Senate Offers Compromise Bill to Keep SBIR Alive

On June 18, the Senate Committee on Small Business and Entrepreneurship will markup S. 1233, a bill to reauthorize and expand the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. Both programs are within weeks of expiring on July 30.

The bill was introduced June 10 by committee chair Sen. Mary Landrieu (D-LA) and co-sponsored by ranking minority member on the Committee, Sen. Olympia Snowe (R-ME). Sen. Jeanne Shaheen (D-NH) became a co-sponsor on June 15. Additional senators in both parties are expected to join the list of co-sponsors as the bill encompasses a compromise many analysts see as palatable to address some of the thorniest issues for SBIR's reauthorization.

SBIR, first authorized in 1982 and credited with providing startup and early-stage financing for several thousand technology and research-related firms across the country, has enjoyed broad, bipartisan support for each of its previous reauthorizations. The current effort has proven more problematic despite several positive evaluations by the Government Accountability Office and most recently the National Academies of Science

The House and Senate were unable to craft a compromise bill before adjourning last year. Instead, Congress extended SBIR and STTR in their current forms until July 30, postponing discussion for a new Congress and new Administration.

Activity toward reauthorization has increased over the past few weeks as hearings were held in both chambers of Congress. In the House Committee on Small Business, the hearings have been virtually identical to those held last year, offering no new ideas or proposals on the divisive issue of the eligibility of venture-capital owned firms, and suggesting the committee leadership had given little consideration of a compromise position during the extension.

The Senate small business committee, on the other hand, is beginning the discussion from its compromise position on the VC eligibility, first offered last fall and now more fully fleshed out in S. 1233.

Currently, SBIR is a single program with 11 federal agencies more or less following the same rules spelled out in the authorizing legislation and the policy directive set down by the Small Business Administration. S. 1233 would alter the playing field, allowing the National Institutes of Health to make more awards to VC-backed firms than the other agencies. NIH, the venture capital community, and trade groups representing biotech and life science firms have been the most vocal advocates for more lax eligibility rules.

To date, the House version of SBIR reauthorization would be more generous - allowing VC-owned businesses full access to SBIR funding across all participating agencies. Opponents to that proposal argue the move would dilute the definition of a small business to the point of being meaningless (any large corporation could establish a SBIR shill, they argue) while also potentially putting small businesses without the financial and technical resources of VC-owned firms at a competitive disadvantage for winning awards. States without significant venture capital activity are among those seeing changes to the eligibility definition as potentially harmful to their efforts to stimulate tech-based economic development.

The compromise offered in S. 1233 would accept VC-backed firms into SBIR and STTR, but only for 8 percent of the total awards made by 10 of the federal agencies. For the National Institutes of Health, the percentage of funding going to VC-owned firms could represent 18 percent of total SBIR award funding. The proposal is consistent with findings from the recent study by the National Academies of Science and, paired with the length of the reauthorization proposed in S. 1233, provides ample time to assess the measure's impact on the small business community, SBIR, and the national innovation system.

The SBIR Gateway Insider, prepared by Rick Shindell at Zyn Systems, summarizes the other elements of S. 1233 as follows:

• Extension of termination dates - 2023 (14 years);
• Improvements to strengthening the SBA Office of Technology;
• Increase SBIR allocation by 0.1% per year (starting in FY11) until reaching 3.5% in FY20;
• Increase STTR allocation to .4% for FY11; .5% for FY13; 0.6% for FY15;
• Increase SBIR/STTR award levels to $150,000 phase I and $1 million for phase II;
• Awards shall not exceed 50% above recommended award levels;
• Elimination of Phase II "invitation" process (i.e., DoD);
• Allow small business to partner with federal labs or FFRDC without requiring a waiver from SBA;
• Reinstate State and Rural outreach and FAST programs;
• Create a SBIR STEM Workforce Development Grant Pilot Program;
• Continuation of Commercialization Pilot Program (DoD);
• Establish Commercialization Pilot Program for civilian agencies;
• Nanotechnology Initiative;
• Accelerating Cures - NIH Pilot;
• Accuracy in Funding Base Calculations ;
• Increase in technical assistance from $4,000 to $5,000; and
• SBIR and STTR Special Acquisition Preference.

S. 1233 as introduced is available through http://thomas.loc.gov