SBIR Gateway

SBIR Insider Newsletter
SBIR Reauthorization

August, 20, 2008 Edition



Dear SBIR Gateway Insider,

Sometimes writers like to "sensationalize" news in order to achieve greater notoriety and sell more newspapers or get higher ratings. Such is not the case here because we don't sell anything and I'm at my happiest when SBIR/STTR are running smoothly and there is little or no news to report. When we compose our SBIR Insiders, it is much more gratifying to give you good news.

This issue is a mixture of potential good news and …..speculation… On to it!

In this issue:

SBA Proposes to Raise SBIR Award $$$ - They Want Your Comments!

In a move that is long overdue, the SBA has released (via the Federal Register) a "Notice of Proposed Amendments to the SBIR Policy Directive" You can read the notice on the Federal Register at http://edocket.access.gpo.gov/2008/E8-18914.htm

The Summary reads: " The U.S. Small Business Administration (SBA) proposes to adjust the Small Business Innovation Research (SBIR) Program award threshold amounts to offset the effect of inflation that has occurred since the amounts were last set in 1992. Current threshold amounts were set by Congress in 1992 at $100,000 for Phase I awards and $750,000 for Phase II awards. SBA is authorized by statute to adjust the award amounts once every 5 years to reflect economic adjustments and programmatic considerations. SBA proposes to increase the award amounts to $150,000 and $1,000,000, respectively, to account for increases in the costs of performing research and development."

DATES: Comments must be received on or before September 15, 2008. SBA intends to make these comments available to the public.

ADDRESSES: You may submit comments, identified by RIN 3245-AF61 by any of the following methods: (1) Federal Rulemaking Portal: http://www.regulations.gov, follow the instructions for submitting comments [Note: as of August 23 the submission process was still inoperative]; (2) Mail: Office of Technology, 409 Third Street, SW., Washington, DC 20416; or (3) Hand Delivery/Courier: Edsel Brown, Assistant Director, Office of Technology, 409 Third Street, SW., Washington, DC 20416.

FOR FURTHER INFORMATION CONTACT: Edsel Brown, Assistant Director, Office of Technology, at (202) 205-7343. You may also e-mail questions to technology@sba.gov.

How the SBA Policy Directive Amendment Affects Reauthorization

The big question people are asking is, "Why is the SBA doing this now, at the end of the SBIR authorization cycle?" There are several answers to this question, but let's concentrate on the most important point. There is a great likelihood that Congress will not pass a new SBIR reauthorization bill until next year, but a Continuing Resolution (CR) may keep the program going "as is" for several months.

The SBA's proposal amends the SBIR Policy Directive, as allowed by the SBIR law 15 USC 638 (see http://www4.law.cornell.edu/uscode/html/uscode15/usc_sec_15_00000638----000-.html ). Because a CR will not change the "nuts & bolts" of the SBIR law (it mainly extends the sunset date), the SBA is within its purview to make the award threshold adjustments. These are long overdue!

When new SBIR legislation is passed, it will certainly contain updated language as to award levels, and the current SBA action will be moot.

The Dark Side of an SBIR Continuing Resolution (CR)

In the 2000 SBIR reauthorization, things did not go smoothly. Reauthorization did not occur on time, there was an interruption, and a CR was instituted until the reauthorization was made in the end of the year in the omnibus.

When Congress passed the CR, it was thought that all was well with the SBIR world. That was not the case because some higher ups in parts of the DoD questioned whether the CR was a temporary reauthorization without appropriation (or some such gray area).

This wreaked havoc in the Air Force as the SBIR troops tried to do what they could with the perception of no new money, but it soon got ugly and some feared the ultimate shutdown of the program. We are hearing stories that some in the DoD fear this could happen again, and there is some talk about some DoD subsets even closing down their SBIR program in lieu of new reauthorization legislation.

Keep in mind, that the highest levels of most of the agencies would welcome the disintegration of SBIR, and look for any reasonable excuse to regain total control of their 2.5%, not to mention their admin overhead. Please remember that this attitude is not at the level of folks you deal with. Most of the SBIR program managers are major supporters of the program, and want to see it benefit the small businesses and their agencies.

The Bright Side of an SBIR Continuing Resolution

When word of the Air Force's 2000 CR shenanigans reached the Senate Small Business Committee, ranking member John Kerry was not amused. He got some Senators together and they talked to the Air Force leadership in a language they could understand. Facing Congressional hearings, not to mention a very irate ranking member of the Senate Armed Services Committee (Carl Levin), the Air Force reluctantly and slowly, got back in gear.

WHEN CONSTRUCTED PROPERLY (hope you staffers take heed of what applies to SBIR), a CR is designed to keep portions of the government running without interruption until such a time that Congress can pass their authorizations and appropriations. They can do this for the SBIR, and perhaps include it in a bundle of CRs that will keep the government funded.

Most of our government will be starting off FY-2009 on CRs, and the agencies had better take notice that lack of an SBIR reauthorization bill is not synonymous with lack of support for the program. Both the House and the Senate want to see the program continue, and will very likely become very "exercised" if an agency tries to reduce, or pull out of the program.

