Small Business Innovation Research to Support Aging Aircraft: Priority Technical Areas and Process Improvements (2001)

The focus of this report is on technical recommendations for using SBIR to support aging aircraft. In this context, the committee also reviewed Air Force SBIR processes in some detail and determined that changes in certain SBIR administrative processes would help the Air Force to address aging aircraft technologies, as well as technology in other areas. The committee did not consider all potential SBIR process improvement options and alternatives, but it offers some recommendations for careful consideration by the Air Force. Because only SBIR projects related to aging aircraft were considered, the Air Force will have to determine if these recommendations also apply to other aspects of its SBIR program. The recommended process improvements are based on the committee's evaluations of the Air Force's SBIR program in Chapter 3 and presentations by the Air Force (see Appendix B).

The process improvements summarized in the memorandum of August 1999 (DOD, 1999) are intended to facilitate the transition of SBIR-developed technologies to the warfighter. The memorandum includes the following directives:

1. Major acquisition programs must designate an SBIR community liaison.

2. Links between SBIR solicitation topics and acquisition program needs should be established.

3. A system should be developed enabling SBIR contractors to contact potential customers/investors in DOD prime contractors and elsewhere.

4. Acquisition programs and the private sector should be able to leverage their investments in SBIR technologies.

5. Senior acquisition executives should issue guidance to acquisition programs for including SBIR as part of their ongoing program planning.

6. Metrics of how well acquisition programs have integrated SBIR technologies into their program should be implemented.

7. Acquisition programs and SBIR communities should be educated on the process for, and the advantage of, integrating SBIR technologies into acquisition programs.

Air Force implementation of these DOD directives is a phased process intended to increase customer involvement to ensure that (1) the requirements of the customer are being met by the SBIR program and (2) customers actively participate in and support the technology transition and implementation strategy to increase the likelihood of success. Including sustainment customers (ALCs) directly in this process and in the acquisition programs is a significant change for the aging aircraft community.

The basic strategy for improving Air Force SBIR processes is to change the SBIR topic allocations, the most powerful tool in the whole process. The topic allocation themes include:

• Taxation with representation. Executive officials of Air Force programs are allocated topics in proportion to their SBIR program funding contributions, which are based on the proportion of R&D in their program portfolios.

• Balanced representation for all customers. Topics are allocated to product centers, logistic centers, and test centers, all of which have important requirements for technology innovation and are the managers of acquisition and sustainment programs.

• Balanced representation for technological experts. The remaining topics are divided equally among AFRL directorates.

The results for the new topic reallocations are summarized in Table 5-1. Topic allocation under the baseline process (see Table 3-3) was made only to AFRL directorates in proportion to their R&D accounts at that time. The total number of SBIR topics for both the baseline (240) and the new process (234) is based on total funding of the Air Force extramural R&D accounts. The small difference between the totals reflects a small reduction in the total Air Force extramural R&D budget. The AFRL also manages the SBIR programs of other DOD agencies, such as the Ballistic Missile Defense Organization (not included in these totals). In practice, Air Force SPO allocations are not made to individual systems but to PEOs. For example, the fighter/bomber PEO portfolio managed in the Pentagon includes the F-16, F-15, F-22, F-117, B-l, and B-2.

Table 5-1 shows that the major difference under the new process is that 170 of the 234 topics (about 75 percent) are now assigned outside the S&T Directorate to the product centers, test centers, ALCs, and SPOs (through PEO portfolios). The proportions of R&D resources range from almost zero to more than 40 percent.

The process steps used to select the technical opportunity areas, which become the subjects of individual SBIR topics, encourage a continuing dialogue among technology program managers, acquisition program managers, and warfighters. These steps include the posting of a large number of potential topics by each AFRL directorate on the AFRL SBIR Shopping List Web site, <http://aftech.afrl.mil/sbir/index.htm>, reviews and evaluations of these topics by the acquisition, sustainment, and warfighter stakeholders, consolidation of laboratory, product center, and PEO topics by the AFRL, and implementation by AFRL of the entire SBIR process for all stakeholders. Customer stakeholders can of course generate their own SBIR topics, but because they may have limited expertise and limited staffs, the AFRL-generated listings may be more useful. Customers can select a proposed AFRL topic directly or tailor it to meet their needs. This is also beneficial to AFRL because each directorate manages not only its own topics (six per directorate) but also the topics of customers who have tailored AFRL-recommended topics. In one respect, AFRL, in effect, still manages the majority of SBIR programs. The positive new element is that many of the programs now have the direct endorsement and participation of acquisition managers and warfighters.

