Navy SBIR/STTR Program Transition Strategies (CPP, RIF, TAP, II.5, etc.)

1. Navy SBIR/STTR ProgramTransition Strategies(CPP, RIF, TAP, II.5, etc.) Mr. John R. Williams Director, Navy SBIR & Technology Transfer Programs November 2011 www.navysbir.com

2. Acquisition Driven Process, withStrong Technology Pull • SBIR/STTR projects derive from SYSCOM-generated Topics announced in quarterly solicitations. • Over 90% of Navy Topics are selected by PEO/PM/FNC office and address one of their specific needs, not just “sponsored”. • Topics/Phase I/Phase II awards selections based on acquisition R&D priorities. • PEO gets back 90% of their SBIR/STTR “tax” back. • Many contracts awarded/monitored by lab employees with Acquisition Office POC involved. Labs funded through SBIR Admin fund (additional tax taken above the 2.5%) which helps to ensure dedicated workforce.

3. Navy SBIR Managers at SYSCOM, PEO and Warfare Centers SBIR Program Director John Williams, Navy SBIR/STTR Director SBIR SYSCOM Program Managers Dean Putnam SBIR, PM NAVSEA Donna Moore SBIR, PM NAVAIR Paul Lambert SBIR, PM MARCOR Tracy Frost SBIR, PM ONR Elizabeth Altmann SBIR, PM SPAWAR Doug Schaefer SBIR PM Navy Eric Pitt SBIR, Technical Liaison PEO Carriers Jamie Guerrero SBIR, Technical Liaison NAVAIR (1.0) Paul Halloran SBIR, Technical Liaison PEO Land Systems Lee Ann Boyer CPP PM Clifton Phillips SBIR, Technical Liaison PEO Space Steve Sullivan STTR PM Navy Glen Sturtevant SBIR, Technical Liaison PEO Ships Kamala Massary  SBIR, Technical Liaison PEO (A) John McDonnell SBIR, Technical Liaison PEO C4I Douglas Marker SBIR, Technical Liaison PEO IWS Jim Alper SBIR, Technical Liaison PEO (T) Al Sweeny SBIR, Technical Liaison JPEO JTRS PEO SBIR Technology Managers Theresa Cramer SBIR, Technical Liaison PEO LCS Edmund Anderson SBIR, Technical Liaison PEO (W) Bill Bankhead SBIR, Technical Liaison PEO Subs David Park SBIR, Technical Liaison PEO (JSF) Michelle Willis CPP PM Dusty Lang STTR PM James Wood NSWC Carderock Joe Garcia NSWC Dahlgren Jack Griffin NUWC Newport Jerry Rubinsky NAWC- AD Patuxent River Kimberly Berch CPP PM Patuxent River Butch Wren Avionics & Sensor Patuxent River Steve Hartle Propulsion and Power Patuxent River SBIR Field Offices John Dement NSWC Crane Nancy Johnson NSWC Indian Head Dr. Mark Husni NAVAIR Lakehurst Dr. Thomas Franz NAWC- TSD Orland Dr. Michael Seltzer NAWC- WD China Lake

4. Navy SBIR Initiatives that Assist and Accelerate Transition to Phase III • Transition Assistance Program (TAP) – Available to all Navy Phase II companies, provides Business Acceleration Manager who helps with DoD customer marketing and Phase III strategies • Opportunity Forum – Annual June event with over 1200 attendees, third SBC’s, Primes and Navy PoR or R&D Managers • Commercialization Pilot Program (CPP) – 1% of SBIR funds used by Navy so we can provide additional non-monetary transition support to SBIR firms • Phase II.5 - Provides SBIR/STTR funding, above normal < $1M Phase II levels, to firms with high Phase III potential • RIF – Rapid Innovation Fund, new program that provides Phase III funding to SBIR and other firms

5. Transition Assistance Program (TAP) Opportunity Forum Started in 2000 • Objective • Accelerate transition to Phase III • All current Phase IIs are eligible • Key Program Elements • Market research provided • Phase III strategy development • Training webinars on advanced topics • Advanced Assistance options provided • Marketing materials developed • Partnering/Investment event • Opportunity Forum – 1300 Attendees • Prime Integrator partnering • Virtual Acquisition Showcase – www.virtualacquisitionshowcase.com

