GAO-13-70R: Small Business Research Programs

United States Government Accountability Office

Washington, DC 20548

November 15, 2012

Congressional Committees

Subject: Small Business Research Programs: Agencies Are Implementing New 

Fraud, Waste, and Abuse Requirements

For 30 years, federal agencies have made awards to small businesses for 

technology research and development through the Small Business Innovation 

Research (SBIR) program and, more recently, through the Small Business 

Technology Transfer (STTR) program. Over the past 6 years, agencies have 

obligated about $2.4 billion annually for these two programs. Federal agencies with 

a budget of more than $100 million for extramural research or research and 

development—which is conducted by nonfederal employees outside of federal 

facilities—must establish and operate an SBIR program. Eleven federal agencies 

currently participate in the SBIR program: the departments of Agriculture, 

Commerce, Defense (DOD), Education, Energy, Health and Human Services, 

Homeland Security, and Transportation; the Environmental Protection Agency 

(EPA); the National Aeronautics and Space Administration (NASA); and the National 

Science Foundation. Federal agencies with a budget of more than $1 billion for 

extramural research or research and development must establish and operate an 

STTR program, in addition to their SBIR program. Five of the 11 federal agencies 

that participate in the SBIR program also participate in the STTR program: DOD, 

the departments of Energy and of Health and Human Services, NASA, and the 

National Science Foundation. 

Each participating agency must manage its SBIR and STTR programs in 

accordance with program laws, regulations, and policy directives issued by the Small 

Business Administration (SBA), whose Office of Technology oversees and 

coordinates agency efforts for the programs by setting overarching policy and 

issuing policy directives, collecting program data, reviewing agency progress, and 

reporting annually to Congress, among other responsibilities. Each participating 

agency has considerable flexibility to design and manage the specifics of these 

programs, such as determining research topics, selecting award recipients, and 

administering funding agreements. 

The National Defense Authorization Act for Fiscal Year 2012 (the act),1

 

1

Pub. L. No. 112-81.

enacted on 

December 31, 2011, reauthorized the SBIR and STTR programs through September 
 Page 2 GAO-13-70R: Small Business Research Programs

30, 2017.2 Among other things, the act required SBA to make certain changes by 

March 30, 2012, to its SBIR and STTR policy directives to prevent fraud, waste, and 

abuse.

3 The act did not specify time frames for agencies to implement the revised 

policy directives. According to the SBIR and STTR policy directives, potential fraud, 

waste, and abuse in the programs include, among others, misrepresentation of the 

use of funds expended under an award, misuse of award funds, falsification in 

reporting results from an award, or extravagant or needless spending of an award. 

In addition to reauthorizing the programs, the act directed GAO to establish a 

baseline of changes made to the SBIR and STTR programs to fight fraud, waste, 

and abuse by December 31, 2012, and identified additional areas for future

evaluation.

4 In this context, this report summarizes (1) the status of the revised SBIR 

and STTR policy directives; information regarding fraud, waste, and abuse included 

in the revised directives; and steps taken to revise the directives and (2) participating 

agencies’ plans for implementing the new fraud, waste, and abuse requirements in 

the revised policy directives, including whether participating agencies anticipate 

challenges to implementing the changes.

To determine the status of the revised SBIR and STTR policy directives, information 

included in the revised directives, and steps taken to revise the directives, we 

tracked the directives through the revision process and, once the directives were 

issued, we reviewed the information contained in the directives, with a particular 

focus on the new fraud, waste, and abuse requirements. We compared the revised 

policy directives with GAO’s fraud-prevention framework to determine the extent to 

which the revised directives included elements of the framework.5 We also 

interviewed SBIR and STTR program managers from SBA and the 11 agencies that 

participate in one or both of the SBIR and STTR programs, as well as 

representatives from a working group of the Council of the Inspectors General on 

Integrity and Efficiency that has been discussing fraud in these programs.6 

 

2

Pub. L. No. 112-81, Div. E. 

3

Other provisions of the act required SBA to make changes to other sections of the policy directives, 

such as increasing the maximum dollar value of awards and revising requirements for agencies to 

report certain information to SBA, by June 28, 2012. SBA decided to revise the policy directives to 

incorporate all of the changes required by the act at one time, rather than issuing multiple revisions to 

the directives.

4

Pub. L. No. 112-81 § 5143(b).

5

We identified the elements of the fraud prevention framework in GAO, Service-Disabled VeteranOwned Small Business Program: Vulnerability to Fraud and Abuse Remains, GAO-12-697 

(Washington, D.C.: Aug. 1, 2012).

6

The Council of the Inspectors General on Integrity and Efficiency was statutorily established as an 

independent entity within the executive branch by the Inspector General Reform Act of 2008 to 

address integrity, economy, and effectiveness issues that transcend individual government agencies 

and increase the professionalism and effectiveness of personnel by developing policies, standards, 

and approaches to aid in the establishment of a well-trained and highly skilled workforce in the offices 

of the Inspectors General. Pub. L. No. 110-409, §7, 122 Stat. 4302, 4305-4313 (codified at 5 U.S.C. 

