It's walled off so that larger entities cannot propose to it (somewhat contrary to "free market" principles, but whatever).
I've managed proposal reviews for SBIR, and the average quality is noticeably lower than NSF proposals I've reviewed. Of course there is significant overlap between them, but that's the average.
So I'm not sure your idea would accomplish anything new.
SBIR is mainly grants to get innovative small businesses going (which is why large businesses are not involved). It's also mostly military, as far as I know. I think SBIR is a great program, but it's not really meant for funding basic research.
But yes, something similarly structured but aimed at basic research might be a good idea.
Greater transparency also couldn't hurt. We could simply demand that universities itemize overhead. Then the PI is responsible for rejecting unneeded items (e.g. university computer lab fee if the PI has his own computer) and the NSF is responsible for rejecting items which are >10% above market.
(I managed a small SBIR category for NASA.) Despite the rhetoric, they do provide a sustainable flow of work to many organizations (sometimes referred to as "SBIR shops").
About basic vs. applied research: What I was trying to say is: The relative lack of breakthrough success for SBIR seems to imply that smaller, more nimble (market-responsive?) organizations are not the answer.
http://www.sbir.gov/solicitations/
It's walled off so that larger entities cannot propose to it (somewhat contrary to "free market" principles, but whatever).
I've managed proposal reviews for SBIR, and the average quality is noticeably lower than NSF proposals I've reviewed. Of course there is significant overlap between them, but that's the average.
So I'm not sure your idea would accomplish anything new.