6. CPP Historical Perspective in Navy • 2006 - CPP legislation goal:“… accelerate the transition of technologies, products, and services developed under SBIR to Phase III, including the acquisition process.” Allowed 1% of SBIR funds to “manage acceleration” efforts, but CPP funds cannot be added to Phase II awards. • 2007 -Navy pilots SBIR Accelerated Transition (SAT) by providing substantially higher SBIR funding to promising Phase II projects, either as a mod or second Phase II award. Put out original Phase II.5 guidance. • 2007 to 2009 -SYSCOM’s used CPP 1% to develop processes and tools to address goal of “accelerate the transition … to Phase III”. • 2010 – pulled together SYSCOM best practices, developedNavy-wide terminology and rules for accelerating from Phase II – III.

7. How Much Should Navy Invest in Phase II? Studied past Phase II funding levels and successes • Norm was that 90% of Phase II projects funded within a tight range to specific dollar amount • Process didn’t provide “carrot” for Navy customer to invest or SBIR firm to seek out and fulfill Navy need • Big successes came from projects that obtained non-SBIR matching funding during Phase II • Industry funds projects in “Gated” fashion and GAO report recommended that DoD do the same • Gated process allows funding same number of Phase II’s but those with greater potential obtain higher funding levels • Gated process is more man-power intensive on Navy but mandates “go – no go” decisions and brings in non-SBIR funds, thus increasing overall SBIR funding levels

9. Prototype Testing & Evaluation Technology Demonstration & Validation Feasibility Technology Development and Prototype Demo. ACTIVITY - FFP Contract CPFF or FFP Contract CPFF or FFP Contract Any TRL - 0-3 2-5 4  7 6-9 Navy “Gated” Phase II.5 Structure (started ~07) te Year 6 Year 1 Year 2 Year 3 Year 4 Year 5 Opt. ~ 9 mo. Phase II.5 Enhancement* ~ 12 mo. $≤ 250K Phase III Phase 1 6 mo. Phase 2 18-24 mo. Option 6 mo. $≤ 750k SBIR Cont. Dev. 12 – 18 mo. Between $500K to $750K Some Require TTP $80K $70k Non-SBIR $ $≤ 750k SBIR variable TTA Required AT (Accelerated Transition)* ≤ 2 yr. $≤ 1.50M SBIR TTA Required SBIR FUNDS - NTE $150K NTE $1M NTE $1.5M NTE $2.65M CONTRACT TYPE - TTA –Technology Transition Agreement -3 -5 yr technical/funding strategy * Requires Non-SBIR Funding Commitment

10. How do I get Phase II.5 Funding? • The SYSCOM SBIR PM, Technical Monitor and PEO Sponsor decide which Phase II’s receive Phase II.5 funding • The firms are identified in different ways at each SYSCOM but the request and start of due diligence process is internal • How can a firm best prepare themselves for a Phase II.5? • Know who wants your technology in Phase III • What you need to overcome to get there • Address Risk, Funding, Competitive approaches, Partnering, Licensing, etc… • Plan transition early and often • Download TTP/TTA template from navysbir.com • Never to early to start to fill out and continuously update

11. Navy SBIR By The Numbers

12. CPP - Phase II.5 To Date • From FY07 to FY09 Navy expended $9.0M in CPP funding (1% of our SBIR allocation for those three yrs) • Funded 123 Phase II.5 projects FY07-FY09 with $104M SBIR funding, matched with $64M non-SBIR funds placed on Phase II.5 awards • Projects support 23 of 45 DoN ACAT I designated programs including the newest Ships, Aircraft, Submarines, Weapons, C4I, and support systems. • Through FY 2009 these 123 projects have received over $300M in Phase III Funding more than doubling the initial SBIR program investment in these projects.

13. What Makes A Successful Phase II.5? (II.5 over $1M in SBIR funds) • Navy reviewed 51 Projects from 2006-2008 CPP starts that were completed prior to FY11 • 82.3% had signed TTP/TTAs • 84.3% included matching funds as part of the CPP project • 58.8% of the projects had received funds above the amount pledged in the CPP project mostly through Phase IIIs • Highest success rates for transition were noted at the acquisition commands not those responsible for S&T/R&D