App. 3, § 11 (2006)).
 Page 3 GAO-13-70R: Small Business Research Programs

To determine agencies’ plans for implementing changes to the revised policy 

directives and potential challenges to implementing the changes, we reviewed 

documentation from SBA about changes to the policy directives and expected time 

frames for implementing the new fraud, waste, and abuse requirements. 

Additionally, we interviewed SBIR and STTR program managers and 

representatives from the Offices of Inspectors General at SBA and the 11 agencies 

that participate in one or both of the SBIR and STTR programs. To the extent 

possible, we corroborated information on the changes that agencies have 

implemented—as well as tools agencies already had in place—by reviewing relevant 

agency documents, such as agency websites and SBIR and STTR funding 

solicitations. 

We conducted this performance audit from March 2012 to November 2012 in 

accordance with generally accepted government auditing standards. Those 

standards require that we plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and conclusions based on 

our audit objectives. We believe that the evidence obtained provides a reasonable 

basis for our findings and conclusions based on our audit objectives. 

Results in Brief

SBA issued revised policy directives for the SBIR and STTR programs in August 

2012 that included new requirements designed to help agencies identify and prevent 

potential fraud, waste, and abuse in the SBIR and STTR programs—changes that 

SBA developed in consultation with agencies that participate in the programs and a 

working group of inspectors general. Among other changes, the revised SBIR and 

STTR policy directives each include a new section on preventing fraud, waste, and 

abuse in the programs. They also include 10 minimum requirements related to fraud, 

waste, and abuse that the 11 participating agencies must meet, such as providing 

information on how to report fraud, waste, and abuse on their program websites and 

in solicitations. The revised policy directives include elements of our fraudprevention framework. Based on our prior work, an effective fraud-prevention 

framework should include up-front preventive controls, detection and monitoring, and 

investigations and prosecutions. The 10 requirements in the revised directives 

include elements of the framework, but the effectiveness of the requirements in 

helping agencies identify and prevent potential fraud, waste, and abuse will depend

on how participating agencies implement the requirements. SBA incorporated input 

from key stakeholders, specifically the SBIR and STTR program managers and 

representatives from an inspectors general working group, when developing the 

revised policy directives. Additionally, SBA chose to solicit comments through a 60-

day public comment period on the revised directives.

Agencies that participate in the SBIR and STTR programs vary in their plans to 

implement the new fraud, waste, and abuse requirements; however, none of the 

agencies anticipate challenges in doing so. Each of the participating agencies 

already had in place some tools to address or partially address the new fraud, 

waste, and abuse requirements in the revised policy directives before SBA issued 

them. According to our analysis of the requirements and the tools agencies had in 

place, each of the agencies needs to modify some existing tools and implement 
 Page 4 GAO-13-70R: Small Business Research Programs

additional tools to meet all of the requirements in the revised policy directives. The 

act and revised directives do not establish time frames by which agencies must 

implement the new requirements. At the time of our review, most agencies were in 

the process of determining their planned time frames for implementing the new 

requirements. Program managers at each of the agencies that participate in one or 

both of the programs told us that they do not anticipate significant challenges to 

implementing most of the new fraud, waste, and abuse requirements.

Background

The SBIR program was initiated in 1982 and has four purposes: to use small 

businesses to meet federal research and development needs, to stimulate 

technological innovation, to increase commercialization of innovations derived from 

federal research and development efforts, and to encourage participation in 

technological innovation by small businesses owned by disadvantaged individuals 

and women. The 11 agencies that participate in the SBIR program reported 

obligating more than $2.2 billion for about 5,500 awards in fiscal year 2011.7 The 

purpose of the STTR program—initiated in 1992—is to stimulate a partnership of 

ideas and technologies between innovative small businesses and research 

institutions through federally funded research or research and development.8 A key 

difference between the SBIR and STTR programs is the requirement that small 

businesses receiving STTR awards must partner with a nonprofit research institution 

that must perform at least 30 percent of the research and development for the 

project. The five agencies that participated in the STTR program reported obligating 

about $250 million for more than 700 awards in fiscal year 2011. 

Agencies follow the same general process to obtain proposals from and make 

awards to small businesses for both the SBIR and STTR programs. At least 

annually, each participating agency issues a solicitation requesting proposals for 

projects in topic areas determined by the agency. Each agency uses its own process 

to review proposals and determine which proposals should receive awards. Also, 

each agency determines whether the funding for awards will be provided as grants 

or contracts. 

In August 2009, the Senate Committee on Commerce, Science, and Transportation 

held a hearing on fraud, waste, and abuse in the SBIR program.9

 

7

We are reviewing agencies’ compliance with required expenditure amounts for the SBIR and STTR 

programs, among other requirements, as part of a separate review required by Pub. Law No. 112-81 

§ 5136.