SBIR Reauthorization Update

Last issue we talked about the excellent work done by the Senate Small Business Committee to try and hammer out an SBIR reauthorization (S. 3362) with many compromises built in, and room for some additional compromise.

Although S. 3362 passed through the Senate Small Business Committee by a 19-0 vote, it has not yet been brought to the full Senate. Some expect the Senate to vote on it after their return on September 9. It will be highly beneficial for you to ask your Senators to support the bill, S. 3362. If the Senate passes the bill, it will most likely go to conference where the Senate and House try to work out their differences.

Unfortunately many in our Insider network feel that the House is in no mood to compromise with the Senate. The House bill, H.R. 5819, had overwhelming support comprised of 368 Ayes, 43 Nays and 20 No Votes. That translates to a bipartisan vote of 219 Democrats and 149 Republicans voting in the affirmative. "With numbers like that, why should we compromise," said a House source wishing anonymity.

I responded to my source, "you should compromise because your constituents want you to." That provoked a slight laugh and end of conversation.

If our insiders are providing an accurate reflection, don't look for an SBIR reauthorization until mid-2009 in the 111th Congress.

Well Deserved Accolades to a Senate Staffer and SBIR Champions

In spite of the prior statements, there is a significant amount of good work that is performed behind the scenes on the hill. Staffers play a key role in all aspects of their bosses' work, and that includes helping to craft legislation.

There are only a handful of attorneys who have specialties in SBIR, are involved in providing guidance to the lawmakers and agencies, and who also strike fear in the hearts of those agencies when they dress in their "warrior" garb to represent a small business going against an agency.

One of these few is David Metzger, of Arnold & Porter LLP. Barrister Metzger sent me an email concerning our report on the Senate's SBIR Reauthorization bill. He provided some great insight. I was so impressed with his message and request, I had to bend his arm to allow me to share it with you. The "Kevin" he is referring to is Ms. Kevin Wheeler, Deputy Staff Director to John Kerry, Senate Committee on Small Business and Entrepreneurship.

To: Rick@zyn.com
From: David Metzger
Date: Thu, 31 Jul 2008 11:39:06 -0400

Rick:

Thank you for your insights on this. Your report is immensely
helpful. I agree with the fact this the Senate Bill is a huge
victory, in the face of a very poor House bill, and must be passed.

At this point, after reading your insightful report, I have one
comment, and a favor to ask. The comment is this: at various times,
in the history of SBIR, individuals have stood up and been counted in
the perilous process of passing and re-authorizing SBIR. Early,
giants like Roland Tibbetts, Milt Stewart, and John Sataja played
significant roles. In 2000, Kit Bond, Senator Kerry, and Jere Glover
were there when needed. This time however, with all due respect to
these senators, Kevin Wheeler stood and delivered. We now have a bill
around which we can rally and for which we can fight. This bill, and
these compromises, had to be conceptualized, drafted, presented,
re-drafted and defended. At the most technical level, we know that
senators do not do the hard technical work. Kevin did. Kevin was
there when we needed her. She's done what we needed. It is up to us
now to rally, to take up the fight, and get this bill passed. And if
the SBIR community has to make compromises, Kevin has shown us how to
do that too, and the necessity for it. Your message now to the SBIR
community needs to be: "Get it done."

The favor I ask is: Thank Kevin for being there.

David Metzger
Partner
Arnold & Porter LLP
1600 Tysons Boulevard
Suite 900
McLean, VA 22102-4865
703-720-7000

State SBIR Outreach Organizations, "You Can Do It!"

Please excuse me for a moment while I address our State SBIR Outreach leaders.

When we talk about your ability to make a difference in the program by involving your politicos, I most often hear "We aren't allowed to lobby." Many years ago when the FAST and ROP programs were cranked up and running, Dept of Education's Lee Eiden (one of the great SBIR resources) identified the difference between education and lobbying. He suggested something in between and coined the phrase "Leducation" (all in fun and legal).

A few months ago some state folks in Louisiana were able to work with their U.S. Senator, Mary Landrieu (D-LA), and they not only talked about the benefits of the FAST and ROP, but actually cited some of the hurdles in its implementation, i.e., the lack of support to the SBA's Office of Technology.

Much of the feedback Ms. Landrieu received guided her to introduce the " Rural Small Business Enhancement Act of 2008," S. 3342. Although the bill wasn't going anywhere, it did raise the call to: "authorize funds for the SBA to add five employees to the Office of Technology, which administers the SBIR and STTR programs." If I had to bet, I'd say Roy Keller's prints were all over that idea. You can make a difference with your state's leaders.

Also, don't forget that SSTI is your friend in this. Mark Skinner knows all too well where the "bodies are buried" in the implementation of state programs. Skinner was one of the few bright lights in the House's SBIR reauthorization.

Accolades to a Former Senate Staffer and SBIR Champion

Kudo's to the Senate Small Business Committee on creating a good and acceptable (to many) compromise bill.

