SBIR Gateway

SBIR Insider Newsletter
The Age of Sequestration
February 28, 2013


Dear SBIR Insider,

To quote the great radio broadcaster Paul Harvey, "You know what the news is, but now you'll hear 'The Rest of the Story.'" We'll discuss sequester and the soon to expire budget "continuing resolution" (CR), and their possible effects on the SBIR and small business communities. Sequester starts (slowly) on March 1, and the CR ends March 27.

In this issue:

The Size of Sequestration Cuts for the Remainder of FY-13

The actual percentage of the sequestration cuts vary depending on the type of glasses you wear, "Blue Blockers" filter out the democrats, while "Red Blockers" do the same to the republicans. Their estimates vary greatly, largely because one side calculates the reductions against the overall budget including the largest part, entitlements, while the other side calculates on the budget excluding entitlements.

For our example we will look to the Office of Management & Budget (OMB), which is the source the agencies listen to. In OMB's February 27, 2013 Memorandum for the Heads of Executive Departments and Agencies, OMB Controller Danny Werf states:

"Unless Congress acts to amend current law, the President is required to issue a sequestration order on March 1, 2013, canceling $85 billion in budgetary resources across the Federal Government. Because these cuts must be achieved over the remaining seven months of the fiscal year, the Office of Management and Budget (OMB) estimates that the effective percentage reductions are approximately 9 percent for nondefense programs and 13 percent for defense programs. These reductions will result in significant and harmful impacts to national security and domestic priorities."

As the irrelevant congressional "blame game" continues, one issue is certain; the DoD will be significantly more affected by sequestration than any other agency, and the DoD's SBIR portion is about half of the entire 11 agency SBIR program. However, no agency is exempt.

According to sources, if sequestration goes into April we may see as many as 700,000 federal employees be furloughed 1 day per week (a 20% cut in pay). There is also talk about making Friday a "dark day" for many agencies (and that's not even addressing contractor employees who will also get hurt). Imagine what this will mean to getting things done within the agencies (e.g. contracting, evaluations, awards etc…)

Possible Consequences of Sequestration on the SBIR Community

Just the threat of sequestration has already had a negative impact on some SBIR awards, and that is likely to worsen unless congress and the administration "acts" on how the $85 billion in across the board budget cuts are to be handled for the remainder of FY-13.

Of course "acting" (as in the Oscars) is exactly what congress and the administration are doing. We see both sides spending an inordinate amount of time and taxpayer money trying to convince you that the other side is at fault. Shouldn't they be working on a bipartisan and bicameral solution?

The smart money is now saying that sequester will be here for a while, perhaps through May or longer. Most may not see much happen until April. However, many experts agree that the $85 billion in cuts for FY-13 will stay, but there is hope that something will be done to allow a more targeted approach to the cuts rather than the broad based across the board meat cleaver approach the sequestration calls for. A solution could happen as a part of addressing the CR that expires March 27.

To our SBIR community, the net effect of these threats have resulted in many new SBIR awards being slowed down or halted. We hear reports from SBIR selectees that agencies want to fund their proposals but are unable to due to lack and/or uncertainty of funds.

Now with sequester as a certainty, you can bet that the number of awards will be reduced, and in some cases perhaps eliminated. Don't blame the agency SBIR program managers because it is not their fault. Orders come down from "on high" i.e. agency comptrollers, who offer the spending guidance within their agency.

Additional guidance from the OMB memo states: "Planning efforts should be done with sufficient detail and clarity to determine the specific actions that will be taken to operate under the lower level of budgetary resources required by sequestration. For example, agencies should identify any major contracts that they plan to cancel, re-scope or delay as well as any grants that they plan to cancel, delay, or for which they plan to change the payment amount."

Also included the general area of procurement and acquisition, the memo states: "As a general matter, agencies should only enter into new contracts or exercise options when they support high-priority initiatives or where failure to do so would expose the government to significantly greater costs in the future. Agencies may also consider de-scoping or terminating for convenience contracts that are no longer affordable within the funds available for Fiscal Year 2013, should no other options exist to reduce contracting costs in these instances."