At present, the ALCs manage their own SBIR programs and do not rely on AFRL support. They participate, however, in the broader process of defining topic subjects and shaping some of the subjects selected by others. AFRL senior management in each directorate makes the final decisions on the subject matter of the six topics directly under its control.

As might be expected, the current listing of SBIR topics from the ALCs is dominated by aging aircraft issues. These centers have limited direct access to R&D funding, so SBIR program participation is something of a windfall for them, and they have expressed considerable interest in expanding their participation. Table 5-2 is a summary of the effects of new processes on SBIR programming in the structures-related aging aircraft arena for FY00 in the Materials and Manufacturing Directorate and the Air Vehicles Directorate. Because the process recycles annually, the total for aging aircraft or any other topic can change each year. The more important point is that a number of these topics are now customer-endorsed or -generated.

Two things are made clear by Table 5-2 : (1) the product centers are using their allocated topics for the potential benefit of aging aircraft and (2) the Air Vehicles Directorate and the Materials and Manufacturing Directorate are not concentrating on the problems of aging aircraft. Thus, some means must be found for providing the AATT with some SBIR topics pertaining to its responsibilities even though AATT does not contribute to the funds set-aside.

As the new Air Force process matures, further improvements will be necessary. First, the topics must be coordinated among all participants. As Table 5-3 shows, stakeholders sometimes independently propose closely related topics; the development of a collective strategy for these would be of great benefit for both the Air Force and the SBIR community. A second important process improvement will be top-down topic selection. If the number of technical areas (of which aging aircraft could be one) is limited, the SBIR funds allocated to aging aircraft might increase. The focus topics would be managed through the AFRL ITTP, which deals with laboratory technologies targeted for transition. A new companion process aimed even more broadly at developing more effective technology transition is being introduced by the AFRL/ALC/MAJCOM partnership: the Applied Technology Council. SBIR focus topics, given significant funds, could become key elements of both the ITTP and the Applied Technology Council processes for ensuring the complete development and successful transition of new technologies.

One of the difficulties in the development of technological innovations for existing flight vehicles is that the budgeting process of the Air Force tracks monies for different purposes in different accounts (i.e., monies from different accounts are considered to have different “colors”). The R&D programming managed by AFRL (in RDT&E [test and evaluation] Appropriation Account 3600: Program Elements 6.1, 6.2, and 6.3) and the systems acquisition programming managed by the product centers and PEO's (Account 3600: PE 6.4-6.7, including the aging aircraft acquisition program [PE 6.5]) are tracked in one account. These funds are separate from funds for sustainment (Appropriation Account 3400: Operation and Maintenance), managed largely by the ALCs.

Most new technologies are for new systems that will be fielded sometime in the future, and transferring them requires AFRL, the product centers, and PEOs employing sequential 3600 Program Element funding to work together. The development, transitioning, and implementation of technologies for existing systems requires partnering between the AFRL, product centers, PEOs, the ALC, and, perhaps, the flight-line customers who perform day-to-day maintenance. This process requires both 3600 and 3400 program funding. This extended technology-

transition track adds to the responsibilities on the overall Air Force team, which must provide as seamless a process as possible to ensure the successful implementation of new sustainment technologies. The new ASC Aging Aircraft Program Office, funded with PE 6.5 acquisition resources, was created to provide bridge funds for this process.

Because of the way the sustainment arena functions, the identification of high-payoff technologies may be difficult; the implementation of technology solutions, even when shown to have high payoff, may also be difficult. As Admiral Massenburg pointed out at the 2000 Aging Aircraft Conference (Massenburg, 2000), the multiple reporting systems, documenting problems, and subsequent maintenance may be a Tower of Babel of different formats and standards. Much of the key information, particularly trend data, can be lost because maintenance data are sometimes retained for only a few months. In addition, maintenance reporting may not even contain sufficient information to identify the fundamental engineering causes of problems.

A number of aging system program offices in the Navy and the Air Force are taking definitive action to facilitate the consistent identification of cost-effective sustainment actions. An example of the new process, the C-5 aircraft enterprise model, was presented at the conference (Compton, 2000). With the enterprise approach, what is going on today is evaluated to establish baselines for all elements of aircraft availability and ownership costs. Then an assessment is made of essential near-term and long-term improvements, and the criteria necessary to achieve the best return on investment for both aircraft modernization and sustainment are identified.

