
 Disorders                                                           
 and Stroke                                                          
 National            212      $106           $8       $98        $33        $73 
 Center for                                                          
 Research           (4%)      (5%)          (2%)     (6%)       (5%)       (5%) 
 Resources                                                           

             Page 51 GAO-06-565 Small Business Innovation Research

Appendix II Detailed Information on SBIR Awards Made by NIH During Fiscal
Years 2001 through

             Page 52 GAO-06-565 Small Business Innovation Research

  (Continued From Previous Page)
  (Dollars in millions)
                                             Dollars to Dollars to Dollars to 
                       Dollars to firms           firms            
                      that had received    that had not awards         awards 
                                                        within          above 
                         Total                          SBA's      SBA's      
                       dollars venture capital          guidelines guidelines 
                     awarded - investment - number and  - number   - number   
  Total awards -        number received venture capital and        and        
  number and               and investment - number and             
  Awarding  percentage percentage percentage percentage percentage percentage 
  component                                                        
  National                                                                    
  Institute        240        $91         $6        $85        $60        $30
  of                                                               
  Child                                                                       
  Health          (5%)       (5%)       (2%)       (5%)      (10%)       (2%)
  and                                                              
  Human Development                                                
  National         201       $80         $3         $77        $26        $55 
  Institute of                                                     
  Mental Health    (4%)     (4%)        (1%)       (5%)       (4%)       (4%) 
  National         197       $78         $4         $74        $23        $55 
  Institute on                                                     
  Aging            (4%)     (4%)        (1%)       (5%)       (4%)       (4%) 
  National         132       $56         $3         $53        $18        $39 
  Institute on                                                     
  Drug Abuse       (3%)     (3%)        (1%)       (3%)       (3%)       (3%) 
  National Eye     159       $50         $5         $46        $15        $35 
  Institute                                                        
                   (3%)     (3%)        (1%)       (3%)       (3%)       (3%) 
  National         125       $47         $3         $44        $21        $26 
  Institute of                                                     
  Environmental    (2%)     (2%)        (1%)       (3%)       (3%)       (2%) 
  Health                                                           
  Sciences                                                         
  National                                                                    
  Institute      120         $38         $5         $33        $12        $26
  of                                                               
  Arthritis      (2%)       (2%)        (1%)       (2%)       (2%)       (2%) 
  and                                                              
  Musculoskeletal and                                              
  Skin Diseases                                                    
  National            92     $36        $12         $25         $7        $29 
  Human                                                            
  Genome        (2%)        (2%)        (3%)       (2%)       (1%)       (2%) 
  Research                                                         
  Institute                                                        
  National            98    $35  Less than $1       $35        $15        $21 
  Institute on                                                     
  Deafness and    (2%)     (2%) (Less than 1%)     (2%)       (2%)       (2%) 
  Other                                                            
  Communication                                                    
  Disorders                                                        
  National          99      $32       $2            $30        $10        $23 
  Institute of                                                     
  Biomedical       (2%)    (2%)      (1%)          (2%)       (2%)       (2%) 
  Imaging                                                          
  and                                                              
  Bioengineering                                                   
  National          90      $28       $1            $27        $13        $15 
  Institute of                                                     
  Dental and       (2%)    (1%) (Less than 1%)     (2%)       (2%)       (1%) 
  Craniofacial                                                     
  Research                                                         
  National            58     $25         $0         $25         $7        $18 
  Institute on                                                     
  Alcohol        (1%)       (1%)        (0%)       (2%)       (1%)       (1%) 
  Abuse and                                                        
  Alcoholism                                                       
  National            25     $11 Less than $1       $11         $6         $5 
  Institute of                                                     
  Nursing   (Less than     (1%) (Less than 1%)     (1%)       (1%) (Less than 
  Research      1%)                                                       1%) 
  National                                                                    
  Center              28     $9       $2             $8         $2         $8
  for                                                              
  Complementary      (1%) (Less (Less than   (Less than (Less than       (1%) 
  and                  than 1%)    1%)              1%) 1%)        
  Alternative Medicine                                             

Appendix II Detailed Information on SBIR Awards Made by NIH During Fiscal Years
                               2001 through 2004

(Continued From Previous Page)
(Dollars in millions)
                                               Dollars to Dollars to Dollars to 
                           Dollars to firms         firms            
                          that had received  that had not awards         awards 
                                                          within          above 
                   Total dollars venture capital          SBA's      SBA's      
                       awarded - investment - number and  guidelines guidelines 
Total awards -        number and received venture capital - number   - number   
number and                       investment - number and  and        and        
Awarding      percentage percentage percentage percentage percentage percentage 
component                                                            
National               9         $4         $1         $3         $2         $2 
Library of                                                           
Medicine      (Less than 1%) (Less   (Less     (Less than (Less than (Less than 
                          than 1%) than 1%)           1%) 1%)               1%) 
National Center      2 Less than $1       $0    Less than  Less than  Less than 
on                                                     $1         $1         $1 
Minority     (Less than 1%) (Less than  (0%)   (Less than (Less than (Less than 
Health and              1%)                           1%) 1%)               1%) 
Health                                                               
Disparities                                                          
Total                  5,061  $1,992     $356      $1,637       $606     $1,386 
                      (100%)  (100%)    (100%)     (100%)     (100%)     (100%) 

Source: GAO analysis of NIH, Dow Jones, and IDI data.

Note: Percentages and totals may not add because of rounding.