However, there is some language of hope to the small business community: "Finally, agencies should take all appropriate steps to minimize to the extent practicable the impact on small businesses of reduced contracting activities."

We all know there will be cutbacks, but will they be disproportionate to the small business community? We've published many times the now famous quote of the original "Mr. Small Business", Milt Stewart who said: "Congress, when it comes to small business, in public they'll hug them, in private they'll mug them." As a community we need to stay active.

SBTC Seeks Small Businesses to Sign on to a Letter to the President & Congress

In light of the sequester (as described above) the Small Business Technology Council (SBTC) is concerned that small business programs such as SBIR may be disproportionately targeted for cuts. Small business programs are often lower on agencies’ lists of priorities than they should be, and in fact many of their members have already reported that awards and contracts have slowed down or even stopped. Some firms have even been given stop-work orders on contracts they already have in anticipation of budget cuts.

In response to these concerns, the SBTC has drafted a letter to the President and Congress urging them to take steps to ensure that small businesses are not disproportionately and unfairly targeted by the upcoming cuts.

SBTC is asking every technology-oriented small business to read this letter, and if you agree with it, add your company’s signature. Complete details are available at: http://www.nsba.biz/content/4610.shtml

The actual letter is available at:
www.nsba.biz/docs/sbtc_letter_on_sequestration__2-22_.pdf

Sean Greene Leaves SBA, Returns to Private Sector

Every now and then the right person comes along at the right time for the right job. Such was the case in early 2010 for Sean Greene coming to the SBA, in the role of Associate Administrator for Investment and Special Advisor for Innovation.

Although Mr. Greene's primary responsibility was in the area of SBA's Investment division, he became extremely interested and involved in SBIR. At the time of his coming to SBA, the Office of Technology (OT), that oversees SBIR, was located (organizationally) in the "bowels" of the SBA, and was often thought of (and I'm not kidding) as an irritant to the hierarchy of SBA. The OT got no respect and very few resources.

Greene breathed new life into the OT, raised the persona of the SBIR/STTR programs within the SBA, and moved it out of the old contracting shop into the Innovation section under the Investment division.

He also obtained more resources for the OT, restarted the SBA's leadership of the Tibbetts Awards, founded the SBIR Hall of Fame, started the new web site portal SBIR.GOV, and helped lead the agencies and the SBIR/STTR community in executing the all important Policy Directives, that provide guidance to the agencies and small businesses on the governance of SBIR and STTR programs.

That's not to say that there weren't problems, or disagreements. When you're a type "A" personality you are used to getting things done your way, and that doesn't always happen in government. There were times when Mr. Greene and your SBIR Insider became "cross-threaded." However, Sean always encouraged us to write what we felt was proper, and let the chips fall as they may.

Sean, the chips have fallen and the result is that you have become a very important part of SBIR history and success. Your contributions will be felt for a long time, and you will be missed. We hope you come back and visit once in a while, or even participate in the program.

Thanks for all you've done.

Find a Partner for the DoD FY-2013A STTR

Time is running out to find a partner for the DoD's FY-13A STTR solicitation. I'm sorry to say that this year's registration is significantly down from last year, but the usage is still strong. We have 150 topic registrations when we would normally have over 300.

The quality of users seeking partners is still high, with universities such as: Philadelphia University; University of North Carolina; University of Memphis; University of Pittsburgh; and University of Vermont. Also some of the most successful SBIR companies such as Physical Sciences Inc., and Creare Inc. have listed to find a partner.

You'll find everything you need at www.zyn.com/sbir/partnering Then click on "Partnering List" button, view your topic(s) of interest and see who wants to partner with you on that topic. It's all free and waiting for you. Remember the solicitation closes on March 27.

More Changes at SBA

SBA Administrator Karen Mills has announced that she will be leaving the SBA as soon as the President finds a replacement and gets Senate confirmation. No reason was given for Mills' leaving.