In that hearing, 

Members of the Committee raised concerns about a prior case of fraud in the SBIR 

program, as well as the potential for additional fraud, waste, and abuse in the 

programs. Shortly after that hearing, the Council of the Inspectors General on 

Integrity and Efficiency’s Misconduct in Research Working Group began to discuss 

8

Research institutions include nonprofit colleges or universities, domestic nonprofit research 

organizations, and federally funded research and development centers.

9

Hearing before the Committee on Commerce, Science, and Transportation, United States Senate; 

Waste, Fraud, and Abuse in the SBIR Program; August 6, 2009.
 Page 5 GAO-13-70R: Small Business Research Programs

fraud in the SBIR and STTR programs and coordinate efforts related to these 

programs among the inspectors general from SBA and each of the 11 participating 

agencies. The working group also established a separate subgroup of investigative 

agents from SBA, the 11 participating agencies, and the Department of Justice to 

share information on ongoing cases, lessons learned, and best practices related to 

SBIR investigations.

We have issued several reports on various aspects of the SBIR program dating back 

to the 1980s. In our August 2009 testimony before the Senate Committee on 

Commerce, Science, and Transportation, we summarized our previous findings 

related to the SBIR program, including our finding that the SBIR program could be 

improved by collecting better data and establishing a database so that SBA and 

participating agencies can share information and enhance their efforts to monitor 

and evaluate the program.10 More recently, we reported on the availability of data to 

evaluate progress in increasing commercialization (e.g., sales) of SBIR 

technologies.11

SBA Issued Revised Policy Directives with New Fraud, Waste, and Abuse 

Requirements after Consulting Key Stakeholders 

SBA issued revised policy directives for the SBIR and STTR programs in August 

2012 that included new requirements designed to help agencies identify and prevent 

potential fraud, waste, and abuse in the SBIR and STTR programs—changes that 

SBA developed in consultation with agencies that participate in the program and a 

working group of inspectors general. The revised policy directives include elements 

of our fraud-prevention framework; however, the effectiveness of these requirements 

in preventing potential fraud, waste, and abuse will depend on how participating 

agencies implement the requirements. In developing the revised directives, SBA 

incorporated input from SBIR and STTR program managers and an inspectors 

general working group, and SBA later sought public comments on the revised 

directives.

SBA Issued Revised SBIR and STTR Policy Directives That Include New Fraud, 

Waste, and Abuse Requirements 

SBA published revised policy directives for the SBIR and STTR programs in the 

Federal Register on August 6, 2012; the directives took effect that day. Among other 

changes, the revised policy directives each include a new section on preventing 

fraud, waste, and abuse in the programs. The fraud, waste, and abuse sections 

contain the same information and requirements for both programs. The revised 

policy directives include 10 new minimum requirements related to identifying and 

preventing potential fraud, waste, and abuse that the 11 participating agencies must 

implement, but the directives do not specify deadlines by which agencies must 

 

10GAO, Small Business Innovation Research: Observations on Agencies’ Data Collection and 

Eligibility Determination Efforts, GAO-09-956T (Washington, D.C.: Aug. 6, 2009).

11GAO, Small Business Innovation Research: SBA Should Work with Agencies to Improve the Data 

Available for Program Evaluation, GAO-11-698 (Washington, D.C.: Aug. 15, 2011).
 Page 6 GAO-13-70R: Small Business Research Programs

implement the changes. To meet the requirements, each agency participating in the 

programs must, at a minimum, take the 10 actions summarized below:

1. Require certifications from award recipients that they are in compliance with 

specific program requirements at the time of the award, as well as after the 

award and during the life cycle of the funding agreement.

2. Include information explaining how an individual can report fraud, waste, and 

abuse on the agency’s respective program website and in each funding 

solicitation using the method provided by the agency’s Office of the Inspector 

General, such as publishing the agency’s fraud hotline number.

3. Designate at least one individual in the agency to, at a minimum, serve as the 

liaison for the SBIR or STTR program, the Office of the Inspector General, 

and the agency’s suspension and debarment official, and ensure that 

inquiries regarding fraud, waste, and abuse are referred to the appropriate 

offices. 

4. Include on its program website information concerning successful 

prosecutions of fraud, waste, and abuse in the programs.

5. Establish a written policy requiring all personnel involved with the program to 

notify the Office of the Inspector General if anyone suspects fraud, waste, 

and/or abuse and ensure the policy is communicated to all personnel.

6. Create or ensure there is an adequate system to enforce accountability by 

developing standardized templates for referrals to the Office of the Inspector 

General and the suspension and debarment official, as well as a process for 

tracking such referrals.

7. Ensure compliance with program eligibility requirements and terms of funding 

agreements.

8. Work with the agency’s Office of the Inspector General in its efforts to 

establish fraud detection indicators; coordinate sharing of information on 

fraud, waste, and abuse between federal agencies; and improve education 

and training to program officials, applicants, and award recipients.

9. Develop policies and procedures to avoid funding essentially equivalent work 

already funded by another agency.