Table 25: Geographical Distribution of NIH Dollars Awarded, Overall and to
Firms That Had Received Venture Capital Investment, Fiscal Years 2001-2002
Compared to Fiscal Years 2003-2004

(Dollars in millions)
               Fiscal years 2001-2002                Fiscal years 2003-2004
                         Dollars to firms that had  Dollars to firms that had
                          received venture capital   received venture capital
     Total dollars awarded - investment - number   Total dollars investment - 
                             and                       awarded - number and   
State         number and             percentage    number and   percentage 
                 percentage                           percentage 
California           $176                   $52          $219          $80 
                       (19%)                 (41%)         (21%)        (35%) 
Massachusetts        $142                    $9          $142          $20 
                       (15%)                  (7%)         (13%)         (9%) 
Maryland              $65                    $3           $77          $20 
                        (7%)                  (2%)          (7%)         (9%) 
New York              $47                   $10           $71          $28 
                        (5%)                  (8%)          (7%)        (12%) 
Texas                 $26                    $5           $55           $6 
                        (3%)                  (4%)          (5%)         (3%) 
Pennsylvania          $38                    $5           $43           $6 
                        (4%)                  (4%)          (4%)         (3%) 
Washington            $40                    $7           $39          $10 
                        (4%)                  (6%)          (4%)         (4%) 
Virginia              $28                    $2           $38           $2 
                        (3%)                  (1%)          (4%)         (1%) 

             Page 53 GAO-06-565 Small Business Innovation Research

Appendix II Detailed Information on SBIR Awards Made by NIH During Fiscal
Years 2001 through Appendix II Detailed Information on SBIR Awards Made by
NIH During Fiscal Years 2001 through

             Page 54 GAO-06-565 Small Business Innovation Research

(Continued From Previous Page)
(Dollars in millions)
              Fiscal years 2001-2002                Fiscal years 2003-2004
                       Dollars to firms that had    Dollars to firms that had
                        received venture capital     received venture capital
                    Total dollars investment -   Total dollars investment -   
                        awarded - number and         awarded - number and     
State               number and     percentage    number and     percentage 
                       percentage                   percentage 
Ohio                       $32             $2           $27             $1 
                             (3%)           (2%)          (3%)           (1%) 
New Jersey                 $31             $2           $26             $3 
                             (3%)           (1%)          (2%)           (1%) 
North Carolina             $32             $1           $24             $3 
                             (3%)           (1%)          (2%)           (1%) 
Wisconsin                  $20             $6           $25             $5 
                             (2%)           (5%)          (2%)           (2%) 
Oregon                     $22             $1           $21             $2 
                             (2%)           (1%)          (2%)           (1%) 
Michigan                   $17             $1           $24             $1 
                             (2%)           (1%)          (2%)           (1%) 
Colorado                   $18             $2           $21             $2 
                             (2%)           (1%)          (2%)           (1%) 
Illinois                   $20             $3           $17             $3 
                             (2%)           (2%)          (2%)           (2%) 
Minnesota                  $14             $0           $17             $1 
                             (2%)           (0%)          (2%) (Less than 1%) 
Connecticut                 $8             $1           $18             $4 
                             (1%) (Less than 1%)          (2%)           (2%) 
Arizona                    $16             $1           $11             $2 
                             (2%)           (1%)          (1%)           (1%) 
Florida                     $9   Less than $1           $14   Less than $1 
                             (1%) (Less than 1%)          (1%) (Less than 1%) 
Utah                       $14             $1            $6   Less than $1 
                             (2%)           (1%)          (1%) (Less than 1%) 
New Hampshire               $9   Less than $1           $11             $1 
                             (1%) (Less than 1%)          (1%) (Less than 1%) 
Georgia                     $9             $2           $11             $4 
                             (1%)           (1%)          (1%)           (2%) 
Indiana                     $7             $1           $11             $3 
                             (1%)           (1%)          (1%)           (1%) 
District of                 $9             $0            $7             $0 
Columbia                  (1%)           (0%)          (1%)           (0%) 
Rhode Island                $7   Less than $1            $8             $1 
                             (1%) (Less than 1%)          (1%)           (1%) 
Hawaii                      $3             $2           $11            $11 
                   (Less than 1%)           (2%)          (1%)           (5%) 

             Page 55 GAO-06-565 Small Business Innovation Research

(Continued From Previous Page)
(Dollars in millions)
              Fiscal years 2001-2002               Fiscal years 2003-2004
                      Dollars to firms that had     Dollars to firms that had
                       received venture capital      received venture capital
                   Total dollars investment -    Total dollars investment -   
                       awarded - number and          awarded - number and     
State              number and     percentage     number and     percentage 
                      percentage                    percentage 
Missouri                   $7             $2             $6   Less than $1 
                            (1%)           (1%)           (1%) (Less than 1%) 
Alabama                    $8             $2             $4             $1 
                            (1%)           (1%) (Less than 1%) (Less than 1%) 
South Carolina             $6             $2             $6             $2 
                            (1%)           (2%)           (1%)           (1%) 
New Mexico                 $5             $1             $6   Less than $1 
                            (1%)           (1%)           (1%) (Less than 1%) 
Iowa                       $6             $0             $3             $1 
                            (1%)           (0%) (Less than 1%)           (1%) 
Oklahoma                   $3             $1             $6             $2 
                  (Less than 1%)           (1%)           (1%)           (1%) 
Tennessee                  $2   Less than $1             $6             $0 
                  (Less than 1%) (Less than 1%)           (1%)           (0%) 
Kentucky                   $3             $1             $5             $1 
                  (Less than 1%)           (1%) (Less than 1%) (Less than 1%) 
Nebraska                   $2             $0             $6             $0 
                  (Less than 1%)           (0%)           (1%)           (0%) 
Vermont                    $2             $0             $6             $0 
                  (Less than 1%)           (0%)           (1%)           (0%) 
Delaware                   $2             $0             $3             $0 
                  (Less than 1%)           (0%) (Less than 1%)           (0%) 
Kansas                     $3             $0             $2             $0 
                  (Less than 1%)           (0%) (Less than 1%)           (0%) 
Montana                    $2             $0             $3             $0 
                  (Less than 1%)           (0%) (Less than 1%)           (0%) 
Nevada                     $3             $0             $1             $0 
                  (Less than 1%)           (0%) (Less than 1%)           (0%) 
Maine                      $3             $0             $1             $0 
                  (Less than 1%)           (0%) (Less than 1%)           (0%) 
Wyoming                    $1             $0             $1             $0 
                  (Less than 1%)           (0%) (Less than 1%)           (0%) 
Arkansas                   $1             $0             $1             $0 
                  (Less than 1%)           (0%) (Less than 1%)           (0%) 
North Dakota               $1             $0             $1             $0 
                  (Less than 1%)           (0%) (Less than 1%)           (0%) 
Louisiana                  $1             $0             $1             $0 
                  (Less than 1%)           (0%) (Less than 1%)           (0%) 

