SBIR Gateway

SBIR Insider Newsletter
May 24, 2010



Dear SBIR Gateway Insider,

This morning, May 23, 2010, on Meet the Press, multi Pulitzer Prize winning author and columnist Thomas Friedman stated: "Money in politics is so out of control… really our congress is a form for legalized bribery, you know that's really what its come down to."

With that in mind, let's explore the status of the SBIR reauthorization efforts, and the long time refusal of the House Small Business Committee (SBC), and the House Science & Technology (S&T) Subcommittee to even respond to the Senate Committee on Small Business and Entrepreneurship (SBE) compromise language offered up back in October 2009.

Secrets can't be kept forever and details of the Senate's SBIR compromise offer to the House back in October are now coming to light. It shows just how hard the Senate SBE worked to try and reach an agreement with the House Small Business Committee (SBC), in order to pass an SBIR reauthorization bill.

On another more positive note, we have some exciting news on a potential new DoD program from the House Armed Services Committee (HASC), the "Rapid Innovation Program". You won't want to miss this.

In this issue:

House (SBC & S&T) Refusal To Discuss Senate SBIR Compromise

Most of the SBIR Insider readers know that both House and Senate passed vastly different SBIR Reauthorization bills last summer, and the Senate SBE bent over backwards to construct a comprise that could be considered by the House. It was delivered to the House SBC back in October 2009.

Nobody on the House SBC, including the chair, Nydia Velazquez (D-NY), her chief of staff, Michael Day, the House bill's author, Jason Altmire (of Altmire Quagmire fame), nor House S&T subcommittee chair David Wu (D-OR) bothered to respond or consider the offer.

In fact, when it recently became known that the details of this compromise became public, it was reported that both Altmire and Wu claimed to be unaware that a compromise was ever made. It is possible that Altmire never heard of it (doubtful since he was the original bill's author), but a copy of the bill was sent with a letter from the Senate SBE to Wu and Velazquez.

Abstract details of the Senate's October compromise were originally reported at

www.zyn.com/sbir/insider/sb-insider01-11-10.htm#three

Below are the astounding details of just how far the Senate SBE stretched to try and reach an agreement:

Venture Capital Majority Ownership:

  • Senate S.1233 Language - VC small biz eligibility original compromise limited to 18% for NIH SBIR Award funding, 8% at the other 10 agencies
  • House H. R. 2965 Language - No limits on award funding to majority VC owned entities
  • Oct 27 Senate Compromise - VC small biz eligibility compromise raised to 25% for NIH, NSF, DOE, and 20% for the remaining agencies.

Direct to Phase II without a Phase I Award

  • Senate S.1233 – No
  • House H. R. 2965 – Yes
  • Oct 27 Senate Compromise - No

Award Amounts

  • Senate S.1233 Language - $150k for Phase I; $1m for Phase II
  • House H. R. 2965 Language - $200k / $2m (increases for inflation)
  • Oct 27 Senate Compromise - $150k for Phase I; $1m for Phase II with option of increasing by 50% to $225k / $1.5m

Length of Authorization:

  • Senate S.1233 Language – 14 Years
  • House H. R. 2965 Language – 2 Years
  • Oct 27 Senate Compromise – 8 Years

Sequential Phase II Awards:

  • House wanted no limits on number of Sequential Awards
  • Senate Compromise allows one Sequential Award

Allocation Increase:

  • House H. R. 2965 Language - None
  • Senate Compromise -
    SBIR: 1 percent allocation increase over 10 years (bringing it to 3.5%).
    STTR: .3 percent allocation increase over 6 years (bringing it to .6%).

Administrative Funds for Agencies

  • House H. R. 2965 Language – Wanted $27,500,000
  • Senate compromise – Up to 3% of SBIR allocation (if the allocation is increased as listed above) as a 3 year pilot program with continuation tied to metrics.

Priority/Preferences Sections:

  • House: Wants to give many sectors selection priority
  • Senate Compromise: Blend the House and Senate language, encourage applications rather than give priority, and sunset after five years rather than in perpetuity.

SBA Chief Counsel for Advocacy

  • House: Wants to disallow any involvement of the Chief Counsel to any agency dealing in SBIR (includes SBA).
  • Senate: Strikes out this language

The Senate compromise also includes an acceptance and blending of House and Senate language for items such as Interagency Policy Committee, Commercialization Programs, Agency Engagement with those not getting Phase II’s.

The overarching issues continue to be the eligibility of VC's having majority ownership and control of businesses competing for SBIR/STTR awards, limits on the overall award amounts (unlimited sequential phase II's in the House), direct to phase II awards, and the length of authorization. All but the last item are of paramount importance to the VC/BIO/Pharma lobbyists.