10.Consider enhanced reporting requirements during the funding agreement.

According to SBA officials, these requirements—along with other information in the 

revised directives—were designed to address the changes required by the act 

regarding fraud, waste, and abuse. For example, the act required SBA to include in 

the revised directives definitions or descriptions of fraud, waste, and abuse. The 

fraud, waste, and abuse sections of each of the revised directives define these terms 

and provide examples of what would constitute fraud, waste, and abuse by award 

recipients or agency personnel. Additionally, the act required SBA to establish 

guidelines for monitoring and overseeing applicants for and recipients of SBIR or 

STTR awards. According to SBA officials, the fraud, waste, and abuse section of the 

revised directives collectively addresses this requirement in the act.

SBA officials expect that other changes incorporated into the revised directives will 

also help agencies identify and prevent potential fraud, waste, and abuse in the 

programs. For example, the policy directives require agencies and small businesses 

to submit information to seven databases to satisfy additional reporting requirements 
 Page 7 GAO-13-70R: Small Business Research Programs

included in the act. Six of the seven databases will be part of Tech-Net, SBA’s 

database for tracking information on SBIR and STTR awards. According to SBA, 

one of the new databases—the Company Registry—will help prevent fraud, waste, 

and abuse because a company must register itself and use the same name and 

registration number each time when applying for awards. Program managers told us 

that they expect this registry will help them determine whether a small business has 

received an award for similar work in the past. Additionally, this registry is expected 

to include information on eligibility requirements for the programs to ensure that 

businesses understand the program requirements before applying for an award.

SBA’s Revised Directives Include Elements of GAO’s Fraud-Prevention Framework 

In analyzing the revised policy directives, we found that they include elements of our 

fraud-prevention framework. We developed this framework and have applied it in our 

past work on fraud prevention in various federal programs, including other small 

business programs and disaster payments.12 The framework consists of three 

crucial elements: (1) up-front preventive controls, (2) detection and monitoring, and 

(3) investigations and prosecutions. (See fig. 1.) 

Figure 1: GAO’s Fraud-Prevention Framework

Our past work has shown that the most effective and efficient part of a fraudprevention framework involves the institution of rigorous controls to prevent fraud. 

Such preventive controls can include efforts such as verifying that a business is 

eligible for the program. Even with effective preventive controls, there is a residual 

risk for fraud, waste, and abuse, which makes detection and monitoring an essential 

part of the framework. Detection and monitoring can include activities such as 

conducting periodic reviews of suspicious businesses and evaluating businesses to 

provide reasonable assurance that they continue to meet program requirements. 

Finally, we have previously reported that fraud-prevention controls are not fully 

 

12See, for example, GAO-12-697.
 Page 8 GAO-13-70R: Small Business Research Programs

effective unless identified fraud is aggressively prosecuted or businesses are 

suspended, debarred, or otherwise held accountable for committing fraud.

SBA included in the revised SBIR and STTR policy directives requirements for 

agencies to put in place tools that include elements of our fraud-prevention 

framework and the associated controls we have identified in our past work. 

However, the effectiveness of the minimum requirements in helping agencies 

identify and prevent potential fraud, waste, and abuse will depend on how 

participating agencies implement the requirements, as discussed below.

• Preventive controls: One preventive control identified in our prior work is 

performing system checks to identify potential duplication before payments 

are made. The revised SBIR and STTR policy directives require participating 

agencies to develop policies and procedures to avoid funding essentially 

equivalent work already funded by another agency. The revised directives 

include a number of examples of procedures that agencies can implement, 

and the directives give agencies flexibility in implementing procedures to 

satisfy the requirement. However, the effectiveness of the agencies’ efforts to 

identify potentially duplicative awards will depend in large part on the 

procedures that the agencies choose to implement.

• Detection and monitoring: One detection and monitoring control identified in 

our prior work is for agencies to perform periodic reviews of eligibility for 

programs. The SBIR and STTR policy directives require agencies to require 

firms to self-certify their compliance with program regulations—including 

eligibility—at the time of an award and throughout the life cycle of the 

associated funding agreement. However, the effectiveness of the 

certifications required in the revised SBIR and STTR policy directives will 

depend, in part, on how agencies implement the certifications, and 

specifically whether agencies implement verification processes to supplement 

the required certifications.

• Investigations and prosecutions: One prosecution control identified in our 

prior work is to maximize the deterrent value of successful prosecutions and 

disbarments. The revised SBIR and STTR policy directives require agencies 

to include on their program websites information on successful prosecutions 

of fraud, waste, and abuse in the programs. However, program managers 

and representatives from the Offices of the Inspectors General at 8 of the 11 

participating agencies told us that they are not aware of any prosecutions for 

fraud, waste, or abuse in the SBIR or STTR programs in their agencies. 