Appendix II Detailed Information on SBIR Awards Made by NIH During Fiscal Years
                               2001 through 2004

(Continued From Previous Page)
(Dollars in millions)
               Fiscal years 2001-2002               Fiscal years 2003-2004
                        Dollars to firms that had   Dollars to firms that had
                         received venture capital    received venture capital
                       Total dollars investment -  Total dollars investment - 
                           awarded - number and        awarded - number and   
State                  number and   percentage     number and   percentage 
                          percentage                  percentage 
South Dakota                   $2           $0             $0           $0 
                      (Less than 1%)         (0%)           (0%)         (0%) 
Idaho                          $1           $0             $1           $0 
                      (Less than 1%)         (0%) (Less than 1%)         (0%) 
Mississippi          Less than $1           $0             $1           $0 
                      (Less than 1%)         (0%) (Less than 1%)         (0%) 
Alaska                         $0           $0   Less than $1           $0 
                                (0%)         (0%) (Less than 1%)         (0%) 
West Virginia        Less than $1           $0             $0           $0 
                      (Less than 1%)         (0%)           (0%)         (0%) 
Total                        $925         $129         $1,068         $227 
                              (100%)       (100%)         (100%)       (100%) 

Source: GAO analysis of NIH, Dow Jones, and IDI data.

Note: Percentages and totals may not add because of rounding.

Table 26: Component Distribution of NIH Dollars Awarded, Overall and to
Firms That Had Received Venture Capital Investment, Fiscal Years 2001-2002
Compared to Fiscal Years 2003-2004

(Dollars in millions)
                      Fiscal years 2001-2002      Fiscal years 2003-2004
                   Dollars to firms that had        Dollars to firms that had
                                received                             received
                  Total dollars venture                               venture
                                capital                               capital
               awarded - number investment - Total dollars       investment -
                                number and   awarded -             number and
Awarding      and percentage   percentage number and            percentage
component                                 percentage          
National                $156          $27                $192          $53
Cancer                                                        
Institute              (17%)        (21%)               (18%)        (23%)
National                $103          $38                $173          $82
Institute of                                                  
Allergy and            (11%)        (29%)               (16%)        (36%)
Infectious                                                    
Diseases                                  
National             $115             $10          $121                $18 
Heart, Lung,                                                      
and Blood           (12%)            (8%)          (11%)              (8%) 
Institute                                                         
National             $75              $14           $76                $19 
Institute of                                                      
General              (8%)           (11%)          (7%)               (8%) 
Medical                                                           
Sciences                                  
National              $63              $7           $79                $11 
Institute of                                                      
Diabetes and          (7%)           (6%)          (7%)               (5%) 
Digestive                                                         
and Kidney                                
Diseases                                  

             Page 56 GAO-06-565 Small Business Innovation Research

Appendix II Detailed Information on SBIR Awards Made by NIH During Fiscal
Years 2001 through Appendix II Detailed Information on SBIR Awards Made by
NIH During Fiscal Years 2001 through

             Page 57 GAO-06-565 Small Business Innovation Research

(Continued From Previous Page)
(Dollars in millions)
                         Fiscal years 2001-2002    Fiscal years 2003-2004
                      Dollars to firms that had     Dollars to firms that had
                          Total received                             received
                        dollars venture capital                       venture
                                                                      capital
                     awarded -  investment -    Total dollars    investment -
                     number     number and      awarded -          number and
Awarding                 and      percentage number and         percentage
component         percentage                 percentage       
National                 $54              $8              $57          $14
Institute of                                                  
Neurological            (6%)            (6%)             (5%)         (6%)
Disorders                                                     
and Stroke                                   
National Center for         $61           $2          $45               $6 
Research Resources         (7%)         (2%)          (4%)            (3%) 
National Institute of       $44           $3          $47               $3 
Child Health and           (5%)         (2%)          (4%)            (1%) 
Human Development                            
National Institute of     $39             $1                $41         $2
Mental Health            (4%)           (1%)               (4%)       (1%)
National Institute on     $40   Less than $1                $38         $3
Aging                    (4%)     (Less than               (4%)       (1%)
                                            1%)                    
National Institute on     $29             $3                $28  Less than
                                                                           $1
Drug Abuse               (3%)           (2%)               (3%) (Less than
                                                                          1%)
National Eye Institute    $22             $2                $28         $3
                            (2%)           (2%)               (3%)       (1%)
National Institute of     $22             $1                $25         $2
Environmental Health     (2%)           (1%)               (2%)       (1%)
Sciences                                     
National Institute        $20             $3          $18               $2 
of                                                                  
Arthritis and             (2%)          (2%)          (2%)            (1%) 
Musculoskeletal and                          
Skin Diseases                                
National Human            $19             $7          $17               $5 
Genome Research          (2%)           (5%)          (2%)            (2%) 
Institute                                    
National Institute on      $19            $0                $16  Less than
                                                                           $1
Deafness and Other         (2%)         (0%)               (2%) (Less than
                                                                          1%)
Communication                                
Disorders                                    
National Institute of         $8          $0                $25         $2
Biomedical Imaging           (1%)       (0%)               (2%)       (1%)
and Bioengineering                                              
National Institute of         $15         $1                $13  Less than
                                                                           $1
Dental and Craniofacial      (2%)       (1%)               (1%) (Less than
                                                                          1%)
Research                                     
National Institute         $8             $0          $17               $0 
on                                                                  
Alcohol Abuse and         (1%)          (0%)          (2%)            (0%) 
Alcoholism                                   

