Timeliness of SBIR and STTR Proposal Review and Notification Overall, component agencies reviewed proposals and notified awardees within the required time for 12,890 of the 15,453 SBIR and STTR awards that we reviewed (84 percent), for fiscal years 2016 through 2018. The Small Business Act and SBIR/STTR policy directive require most agencies notify applicants of the agency’s decision within 90 calendar days and require NIH and NSF do so in 1 year. Agencies notified awardees after the required time period for 2,533 of 15,453 awards (16 percent). Three of the 28 component agencies met the notification requirement for every award in the data we reviewed, and nine additional component agencies did so for at least 90 percent of their awards. The remaining 16 component agencies met the notification requirement for less than 90 percent of their awards. Table 2 lists the mean and median notification times and the percentage of awardees notified within the required time period for each component agency. Some notifications occurred within days after the required time period, while others occurred months later. For example, all of the notifications by the Department of Education from fiscal year 2016 through 2018 that took longer than 90 days occurred in 91 days. Department officials attributed the one day difference to interpreting the 90-day requirement as a 3- month requirement. Similarly, all of the notifications for Army STTR awards that occurred after the 90-day requirement occurred within 92 days. Of the 2,533 awards with notifications after the required time, notifications occurred on average about 1 ½ months later. During the 3 fiscal years that we reviewed, some component agencies had substantial changes from year to year in the percentage of awardees that they notified within the required time period, while other component agencies consistently notified about the same percentage of awardees. For example, the Department of Energy’s Office of Science and the Army SBIR program each had a single fiscal year during which they notified less than 50 percent of awardees within the required time period, substantially less than during the other fiscal years we examined. Table 3 describes the percent of awardees notified within the required time by each component agency for each of the 3 fiscal years we examined. Agency officials described several factors that affect the time spent reviewing proposals and notifying awardees, including (1) the availability of reviewers, (2) the number of proposals to review, and (3) other agency- specific factors. Availability of reviewers. Officials from some component agencies we interviewed said the availability of agency staff or external reviewers affected the time they spent reviewing proposals. For example, USDA officials told us that the agency cannot notify awardees within 90 days because they need additional time to identify and recruit experts for their external peer review system. USDA officials compared their review process to that of the NSF and NIH, the two agencies that are directed to complete proposal review and notification within 1 year. Similarly, Navy officials said that the availability of reviewers was the biggest variable in completing their proposal review and notification process. These reviewers are Navy employees who contribute part of their time to reviewing SBIR and STTR proposals while continuing to perform their regular duties. According to Navy officials, although they give reviewers deadlines based on the number of proposals they have to review, conflicts with their regular duties or higher priority tasks may cause reviewers to miss their deadlines. In contrast, Department of Education officials said that they identify and train reviewers before the agency receives proposals so that the reviews may begin as soon as possible. Other agencies, however, may not know what areas of expertise reviewers will need until the agency has examined the proposals it received. Number of proposals. Officials from some component agencies we interviewed said the number of proposals they receive affected the time spent reviewing proposals and notifying awardees. For example, officials from the Department of Transportation said that the number of proposals they receive can range between two and 40, which makes it difficult to predict the workload of agency evaluators who perform the proposal reviews. Similarly, National Institute of Standards and Technology officials said that the number of proposals they receive fluctuates from year to year. Because agencies must review all proposals that meet the minimum requirements, an increase in the number of proposals directly increases the workload of proposal reviewers. Other agency-specific factors. Some component agency officials identified factors specific to their agency or process as factors affecting the time needed. For example: Two component agencies within the Department of Health and Human Services—the Centers for Disease Control and Prevention (CDC) and Food and Drug Administration (FDA)—notified none of their awardees within the required time in fiscal years 2016 through 2018. CDC and FDA participate in the solicitation and review process led by the NIH. However, while the NIH has 1 year to notify awardees, these agencies are required to notify awardees within 90 calendar days. CDC officials said that participating in the longer NIH program is more efficient than creating their own review process and allows them to leverage additional programs at NIH that support small business awardees. Environmental Protection Agency officials told us that their review process includes three consecutive reviews, which leads the agency to regularly request waivers to exceed the 90-day notification requirement. These reviews include an administrative review for responsiveness to the solicitation, an external peer review process, and an internal review by the SBIR program office. Some agency officials also identified continuing