SBIR Gateway

SBIR Insider Newsletter
February 11, 2008 Edition


Dear SBIR Insider,

If you put any credence to Harry Truman's observation "The only thing new under the sun is the history that you don't know," this issue will, and should startle you. Special interests, along with a war, recession, historic deficits, an extraordinary election, and what could charitably be called a well meaning but misguided Congress, all add up to the likelihood of a failed SBIR reauthorization attempt.

Timely SBIR Reauthorization Unlikely

Getting bills in both houses passed and signed into law is generally a protracted process especially if there are powerful special interest groups involved and the bill is to provide sweeping changes to an existing popular program that supplies significant amounts of money to fund projects.

Such is the case of the latest SBIR reauthorization. It is an accepted fact that the program needs changes / modernization but many debates rage over what those changes should be.

These items are not insignificant, and some are grounds for contentious debate.

Some of the major areas being addressed are:

  • Majority VC ownership and control
  • Raising award amounts
  • Raising agencies' percentage set aside (currently at 2.5% extramural)
  • Changing the set aside % and linkage from extramural to the full R&D budget
  • Lowering the $100m participation threshold to include smaller agencies
  • Providing agencies with administrative funds out of the SBIR pool
  • Increasing the percentage (ratio of work) allowed to subcontractors/universities
  • Commercialization assistance programs out of the SBIR pool (awardee's $$$)
  • Commercialization Pilot Program (CPP)
  • SBA oversight and support (Office of Technology)
  • FFRDC and Federal Laboratory partnering (the need and process for SBA waivers)
  • Federal and State Technology Partnership (FAST) outreach to new entities
  • Rural Outreach Program (ROP)
  • SBIR Mentor/Protégé program
  • STEM incentives
  • Energy Focus Area (similar in construction to the manufacturing clause)
Addressing these changes will require a lot of time and effort. The three oversight bodies in congress, the Senate Committee on Small Business & Entrepreneurship (SBE); House Committee on Small Business (SB); and the House Committee on Science & Technology (S&T), have vastly different perspectives on the program, and little harmonization on SBIR among them. To make matters worse, behind the scenes, many of these folk don't even like each other and some are vying to be the "alpha" in controlling the program.

Looking at Congress on the whole, and considering what's on their plate, such as the upcoming elections, the war, the economy, and the budget, SBIR just doesn't measure up in importance, and will likely take a back seat during the law making process. Of course, they will never admit this to you.

How hard can it be to get a popular program reauthorized? In 2006 (the 109th congress), there was a valiant attempt in the Senate Small Business Committee, and the staffers achieved workable compromises from both the VC and small business communities. However, there were additional roadblocks, not the least of which was an election, and the bill ultimately failed.

Senator John Kerry knew that SBIR may be in peril in 2008, so he proposed a bill to reauthorize SBIR "As-Is" through 2010. This would remove the program from an election year and provide an opportunity to thoroughly investigate the needs for improvements and their implementations. It failed, being knocked out by the House.

In order to understand what may lie ahead, let's look at the previous SBIR reauthorization. Travel back in time with me to the year 2000, an election year that seemed (prior to the election) rather ordinary, an incumbent vice president running against a governor, an economy that was fair but sloping downward, a congress whose controlling party was not endangered, and a world situation that was not unusually turbulent.

The SBIR program was due to sunset on September 30, 2000 (the end of the government's fiscal year), and efforts for its reauthorization seemed under control. Then, as now, three committees had jurisdiction of the program.

The reauthorization attempt was started early in 1999 with series of hearings in the three committees, and in June a bill was introduced in the house, HR2392, "The SBIR Reauthorization Act of 1999." Wherein the course of Congressional events, and significant time lapses, the bill morphed into the Small Business Innovation Research Program Reauthorization Act of 2000'. Some in the Senate could see that reauthorization in a presidential election year would be tough, and so changed the sunset language from September 30, 2008, to September 30, 2010. The bill failed to pass and now the SBIR was in jeopardy.

Election politics ramped up in September 2000, and nothing substantive for SBIR occurred prior to the sunset, and the program had a lapse. Attempts at a continuing resolution (CR) would be inadequate because funding amounts and vehicles for grants under a short term CR could not be assured.

It was now October 2, 2000 and another bill, H. R. 5667 "Small Business Reauthorization Act of 2000" was presented. It was going nowhere and many businesses and support groups as well as congressionals started to panic. The 2000 elections were in full gear and somehow small businesses were not important enough to stay on the overall congressional radar screen, except for a few.