(Continued From Previous Page)
(Dollars in millions)
                         Fiscal years 2001-2002    Fiscal years 2003-2004
                      Dollars to firms that had     Dollars to firms that had
                           Total received                            received
                         dollars venture                              venture
                                 capital                              capital
                     awarded -   investment -   Total dollars    investment -
                     number      number and     awarded -          number and
Awarding                  and     percentage number and         percentage
component          percentage                percentage     
National                   $5             $0             $6   Less than $1
Institute of                                                
Nursing Research         (1%)           (0%)           (1%) (Less than 1%)
National Center            $6             $1             $3             $1
for                                                         
Complementary and        (1%)           (1%) (Less than 1%) (Less than 1%)
Alternative Medicine                         
National Library of        $2             $0                $2          $1 
Medicine                 (Less          (0%)  (Less than 1%)    (Less than 
                           than 1%)                                       1%) 
National Center on         $0             $0   Less than $1             $0 
Minority Health and       (0%)          (0%)  (Less than 1%)          (0%) 
Health Disparities                                             
Total                     $925          $129            $1,068        $227 
                            (100%)       (100%)            (100%)      (100%) 

Source: GAO analysis of NIH, Dow Jones, and IDI data.

Note: Percentages and totals may not add because of rounding.

Appendix III

Detailed Information on SBIR Awards Made by DoD During Fiscal Years 2001 through
2004

    Table 27: Geographical Distribution of DoD's Phase I Applications, Total
      Awards, Total Dollars Awarded, Dollars to Firms That Had and Had Not
     Received Venture Capital Investment, and Dollars to Awards within and
             above SBA's Guidelines, Fiscal Years 2001 through 2004

(Dollars in                                                                      
millions)                                                                        
                                                Dollars to Dollars to            
                                                firms                            
                                          Total   that had firms that Dollars to Dollars to
                                                           had                   
                  Phase I      Total    dollars   received        not     awards     awards
             applications    phase I  awarded -    venture   received     within      above
             - number and  and phase number and    capital    venture      SBA's      SBA's
                           II awards            investment    capital guidelines guidelines
                          number and              - number investment   - number   - number
                                                       and   - number        and        and
                                                                  and            
State        percentage   percentage percentage percentage percentage percentage percentage
California   10,584       2,433      $741       $68        $673       $567       $175
                       (21%)      (22%)      (23%)      (31%)      (22%)     (22%)    (24%) 
Massachusetts          6,173      1,568       $483       $17        $465      $363     $120 
                       (12%)      (14%)      (15%)       (8%)      (15%)     (14%)    (16%) 
Virginia               3,787       825        $245       $12        $232      $185      $60 
                       (7%)        (8%)       (7%)       (6%)       (8%)      (7%)     (8%) 
Ohio                   2,022       485        $163        $1        $161      $130      $33 
                       (4%)        (4%)       (5%)       (1%)       (5%)      (5%)     (4%) 
Colorado               1,956       543        $160       $14        $146      $128      $32 
                       (4%)        (5%)       (5%)       (6%)       (5%)      (5%)     (4%) 
Maryland               2,594       543        $152        $7        $145      $121      $31 
                       (5%)        (5%)       (5%)       (3%)       (5%)      (5%)     (4%) 
Pennsylvania           1,840       440        $132        $2        $131      $103      $29 
                       (4%)        (4%)       (4%)       (1%)       (4%)      (4%)     (4%) 
New York               1,946       423        $126       $14        $113      $97       $29 
                       (4%)        (4%)       (4%)       (6%)       (4%)      (4%)     (4%) 
Texas                  2,619       447        $125        $6        $119      $101      $23 
                       (5%)        (4%)       (4%)       (3%)       (4%)      (4%)     (3%) 
New Jersey             1,644       305        $88        $12        $76       $68       $20 
                       (3%)        (3%)       (3%)       (5%)       (2%)      (3%)     (3%) 
Florida                1,662       280        $83         $2        $81       $66       $17 
                       (3%)        (3%)       (3%)       (1%)       (3%)      (3%)     (2%) 
Alabama                1,139       280        $81         $6        $75       $67       $14 
                       (2%)        (3%)       (2%)       (3%)       (2%)      (3%)     (2%) 
Michigan               1,400       224        $69        $14        $55       $52       $17 
                       (3%)        (2%)       (2%)       (7%)       (2%)      (2%)     (2%) 
Washington              828        179        $63         $3        $60       $47       $17 
                       (2%)        (2%)       (2%)       (2%)       (2%)      (2%)     (2%) 
Arizona                1,291       226        $60         $3        $56       $51        $9 
                       (3%)        (2%)       (2%)       (1%)       (2%)      (2%)     (1%) 
New Mexico              801        179        $50         $1        $48       $37       $13 
                       (2%)        (2%)       (2%)       (1%)       (2%)      (1%)     (2%) 

             Page 59 GAO-06-565 Small Business Innovation Research

Appendix III Detailed Information on SBIR Awards Made by DoD During Fiscal
Years 2001 through 2004

                         (Continued From Previous Page)

