Decades of Lost Potential in Defense Research and Development

The Pentagon's Small Business Innovation Research (SBIR) program is failing its mission and has become a subsidy for entrenched firms known as "SBIR mills." These companies exploit flawed size standards to capture a disproportionate share of funding, with the top 25 mills receiving over $4.1 billion, or 15% of the Defense Department's total. The program, intended as an on-ramp for new innovators, instead favors incumbents, with less than 4% of Phase I funding going to companies with no prior federal experience. To reorient the program towards its original objectives, the author proposes implementing revenue caps, lifetime funding limits, and reserving a portion of awards for new market entrants.