Mills became SBA Administrator in April of 2009 and the position was elevated to "cabinet level" in January of 2012. We haven't seen an SBA Administrator at cabinet level since the Clinton era, although the President did state when he elevated the position that it would be temporary.

A front runner for successor is not in sight at this time. Some speculated that former Senator and small business champion Olympia Snowe (R-ME) would be interested. Not likely, Ms. Snowe knows first hand the amount of abuse the SBA and its Administrator gets from congress, and how Snowe had to fight tooth and nail to get additional support for the agency.

Also, Mill's Deputy Administrator Marie Johns has announced she is leaving the SBA in May. Is there something going on we should know about? Is the President paving the way for some agency consolidation in the near future? Time will tell.

Even More Changes at SBA: Welcome Pravina Raghavan

With the departure of Sean Greene, the SBA has some big shoes to fill. Enter Ms. Pravina Raghavan, former SBA District Director of New York. Ok, she doesn't have to fill Sean's shoes, but she is following someone very dynamic.

We hear from our NY sources that Ms. Raghavan is very experienced and has provided advisory services to businesses in the start-up, growth, expansion and maturity phases of development. She completed over 100 Mergers and Acquisitions (M&A) transactions and has advised companies on strategy, marketing, sales development, capital raising, mergers and acquisitions, divestitures, outsourcing, joint ventures and partnerships, and international development.

Ms. Raghavan knows media and promotion, having served as a Vice President with MTV and BET Networks in Content Distribution and Marketing where she was responsible for contract negotiations and marketing for 23 channels.

Pravina has an MBA in Finance from Seton Hall University and a BS in Finance from The Pennsylvania State University. She has worked in over 15 countries around the world and is familiar with five languages!

Pravina Raghavan is coming to the SBA in the role of Director, Office of Innovation. As such she will also be overseeing the SBA's Office of Technology, and hopefully she will be as enthusiastic and supportive of SBIR and STTR as her predecessor.

Once she is settled in we'll try and get an interview with her to help give you a better picture of some new leadership at SBA.

Welcome Pravina, and we wish you the best in your new position.

National SBIR Spring Conference & the Sequester

This year's National SBIR/STTR Spring Conference will take place May 14-16 at the Gaylord Convention Center, National Harbor, MD (Washington DC area). This conference is collocated with two other exciting conferences, the TechConnect World Conference, and the National Innovation Summit and Showcase.

This important conference will address many of the new items you need to know in order to compete in the reauthorized SBIR/STTR programs. The agenda has been formulated by the SBIR agencies who want to bring you up to date with all the changes including sequester and FY-13 budgets as they affect the programs.

Many of you have heard about recent cancellations of government conferences such as the Federal Laboratory Consortium (FLC) and Techcom, BUT this conference is not hosted by the federal government, it is hosted by TechConnet, a private sector venue that usually attracts 4,000 attendees. Also, most of the federal SBIR support folk live and work in the Beltway area, so travel is not likely to be an issue. We'll keep you informed of that.

There is an early bird registration fee of $375.00 through March 29, for the SBIR conference, and other deals may be available for discounts to attend all the conferences, check with the SBIR agencies.

The conference web site is located at: http://nationalinnovationsummit.com/program/National_SBIR_Conference.html and a working agenda is located at:

http://nationalinnovationsummit.com/program/DAG_SBIR.html

Closing Thoughts

We've run too long to include the "Technical Assistance" article in this issue, but I promise to have it in the next one.

Some people have asked us about Chuck Hagel as the new Secretary of Defense. In our February 16, 2006 SBIR Insider, we wrote about INC Magazine's Best Friends In DC: On the Hill. Chuck Hagel was listed as an Entrepreneur-friendly member of Congress, he was SBIR friendly and a key proponent of initiatives that promoted entrepreneurship as a solution to the decline of rural America. Hagel was listed right up there with John Kerry, Olympia Snowe and Don Manzullo. That was 2006, who knows now?

Hold on to your hat, we're going to be in for a bumpy ride.

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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