             Page 60 GAO-06-565 Small Business Innovation Research

(Dollars in                                                                     
millions)                                                                       
                                               Dollars to Dollars to            
                                               firms                            
                                         Total   that had firms that Dollars to Dollars to
                                                          had                   
                 Phase I      Total    dollars   received        not     awards     awards
            applications    phase I  awarded -    venture   received     within      above
            - number and  and phase number and    capital    venture      SBA's      SBA's
                          II awards            investment    capital guidelines guidelines
                         number and              - number investment   - number   - number
                                                      and   - number        and        and
                                                                 and            
State       percentage   percentage percentage percentage percentage percentage percentage
Connecticut 705          151        $46        $3         $43        $39        $8 
                          (1%)       (1%)       (1%)       (1%)       (1%)    (2%)    (1%) 
New                        541        142        $44 Less than         $43     $31     $13 
Hampshire                                                $1                        
                          (1%)       (1%)       (1%) (Less than       (1%)    (1%)    (2%) 
                                                            1%)                    
Minnesota                  645        134        $41        $11        $31     $35      $6 
                          (1%)       (1%)       (1%)       (5%)       (1%)    (1%)    (1%) 
Georgia                    673        101        $34         $8        $27     $23     $11 
                          (1%)       (1%)       (1%)       (4%)       (1%)    (1%)    (2%) 
Illinois                   788        112        $31 Less than         $31     $27      $5 
                                                         $1                        
                          (2%)       (1%)       (1%) (Less than       (1%)    (1%)    (1%) 
                                                            1%)                    
Nevada                     189         62        $25         $0        $25     $17      $8 
               (Less than            (1%)       (1%)       (0%)       (1%)    (1%)    (1%) 
                           1%)                                                     
North                      478         92        $23         $6        $16     $21      $1 
Carolina                                                                           
                          (1%)       (1%)       (1%)       (3%)       (1%)    (1%)   (Less 
                                                                                      than 
                                                                                       1%) 
Oregon                     350         73        $21         $1        $19     $17      $4 
                          (1%)       (1%)       (1%)       (1%)       (1%)    (1%)    (1%) 
Utah                       352         63        $21         $1        $20     $16      $4 
                          (1%)       (1%)       (1%) (Less than       (1%)    (1%)    (1%) 
                                                            1%)                    
Tennessee                  383         57        $17         $0        $17     $15      $2 
                          (1%)       (1%)       (1%)       (0%)       (1%)    (1%)   (Less 
                                                                                      than 
                                                                                       1%) 
Rhode                      151         35        $15         $0        $15     $11      $4 
Island                                                                             
               (Less than      (Less than (Less than       (0%) (Less than  (Less     (1%) 
                                                                            than   
                           1%)        1%)        1%)                   1%)     1%) 
West                       201         45        $15         $0        $15      $8      $7 
Virginia                                                                           
               (Less than      (Less than (Less than       (0%) (Less than  (Less     (1%) 
                                                                            than   
                           1%)        1%)        1%)                   1%)     1%) 
Indiana                    287         49        $14         $1        $12     $11      $3 
                          (1%) (Less than (Less than       (1%) (Less than  (Less    (Less 
                                                                            than      than 
                                      1%)        1%)                   1%)     1%)     1%) 
Maine                      154         40        $13         $1        $13      $8      $5 
               (Less than      (Less than (Less than (Less than (Less than  (Less     (1%) 
                                                     1%)                    than   
                           1%)        1%)        1%)                   1%)     1%) 

Appendix III Detailed Information on SBIR Awards Made by DoD During Fiscal
Years 2001 through 2004

                         (Continued From Previous Page)

             Page 61 GAO-06-565 Small Business Innovation Research

(Dollars in     
millions)       
                                  Dollars to firms Dollars to                 
                          Total that had firms that had Dollars to Dollars to 
                   Phase I Total phase I dollars received not received awards 
                                                                within awards 
                   applications and phase II awarded - venture capital        
                   venture capital SBA's above SBA's                          
                   - number awards number investment - investment -           
                   guidelines - guidelines -                                  
                   and number and and number and number and number and number 
                                                                          and 
State           percentage percentage percentage percentage percentage     
                   percentage percentage                                      
South Carolina                                     190 42 $11 $0 $11 $8 $3 
                   (Less than (Less than (Less than (0%) (Less than (Less     
                   than (Less than                                            
                                                      1%) 1%) 1%) 1%) 1%) 1%) 
Wisconsin                                          173 29 $11 $1 $10 $9 $1 
                   (Less than (Less than (Less than (Less than (Less than     
                   (Less than (Less than 1%)                                  
                   1%) 1%) 1%) 1%) 1%) 1%)                                    
Oklahoma                                            226 46 $10 $3 $7 $8 $2 
                   (Less than (Less than (Less than (1%) (Less than (Less     
                   than (Less than                                            
                                                      1%) 1%) 1%) 1%) 1%) 1%) 
Idaho                                                178 27 $9 $0 $9 $4 $5 
                   (Less than (Less than (Less than (0%) (Less than (Less     
                   than (1%)                                                  
                   1%) 1%) 1%) 1%) 1%)                                        
Missouri                                   248 36 $8 $0 $8 $8 Less than $1 
                   (Less than (Less than (Less than (0%) (Less than (Less     
                   than (Less than                                            
                                                      1%) 1%) 1%) 1%) 1%) 1%) 
Montana                                              173 30 $8 $0 $8 $7 $1 
                   (Less than (Less than (Less than (0%) (Less than (Less     
                   than (Less than                                            
                                                      1%) 1%) 1%) 1%) 1%) 1%) 
Vermont                                              120 19 $7 $0 $7 $5 $1 
                   (Less than (Less than (Less than (0%) (Less than (Less     
                   than (Less than                                            
                                                      1%) 1%) 1%) 1%) 1%) 1%) 
Kansas                                     108 20 $7 $0 $7 $6 Less than $1 
                   (Less than (Less than (Less than (0%) (Less than (Less     
                   than (Less than                                            
                                                      1%) 1%) 1%) 1%) 1%) 1%) 
Louisiana                                  166 29 $6 Less than $1 $6 $5 $1 
                   (Less than (Less than (Less than (Less than (Less than     
                   (Less than (Less than                                      
                                                  1%) 1%) 1%) 1%) 1%) 1%) 1%) 
District of                                          129 20 $6 $0 $6 $5 $1 
Columbia        
                   (Less than (Less than (Less than (0%) (Less than (Less     
                   than (Less than                                            
                                                      1%) 1%) 1%) 1%) 1%) 1%) 
Hawaii                                               158 22 $6 $0 $6 $4 $2 
                   (Less than (Less than (Less than (0%) (Less than (Less     
                   than (Less than                                            
                                                          1%) 1%) 1%) 1%) 1%) 
Iowa                                                 143 17 $5 $0 $5 $4 $2 
                   (Less than (Less than (Less than (0%) (Less than 1%) (Less 
                   than (Less than                                            
                                                          1%) 1%) 1%) 1%) 1%) 
Delaware                                             153 21 $4 $0 $4 $3 $1 
                   (Less than (Less than (Less than (0%) (Less than (Less     
                   than (Less than                                            
                                                      1%) 1%) 1%) 1%) 1%) 1%) 

