Vulnerabilities in the HHS Small Business Innovation Research Program

WHY WE DID THIS STUDY

The Small Business Innovation Research (SBIR) program awards funds to small businesses to pursue innovative research and development ideas that have potential for commercialization and that meet research and development needs of the Federal Government. Since the implementation of the SBIR program in 1982, the Department of Health and Human Services (HHS) has funded more than $8 billion in awards to small businesses that self-certify that they meet program requirements. However, unlike most other SBIR awarding agencies, HHS does not have a single office responsible for overseeing its SBIR program. In 1999, OIG reported HHS had not evaluated the success of the program. Further, other Federal agencies have identified fraud in the SBIR program, including awardees that falsely certify eligibility and receive duplicative funding from multiple agencies.

HOW WE DID THIS STUDY

We reviewed fiscal year 2011 data from the four HHS Operating Divisions (OpDivs) that participate in the SBIR program to determine the extent to which they ensured that awardees were eligible and awards were meeting program guidelines and goals. We also verified awardees' eligibility using data sources commonly used by other Federal agencies to identify potentially ineligible awardees.

WHAT WE FOUND

HHS awarded $360 million in SBIR funds to nearly 1,000 awardees in 2011 and had the highest average SBIR award amount of any participating agency. Although it was not required to do so, HHS did not consistently collect information on or assess the commercial success of SBIR awards and therefore cannot determine whether the program is meeting one of its primary goals. Although all awardees self-certified that they intended to meet SBIR eligibility requirements, we found that 31 percent of awardees had questionable or unverified eligibility for at least one requirement. Although they are not required to do so, HHS OpDivs did not take any steps to independently verify that these awardees met eligibility requirements. Furthermore, although one OpDiv checked for duplicative funding within HHS, none of the four OpDivs completed a required check for duplicative awards across other Federal agencies.

WHAT WE RECOMMEND

Our findings raise concerns about vulnerabilities in the SBIR program. To address these vulnerabilities, HHS should create a central office to oversee the SBIR program. HHS OpDivs should track and assess the commercial success of SBIR projects, ensure compliance with eligibility requirements, and improve procedures to check for duplicative awards. ASFR did not indicate whether it concurred with each of our recommendations. However, ASFR concurred that additional coordination and oversight across participating OpDivs is warranted and agreed that HHS must ensure that applicants meet SBIR eligibility requirements.