resolutions, sequestration, or government shutdowns as factors that could slow proposal review. Proposal review and notification activities could be affected because the availability or amount of funds for agency activities is uncertain in these instances. For example, a Defense Microelectronics Activity official told us that their agency generally completes its proposal review process within 90 days, but does not notify awardees until it has determined funding availability for awards later in the fiscal year. National Institute of Standards and Technology officials described a delay notifying one awardee, a replacement awardee, due to the initial awardee being determined ineligible during a pre-award assessment. The agency made a replacement selection immediately, but this replacement awardee was notified approximately 20 days after the 90-day requirement. Timeliness of SBIR and STTR Award Issuance Overall, component agencies issued 11,710 of the 15,453 awards we reviewed (76 percent) within the recommended time period, for fiscal years 2016 through 2018. The SBIR/STTR policy directive recommends that most agencies issue an award within 180 days and recommends that NIH and NSF do so in 15 months. Agencies issued 3,743 of the 15,453 awards (24 percent) after the recommended time period. Three of 28 component agencies issued every award in the data we reviewed within the recommended time, and five additional component agencies did so for at least 90 percent of their awards. The remaining 20 component agencies issued less than 90 percent of their awards within the recommended time period. For the 3,743 awards that agencies issued after the recommended time period, the average award was issued about two and a half months after the recommended time. Table 4 lists the mean and median award issuance times and the percent of awards issued within the recommended time for each component agency. During the 3 fiscal years that we reviewed, some component agencies had substantial changes from year to year in the percentage of awards they issued within the recommended time period, while other component agencies consistently issued about the same percentage of awards within the recommended time period. For example, the Department of Energy’s Advanced Research Projects Agency-Energy issued no awards within the recommended time in each of the three years we examined. Table 5 describes the percent of awards issued within the recommended time period by each component agency for each of the 3 fiscal years we examined. Agency officials described several factors that increased the time spent issuing awards, including (1) additional time needed to issue certain types of contracts, (2) the availability of grants and contracting officers, (3) delays coordinating among agency officials, (4) the responsiveness of awardees, and (5) the availability of funding for the awards. Cost reimbursement contracts. Officials from some component agencies we interviewed said that the contract type was a factor that affected the time needed to issue SBIR and STTR awards. Specifically, officials said cost reimbursement contracts took longer to issue because of the need to review the awardee’s accounting system in accordance with federal acquisition regulations. For example, officials from the Defense Advanced Research Projects Agency (DARPA) said cost reimbursement contracts routinely take more time to award than fixed- price contracts because of this accounting system review. According to DARPA officials, this review can add 45 days or more to the awards process. In February 2019, we found that the Department of Defense does not have a mechanism to monitor and ensure that contractor business system reviews and audits are conducted in a timely manner and recommended that the department develop such a mechanism. Our analysis of the SBIR and STTR award data confirmed that component agencies spent more time issuing awards identified as cost reimbursement contracts than issuing fixed price contracts. We found that SBIR and STTR awards identified as cost reimbursement contracts in the fiscal year 2016 through 2018 data took significantly longer to issue than those identified as fixed-price, as shown in figure 1. Fixed-price contracts took on average 152 days and cost reimbursement contracts took 231 days (79 days longer). Cost reimbursement contracts also took on average 40 days longer than contracts that were not specified as fixed or cost reimbursement. Availability of grants or contracting officers. The availability or experience of agency staff to negotiate the contract or grant can be a factor, according to some component agency officials. First, some officials said limited availability of grants or contracting officers was a factor in the time to issue awards and may result in delays. For example, officials from both Army program offices said that the workload for contracting officers is high, and SBIR and STTR awards are part of a larger contracting backlog. Similarly, officials from the National Institute of Standards and Technology and National Oceanic and Atmospheric Administration also said that the availability of grants and contracting officers is a pervasive issue for federal agencies that can affect award timeliness. Second, officials from some component agencies said that the contracting officer’s level of experience with small business awards affects the time needed to issue SBIR and STTR awards. Coordination among agency officials. Air Force officials said that the need for coordination among agency officials, such as between the contracting officer and proposal evaluators, can create delays. Because the proposal review and award process can require coordination among multiple officials who are not always immediately available, delays may occur as one official waits for input or information from another. Beginning in fiscal year 2018, the Air Force made changes to its proposal review and award process for a subset of awards that included scheduling dedicated