Appendix III Detailed Information on SBIR Awards Made by DoD During Fiscal Years
                               2001 through 2004

                         (Continued From Previous Page)

(Dollars in                                                                              
millions)                                                                                
                                               Dollars to firms    Dollars to            
                                         Total         that had firms that    Dollars to  Dollars to
                                                                had                      
                  Phase I  Total phase dollars received venture  not received     awards      awards
             applications  I and phase awarded          capital       venture     within above SBA's
             - number and    II awards       -     investment -       capital      SBA's  guidelines
                            number and  number       number and  investment - guidelines    - number
                                           and                     number and   - number         and
                                                                                     and 
State          percentage 81  percentage percentage $4 percentage percentage   percentage percentage 
Arkansas      (Less than 1%)    12 (Less    (Less than    $0 (0%)   $4 (Less     $4 (Less    $0 (0%) 
                                than 1%)           1%)              than 1%)     than 1%) 
Mississippi    95 (Less than    19 (Less $3 (Less than $1 (1%)      $2 (Less     $3 (Less $0 (0%)    
                         1%)    than 1%)           1%)              than 1%)     than 1%) 
Nebraska       49 (Less than    10 (Less $3 (Less than $0 (0%)      $3 (Less     $2 (Less   $1 (Less 
                         1%)    than 1%)           1%)              than 1%)     than 1%)   than 1%) 
Kentucky       64 (Less than     6 (Less $2 (Less than $0 (0%)      $2 (Less Less than $1   $2 (Less 
                         1%)    than 1%)           1%)              than 1%)   (Less than   than 1%) 
                                                                                      1%) 
Wyoming        42 (Less than     5 (Less $2 (Less than $0 (0%)      $2 (Less     $2 (Less  Less than 
                         1%)    than 1%)           1%)              than 1%)     than 1%)   $1 (Less 
                                                                                            than 1%) 
Alaska         36 (Less than 1%) 4 (Less $1 (Less than $0 (0%)    $1 (Less   $1 (Less     $0 (0%)    
                                than 1%)           1%)            than 1%)   than 1%)     
North          25 (Less than 1%) 3 (Less $1 (Less than $0 (0%)      $1 (Less     $1 (Less  Less than 
Dakota                          than 1%)           1%)              than 1%)     than 1%)   $1 (Less 
                                                                                            than 1%) 
South        29 (Less than 1%) 5 (Less than 1%) Less   $0 (0%)     Less than Less than $1 $0 (0%)    
Dakota                than $1 (Less than 1%)                        $1 (Less   (Less than 
                                                                    than 1%)          1%) 
Total       50,775a (100%)        10,958   $3,294      $218       $3,075     $2,550       $743       
                                  (100%)   (100%)      (100%)     (100%)     (100%)       (100%)     

Source: GAO analysis of DoD, Dow Jones, and IDI data.

aAlso included in this total are six phase I applications submitted to DoD
by firms in Puerto Rico, none of which were funded.

Notes: 

(1)
           Dollar totals include SBIR dollars and non-SBIR funds from DoD
           awarding components.

(2)
           Percentages and totals may not add because of rounding.

Appendix III Detailed Information on SBIR Awards Made by DoD During Fiscal Years
                               2001 through 2004

Table 28: Component Distribution of DoD Awards, Dollars Awarded, Dollars
to Firms That Had and Had Not Received Venture Capital, and Dollars to
Awards within and above SBA's Guidelines, Fiscal Years 2001 through 2004

 (Dollars in millions)
                                                                     Dollars to
                                    Dollars to firms that had
                                firms that had not        Dollars to Dollars to 
                                               received              
                                      received    venture awards         awards 
                                                          within          above 
                      Total dollars venture       capital      SBA's      SBA's 
                                    capital                          
          Total awards -  awarded - investment investment guidelines guidelines 
                                             - -              -               - 
              number and number and number and number and number and number and 
 Awarding     percentage percentage percentage percentage percentage percentage 
 component                                                           
 Air Force         2,783     $1,018        $53       $965       $756       $263 
                   (25%)      (31%)      (24%)      (31%)      (30%)      (35%) 
 Army              2,003       $683        $61       $622       $499       $185 
                   (18%)      (21%)      (28%)      (20%)      (20%)      (25%) 
 Navy              2,548       $619        $32       $587       $508       $111 
                   (23%)      (19%)      (15%)      (19%)      (20%)      (15%) 
 Missile                                                                        
 Defense           1,912       $483        $32       $451       $382       $101
 Agency                                                              
                   (17%)      (15%)      (14%)      (15%)      (15%)      (14%) 
 Defense             680       $235        $23       $212       $168        $67 
 Advanced                                                            
 Research           (6%)       (7%)      (11%)       (7%)       (7%)       (9%) 
 Projects                                                            
 Agency                                                              
 Office of           653       $163         $8       $155       $159         $4 
 Secretary of                                                        
 Defense            (6%)       (5%)       (4%)       (5%)       (6%)       (1%) 
 Chemical                                                                       
 Biological          141        $35         $6        $30        $32         $4
 Defense                                                             
                    (1%)       (1%)       (3%)       (1%)       (1%) (Less than 
                                                                            1%) 
 Special             149        $35         $2        $33        $27         $8 
 Operations                                                          
 Command            (1%)       (1%)       (1%)       (1%)       (1%)       (1%) 
 Defense                                                                        
 Threat               72        $18         $1        $17        $17         $1
 Reduction                                                           
 Agency             (1%)       (1%) (Less than       (1%)       (1%) (Less than 
                                           1%)                              1%) 
 National             17         $4         $1         $3         $4         $0 
 Geospatial                                                          
 Intelligence (Less than (Less than (Less than (Less than (Less than       (0%) 
 Agency                                      1                       
                     1%)        1%)         %)        1%)        1%) 
 Total            10,958     $3,294       $218     $3,075     $2,550       $743 
                  (100%)     (100%)     (100%)     (100%)     (100%)     (100%) 

