The Federal Government is changing and the Department of Defense (DoD) budget is expected to increase. This may lead to increased availability of non-dilutive funding (NDF) for private industry from the DoD. These DoD funding opportunities may be less frequently pursued by small business than NDF grants from other Federal agencies, such as the National Institutes of Health (NIH); however, with concomitant rumors of decreased NIH budgets, DoD NDF may present opportunities for your company to offset R&D shortfalls secondary to proposed NIH budget cuts. The processes for obtaining DoD NDF may be unfamiliar, but the sooner your company starts to learn about these processes to decrease the impact of these Governmental changes, the better. Reaching out to companies in your local area and obtaining guidance from personnel with experience in DoD contracts are always helpful ways to start.
Types of DoD NDF
In contrast with dilutive funding (e.g., Angel investors, Venture Capitalists, Private Equity), NDF does not require a company to dilute its ownership in exchange for receipt of funding (i.e., it doesn’t dilute existing shareholders). DoD and other Federal agencies will provide NDF to qualified applicants for R&D to accelerate their desired capabilities or requirements in the form of project deliverables to commercial marketplaces. NDF will fund your R&D, testing and evaluation (RDT&E) of technologies, which is an incredible opportunity for qualified applicants. However, NDF should never be considered as a way for a company to make money.
Research Grants and DoD Contracts
Unlike the NIH, the National Science Foundation (NSF), and some other federal grant-awarding agencies, DoD grants are technically contracts. Contracts are legally binding and therefore require a more detailed structure and offer less flexibility in how awarded funds are utilized. A helpful description of the differences between a grant and a contract can be found here. The DoD typically has around 100-150 solicitation mechanisms open at any given time. Many DoD grants can be found on Grants.gov and FedBizOpps.gov (other subcommand and intramural solicitations are not so easy to find but dig deep — we will provide some DoD search tips in future articles). There can be eligibility restrictions, in which only school districts, universities, non-profits, or small businesses may apply, so review these immediately after identifying an announcement of interest — this will save unnecessary use of resources. However, most solicitations are unrestricted and open to all entity types. For most DoD funding programs, there is a two-stage submission process: 1) a white paper, concept paper or pre-proposal is submitted; and 2) industry submissions that closely match requested capabilities or the highest-rated applicants are then invited to submit a full application.
Even though topic requirements for DoD laboratories, Small Business Innovation Research or Small Business Technology Transfer Research can be very specific, the DoD offers funding for a wide variety of research areas (e.g., basic research to clinical trials and operational demonstrations), some of which may seem only distantly related to military objectives. Some large NDF programs are funded by Congress and managed by the DoD (i.e., Congressionally Directed Medical Research Programs or CDMRP). CDMRP topics are also selected by Congress and therefore, some of the topics reflect conditions that are rarely associated with currently serving active duty DoD, reserve, or Guard personnel (e.g., autism, Duchenne muscular dystrophy, Alzheimer’s). Locations such as the U.S. Army Medical Research and Materiel Command (MRMC), Air Force Research Lab (AFRL), Defense Advanced Research Projects Agency (DARPA), U.S. Special Operations Command (USSOCOM), and U.S. Army Corps of Engineers Engineer Research Development Center (ERDC) typically release Broad Agency Announcements (BAAs) annually or on a recurrent periodic basis. BAAs tend to encompass a wider range of research topics and focus areas for desired capabilities than other solicitation mechanisms.
Under the U.S. Government Small Business Innovation Research (SBIR) program, all federal agencies with extramural research budgets greater than $100 million must have a percentage of that budget reserved for contracts or grants to small businesses. For FY16, this percentage was ≥ 3.0%, and for FY17 it is ≥ 3.2%. The Small Business Technology Transfer (STTR) program is similar – it funds cooperative R&D projects with small businesses in collaboration with universities and other not-for-profit research institutions. Federal agencies with extramural budgets exceeding $1 billion must reserve 0.45% of their funds for STTR projects (for FY16 and beyond).
The DoD SBIR/STTR programs release solicitations for proposals three times each year. The latest DoD SBIR and STTR BAA topics can be found on the DoD SBIR/STTR Small Business Portal. SBIR/STTR grants typically focus on commercialization of research technology rather than funding basic research. Each SBIR/STTR is broken up into Component Topics which are specific to various DoD agencies (e.g., Army, Air Force, Navy, DARPA), and each Component Topic has its own Topic Index/Technology Areas defining the areas of research being solicited. It is important to check on the current SBIR/STTR solicitations while they are open, as modifications are frequently made. You can also sign up to receive automated notifications of announcement changes on Grants.gov or FedBizOpps.gov.
The SBIR/STTR programs are structured into three phases:
1. Phase I (project feasibility) determines the scientific, technical and commercial merit and feasibility of the ideas submitted.
2. Phase II (project development to prototype) is the major research and development effort, funding the prototyping and demonstration of the most promising Phase I projects.
3. Phase III (commercialization) is the ultimate goal of each SBIR/STTR effort and statute requires that Phase III work be funded by sources outside the SBIR/STTR Program.
How do the DoD SBIR/STTR program awards and success rates compare to other Federal SBIR/STTR programs? Even though the DoD has received more than twice as many SBIR and STTR applications each year than the NIH, the DoD consistently has a higher rate of award success.
Rapid Innovation Fund (RIF)
The goal of the DoD RIF is to transition small business technologies into defense acquisition programs. According to the 2017 RIF Program Overview, 88% of all awards over the history of the program have gone to small businesses. The average award amount is $2.2 million, with a maximum of $3 million. There are topic components for the Army, Navy, Air Force, and Office of the Secretary of Defense (OSD). Typically, most DoD SBIR/STTR topics are heavily line-focused (i.e., non-medical topics). The number of biomedical, life science, or human weapon systems topics are typically < 5%, but these can vary from year to year. The FY16 requirements included research interests in portable mild traumatic brain injury (mTBI)/concussion diagnosis and monitoring systems, blood-borne pathogen and blood typing devices, medical informatics, and telemedicine. In FY17 the Defense Health Agency (DHA) significantly increased the number of health-related SBIR/STTR topic opportunities by releasing 14 DHA SBIR and 5 DHA STTR biomedical topics.
If your company has technologies that can improve the operational readiness, situational awareness or healthcare for our military personnel, Veterans and their families please consider utilizing DoD NDF resources to accelerate your technologies to DoD, VA, civilian and international marketplaces. If your current product(s), systems or platforms offer dual-use (military and civilian) capabilities, consider contacting experienced companies or personnel to start. If your company has dual-use technologies in the biomedical, life science or human systems focus areas, connect with us to discuss methods to improve your likelihood of DoD NDF award success.