SBIR Gateway

SBIR Insider Newsletter
October 2, 2007 Edition



Dear SBIR Gateway Insider,

We start with the announcement of an important SBIR action.

In this issue:

SBIR and CPP Reauthorization Passes in the Senate

First, the good news: The Senate has passed the Department of Defense Authorization Bill that includes an SBIR reauthorization to extend the program through FY-2010. It also includes a provision to extend the DoD's Commercialization Pilot Program (CPP), a program that Senators John Kerry (D-MA) and Olympia Snowe (R-ME) created in 2005, through FY-2012.

The effort to include these two items in the Defense Authorization Bill was driven by Senators John Kerry, Chair of the Senate Committee on Small Business & Entrepreneurship, and Carl Levin (D-MI), Chair of the Senate Armed Services Committee. Levin, who also sits on Kerry's Small Business Committee, worked very closely with Kerry to add these "short term" reauthorizations to Levin's overall DoD Authorization bill.

Now the reality: This is basically a stop gap measure, leaving the SBIR program "as is" while Congress buys time to do a comprehensive reauthorization of the program in the near future. Several months ago the Insider reported on the possibilities of the SBIR program lapsing, as it did in 2000, due to the attention needed for higher profile issues in Congress, i.e. elections and budget reform.

Without this new extension, SBIR would have to compete with congressional issues such as an "unusual" election, a controversial war, immigration controversies, and the largest deficits ever known, just to name a few. Some dedicated staffers with excellent memories (some of whom helped bail out SBIR in 2000), worked with their bosses to try and prevent a new SBIR lapse. The Bad News: This potential short term remedy is not a sure thing. It will need support when it hits the House or it could get scrubbed. The House Armed Services, Small Business, and Science & Technology committees will weigh in, as will government organizations such as the SBA, and agencies that have SBIR programs.

Some special interest groups (yep, the big VCs) are already looking at this as an opportunity to get what they want, or threaten to let the program die. Your voice may be needed again. We will keep you informed.

SBTC's SBIR in Rapid Transitions Conference

We've announced this conference before, but with the news listed above, this conference is taking on a new importance. It will be addressing this new issue of reauthorization and what can be done to help insure the SBIR program will not be interrupted.

Both Tibbetts Award Attendees and the SBIR in Rapid Transitions Conference include the SBIR Reauthorization Rally that will be held Wednesday afternoon, October 10, at the Weston DC City Center hotel, culminating with an early evening reception on Capitol Hill.

More information about the conference and its Reauthorization Rally is available on the SBTC Events web site at www.sbtcevents.org/rt072/

More About House Passage of H.R. 3567, Small Business Investment Act of 1958

The manner in which this bill was passed shows that special interest can "creatively" use many of your Representatives to marginalize your small business interests. The bottom line was that rules were used to limit debate, and no mainstream small business organizations were asked or allowed to have input. However, one representative did stand up against several important points of the bill, but it was kept relatively quite and the press did not pick up on it.

For many years Congressman Donald Manzullo (R-IL) fought the large entity special interests trying to leverage small business programs.. Mr. Manzullo spent several years as Chair of the House Small Business Committee, and was a major proponent for SBIR. He was considered one of the Small Businessman's Best Friends in DC (by Inc. magazine in 2006). Below are some of his comments on Title V of H.R. 3567 (taken from the Congressional Record, September 27, 2007.

....But the most egregious provision in H.R. 3567 is the revamping of small business size standards in Title V. This provision allows companies not independently-owned and operated but controlled by venture capital, VC, investors to still be considered as a small business in the eyes of the Federal Government. Title V will allow large businesses and universities that establish a VC to potentially game the system to benefit from not just various SBA technology programs but every other SBA loan and procurement assistance program. It could even complicate the Regulatory Flexibility Act, which requires Federal agencies to take into account the interests of small businesses during the development of new regulations. When I was chairman of the Small Business Committee, I was proud of the bipartisan support I received in eliminating big businesses from participating in various federal small business programs. This led the SBA to finally clamp down on this abuse and issue new regulations and policies to do away with this practice. However, I fear that many of my colleagues have not fully thought through the implications of this provision. Title V would undo all the bipartisan work done on this issue over the past five years.

In particular, I spent a lot of time and effort trying to solve the specific problem of the eligibility of some small businesses with venture capital investments to participate in the Small Business Innovative Research, SBIR, program at the National Institutes of Health, NIH. The SBIR program guarantees that at least 2.5 percent of Federal research and development, R&D, dollars must go to small businesses. After the Defense Department, the NIH is the second-largest spender of R&D funding in the Federal Government.

Title V tries to solve a problem that is grossly exaggerated. It is a myth that small businesses with VC investments are unable to participate in the SBIR program at NIH because of a misinterpretation of the law by the SBA. In an impartial Government Accountability Office, GAO, study that I requested, they discovered that 17 percent of NIH SBIR awards, accounting for 18 percent of the dollar value, went to small business with VC investments in fiscal year 2004. These small firms had no problem in complying with SBA guidelines. Nevertheless, I tried to proffer a compromise that would have established a 2-year pilot program to set-aside 0.5 percent of NIH R&D funding, over-and-above the 2.5 percent currently set-aside for small businesses, for these firms that receive a preponderance of their funding from VCs and do not own or control their company. Unfortunately, my compromise was rejected by NIH and by the biotech and VC industries. However, the solution contained in Title V is a dramatic overreach in the effort to solve this specific problem with NIH.

You can read the entirety of his comments on the bill on the SBIR Gateway Insider at: www.zyn.com/sbir/insider/Manzullo_cr07.htm

Texas Extends Early National SBIR Conference Registration Discount

The early registration discount for the Fall National SBIR Conference October 29-November 1, 2007 has been extended to October 5, and the Hotel room block to October 12. The conference is being held at the Renaissance Dallas Richardson, TX.

Complete conference details are available at www.sbirtexas.com

Notice to State SBIR Representatives

There will be a state meeting of SBIR representatives on Monday, October 29, 2007 from 9:00a to 12:00p at the National SBIR conference in Richardson, TX. The SBA wants to extend an invitation to all sanctioned state representatives. If you have questions, please contact Edsel Brown at edsel.brown@sba.gov

SBIR activities will be in high gear for a while and we will keep the reports coming. We welcome your thoughts and 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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