Additionally, the minimum requirements in the policy directives may not fully address 

the vulnerabilities of the programs to fraud, waste, and abuse. For example, the 

revised directives include a requirement for small businesses to certify their 

compliance with certain program requirements and another requirement allows 

agencies to rely on the small business to certify that it has not received funding for 

essentially equivalent work already funded by another agency. However, the revised 

policy directives do not require agencies to take steps to verify the accuracy of the 

information in these certifications. We have previously reported that a different small 

business program that relied exclusively on self-certification of eligibility was 

particularly vulnerable to fraud and abuse and that the self-certification process did 
 Page 9 GAO-13-70R: Small Business Research Programs

not prevent ineligible firms from receiving contracts.13 Additionally, in our past work 

we identified the conduct of unannounced site visits to locations where contracted 

work is performed as an element of an effective fraud-prevention framework.14 The 

revised policy directives require agencies to ensure compliance with the terms of 

funding agreements, but they do not specify how agencies should implement this 

requirement. We have previously reported that instituting elements, such as 

unannounced site visits, can help minimize the likelihood of fraud occurring while 

maximizing the possibility of detecting fraudulent activity that may occur.15

Because agencies have not yet implemented the requirements included in the 

revised policy directives, it is too early for us to determine the effectiveness of these 

requirements in helping agencies address the vulnerabilities in the program and 

identify and prevent potential fraud, waste, and abuse. We plan to evaluate the 

changes to the policy directives as part of our future reviews of fraud, waste, and 

abuse in the SBIR and STTR programs.

SBA’s Process for Revising the Policy Directives Included Input from Key 

Stakeholders

According to officials from SBA and participating agencies, SBA sought input from 

key stakeholders when revising the SBIR and STTR policy directives. Starting in 

January 2012, SBA met with the SBIR and STTR program managers at the 11 

participating agencies and representatives from the Council of the Inspectors 

General on Integrity and Efficiency’s Misconduct in Research working group to 

discuss the changes to the policy directives, including changes to help prevent fraud, 

waste, and abuse. In addition to attending these meetings, program managers and 

representatives from the inspectors general working group provided comments on 

multiple drafts of the revised policy directives. Program managers and members of 

the Inspectors General working group said that they were satisfied with the process 

SBA used to update the SBIR and STTR policy directives, particularly with the 

amount of input that SBA requested from these stakeholders. Furthermore, we have 

previously reported that early and frequent communication with stakeholders and 

two-way communication that allows stakeholders to provide feedback can be an 

effective strategy when implementing changes in a program.16

Although SBA began working to incorporate changes to the policy directives 

required by the act in January 2012, officials told us that the agency had begun 

discussing fraud, waste, and abuse and potential changes to the directives with 

SBIR and STTR program managers and representatives from the Inspectors 

 

13GAO-12-697.

14GAO, Service-Disabled Veteran-Owned Small Business Program: Additional Improvements to 

Fraud Prevention Controls Are Needed, GAO-12-152R (Washington, D.C.: Oct. 26, 2011) and 

Hubzone Program: Fraud and Abuse Identified in Four Metropolitan Areas, GAO-09-519T 

(Washington, D.C.: March 25, 2009).

15GAO-09-519T.

16GAO, Results-Oriented Cultures: Implementation Steps to Assist Mergers and Organizational 

Transformations, GAO-03-669 (Washington, D.C.: July 2, 2003). 
 Page 10 GAO-13-70R: Small Business Research Programs

General working group in August 2009. According to the SBA officials, the August 

2009 hearing before the Senate Committee on Commerce, Science, and 

Transportation led to several meetings and discussions about fraud, waste, and 

abuse in the SBIR and STTR programs, which resulted in many of the ideas for 

updates and revisions to the policy directives.

In addition to incorporating input from program managers and the inspectors general 

working group before issuing the revised directives, SBA chose to solicit comments 

from the public on the policy directives. Specifically, SBA published the revised 

directives in the Federal Register, which started a 60-day public comment period 

that ended on October 5, 2012. SBA was not required by the act to obtain public 

comments on the revised directives; however, SBA officials chose to solicit 

comments. The officials said they plan to incorporate the comments that they 

receive into future revisions to the directives. In addition, SBA held two webinar 

sessions to explain the changes to the revised policy directives and answer

questions from session participants on the changes to the policy directives. Partly on 

the basis of questions asked at these sessions, SBA posted on its program website 

a list of “frequently asked questions” and answers about the revised directives. This 

list covers questions and answers on a variety of topics, including the new fraud, 

waste, and abuse requirements. 

Agencies’ Plans to Implement New Requirements in the Policy Directives Vary, 

and Officials Do Not Anticipate Implementation Challenges 

Agencies that participate in the SBIR and STTR programs vary in their plans to 

implement the new fraud, waste, and abuse requirements in the policy directives; 

however, none of the agencies anticipate challenges in doing so. The variation in the 

agencies’ plans is due to differences in the tools that agencies already have in place 

for identifying and preventing potential fraud, waste, and abuse, as well as 

differences in when they plan to complete implementation of the changes to the 

policy directives. Agency officials do not anticipate significant challenges in making 

the changes, either because of the tools they already have in place or because the 

changes seem straightforward.

