SBIR Gateway

SBIR Insider Newsletter
February 16, 2006 Edition



Dear SBIR Gateway Insider,

Lots of politics in this issue.  Politics are a significant part of any government program and SBIR/STTR is not an exception. 

In this issue:

Bill Introduced to Raise SBIR Awards
Congressman Bud Cramer (D-AL) introduced H.R.4684, a bill to amend the Small Business Act to provide for an increase in the amount of awards under the first and second phases of the Small Business Innovation Research program.  The amounts would increase from $100K to $145K in phase I and $750K to $1010K. 

There may be more to this than meets the eye.  Although the SBA has the authority to revisit and adjust the SBIR award amounts every five years, they have not done so.  SBA cannot do it alone, and must receive the blessings of the Office of Management and Budget (OMB), who often sees things differently than SBA.

Although Congressman Cramer's bill seeks to increase the SBIR award amounts, the language employed may have additional ramifications for several agencies in the SBIR program.  Rather than just substituting new numbers for old, Cramer carefully replaced old ambiguous language with new and concise statements.  Currently 15 U.S.C. 638 (the law that controls SBIR) states that an agency may award $xxx.  The proposed bill deletes the ambiguous language in 15 U.S.C. 638(2)(D), and adds a new paragraph that states:
"The program directives issued pursuant to this subsection shall provide that an agency may award an amount of not more than $145,000 in the first phase of an SBIR program and an amount of not more than $1,010,000 in the second phase of an SBIR program."
If passed, Cramer's bill could have a major impact on agencies such as the NIH who commonly make SBIR awards far in excess of the current $100K / $750K guidelines.  The SBA's SBIR Policy Directive (PD) (see Section 7(h)(1)) states, "Generally, a Phase I award may not exceed $100,000..."  The PDs use of the word "Generally" was made possible by the ambiguity of 15 U.S.C. 638(j)(2)(D).  Cramer's bill would force the SBA to tighten the "Dollar Value of Awards" clause, and delete the SBIR PDs Section 7(h)(2) that states,  "An awarding agency may exceed those award values where appropriate for a particular project."  This could eliminate the large multi-million dollar phase II SBIR awards currently being made.

Many SBIR professionals believe these large multi-million dollar awards are beyond the scope and intent of the SBIR program and is
responsible for the movement by big pharma supported groups such as BIO, to have Congress exempt VC owned companies from small business affiliation size standards.  VCs can and routinely do participate in SBIR.  However, if the VC is a majority owner of the small business, the VC must pass the same SBA size standard rules as the small business.  This issue has not gone away and will be heating up again in the near future. 

The SBIR Gateway has created an easy to read PDF that shows the original and proposed changes to 15 U.S.C. 638.   You can download it from www.zyn.com/sbir/articles/Section_9j-hr4694-proposed.pdf  Congressman Cramer's bill has been referred to the House Committee on Science, Subcommittee on Environment, Technology, and Standards.


Changes at DHS's HSARPA
HSARPA has issued their FY06.1 prerelease that marks the inauguration of HSARPA's STTR program.  This is a combined SBIR/STTR solicitation and the topics apply to both programs. 

Note - Of the 10 topics, 9 belong to HSARPA and 1 belongs to DHS' Domestic Nuclear Detection Office (DNDO).  The DNDO topic differs from HSARPA topics in that it allows phase I awards of up to $150K, while the HSARPA topics are $100K. 

Also, HSAPRA is changing their web site address.  The new site address is www.dhssbir.com and the old address of www.hsarpasbir.com will mirror the new site and remain on line at least through the remainder of the solicitation period. 


Inc. Magazine's Best Friends In DC: On the Hill
Three of the four selectees for Inc. Magazine's article on entrepreneur-friendly members of Congress are keystone figures supporting the SBIR and STTR programs.  Named in the article are Senator John Kerry (D-MA), ranking member of the Senate Small Business and Entrepreneurship Committee, Congressman Donald Manzullo (R-IL), Chair of the House Small Business Committee, and Olympia Snowe (R-ME), Chair of the Senate Small Business and Entrepreneurship Committee.  Also named in the article is Senator Chuck Hagel (R-NE), who is an SBIR supporter. 

On the downside of the article is "With Friends Like These...", which names Hector Barreto Jr., Administrator of the SBA as "The Disappointment."   The SBIR Gateway has had issues with Administrator Barreto pertaining to management of the SBIR program and the Office of Technology.  However, it should be remembered that the SBA has had budget cuts amounting to more than 36% since 2001, which is more than any other agency has had to endure (see President's Budget below).  The Inc Magazine article can viewed at www.inc.com/magazine/20060201/dc-intro.html


The President's 2007 Budget and SBA
These are tough times financially and the President's 2007 budget request reflects it.  The SBA actually gained ground by not losing ground.  What does that mean?  No agency has been hit harder with budget cuts than the SBA, suffering more than 36% reductions since 2001.  This year's SBA's budget is flat-lined, so in a perverse way, it's better than the past few years because it wasn't reduced.  Nevertheless it still keeps SBA in a state of diminished capacity. 

Last year in the Senate Small Business and Entrepreneurship Committee, Senators Snowe and Kerry hammered out a bipartisan amendment (SA.216), that would restore $78 million in much needed SBA funding (Kerry wanted $132m). In spite of the fact that the amendment was passed by the Senate and had support from all 100 Senators, it was ultimately eliminated from the final budget passed by Congress, ironically during National Small Business Week.

There has been "small talk" in the recesses of DC that the SBA may have outlived its usefulness and be shut down in the future.  The best way to bring this about is to slowly "starve" the SBA until they become irrelevant, then move their programs to Commerce.  

"Nonsense," say some insiders, "it could never happen."  I remind them of how close Commerce came to being closed down during the Ron Brown era.  When the Bureau of Mines was closed down, the spoils were divided between DOE and NIOSH.  SBA does come up for reauthorization in 2006. 

In other parts of the President's budget, some expectations were met with the zeroing out of NIST's ATP program, that is perennially saved by Congress, and the Draconian cuts to NIST's MEP program, also saved several times by Congress.  Will Congress save them again?

For those of you interested in a good budget analysis from a technology point of view, visit the State Science & Technology Institute
(SSTI) web site at www.ssti.org The SSTI has released their comprehensive budget issue in PDF format.  It is available free on their web site.


Change in HSARPA's RTAP Schedule
HSARPA has announced a change in schedule to their Rapid Technology Application Program (RTAP) (BAA 05-10) Broad Agency Announcement (BAA).

Due to the large number of White Papers submitted, HSARPA intends to notify offerors to either encourage or discourage submission of a full proposal.  RTAP white paper notifications will be sent to offerors via electronic mail by February 28, 2006, which will include the new due date for full proposal submission.

Note: Offerors receiving notice from HSARPA discouraging submittal of a proposal, are still eligible to submit a proposal although the chances of receiving funding are very slim. However, it is not without precedent that an offeror who was discouraged from submitting a proposal, changed their approach to the problem and submitted a proposal that was successful in spite of a poor white paper. This is the exception rather than the rule.

That's it for now. 

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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