time for reviewers, contracting officers, and other agency officials to jointly evaluate proposals and process awards. This change guaranteed the availability of agency officials and reduced the time needed for coordination among these officials. Overall, it allowed the agency to issue awards within a few days or weeks. According to agency officials, the Air Force awarded about 150 awards in 2018 through this process and they expect about one-third of Air Force awards in fiscal year 2019 and half of awards in fiscal year 2020 will use this expedited process. Responsiveness of awardees. Some component agency officials said that the responsiveness of the small business was a factor in delays. For example, officials from USDA said that the majority of SBIR grantees at USDA are first-time grantees who have never worked with the federal government, and this can extend the time it takes to issue the award. In order to receive an SBIR or STTR award, the small business must, among other things, submit a certification that it meets size, ownership, and other requirements. Delays in providing these certifications or other information required by the awarding agency can therefore delay award issuance. In our July 2018 report that reviewed DOD’s weapon-systems- related contracts awarded from fiscal year 2014 through fiscal year 2016, contracting officials stated that quicker contractor responses to requests for additional information could help reduce the time between when a solicitation is issued to when a contract is awarded. Availability of funding. Some component agency officials said that delays in determining the amount of funding available for small business awards due to continuing resolutions or delays in intradepartmental fund transfers may delay the issuance of awards. For example, NASA officials said that they estimate the agency’s R&D budget at the start of the fiscal year to calculate the amount required for SBIR and STTR awards. According to these officials, if NASA is operating under a continuing resolution at the start of the fiscal year, the estimate may be smaller than the final appropriated amounts. In this case, NASA would go back to its proposals to make additional awards from the pool of proposals that were rejected under the original estimate, and this would lead to longer issuance times for some awards. Agency Comments and Our Evaluation We provided a draft of this report to SBA and the 11 agencies that participated in the SBIR and STTR programs in fiscal years 2016 through 2018 for their review and comment. The SBA, Department of Defense, and Department of Education provided written comments that are reproduced in Appendix II, III, and IV. In addition, the Department of Energy, the NIH within the Department of Health and Human Services, Department of Transportation, and the National Institute of Standards and Technology within the Department of Commerce provided technical comments, which we incorporated as appropriate. The remaining agencies told us they had no comment. In its formal comments, the Department of Education stated that it has taken steps to ensure that future awardees will be notified within the required period. In their comments, SBA and the Department of Defense suggested phase I and II awards should be evaluated separately in future reports. In this report, we combined phase I and II awards because we did not find a statistically significant difference in notification time between phase I and II awards in the fiscal year 2016 through 2018 data that we examined. However, some analyses showed that phase II awards took longer to issue. We may further examine differences between phase I and phase II awards in subsequent reports. SBA also described the importance of minimizing delays between phase I and phase II awards. We did not evaluate the time between phase I and subsequent phase II awards in this report, but agree that the time between awards may be of interest in future reports because, as noted by SBA, the time between awards may affect small businesses' ability to retain key personnel. SBA also sought explanations for various dates and figures used in our analysis and we updated the report to include the definitions used when collecting award data and to describe our figures in more detail. The Department of Defense also stated that the SBIR and STTR policy directive does not explicitly include phase II awards in its 90 and 180-day timeliness requirements. However, we confirmed with SBA—the agency that issues the directive—that the 90-day requirement for notification of selection and the 180-day recommendation for award issuance apply to both phase I and phase II awards. The Department of Defense further stated that subsequent phase II awards could occur several years after the end of the initial phase II award and should not be included in the analysis of phase II awards. In this report, we took steps to eliminate these outliers from the data. We are sending copies of this report to the appropriate congressional committees, the Acting Administrator of the SBA, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-6888 or neumannj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III. Appendix I: Timeliness of Agencies’ Small Business Awards This appendix describes the awards made by agencies participating in the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, based on the data provided to GAO for fiscal years 2016 through 2018. These data include figures showing the (1) proposal review and notification time, (2) award issuance time, and (3) distribution of awards by fiscal year and phase. The fiscal year and phase figure describes the number of phase I and phase II awards issued in fiscal years 2016 through 2018 and is based on the first year of the award activities. For example, if an agency obligated funding to a phase II award in fiscal years 2017 and 2018, the award is counted among the fiscal year 2017 phase II awards. NIST participated in SBIR only. Fiscal Year 2016-2018 