Agencies’ Plans to Implement New Fraud, Waste, and Abuse Requirements Vary

Participating agencies vary in their plans to implement new requirements designed 

to help agencies identify and prevent potential fraud, waste, and abuse in the 

revised SBIR and STTR policy directives. The agencies vary in part because some 

agencies already have some tools in place that address or partially address the 

requirements included in the revised policy directives. As discussed below, these 

tools were either in place before SBA began revising the policy directives or were 

put in place while SBA was in the process of revising the directives. However, our 

analysis of the requirements in the revised policy directives and the tools agencies 

have in place indicates that each of the agencies still needs to modify some existing 

tools and implement additional tools to meet all of the new requirements.

Even before SBA began revising the policy directives in January 2012, each of the 

11 participating agencies already had in place some tools that addressed or partially 
 Page 11 GAO-13-70R: Small Business Research Programs

addressed the new fraud, waste, and abuse requirements in the revised policy 

directives. These tools differed among agencies, in part because of the flexibility 

each agency has in designing and managing its own SBIR and STTR programs. For 

example, before SBA revised the directives, EPA required small businesses to 

certify compliance with eligibility requirements when they received their award and 

when they submitted the final report on their research—as is now required in the 

revised policy directives; the previous versions of the policy directives required small 

businesses to certify compliance only at the time of the proposal. Additionally, with 

the revisions to the policy directives, agencies are now required to ensure 

compliance with program eligibility criteria and terms of funding agreements. At least 

two agencies had in place tools that addressed or partially addressed this 

requirement before SBA issued the revised directives. For example, to help ensure 

they are complying with program regulations and the terms of their funding 

agreements, NASA has performed “virtual site visits” through the internet for certain 

new award recipients, and the Department of Education has held quarterly meetings 

with each of its SBIR award recipients.

While agencies were not required to do so, 8 of the 11 agencies began to use 

additional tools to address expected requirements in the revised directives between 

the time SBA began drafting the revised directives in January 2012 and the time 

SBA issued them in August 2012. For example, six of the participating agencies that 

had begun to use additional tools—the National Institute of Standards and 

Technology within the Department of Commerce, the Department of Homeland 

Security, the Department of Transportation, DOD, EPA, and NASA—updated their 

program websites to include information on how an individual can report fraud, 

waste, and abuse while SBA was revising the directives. Program managers at the 

three remaining agencies that decided to wait until SBA issued the revised policy 

directives before implementing the new fraud, waste, and abuse requirements—the 

departments of Agriculture, Education, and Health and Human Services—indicated 

that they chose to wait until SBA issued the final policy directives because they 

wanted to avoid making unnecessary revisions to agency procedures if there were 

significant changes between the draft and final directives. Table 1 shows when the 

agencies began to use additional tools designed to help agencies identify and 

prevent potential fraud, waste, and abuse, as well as their planned time frames for 

completing implementation of the requirements in the policy directives. 
 Page 12 GAO-13-70R: Small Business Research Programs

Table 1: Participating Agencies’ Approaches to and Time Frames for Implementing New Fraud, Waste, 

and Abuse Requirements in the SBIR and STTR Policy Directives 

Agency Agency began 

implementing changes 

before SBA issued 

revised policy 

directives

Agency waited until 

SBA issued revised 

policy directives to 

begin implementing 

changes

Anticipated time frame for 

completing implementation of 

changes

Department of 

Agriculture

X 

Department of 

Commerce

a

X

DOD

b

X

Department of 

Education

a

X Before next SBIR solicitation

Department of 

Energy

c

X

Department of 

Health and Human 

Services

a

X

Department of 

Homeland Security

a

X 

Department of 

Transportation

a

X Before next SBIR solicitation

EPA

c

X Before next SBIR solicitation

NASA

c

X No later than October 1, 2013

National Science 

Foundation

X d

Source: GAO analysis of agency responses.

a

Agency was in the process of determining the time frames for implementing the new fraud, waste, and abuse 

requirements at the time of our review.

b

The National Institute of Standards and Technology plans to implement the new fraud, waste, and abuse 

requirements before its next SBIR solicitation, which is expected to be issued in mid-November 2012. The 

National Oceanic and Atmospheric Administration was in the process of determining the time frames for 

implementing the new fraud, waste, and abuse requirements at the time of our review.

c

Agencies differ in when they expect to issue their next SBIR solicitations. The Department of Education expects 

to issue its solicitation for one organization within the agency that participates in the program by the end of 2012 

and the other organization that participates in the program early in 2013.The Department of Transportation 

expects to issue its solicitation in December 2012. EPA expects to issue its solicitation in March 2013.

d

Agency was awaiting guidance on the time frames for implementing the new fraud, waste, and abuse 

requirements from SBA at the time of our review.