14. 14 Sept 2010 Memo from Dr. Ashton Carter Objectives • “affordability as a requirement” – SBIR funds applied to programmatic needs • “incentivize productivity and innovation in industry” – use SBIR to reduce costs • “promote real competition” – SBIR allows PMs to introduce competition where there is none • “require open systems architectures” - SBIR companies validate and contribute to OA • “increase dynamic small business role in defense marketplace” – this defines SBIR • Deliver the warfighting capability we need for the dollars we have • Get better buying power for warfighter and taxpayer • Restore affordability to defense goods and services • Improve defense industry productivity • Remove government impediments to leanness • Avoid program turbulence • Maintain a vibrant and financially healthy defense industry Obtain 2-3% net annual growth in warfighting capabilities without commensurate budget increase by identifying and eliminating unproductive or low-value-added overhead and transfer savings to warfighting capabilities. Do more without more. Providing Incentives for Greater Efficiency in Industry • LEVERAGING REAL COMPETITION: Avoid directed buys and other substitutes for real competition. Use technical data packages and open systems architectures to support a continuous competitive environment. • USING PROPER CONTRACT TYPE FOR DEVELOPMENT AND PROCUREMENT: Phase out award-fee contracts and favor fixed-price or cost-type incentive contracts in which government and industry share equally in overruns and under-runs, and overruns have analytically based caps. Use cost-reimbursement contracts only when either government requirements or industry processes cannot be adequately specified to support pricing. Adjust sole-source fixed-price contracts over time to reflect realized costs. Work down under-finalized contract actions. Seek authority for multi-year contracts where significant savings are possible. Adopting Government Practices that Encourage Efficiency • ADOPTING “SHOULD-COST” AND “WILL-COST” MANAGEMENT: Use historically informed independent cost • estimation (“will-cost” estimates) to inform managing of programs to cost objectives (“should-cost” estimates). • • STRENGTHENING THE ACQUISITION WORKFORCE: Achieve SECDEF goal of adding to government acquisition • workforce with increased skill levels. Leverage unique qualities of non-profit FFRDCs and UARCs to augment acquisition workforce capability. • • IMPROVING AUDITS: Improve consistency and quality of government audits, and focus them on value-added content.

15. Navy SBIR Rapid Innovation Fund (RIF) ProgramRIF Execution Strategy

16. RIF’s Background • Congress authorized H.R. 6523, FY2011 NDAA at Sec. 1073 “Rapid Innovation Program” and “Explanatory Statement” pg. 447 • “… accelerate the fielding of technologies developed pursuant to Phase II SBIR projects … and others … to stimulate innovative technologies … and reduce acquisition costs … address technical risks … improve T&E outcomes … and rapidly insert such products … in primarily MDAPs …” • Appropriated $105M RDT&E and $15M O&M • AT&L 12 August Memo Implementation Guidelines • $24M RDT&E released to DoN • BAA released on 2 Sept 11 - Closed on 7 Nov 11 • Currently in evaluation stage, hope to have selections by mid January

17. White Paper Format – 5 pages • Project Description/Executive Summary (300 words or less) • Technical Approach – How approach is innovative, feasible, achievable, complete and supported by a proposed technical team that has the expertise and experience to accomplish the proposed tasks. (150 words or less) • Operational Need – Describe your proposed technology’s contribution to the JUON, UON, UUN, Naval Challenge Areas or acquisition program need. (125 words or less) • Cost Reasonableness – Describe the methods used to ensure that the proposed costs are realistic for the technical approach proposed. (125 words or less)

18. Transition Plan – How project will be supported during the RIF effort and during the post-RIF period to transition by DoN program office, prime systems integrator, or both. Describe how the TRLs will mature and what will be required of the organizations supporting the transition of this technology. Include organization and points of contact information involved in the transition process. (125 words or less) • Cost Matching – Describe matching funds, if any, to be provided to include the timing, source, amount, and planned use of the funds. (125 words or less) • Program Goals – Describe how project addresses each RIF goal. (300 words or less) • Enhances Military Capability– Describe how project increases/improves the military capabilities in relationship to identified JUON, UON, UUN, national security need, or Acquisition program. • Accelerates Military Development Capability– Describe how proposal accelerates development and ability to deploy military capabilities required for use by the Department of the Navy. • Acquisition Development Cost Reduction – Describe how effort reduces acquisition development and TOC of the identified Acquisition program. • Fielded Systems Sustainment Cost Reduction – Describe how project reduces the sustainment costs of the identified fielded system or acquisition program. • Project/Management Plan – Describe required to fully implement the project into a PoR or otherwise transition the technology for field use.