Source: GAO analysis of DoD, Dow Jones, and IDI data.

Notes:

(1)
           DoD's dollar totals include SBIR dollars and additional non-SBIR
           funds from DoD awarding components.

(2)
           Percentages and totals may not add because of rounding.

Appendix III Detailed Information on SBIR Awards Made by DoD During Fiscal
Years 2001 through 2004 Appendix III Detailed Information on SBIR Awards
Made by DoD During Fiscal Years 2001 through Appendix III Detailed
Information on SBIR Awards Made by DoD During Fiscal Years 2001 through

Table 29: Geographical Distribution of DoD Dollars Awarded, Overall and to
Firms That Had Received Venture Capital Investment, Fiscal Years 2001-2002
Compared to Fiscal Years 2003-2004

(Dollars in millions)
              Fiscal years 2001-2002                Fiscal years 2003-2004
                       Dollars to firms that had    Dollars to firms that had
                        received venture capital     received venture capital
     Total dollars awarded - investment - number Total dollars investment -   
                             and                     awarded - number and     
State         number and           percentage    number and     percentage 
                 percentage                         percentage 
California           $320                 $28          $421            $40 
                       (23%)               (34%)         (22%)          (29%) 
Massachusetts        $204                  $2          $279            $15 
                       (15%)                (2%)         (15%)          (11%) 
Virginia             $115                  $7          $130             $5 
                        (8%)                (9%)          (7%)           (4%) 
Ohio                  $72                  $0           $90             $1 
                        (5%)                (0%)          (5%)           (1%) 
Colorado              $68                  $8           $92             $6 
                        (5%)                (9%)          (5%)           (4%) 
Maryland              $57                  $2           $94             $5 
                        (4%)                (3%)          (5%)           (3%) 
Pennsylvania          $54                  $1           $78             $1 
                        (4%)                (1%)          (4%) (Less than 1%) 
New York              $47                  $3           $80            $10 
                        (3%)                (4%)          (4%)           (8%) 
Texas                 $47                  $3           $78             $3 
                        (3%)                (3%)          (4%)           (2%) 
New Jersey            $40                  $5           $48             $7 
                        (3%)                (6%)          (2%)           (5%) 
Florida               $34                  $1           $50             $1 
                        (2%)                (1%)          (3%)           (1%) 
Alabama               $23                  $1           $58             $4 
                        (2%)                (2%)          (3%)           (3%) 
Michigan              $25                  $4           $44            $10 
                        (2%)                (5%)          (2%)           (7%) 
Washington            $24                  $1           $40             $3 
                        (2%)                (1%)          (2%)           (2%) 
Arizona               $31                  $2           $29             $1 
                        (2%)                (3%)          (2%)           (1%) 
New Mexico            $24                  $0           $25             $1 
                        (2%)                (0%)          (1%)           (1%) 
Connecticut           $19        Less than $1           $28             $3 
                        (1%)      (Less than 1%)          (1%)           (2%) 

             Page 64 GAO-06-565 Small Business Innovation Research

             Page 65 GAO-06-565 Small Business Innovation Research

(Continued From Previous Page)
(Dollars in millions)
              Fiscal years 2001-2002               Fiscal years 2003-2004
                      Dollars to firms that had     Dollars to firms that had
                       received venture capital      received venture capital
                   Total dollars investment -    Total dollars investment -   
                       awarded - number and          awarded - number and     
State              number and     percentage     number and     percentage 
                      percentage                    percentage 
New Hampshire             $16   Less than $1            $28             $0 
                            (1%) (Less than 1%)           (1%)           (0%) 
Minnesota                 $20             $6            $21             $5 
                            (1%)           (7%)           (1%)           (4%) 
Georgia                   $19             $5            $16             $3 
                            (1%)           (6%)           (1%)           (2%) 
Illinois                  $11   Less than $1            $21   Less than $1 
                            (1%) (Less than 1%)           (1%) (Less than 1%) 
Nevada                     $9             $0            $16             $0 
                            (1%)           (0%)           (1%)           (0%) 
North Carolina             $8             $2            $14             $5 
                            (1%)           (2%)           (1%)           (3%) 
Oregon                     $8   Less than $1            $13             $1 
                            (1%) (Less than 1%)           (1%)           (1%) 
Utah                       $7   Less than $1            $14             $1 
                            (1%) (Less than 1%)           (1%)           (1%) 
Tennessee                  $8             $0             $9             $0 
                            (1%)           (0%) (Less than 1%)           (0%) 
Rhode Island               $8             $0             $7             $0 
                            (1%)           (0%) (Less than 1%)           (0%) 
West Virginia              $2             $0            $14             $0 
                  (Less than 1%)           (0%)           (1%)           (0%) 
Indiana                    $4   Less than $1            $10             $1 
                  (Less than 1%) (Less than 1%)           (1%)           (1%) 
Maine                      $5             $0             $9             $1 
                  (Less than 1%)           (0%) (Less than 1%)           (1%) 
South Carolina             $4             $0             $7             $0 
                  (Less than 1%)           (0%) (Less than 1%)           (0%) 
Wisconsin                  $3   Less than $1             $8             $1 
                  (Less than 1%) (Less than 1%) (Less than 1%)           (1%) 
Oklahoma                   $2             $0             $7             $3 
                  (Less than 1%)           (0%) (Less than 1%)           (2%) 
Idaho                      $5             $0             $3             $0 
                  (Less than 1%)           (0%) (Less than 1%)           (0%) 
Missouri                   $3             $0             $6             $0 
                  (Less than 1%)           (0%) (Less than 1%)           (0%) 
Montana                    $4             $0             $4             $0 
                  (Less than 1%)           (0%) (Less than 1%)           (0%) 