Most of the feedback the SBIR Insider has been hearing is that the Senate's offer was overly generous. We'd like to hear your thoughts and also have you provide them to your Senators and Representatives.

House Armed Services Committee's "Rapid Innovation Program

As you read this, many House members will be working away on amendments to the House Armed Services Committee's National Defense Authorization Act for Fiscal Year 2011. The bill has been sent to the House Committee on Rules and is open for amendments until 5pm Tuesday, May 5, 2010. It is expected that the bill will come to the full House perhaps as early as Thursday.

An interesting addition to this large and important bill is a new program named "Department of Defense Rapid Innovation Program" Here is a portion of the bill's language:

The Secretary of Defense shall establish a program to accelerate the fielding of innovative technologies developed using Department of Defense research funding and the commercialization of such technologies.

Under the program, the Secretary shall, not less often than annually, solicit from the heads of the military departments, the defense agencies, and the unified combatant command for special operations forces applications for funding to be used to enter into contracts, cooperative agreements, or other transaction agreements entered into pursuant to section 845 of the National Defense Authorization Act for Fiscal Year 1994 (Public Law 103-160; 107 Stat. 1721; 10 U.S.C. 2371 note) with appropriate entities for the fielding or commercialization of technologies.

Click here for the complete section of this bill. Things in the overall bill are likely to change this week, then if passed, the Senate will be doing their version. Unlike NIH ARRA, there's no reason to believe that this program will exclude our community. We'll be sure to keep you up to date on this.

A Compromise Of O'Reilly & Olberman

With all the talk of SBIR compromise, I'll attempt a compromise between two polar opposites, Bill O'Reilly of Fox News and Keith Olberman of MSNBC. Of course there is a political component to this, but our mission over the next few weeks will be to inform you of small business, SBIR friendly politicos, and those that are…. well…. let's say.. less than supportive of your program.

Olberman does a tongue-in-cheek feature known as "The Worst Person in the World", while O'Reilly (who is often Olberman's choice for that honor) does a segment called "Pinheads and Patriots." With that in mind, we'll have the SBIR Insider's inauguration of "The Worst Pinhead in the World!"

Leading that "honor" is none less than Nydia M Velazquez, (D-NY), a nine term congresswoman who has been chair of the House Small Business Committee (SBC) since 2006. New York's 12th district was perfectly gerrymandered to suit a candidate such as Nydia and, as in so many previous years, she faces no substantive competition for reelection.

In essence, she can probably be "congresswoman for life" since the district is made up of a Latino majority (largely Puerto Rican) and Velazquez was the first Puerto Rican woman elected to the U.S. House of Representatives.

Being from a financially poor district, Velazquez (a multimillionaire) requires help to raise the monies needed to contribute to her party in order to remain in a powerful congressional role of a committee chair. Hence the lobbyists and contributors from outside New York provide more than 70% of her funds for 2010.

Not surprisingly, the largest sector contributing is from the world of finance, with the top industries being the investment community. Her top contributors include the National Venture Capital Association (NVCA), Omega Investments, and the Service Employees International Union (source: The Center for Responsive Politics).

Velazquez stays popular by appearing to legislatively work hard for her constituents, in spite of the fact that she gives precedence to the Wall street and VC community over small businesses. Of course we all know how generous Wall street is to the Latino community.

Statistics from Govtrack.us doesn't paint a pretty picture of her performance as a legislator. It states that since the beginning of Velazquez's congressional career (1993), she has sponsored 111 bills of which 94 haven't made it out of committee! They report that 6 were successfully enacted and I think we can count 3 of those as her 3 month SBIR extensions.

In a recent statement to the House Committee on the Budget, Ms. Velazquez stated: "Without the participation of venture-backed companies, the SBIR program has become little more than corporate welfare for marginal companies who are unable to secure external market based funding."

In an earlier effort to revise the SBIR statute to allow majority ownership and control of small businesses by non-small business VC firms, Velazquez stated: "During this modernization effort, the Committee will make certain that the SBIR program is providing the resources for economically viable technologies – and not wasting its efforts on second-rate science fair projects."

Velazquez has been an impediment to the SBIR program, trying to use it as a cash cow for raising funds from biotech and VC communities, and only allowing a 2 year reauthorization which coincidentally correlates to the election cycle. She also tried unsuccessfully to block the House and Senate Armed Services Committees' move to extend the DoD's portion of the SBIR/STTR programs through the end of FY-10 (September 30, 2010).

By the way Ms. V, did you know that over 99% of the small businesses in the U.S. do not have VC funding? You're truly deserving as the SBIR Insider's first (and probably last) Worst Pinhead in the World……

Folks, not to worry, we'll have no more of that pinhead stuff, but we will point out the heroes and detractors of the program you love. What you do with that information is up to you.

Thanks again for your time and we welcome your comments.

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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