Utilizing Managed Services for SBIR Commercialization Support

The annual $3.5B Small Business Innovation Research (SBIR) market consists of about 2,500 unique entrants of which 80% are firms consisting of 20 people or less. The SBIR program is available to firms with up to 500 employees to conduct federally funded research and development for the twelve participating federal agencies. Most SBIR awards occur through contracts with the Department of Defense (DoD) and through grants from the National Institute of Health (NIH). Some agencies refer to the SBIR program as "America's Seed Fund" because the intent of the program is to transition promising technologies to the private sector for "commercialization." The path to commercialization requires a strong business foundation to comply with the safeguards surrounding federal funding.

This blog provides insights that will aid SBIR recipients seeking to achieve commercialization and become successful federal contractors. Achieving commercialization requires completing the journey from "start-up" to "prime" federal contractor. In a related blog, we provide a more detailed description of the capabilities and expertise required to reach commercialization. It summarizes the benefits of putting in place an outsource approach to jumpstart your SBIR grants and ultimately your GovCon business.

AtWork Business Managed Services for SBIR Commercialization

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SBIR Commercialization

Commercialization, according to the DoD SBIR program definition, is, "The process of developing products, processes, technologies, or services and the production and delivery (whether by the originating party or others) of the products, processes, technologies, or services for sale to or use by the Federal government or commercial markets." What this means is that a viable firm achieves commercialization when it can deliver products or services created from SBIR projects. It's not just a matter of developing an innovative technology. It's also a matter of running a sound business.

To achieve commercialization in DoD, the SBIR journey consists of three phases. Phase I is the initial 2 to 6-month period after a firm successfully competes for and receives a federal contract or grant for up to $162,000. The Phase I deliverable is a White Paper assessing the technical feasibility and commercial merit of developing a new technology requested by one of the federal agencies. Phase II is the 18 to 24 month period following the receipt of a second contract or grant for up to $1,075,000; awarded non-competitively only to Phase I award recipients; to build and demonstrate a working prototype. Phase III begins when SBIR Phase I or II awardees receive a contract or other funding to implement their commercialized technology as a solution to a government or private sector need. The federal contracting rules allow government agencies to issue sole-source Phase III contracts to firms that developed or acquired the technology stemming from an SBIR project. Phase III opportunities can be very lucrative to those who prudently orchestrate their SBIR experience.

As companies plan their SBIR journey they often focus on the development of their technologies but overlook their business operations. The founding team frequently consists of brilliant scientists and engineers, or insightful military veterans, who passionately refine their product or service innovations but have little business training or experience. It is equally important that SBIR firms also plan and implement a roadmap to develop their company's business practices. If they adopt, implement and use a business operating solution like AtWork Systems' OneLynk, the SBIR firm is more likely to successfully commercialize their product and thrive as part of the US national industrial base. They would be well-positioned to receive Phase III contracts if they play their cards right by developing both their technology and their business.

Managed Services for Technical and Business Assistance

One proactive measure available to SBIR applicants is to request "Technical and Business Assistance" in their initial Phase I proposal and in subsequent Phase II proposals. Although federal agencies have the authority to determine if they will allow companies to include TABA in their projects, a strong case for assistance that supports the development of the technology or the business can be persuasive. Prior to 2018, TABA was called "Discretionary Technical Assistance." Federal laws changed the name and increased the amounts from $5,000 for each year of Phase I and II to $6,500 annually for Phase I and up to $50,000 total for the life of the Phase II project.

The first place to request Technical and Business Assistance is in the section of the SBIR proposal with cost information. For the DoD, Volume 3 of the six-volume proposal consists of an online spreadsheet form intended to provide enough information to allow DoD reviewers to understand "how you plan to use the requested funds if a contract is awarded." The most comprehensive SBIR cost accounting requirements stem from the DoD and consists of the following: labor costs broken out by the number of labor hours from each employee (by name) who contributes to the project, material costs for things like special tools or test equipment, and travel costs "related to the needs of the project." The same details apply to all subcontractor and consultant costs. The place to describe and enter these costs is in the section described as "Discretionary Technical and Business Assistance" in the "Explanatory Material" section of the cost spreadsheet.

