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DoD Considered Small Business Innovation Research Intellectual Property Protections in Phase III Contracts, but Program Improvements Are Needed

DODIG-2014-049

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Objective

In response to a requirement in House Armed Services Committee Report 112-479, to accompany the National Defense Authorization Act for FY 2013, we reviewed 22 Small Business Innovation Research (SBIR) Phase III contracts, with a combined base award value of about $244.9 million, to determine whether the Services properly awarded SBIR Phase III contracts to other than small businesses. Specifically, we determined whether the Services considered small business intellectual property rights and properly notified the Small Business Administration (SBA) of the contract award.

Finding

U.S. Army Medical Research Acquisition Activity, Naval Air Systems Command, Naval Sea Systems Command, and Air Force Research Laboratory contracting personnel:

  • properly awarded all 11 SBIR Phase III contracts that were awarded to other than small businesses because the awardee owned the SBIR data rights; and
  • considered SBIR intellectual property rights when awarding 21 of 22 contracts byincluding the required contract clause.

However, DoD contracting and U.S. Army Medical Research and Materiel Command personnel inconsistently followed policies that governed SBIR intellectual property protections because of unclear and inconsistent DoD and SBA requirements.

In addition, DoD organizations did not:

  • have any documented instances of contractor intellectual property complaints within the SBIR Program because DoD personnel were not required to track complaints and believed that none existed; and
  • know the complete universe of SBIR Phase III contract awards because no mechanism existed to fully track SBIR Phase III contracts.

DoD organizations’ inconsistent interpretation of unclear requirements hinders program oversight and weakens protections over small business intellectual property. Without a clear interpretation of existing policy, DoD organizations could face obstacles in exercising their rights to SBIR data. DoD does not have reliable data to report the success of the DoD SBIR Program. As a result, DoD’s program oversight and the protections over small business intellectual property within the SBIR Program is weakened, and information provided to Congress is not complete.

Recommendations

DoD officials should:

  • develop training and issue guidance that will allow for a uniform interpretation of intellectual property protections across DoD;
  • issue guidance to improve the accuracy of SBIR information being entered into existing databases; and
  • address inconsistencies in DoD regulations regarding intellectual property protections.

Management Comments and Our Response

The Deputy Director, Policy and Procurement, DoD Office of Small Business Programs, responding for the Administrator, DoD Office of Small Business Programs, SBIR Office, partially addressed the recommendations to develop training and issue guidance. The deputy director agreed with the recommendations and stated the DoD Office of Small Business Programs would address the following topics during the SBIR/Small Business Technology Transfer annual training workshop planned for June 2014:

  • standard intellectual property protections;
  • use of the data assertions table;
  • when the SBIR protection period begins and when it can be extended;
  • timely SBA notification requirements; and
  • accuracy and uniformity of SBIR database information.

However, the deputy director did not fully address the actions needed to allow for a uniform interpretation of intellectual property protections across DoD or those needed to increase the accuracy of SBIR information being entered into existing databases.

Comments from the Director, Defense Procurement Acquisition Policy addressed all specifics of the recommendation. He agreed to address inconsistencies in DoD regulations. The director stated DoD would work with SBA to address the inconsistencies regarding intellectual property and noted DoD has taken steps to clarify guidance on the initiation and extension of the protection period of SBIR generated data.

We request that the Administrator, DoD Office of Small Business Programs, SBIR Office, provide comments in response to this report.

This report is a result of Project No. D2013-D000CG-0066.000.