When potentially cost-effective solutions have been developed, completion of all steps for successful implementation at an ALC or on the flight line may be a real challenge. A number of steps may be required at the ALC for full implementation (e.g., preparation of technical orders or detailed maintenance manuals, completion of facility hardware and software upgrades, purchase of new supplies and equipment, and purchase of new replacement parts). Each step may require action by different parties subject to different processes to secure the required funds. In addition, AFRL and acquisition team members must absolutely ensure that all development and system engineering work has been completed before proposing that ALC adopt new technologies. The ALCs have very limited “sustaining engineering” resources, and these must be used to fulfill their principal mission of aircraft maintenance.

Although these issues may not directly concern the SBIR community, an appreciation of the overall process is important for a successful technology transfer. Fortunately, the military services are taking concerted steps to improve the processes for introducing new technologies into the sustainment arena. These initiatives include the new Navy Aging Aircraft Integrated Product Team, introduced at the 2000 Aging Aircraft Conference; annual Air Force durability

surveys of the entire aging aircraft fleet; the Air Force Aging Aircraft Working Group; and actions by individual SPOs, such as that for the C-5. However, no fully integrated Air Force team applying a coordinated and focused programming approach has been established.

The recommended process improvements are based on the committee's evaluations of the Air Force's SBIR program in Chapter 3 and presentations by the Air Force (see Appendix C). Because only SBIR projects related to aging aircraft were considered, the Air Force will have to determine if these recommendations also apply to other aspects of its SBIR program.

Some representatives of Air Force units that made presentations to the committee felt that because they did not have sufficient control over the SBIR process, they did not plan on using SBIR funds for flight-critical programs. This is easy to understand, because the operating units submit topics for consideration but do not make the final decision on which topics will go forward. Topics are currently selected and approved at the higher echelons of the DOD and then returned to the operational levels for implementation. Further, SBIR resource commitments for Phase II are made at the higher echelons of the Air Force.

If a significant level of SBIR funding is routinely provided to ITT areas by rotation, then Air Force technical managers, who develop the S&T core-funding road maps, can incorporate an SBIR funding wedge as an integral part of the overall strategy, which would include practical plans for commercialization.

Finding. The current process of selecting SBIR topics is time consuming and may actually stifle the use of SBIR funds for time-critical innovations.

Recommendation. Final decisions on SBIR topics should be made at the operational level (the air logistics centers [ALCs], system program offices [SPOs], product centers, test centers, or laboratory directorates) so that the process of selecting SBIR topics can be shortened considerably.

Recommendation. A smaller number of topics with resource commitments for the full cycle would allow the Air Force to focus on major areas (each of which would encompass multiple topics) based on an Air Force-wide development strategy. Focus areas should be rotated systematically in response to evolving Air Force requirements and to ensure that areas left out in earlier cycles receive attention. Aging aircraft should be one of the first focus areas to be implemented. The committee suggested that about 40 percent of the SBIR funds could be set aside for the focus areas.

Recommendation. The process should be implemented through the six Air Force Research Laboratory integrated technology thrust (ITT) structures and the program arenas in them (the 29 ITTPs), of which aging aircraft is one. For example, four ITTP areas could be given all of the money in one year, along with funding commitments for out years. This would enhance the value of a given ITT area based on Air Force need in relationship to warfighter and sustainer requirements. The ITTs are the recommended vehicle for implementing focus topics because they are responsible for ensuring technology transition to meet high-priority warfighter and sustainer needs.

Recommendation. Customer stakeholders, now full partners in the SBIR process, should become full partners in developing the major focus areas. In this way, they would be contributing topics and contributing implementation resources (and, of course, they are the ultimate beneficiaries).

In the current SBIR program implemented by AFRL, there is no programmatic flexibility to allow for sudden, new, or unforeseen needs. In addition, there is no provision to support new directions or programs that might require innovation support or to support an existing program for which a funding concentration is needed over the short term.

Recommendation. A pool of SBIR funds should be made available on a case-by-case basis to agencies, programs, depots, or laboratories that can document a need for short-term SBIR support. If each agency, command, program, depot, or laboratory that now has six topics available to it were given five topics instead, a pool of topics (and of SBIR funds) would become available for an open competition or assignment on an annual basis according to demonstrated, documented needs.

In some cases, SBIR funding is simply the front-end cost of development programs to test the feasibility of full development programs. In these cases, the “sponsoring” manufacturer, depot, laboratory, or agency is expected to furnish at least some of the support necessary to bring a program to fruition. In fact, several programs may be able to contribute funds for the completion of an innovation in which they are all interested. Another advantage to this approach concerns the flow of information during a development program. If funding for Phase III is provided by a government agency, it will facilitate use of the innovation at the much-needed ALC depot level.