The TABA request should address: 1) the purpose of the required assistance and what objective it will help accomplish, 2) the name and point of contact providing the assistance, 3) why the provider is uniquely qualified to provide the work, and, 4) costs and proposed hours or other relevant details. For example, the DoD Volume 3 TABA request could be as follows:

Additionally, to ensure the proposal addresses the soundness of the business as a key factor for commercialization, the Technical Volume of a DoD proposal (Volume 2) should also include a brief statement about the viability of the firm and its future potential. For example:

Providing the government evaluators with a comprehensive vision for both technical and business growth will help differentiate the proposal from the competition. Many SBIR applicants over emphasize what they will do technically without explaining how they'll do it from a business perspective. Communicating an eye toward business growth will make the innovative technology more appealing to government evaluators. The Technical Volume includes a one-page section for commercialization, which would be an appropriate place to insert the above example statement.

Beyond SBIR Phase II–Phase III Contracts

Finally, to prepare for other government sales opportunities, a well-run business will help win future work with programs that rely heavily on SBIR technologies, such as the DoD Rapid Innovation Fund. The RIF, like the SBIR program, uses the government "Broad Agency Announcement" to solicit proposals. Although the BAA gives private sector firms a break on cost accounting to encourage participation from non-traditional sources, one of the evaluation factors used by the RIF reviewers is as follows:

"Factor #4 - Cost Estimating Methods, Risks and Controls: The degree to which the proposed costs are realistic for the technical approach and the methods used to demonstrate the Offeror's ability to complete the total project for the amount requested are in accordance with the BAA. This includes an evaluation of the potential cost risks and controls used to mitigate those risks."

This means the proposal must convince the technical evaluators, not the government auditors, of cost reasonableness. Technical evaluators will have a bias toward choosing innovative technologies, rather than focusing on the internal business practices of a firm submitting an SBIR or RIF proposal.

Eventually, to be successful in the government market, a firm will have to demonstrate acceptable cost accounting to the auditors from the Defense Contract Audit Agency. A prudent long-term strategy is to introduce sound cost accounting and other disciplines such as human resources, procurement, and financial management early in a company's history.

Without a business operating system, contractors conducting funded government research and development will encounter challenges. There are several activities, faced by firms engaged in SBIR contracts, that can make or break a company: cost accounting, managing contracts, commercialization of their technology, becoming a reliable subcontractor and cybersecurity. In a related blog, Utilizing Managed Services to Improve Competitiveness we describe the capabilities journey from "startup" to "prime" contractor. We describe how leveraging an outsourced managed services model can provide professionals with the expertise needed to augment the "back-office" staff of a firm who is new to government contracting.

AtWork Systems designed OneLynk to enable GovCon's to navigate through the challenges of growing a GovCon business by providing the processes and systems to deliver exceptional performance. While a government contractor is maturing in the government market, as either a prime or subcontractor, OneLynk is there to instill the processes needed to help achieve government compliance. AtWork Systems offers subject matter experts - across functions like accounting, HR, financial, contract and project management - to help startups step out on the right foot or to help more mature firms transform ad hoc or inadequate processes into higher levels of performance. The combination of AtWork Systems' OneLynk and associated professional services is available as a comprehensive, secure, and affordable means of gaining the competitive advantage.

Learn More About AtWork Systems

AtWork Systems is an Arlington, Virginia based managed services and software development company. Its principals have decades of experience doing business with and working for federal, state and local government. They developed OneLynk as a configurable and scalable business operating platform that digitizes and optimizes processes while providing just in time business intelligence for decision making. OneLynk contains a suite of easily configurable web applications for automating and monitoring business transactions, including: human capital management, accounting, timekeeping and expense management, procurement, contracts and project management, payroll services and more. Discover the latest ERP System for Government Contractors at www.AtWorkSys.com.