Awards NOAA participated in SBIR only. Fiscal Year 2016-2018 Awards Air Force participated in SBIR and STTR. Fiscal Year 2016-2018 Awards Small Business Award Timeliness (Fiscal Year 2016-2018 Awards) Small Business Award Timeliness (Fiscal Year 2016-2018 Awards) Navy participated in SBIR and STTR. Fiscal Year 2016-2018 Awards MDA participated in SBIR and STTR. Fiscal Year 2016-2018 Awards DARPA participated in SBIR and STTR. Fiscal Year 2016-2018 Awards DHA participated in SBIR and STTR. Fiscal Year 2016-2018 Awards SOCOM participated in SBIR and STTR. Fiscal Year 2016-2018 Awards DLA participated in SBIR and STTR. Fiscal Year 2016-2018 Awards DTRA participated in SBIR and STTR. Fiscal Year 2016-2018 Awards CBD participated in SBIR and STTR. Fiscal Year 2016-2018 Awards NGA participated in SBIR and STTR. Fiscal Year 2016-2018 Awards DMEA participated in SBIR and STTR. Fiscal Year 2016-2018 Awards Education participated in SBIR only. Fiscal Year 2016-2018 Awards Office of Science participated in SBIR and STTR. Fiscal Year 2016-2018 Awards ARPA-E participated in SBIR and STTR. Fiscal Year 2016-2018 Awards NIH participated in SBIR and STTR. Fiscal Year 2016-2018 Awards CDC participated in SBIR only. Fiscal Year 2016-2018 Awards FDA participated in SBIR only. Fiscal Year 2016-2018 Awards DHS S&T participated in SBIR only. Fiscal Year 2016-2018 Awards DNDO participated in SBIR only. Fiscal Year 2016-2018 Awards DOT participated in SBIR only. Fiscal Year 2016-2018 Awards EPA participated in SBIR only. Fiscal Year 2016-2018 Awards NASA participated in SBIR and STTR. Fiscal Year 2016-2018 Awards NSF participated in SBIR and STTR. Fiscal Year 2016-2018 Awards USDA participated in SBIR only. Fiscal Year 2016-2018 Awards Appendix V: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Rob Marek (Assistant Director), Tind Shepper Ryen (Analyst-in-Charge), Nora Adkins, David Aja, Jenny Chanley, Robert Letzler, Anika McMillon, Amanda Postiglione, and Ben Shouse made key contributions to this report.


Top Leadership Commitment Is Critical to Sustained Progress in Strengthening Management Functions With top leadership support and commitment, DHS has made important progress in strengthening its management functions, but considerable work remains. As shown in figure 1, as of March 2019, DHS had met three out of five criteria for removal from our High Risk List—leadership commitment, action planning, and monitoring progress. DHS has partially met the remaining two criteria: capacity (i.e., people and other resources) and demonstrated, sustained progress. To address the criteria for capacity, DHS needs to make additional progress in identifying and allocating resources in certain areas—namely, acquisition, information technology, and financial management—to fully demonstrate its capacity. For the criteria for demonstrated, sustained progress, we reported in March 2019 that DHS had fully addressed 17 out of the 30 outcomes that are the basis for gauging DHS’s progress across management areas, as shown in table 1. To fully meet the criteria for demonstrated, sustained progress, DHS needs to continue implementing its Integrated Strategy for High-Risk Management and maintain engagement with us to show measurable, sustainable progress in implementing corrective actions and achieving outcomes. DHS can accomplish this by, among other things, maintaining a high level of top leadership support and sustained commitment to ensure continued progress in executing its corrective actions through completion, and increasing employee engagement and morale. Examples of important programs and remaining work in the key management functions include: In the key management function of human capital management, DHS leadership is needed to address skills gaps that have had a significant role in the DHS management high-risk area. For example, we have found that DHS lacks guidance on how to identify critical cybersecurity and acquisition skills needed to support its new information technology delivery model. We have also found that DHS has insufficient technical skills to support its biometric identification services program. Addressing these skill gaps could help DHS fully demonstrate its capacity to strengthen and integrate its management functions. Additionally, within human capital management, DHS has struggled with low employee morale scores since it began operations in 2003. DHS’s 2018 score ranked 20th among 20 large and very large federal agencies. Increasing employee engagement and morale is critical to strengthening DHS’s mission and management functions. DHS has continued to strengthen its employee engagement efforts by implementing our 2012 recommendation to establish metrics of success within components’ action plans for addressing its employee satisfaction problems. Further, DHS has conducted audits to better ensure components are basing hiring decisions and promotions on human capital competencies. In addition, OPM’s 2018 Federal Employee Viewpoint Survey data showed that in the past 2 years, DHS’s score on the Employee Engagement Index (EEI) increased by 4 points—from 56 in 2016 to 60 in 2018—which was 1 point more than the government-wide increase over the same period. While this improvement is notable, DHS’s current EEI score is 1 point below its EEI baseline score in 2010, suggesting that DHS is still working to regain lost ground after an 8 point drop between 2010 and 2015. In the key management function of financial management, DHS officials have faced challenges modernizing DHS components’ financial management systems and business processes that affect the department’s ability to have ready access to timely and reliable information for informed decision-making. Effectively modernizing financial management systems for the Coast Guard, FEMA, and ICE would help improve the reliability of their financial reporting. As we have reported, perhaps the single most important element of successful management improvement and transformation initiatives