(Continued From Previous Page)
(Dollars in millions)
              Fiscal years 2001-2002               Fiscal years 2003-2004
                      Dollars to firms that had     Dollars to firms that had
                       received venture capital      received venture capital
                  Total dollars investment -     Total dollars investment -   
                      awarded - number and           awarded - number and     
State             number and      percentage     number and     percentage 
                     percentage                     percentage 
Vermont         Less than $1              $0             $6             $0 
                 (Less than 1%)            (0%) (Less than 1%)           (0%) 
Kansas                    $3              $0             $3             $0 
                 (Less than 1%)            (0%) (Less than 1%)           (0%) 
Louisiana                 $2    Less than $1             $4             $0 
                 (Less than 1%)  (Less than 1%) (Less than 1%)           (0%) 
District of               $2              $0             $4             $0 
Columbia      (Less than 1%)            (0%) (Less than 1%)           (0%) 
Hawaii                    $1              $0             $5             $0 
                 (Less than 1%)            (0%) (Less than 1%)           (0%) 
Iowa                      $3              $0             $2             $0 
                 (Less than 1%)            (0%) (Less than 1%)           (0%) 
Delaware                  $2              $0             $2             $0 
                 (Less than 1%)            (0%) (Less than 1%)           (0%) 
Arkansas                  $1              $0             $3             $0 
                 (Less than 1%)            (0%) (Less than 1%)           (0%) 
Mississippi               $2              $1             $2   Less than $1 
                 (Less than 1%)            (1%) (Less than 1%) (Less than 1%) 
Nebraska                  $3              $0   Less than $1             $0 
                 (Less than 1%)            (0%) (Less than 1%)           (0%) 
Kentucky        Less than $1              $0             $2             $0 
                 (Less than 1%)            (0%) (Less than 1%)           (0%) 
Wyoming                   $1              $0             $1             $0 
                 (Less than 1%)            (0%) (Less than 1%)           (0%) 
Alaska          Less than $1              $0             $1             $0 
                 (Less than 1%)            (0%) (Less than 1%)           (0%) 
North Dakota              $1              $0             $0             $0 
                 (Less than 1%)            (0%)           (0%)           (0%) 
South Dakota    Less than $1              $0   Less than $1             $0 
                 (Less than 1%)            (0%) (Less than 1%)           (0%) 
Total                 $1,371             $82         $1,922           $136 
                         (100%)          (100%)         (100%)         (100%) 

Source: GAO analysis of DoD, Dow Jones, and IDI data.

Notes:

(1)
           DoD's dollar totals include SBIR dollars and additional non-SBIR
           funds from DoD awarding components.

(2)
           Percentages and totals may not add because of rounding.

Appendix III Detailed Information on SBIR Awards Made by DoD During Fiscal Years
                               2001 through 2004

Table 30: Component Distribution of DoD Dollars Awarded, Overall and to
Firms That Had Received Venture Capital Investment, Fiscal Years 2001-2002
Compared to Fiscal Years 2003-2004

(Dollars in millions)  
                           Fiscal years 2001-2002   Fiscal years 2003-2004
                        Dollars to firms that had       Dollars to firms that
                                 received venture Total dollars  had received
                                 capital          awarded             venture
         Total dollars awarded - investment -      - number and       capital
                                 number and                      investment -
Awarding component     number and   percentage   percentage number and
                          percentage                           percentage
Air Force                     $479         $22         $539            $31
                                (35%)       (27%)        (28%)          (22%)
Army                          $286         $20         $398            $41
                                (21%)       (24%)        (21%)          (30%)
Navy                          $267         $12         $352            $21
                                (19%)       (14%)        (18%)          (15%)
Missile Defense               $144         $12         $339            $20
Agency                       (10%)       (14%)        (18%)          (14%)
Defense Advanced               $95         $10         $140            $14
Research Projects             (7%)       (12%)         (7%)          (10%)
Agency                                         
Office of Secretary of       $54            $3             $109         $5 
Defense                     (4%)          (4%)             (6%)       (4%) 
Chemical Biological          $18            $3              $17         $3 
Defense                     (1%)          (4%)             (1%)       (2%) 
Special Operations           $11  Less than $1              $24         $1 
Command                     (1%)    (Less than             (1%)       (1%) 
                                              1%)                  
Defense Threat               $15  Less than $1               $3         $1 
Reduction Agency            (1%)    (Less than  (Less than 1%)  (Less than 
                                              1%)                         1%) 
National Geospatial-          $2  Less than $1               $1         $1 
Intelligence Agency      (Less      (Less than  (Less than 1%)  (Less than 
                          than 1%)            1%)                         1%) 
Total                     $1,371           $82           $1,922       $136 
                             (100%)        (100%)           (100%)     (100%) 

Source: GAO analysis of DoD, Dow Jones, and IDI data.

Notes:

(1)
           DoD's dollar totals include SBIR dollars and additional non-SBIR
           funds from DoD awarding components.

(2)
           Percentages and totals may not add because of rounding.

                                  Appendix IV

                    Comments from the Department of Defense

Appendix V

Comments from the Small Business Administration

Appendix V Comments from the Small Business Administration

Appendix VI

                     GAO Contact and Staff Acknowledgments

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Rhodes-Kline made key contributions to this report.

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