It was now mid December, 2000 and Congress, in an attempt to get home for the holidays, was in it's usual end-of-the-year mode of "chaos" to pass an omnibus appropriations bill, loaded with God knows what. In the dead of night, some SBIR hero (legend suggests it was Patty Forbes, staffer for Senator John Kerry) got H.R. 5667 incorporated (by reference at 2:00am) into H.R. 4577 the Consolidated Appropriations Act 2001 that was passed and signed into law as PL 106-554 on December 21, 2000. SBIR was saved, at least until 2008.

Back to 2008: Lawmaking is all about compromise, and the House SB has shown a lack of desire to do just that. On the VC issue, the Biotech Industry Organization (BIO) and NVCA has spread their untruths around for so many years that it now seems like truth and has taken seed in the House SB committee. Indications are that BIO and the committee will accept no compromise on this issue (even though BIO did compromise in the last reauthorization attempt). House SB chair, Nydia Velázquez and her staffers, refuse to hear anything opposed to the VC issue. Word on the street is that BIO believes they have this program wrapped up, even if it does lapse for a while.

Why does BIO have all this power? BIO's big pharma wallets work the halls of congress very effectively, and especially during elections! BIO hates to be referred to as big pharma, but what would you call an organization whose large members include: Abbott Laboratories, Pfizer, Merck, Monsanto, Bristol-Myers Squibb, Amgen, Eli Lilly, Schering-Plough, GlaxoSmithKline just to name a few. Also they have influential international entities that could "carefully" participate in BIO's SBIR VC legislation, such as China's Baxter Asia Pacific, and Japan External Trade Organization (JETRO).

Note: Major friends of small businesses on the hill report to us that they hear frequently from BIO, NVCA and large special interests. They also hear from the Small Business Technology Council (SBTC), but they hear virtually nothing from YOU!!

I can promise you that if you don't get involved, there will most likely be a lapse, and/or the program will morph into the majority of funding for the "chosen few" and you'll fight for the scraps.

Write/call/fax your senators and representative, tell them that timely reauthorization of SBIR is important/critical to you and your business (and say why). State your concerns and offer suggestions for improvements. Stay in touch with them to keep the ball rolling.

Optionally, consider joining a trade organization such as SBTC ( see www.sbtc.org ). There needs to be individual and collaborative efforts to keep SBIR and improve it to better serve you, the agencies, government and American competitiveness.

We'll have more coverage on this as it comes into focus.

Questions and Answers

Q. Have I been taken off the list?

A. No, family and personal health issues have forced me to subordinate my SBIR Insider activity. Most of that is behind us now.

Q. I resent the fact that you imply VCs are evil. What's your problem?

A. I apologize if you or others feel I was demonizing VCs. I never said anything like "VCs are evil." I did say that "some VCs are greedy", but if we listen to Michael Douglas in the 1987 hit movie "Wall Street", he tells us "Greed is Good!" It's all how you look at it.

There are many good VCs and a significant number of … well let's say, "not so good." VCs play a very important role in business and in SBIR. There is surely a need for proper VC participation in the program. In fact, VCs have, and continue to participate in SBIR.

Q. What has happened to SBIRWorld and why did SBIR.GOV replace it? I preferred SBIRWorld.

A. The NSF sponsored SBIRWorld as a cross agency SBIR resource since 2001, as part of their national SBIR conference funding. NSF has since terminated the conference funding and recently decided to do a cross agency SBIR web site "in house" and SBIR.GOV was born. You can also use our SBIR Gateway as a cross agency SBIR resource, and we have the only cross agency SBIR/STTR topic search engine on the net www.zyn.com/sbir For DoD searches you still have the DoD Topic Search site at www.dodsbir.net/Topics/ as well as DTIC's www.dtic.mil/dtic/sbir/ and DoD TechMatch www.dodtechmatch.com

Q. Why did Homeland Security drop their STTR program?

A. This is better answered by DHS' Vinny Schaper or Lisa Sobolewski. However, I'll bet they will tell you that their extramural R&D budget has been reduced to below the threshold that requires STTR participation.

There are many more items going on in SBIR at the moment, and I'll share those with you on the next SBIR Insider. In the mean time, please send me your questions and comments, and I will share those on our new upcoming web site and blog. Also, please reply to this email if you want to be removed from the list.


Sincerely,

Rick

Rick Shindell
SBIR Gateway
Zyn Systems
40 Alderwood Dr.
Sequim, WA 98382
360-681-4123
rick@zyn.com
www.zyn.com/sbir

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