As shown in table 1, agencies also vary in when they plan to complete 

implementation of the new fraud, waste, and abuse requirements. While the policy 

directives took effect immediately, not all of the changes are expected to be 

implemented immediately, according to SBA. For example, SBA set a goal of 

October 1, 2012, for agencies to include information on reporting fraud, waste, and 

abuse on their program websites and in their solicitations and to begin requiring 

awardees to certify they are complying with specific program requirements during 

the life cycle of the funding agreement. As of October 4, 2012, 10 of the 11 

participating agencies had implemented or had begun implementing these 

changes.17

 

17A Department of Agriculture official said that the agency had not yet implemented the changes.

Similarly, SBA set a goal of October 1, 2013, for agencies to fully 

implement their life cycle certification processes. As shown in table 1, three 

agencies—the departments of Education and of Transportation and EPA—plan to 
 Page 13 GAO-13-70R: Small Business Research Programs

implement all of the required changes before they issue their fiscal year 2013 

solicitations for SBIR proposals, and NASA plans to implement all of the changes no 

later than the beginning of fiscal year 2014. However, as of August 2012, most of the 

program managers were in the process of determining time frames for implementing 

the changes to the revised policy directives. 

Agency Officials Do Not Anticipate Significant Challenges to Implementing Most 

Changes to the Revised Policy Directives 

Program managers at the 11 participating agencies told us that they do not 

anticipate significant challenges to implementing most of the new fraud, waste, and 

abuse requirements for two reasons. First, program managers told us that they 

already have some tools in place that either meet or require minimal modification to 

meet requirements in the revised policy directives. For example, according to the 

National Science Foundation program manager, the only change needed to the 

agency’s existing certification process, which has been in place for several years, 

will be a revision to the language on the certification form because the agency 

already requires award recipients to certify their compliance with program 

requirements at several points throughout the life cycle of the funding agreement. 

Second, some program managers told us that some changes that agencies have not 

yet implemented seem straightforward. For example, NASA program officials stated 

that they have not yet published examples of successful prosecutions of fraud, 

waste, and abuse on their SBIR and STTR website, but that posting this information 

should be easy because NASA has had several such successful prosecutions. 

While program officials do not anticipate significant challenges in implementing most 

of the changes to the policy directives, agencies have sought guidance and 

information from several sources, including those listed below, on how to minimize 

potential challenges. 

• The agencies’ own inspectors general: Several of the participating agencies 

have worked with or plan to work with their Office of Inspector General to 

implement the new fraud, waste, and abuse requirements. Some program 

managers we spoke with stated that enhanced coordination with their Office 

of Inspector General should generate benefits in identifying fraud, waste, and 

abuse in the SBIR and STTR programs. For example, the Department of 

Transportation’s SBIR program manager and officials from the department’s 

Office of Inspector General met about a month before SBA issued the revised 

policy directives to discuss anticipated changes to the revised directives, 

particularly changes to help agencies identify and prevent potential fraud, 

waste, and abuse. The program manager told us that representatives from 

the Office of Inspector General provided information and examples that the 

program manager used to implement some of the requirements in the revised 

directives, including updating the agency’s SBIR website and solicitations with 

information on reporting fraud, waste, and abuse. 

• The Council of the Inspectors General on Integrity and Efficiency’s 

Misconduct in Research Working Group: Representatives from each 

participating agency’s Office of Inspector General attend this working group. 

Officials told us this working group provided a forum for the members to share 
 Page 14 GAO-13-70R: Small Business Research Programs

information and best practices related to identifying and preventing fraud, 

waste, and abuse in the SBIR and STTR programs. The working group also 

sponsored a conference in 2011 on fraud, waste, and abuse in the programs 

that officials told us was attended by representatives from the Offices of 

Inspectors General and program officials. 

• Other agencies with experience using tools to identify and prevent fraud, 

waste, and abuse: Some program officials told us they obtained information 

about implementing the requirements in the revised policy directives from 

other agencies that already use some of the tools. For example, program 

officials from the Department of Energy and the National Oceanic and 

Atmospheric Administration within the Department of Commerce met with 

National Science Foundation program officials on their life cycle certification 

process to understand and implement a similar certification process at their 

own agencies. 

• SBA working groups: Officials anticipate that two SBA-sponsored working 

groups will be useful in sharing information on and best practices for 

implementing all of the changes to the policy directives, including the new 

fraud, waste, and abuse requirements. One group is the SBIR and STTR 

program managers group, which meets quarterly to discuss a variety of 

issues that affect the SBIR and STTR programs. SBA officials and program 

managers expect that this group will be used to discuss experiences in 

implementing changes to the policy directives, among the other issues that 

the group discusses. The second group, which SBA recently established, is a 

separate implementation working group comprising SBIR and STTR program 

managers that will focus exclusively on issues related to implementing the 

revised policy directives, including the new fraud, waste, and abuse 

requirements. Some program managers expect that this group will provide a 

forum to discuss and resolve questions about implementing the revised policy 

directives.