is the demonstrated commitment of top leaders, as shown by their personal involvement in reform efforts. With regard to leadership commitment, DHS’s top leadership, including leaders at the Secretary and Deputy Secretary level, has demonstrated exemplary commitment and support for addressing the department’s management challenges. They have also taken actions to institutionalize this commitment to help ensure the long- term success of the department’s efforts. One such effort is the Under Secretary for Management’s Integrated Priorities initiative to strengthen the integration of DHS’s business operations across the department. During monthly leadership meetings with the Under Secretary for Management, the department’s Chief Executive Officers have been providing status updates on their respective actions to address this high- risk designation. Furthermore, top DHS leaders, such as the Under Secretary for Management and the department’s Chief Executive Officers, routinely meet with our management to discuss progress on high-risk areas. Continued Leadership Commitment Is Critical to Addressing Priority Open Recommendations In April 2019, we sent a letter to the Acting Secretary of Homeland Security detailing 26 open recommendations that we deem highest priority for implementation. Priority recommendations are those that we believe warrant priority personal attention from heads of key departments or agencies. These 26 recommendations fall into six major areas— emergency preparedness and response, border security, transportation security, infrastructure and management, cybersecurity, and chemical and nuclear security. Many of these recommendations cut across DHS’s mission areas that are critical for national security. Given that these recommendations are often the most complex and difficult to implement, top DHS leadership will play a critical role in addressing them. Fourteen of the 26 priority open recommendations we identified in the April 2019 letter are directed to acting officials serving in vacant positions. We have issued 12 recommendations to the Secretary of Homeland Security who is currently an acting official. We have also issued two recommendations to FEMA which is currently operating under acting leadership. Committed and consistent leadership at the department and component levels will be critical for addressing our priority recommendations. For example: In September 2014, we recommended that the Secretary of Homeland Security work jointly with the Administrator of the General Services Administration to strengthen management of the ongoing acquisition project to develop the multi-billion dollar headquarters facilities at the St. Elizabeth’s campus in Washington, D.C. Leadership is critical in this effort, given the magnitude of the project and the impact of headquarters consolidation on DHS operations. In October 2008, we recommended actions that FEMA should take to improve its administration of the National Flood Insurance Program high-risk area. We also recommended in September 2012 that FEMA develop a methodology to better assess a jurisdiction's capability to respond to and recover from a disaster without federal assistance. In July 2015, we further recommended that the Mitigation Framework Leadership Group establish an investment strategy to identify, prioritize, and guide federal investments in disaster resilience. Implementing these actions could limit the federal government’s fiscal exposure and increase the nation’s resilience to extreme weather events as the costs and impacts of weather disasters resulting from floods, drought, and other events are expected to increase in significance as previously “rare” events become more common and intense. In July 2018, we recommended that U.S. Customs and Border Protection (CBP) analyze the costs associated with future barrier segments along the southwest border and include cost as a factor in the Impedance and Denial Prioritization Strategy. Obtaining this key information could help CBP evaluate designs and prioritize locations for future border barrier segments to deter cross-border illegal activity. In February 2017, we recommended that DHS establish metrics and methods by which to evaluate the performance of DHS’s National Cybersecurity and Communications Integration Center in relation to its statutorily-required cybersecurity functions. Until it develops metrics and methods to evaluate its performance, the center cannot ensure that it is effectively meeting its statutory requirements, while cyber- based intrusions and attacks on federal systems and systems supporting our nation’s critical infrastructure are becoming more numerous, damaging, and disruptive. We also recommended in February 2018 that DHS take steps to better manage and assess its cybersecurity workforce gaps and areas of critical need. Given its important role in the nation’s cybersecurity, taking steps to address these issues will be critical. We will continue to monitor DHS’s progress in strengthening management functions and addressing priority recommendations. We also plan to continue to meet quarterly with DHS management to gauge leadership commitment, discuss progress, and review DHS’s goals and corrective action plans in its Integrated Strategy for High-Risk Management, which DHS issues twice per year. Thank you, Chairman Thompson, Ranking Member Rogers, and Members of the Committee. This concludes my testimony. I would be pleased to answer any questions. GAO Contact and Staff Acknowledgments For further information on this testimony, please contact Christopher P. Currie at (404) 679-1875 or curriec@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Other individuals making key contributions to this work include Alana Finley, Assistant Director; Luis E. Rodriguez, Analyst-in-Charge; Karin Fangman; Andrew Howard; and Thomas Lombardi. Key contributors for the previous work that this is based on are listed in each product. 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