Finding. SBIR funds now cover Phases I and II. Private funding is usually used to fund Phase III and beyond, although this is not mandatory.

Recommendation. If the Air Force is the only customer for an innovation developed with SBIR funding, the Air Force Research Laboratory, the system program office, and/or the program manager should take ownership by funding these innovations beyond Phase II with non-SBIR money. Once an SBIR-funded project has developed a desired necessary innovation, the user agencies should be prepared to transfer successful developments to normal internal funding sources to complete development.

Recommendation. SBIR proposals should have complete manufacturer, system program office, agency, or depot backing when Phase I proposals are selected for award. That backing should be a simple but forceful statement to the effect that “we need it, so if it works and is affordable (cost-effective), we will use it.”

Air Force SBIR program managers do not appear to consider the significant costs involved in preparing an SBIR Phase I proposal. Small businesses estimate the current cost at $3,000 to $10,000, a significant investment for a very small business. Many more small businesses might be interested in competing for Air Force SBIR funds if it were less costly for them to participate or if they could prepare and submit a white paper. The preparation of a white paper would be much less expensive because much of the material probably already exists. The format of the submission could be strictly controlled to, say, a two-page technical

write-up and a one-page write-up about the business, its products, and expertise. Several small businesses estimated that this process would cost less than $500. White papers would also be easier to handle because they would not require debriefing. From the white papers, the Air Force could request 1,000 Phase I proposals per year, from which the 500 most relevant could be selected for awards, at a much lower administrative burden.

Finding. Each year approximately 2,500 to 4,000 proposals are received and evaluated. The current selection rate is one out of nine, which means eight out of nine proposals are rejected. This places a huge administrative burden on Air Force units and laboratories and a substantial economic burden on small businesses.

Recommendation. Only companies whose ideas were originally submitted as a white paper and were shown to be of interest to the Air Force should be invited to submit Phase I proposals. The format for the white paper should be strictly limited to, say, a two-page technical write-up and a one page write-up about the small business, its products, and expertise.

The long gestation time between the submission of a proposal and the award of a contract creates a burden for some small businesses. In addition, the gap between the end of a Phase I contract and the beginning of the Phase II contract is typically around 6 months but can be as long as 1 year. This hiatus makes it difficult for small businesses to retain people with specialized skills and often results in the loss of key personnel. In many cases, this factor alone discourages some small businesses from attempting to enter the SBIR program. The Air Force could allocate funding to bridge the gap between the end of a Phase I contract and the award of a Phase II contract. A typical strategy might be to withhold $30,000 of the $100,000 now allocated for Phase I and ask for Phase II proposals up to the last day of the Phase I. If a Phase II award could be decided on in 6 weeks, the Air Force could immediately release the $30,000 for another 90 days as a modification to the Phase I contract while the Phase II contract is being negotiated.

Executing the Phase I award as a grant rather than as a contract could facilitate the implementation of this strategy. The only deliverable for a grant awarded for research projects is usually a final report. Grants from several federal agencies, such as NSF, DOE, and NASA, allow for automatic payments at appointed intervals (usually 2 months), which greatly improves the cash flow for small

businesses. Modifying a grant is also less bureaucratic than modifying a contract for which several deliverables are involved. DOD contracts usually require submission of invoices and reports every month or every 2 months, even for short, 6-month projects. Because Phase I usually involves only proof of feasibility and a report, a grant would be a better, more efficient mechanism from the small business point of view.

Recommendation. The time line of the entire SBIR process should be shortened and the efficiency improved for both the Air Force and the small business community by issuing Phase I awards as grants instead of contracts. This would also lead to payment processes that are more responsive to the needs of small businesses and would reduce the paperwork and shorten the response time for Air Force program implementers.

Recommendation. By the end of the Phase I award, the Air Force and the awardee should be clear about the probability of Phase III funding in order to plan for its execution. For the Air Force, this would mean the allocation of funds; for the small business, it would mean an understanding of milestones to be met during Phase II to reach Phase III. The Air Force should require milestone dialogues between the customer (Air Force) and the small business to increase commercialization from the current paltry rate of 1.5 to 2 percent to a rate of 20 to 25 percent. This would have a major impact on the Air Force mission.

Staffing for SBIR programs is inadequate at many levels in the Pentagon and at the ALCs. SBIR programs are often assigned to the least experienced engineers, who are not aware of the needs of the Air Force, the ALCs, the SPOs, the aging aircraft program, and other relevant programs. At one ALC, the SBIR program manager was the third person assigned to that responsibility in 4 years. The champion, the one who initiated the program for a particular manufacturer, depot, agency, or laboratory, is often left out of the loop.