While program officials are in the process of implementing the new fraud, waste and 

abuse requirements, some program officials identified potential limitations to certain 

tools that are currently available for this purpose. Specifically, the revised policy 

directives require agencies to develop policies and procedures to avoid funding 

essentially equivalent work already funded by another agency, also referred to as 

“duplicate” awards. All of the agencies already have in place some procedures to try 

to avoid funding duplicate awards, such as searching Tech-Net or other agency 

databases or requiring small businesses to certify that they have not submitted the 

same proposal to another agency. However, officials, including program managers 

and some representatives from the Office of the Inspector General at most of the 

participating agencies, raised three key issues about using Tech-Net as currently 

implemented to identify duplicate awards. 

• First, officials stated that Tech-Net does not always include up-to-date award 

information. These officials told us that before the revision to the policy 

directives, agencies were required to update award information in Tech-Net 

annually. As a result, information on recent awards for some agencies might 

not be included in Tech-Net when a program manager searched the database 

for duplicate awards. Without up-to-date information on awards, program 
 Page 15 GAO-13-70R: Small Business Research Programs

managers could not ensure that a proposal they were considering funding 

had not recently received an award from another agency. The revised policy 

directives require agencies to update most award information in Tech-Net 

quarterly, rather than annually. 

• Second, according to officials, Tech-Net contains incomplete or inaccurate 

data for some awards. For example, program managers at two agencies told 

us they found errors in their own agencies’ data when reviewing the data in 

Tech-Net within the past year. Similarly, some program managers stated it 

can be difficult to determine whether small businesses with similar names are 

the same company or different companies. Officials expect that the new 

Company Registry database within Tech-Net, which SBA expects to 

implement after finalizing the updated eligibility requirements for the programs 

in early 2013, will help address this issue. 

• Third, officials told us that the previous interface used to access Tech-Net had 

limited search capabilities, making it difficult for agencies to search for 

potentially duplicative awards in the system. Within the past year, SBA 

installed a new interface to access Tech-Net, referred to as “SBIR.gov.” 

Officials said they have not yet had much opportunity to use the new interface 

to search for duplicate awards but expect that the changes will make such 

searches easier. 

It is too early to assess the effectiveness of the recent and planned changes to 

Tech-Net and other tools designed to help agencies identify and prevent potential 

fraud, waste, and abuse in the SBIR and STTR programs. We plan to further review 

these tools in our future work on fraud, waste, and abuse in the programs, as 

required by the act.

Agency Comments and Our Evaluation

We requested comments from SBA and the 11 participating agencies on a draft of 

this report. In its written comments, reproduced in enclosure I, SBA generally agreed 

with the information and findings in our report. SBA believed that we suggested in 

the report that self-certification for SBIR and STTR program eligibility is not sufficient

and SBA should require agencies to verify the information in the self certifications. 

We note in the report that it is too early for us to assess the effectiveness of the new 

fraud, waste, and abuse requirements and we do not draw any conclusions in this 

report about whether the self certification requirements for SBIR and STTR program 

eligibility are sufficient. As we reported, we plan to evaluate the changes to the 

policy directives in our future reviews. The Departments of Commerce, Education, 

and Homeland Security and the National Science Foundation provided technical 

comments that we incorporated, as appropriate. The remaining agencies—the 

Departments of Agriculture, Energy, Health and Human Services, and 

Transportation; DOD; EPA; and NASA—had no comments on our draft report.

- - - - - 
 Page 16 GAO-13-70R: Small Business Research Programs

We are sending copies of this report to the Secretaries of Agriculture, Commerce, 

Defense, Education, Energy, Health and Human Services, Homeland Security, and 

Transportation; the Administrators of EPA, NASA, and SBA; the Director of the 

National Science Foundation; the appropriate congressional committees; and other 

interested parties. In addition, this report is available at no charge on the GAO 

website at http://www.gao.gov/. 

If you or your staff have any questions about this report, please contact me at (202) 

512-3841 or ruscof@gao.gov. Contact points for our Offices of Congressional 

Relations and Public Affairs may be found on the last page of this report. Key 

contributors to this report were Tim Minelli, Assistant Director; Hilary Benedict; 

Antoinette Capaccio; Jennifer Costello; Cynthia Norris; and Rajneesh Verma.

Frank Rusco

Director

Natural Resources and Environment
 Page 17 GAO-13-70R: Small Business Research Programs

List of Committees

The Honorable Mary L. Landrieu

Chairman

The Honorable Olympia J. Snowe

Ranking Member

Committee on Small Business and Entrepreneurship

United States Senate

The Honorable Ralph M. Hall

Chairman

The Honorable Eddie Bernice Johnson

Ranking Member

Committee on Science, Space, and Technology

House of Representatives

The Honorable Sam Graves

Chairman

The Honorable Nydia M. Velázquez

Ranking Member

Committee on Small Business

House of Representatives
 Page 18 GAO-13-70R: Small Business Research Programs

Enclosure I: Comments from the Small Business Administration
 Page 19 GAO-13-70R: Small Business Research Programs

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