The Senate bill is based on many factors including hearings held in both the 110th and 109th Congress. As many of us have lauded Kevin Wheeler's work on S.3362, I want to take a moment to honor Mr. Max Kidalov, former council for Senator Olympia Snowe, (R-ME) when she was chair of the Senate Small Business Committee in the 109th Congress.

Mr. Kidalov did great work on crafting an SBIR reauthorization bill, S.3778 in the 109th, which brought BIO and SBTC together (kicking and screaming) to strike a compromise on the VC issue. Unfortunately, Kidalov's bill came at a time when the powers that be in Congress were in no mood to vote for anything.

Kidalov's work was not wasted because it provided a quasi-framework that could be used by the Senate Small Business Committee in crafting the current S.3362 reauthorization bill.

Max is now in the private sector but I know he's watching the progress with great interest. Just as we thank Kevin for her work today, I (and many of us) thank Max Kidalov for his efforts of yesterday. Max can be reached at:

Max V. Kidalov
Vice President & General Counsel
THE CENTECH GROUP, Inc.
4600 North Fairfax Drive
Suite 400
Arlington, VA 22203
main: 703-525-4444
direct: 703-504-2841
kidalovm@centechgroup.com

Is Congressional Cynicism Justified and/or Appropriate?

A few of my colleagues believe I was unnecessarily cynical of the House SBIR bill, H.R. 5819. I will admit, there were many points that "frosted" me, but I wonder if it did the same to you.

Very troubling are items at the core of the bill, such as the direct access to phase II, the lack of a ceiling on SBIR award amounts, legitimization and encouragement of jumbo awards, and the unfettered access by companies majority owned and controlled by VCs. These changes also set the environment for the potential, and probable earmarking of SBIR funds.

Congressman Jeff Flake (R-AZ) immediately recognized the potential and perhaps intentional design to allow the low hanging fruit of SBIR awards to become available for earmarks. With the House changes to award sizes and direct access to phase II, it would now be possible to make $10m, $15m, even $20m dollar SBIR awards!

Flake submitted an amendment to prohibit the earmarking of SBIR award dollars, but the "House leadership" would not allow his amendment to be entered or voted on in spite (or because) of the fact that his amendment, being a public vote, would most likely pass.

You can view Mr. Flake addressing his question on our SBIR.TV web site at www.sbir.tv/flake1.htm. (Please let me know if you are unable to view this video via youtube. If we receive enough requests, we will embed the video directly on our sbir.tv site)

Keep in mind that earmarks are predominately the domain of "higher ups" in party leadership, but occasionally a party will make such funds available to the lesser reps who may be in re-election trouble in their districts.

Also consider that with all the sweeping changes in the House bill, it was only for a 2 year authorization (not enough time to be able to measure any effectiveness from the changes). However, 2 years means reauthorization would take place again in late summer of 2010, just in time to raise money from lobbyists such as BIO and NVCA for the off year elections. History shows us that the party in power generally loses seats in the off year elections, so the dems will be looking for $$$ then.

Now let's add to this BIO's August 12, 2008 announcement in the Wall Street Journal that BIO will be greatly increasing their contributions to the democrats via their "political action committee for federal office-seekers" (see http://blogs.wsj.com/health/2008/08/12/bio-chief-on-the-wisdom-of-giving-money-to-democrats/).

In the WSJ article BIO's CEO, James C. Greenwood (not our SBIR Jim Greenwood) inferred that bad policy comes more easily than good policy, and BIO is doing what it can to "tilt" the balance in its favor. Hmm… This is the same group who fought against the new Massachusetts law requiring disclosure of gifts and payments to doctors from the drug folks.

As for the NVCA, the American Small Business League just posted an article titled: "National Venture Capital Association Moves to Hijack Federal Small Business Contracts" (see http://www.asbl.com/showmedia.php?id=1118 ) and "Pelosi Backed Bills Let Billionaire Investors Hijack Small Business Contracts" (see http://www.asbl.com/showmedia.php?id=1114 ). You can read about H.R. 5819 from a non-SBIR perspective.

Overall, our politicians don't fear us, unless there is something totally overwhelming. I do not understand why Congress, with an approval rating between 9% to 16% (the lowest rating of all time) will most likely get 90% of the incumbent democrats re-elected and 80% of the incumbent republicans.

This 110th Congress has passed the fewest number of laws of any congress in the last 20 years! Their record is far worse than the 80th Congress which Harry Truman called "a good-for-nothing Congress." Yes, he coined the phrase "do-nothing Congress" but in the case of the 80th, he often used the former description.

In Conclusion

Don't forget about the Beyond Phase II Conference & Exhibition in Palm Desert, Sept 2-5. We hear there is still room. Visit www.beyondphaseii.com

Also mark your calendar for the National SBIR Fall Conference, November 12-14, 2008 in Hartford, CT. Visit www.ccat.us/sbir_conference_08 for details.

I appreciate your taking the time to read these "SBIR Insiders", and I enjoy, as well as benefit from hearing from you.

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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