Recommendation. Engineers whose tenure is expected to be long should be selected for important innovation programs, especially at the air logistics centers (ALCs), where SBIR-developed innovations are likely to be transitioned to service use. If possible, the initiator or technical champion should be responsible for managing an SBIR program through its life cycle. If an ALC is unable to staff

its SBIR programs, the Air Force Research Laboratory could provide staff on behalf of the ALC.

Finding. The product center or other primary customer of a technology is not always involved in the decision to invite proposals for Phase II.

Recommendation. To ensure that the Air Force derives maximum benefit from its SBIR programs, the product center commander, system program officer, or operation manager should be apprised of Phase I developments and involved in the decision by Air Force Research Laboratory to solicit Phase II proposals. Small businesses could then fine-tune their Phase II programs to meet the specific needs of the customer.

The nature and operation of the Air Force SBIR program are not well understood at many sites where military and civilian personnel are expected to be directly involved with the program. The same is tree of many existing contractors and small businesses that may contemplate participating in the program. Many small businesses are not fully aware of the needs of the Air Force, and many Air Force personnel are not aware of the capabilities available in the small business sector. Information about the ins and outs of military SBIR programs is lacking, as is personal contact with an appropriate engineer to avoid blind proposals. Most small businesses are not aware of the value of working with an end-user organization as early as possible, even at the Phase I stage. Unlike the laboratories, the ALCs do not publicize their needs through road map briefings.

Most SBIR funds are spent for what would otherwise be classified as PE 6.1 or 6.2 research. Many people, both in and out of government, believe that the most important word in the title SBIR is “research ” and that the “I” stands for “innovative” rather than “innovation.” The distinction is subtle but important. The product of “innovative research” can be a theory, an experimental result, or a research paper. However, the result of “innovation research” will be a useful product expected to improve an Air Force mission.

Finding. Because of the lack of communication between small businesses and end users, Phase I proposals are often inappropriate and unfocused.

Recommendation. Workshops should be conducted with both small and large businesses to inform them of Air Force needs and ensure that Air Force personnel understand the mechanics of the SBIR process and the small business capabilities available to them. Large businesses can catalyze the efforts of small businesses by providing expertise and insight into important customer (Air Force) requirements. Workshops would lead to better use of SBIR funds for all participants and establish a dialogue that could lead to solutions to real Air Force needs.

In the present system, most Air Force SBIR contract technical representatives do not meet the company until after a Phase II award has been made. Often, the Phase I reports and the Phase II promises are not directly relevant to the needs of the end user. Because the small business is already under contract, Phase II resources may be wasted. Allocation of resources in a Phase I award for travel to the center managing the Phase I award would-promote an understanding by the Air Force of the grantee's approach and the success of Phase I developments. At that time, Air Force officials could determine the relevance of Phase I to the longer, 2-year Phase II.

Recommendation. Approximately 3 months into a Phase I award, a grantee's meeting should be held at the center soliciting the topic. The purpose of this meeting would be for the small business to highlight its work up to that point and to interface with the end user within the Air Force. The end user could assist in any midcourse correction to be undertaken in the remaining 3 months of Phase I and in establishing general requirements for Phase II. Program managers and system program officers (SPOs) could then be sure that the funds are being used effectively. Program managers and SPOs could also plan on budgeting funds for approximately 2 years down the road to help move the technology into Phase III. The Air Force liaison for the center should also invite large contractors who would benefit from the Phase I developments in their programs. In this way, benefits from the Phase I award would be enjoyed by the Air Force, small businesses, and large government contractors.

The current process calls for the solicitation to remain open for 6 weeks so that the solicitor of the topic and the small businesses can engage in a dialogue. However, most small businesses have had great difficulty in obtaining answers to their questions or even reaching the points of contacts listed in just 6 weeks. This lack of communication limits the number of responses and often results in proposals that do not address the Air Force's needs. Effective communication

would enable the Air Force to adopt a market-pull strategy from within the Air Force and address the specific needs of end customers, as opposed to the current technology-push strategy, which makes the commercialization of technologies developed by small companies extremely difficult.

Recommendation. Each center in the Air Force should appoint and empower an ombudsperson to help small businesses communicate with program managers or end users. An effective ombudsperson would ensure that small businesses receive relevant responses to their concerns. Such an appointment will also increase the benefit and recognition to the SBIR program at the various Air Force customer levels.