SBIR Gateway
Comments on Pending SBA Policy Directive
In Opposition to the SBA Policy Directive
Jim & Gail Greenwood
Greenwood Consulting

The following is a letter from Jim & Gail Greenwood to Dr. Chris Busch and an unnamed government staff person in rebuttal to comments from their July 8 letter. The government staffer asked to remain "off the record" so we are honoring their request by substituting their name with "[ name withheld ]". This letter is presented with permission. The Greenwoods are speaking on their own behalf and are not representing any government agency or organization.

July 11, 2002

Greetings, Everyone:

We appreciate [name withheld] and Chris Busch's responses to our expression of concern to Ms. Dennis and Ms. Coughlin about the portion of the SBA policy directive regarding use of federal laboratories or other FFRDC's as subcontractors on SBIR projects. We respect their viewpoints, and in some cases we agree with them.

We think [name withheld] covers the gist of what SHOULD be covered by the directive when he writes "..small businesses should have the flexibility to use the resources of the Federal labs but should not be mandated to subcontract with them as a condition of award." We could not agree more. How could anyone disagree with such a position? The only exception to such a policy should be when a Federal laboratory or FFRDC has a unique resource (such as a user facility) that is a one-of-a-kind and for the project to be performed successfully that resource must be used. That sort of exception could be handled by the proposed waiver process.

However, that is not what the policy directive says. Quoting the directive, "An agency shall not issue an SBIR funding agreement that includes a provision for subcontracting any portion of that agreement back to the issuing agency, to any other Federal Government agency, or to other units of the Federal Government." This covers a lot more territory, and clearly is a case where we are trying to kill a fly with a cannon. Not only does this language prohibit, for example, a DOE Federal lab from inappropriately requiring that an SBIR winner use that same DOE lab's resources, it also prohibits the SBIR winner from using any other DOE lab's facilities or scientists. For that matter, it prohibits the SBIR winner from using any other Federal lab or FFRDC (DOD, NASA, NIH, etc) in the conduct of a DOE SBIR project. What possible logic is there from such a blanket prohibition?

Of course, the simple response is "let them ask for a waiver." The problem with the simple answer is that it is the most cumbersome and burdensome answer that could be imposed on the small company, the federal agency trying to make the award, the agency that owns the Federal laboratory to be used, and on the SBA. [name withheld] notes that SBA's Office of Technology staff is already working "insane hours," so why should we enact a policy that will place yet another burden on them? A concise and focused statement that covers the specific area of concern would greatly limit the burden on everyone else who is not subject to what is being prohibited--why should a large administrative burden be placed on so many innocent bystanders?

We have been active in the SBIR program for 20 years, and have taught and consulted with SBIR companies in over 40 different states. Our SBIR efforts have been recognized by a Tibbetts Award, awards by Project SBIR West, and the Federal Laboratory Consortium (yes, we do work with Federal laboratories, although they constitute only about 5% of our work, less than what we do for universities). Despite being in contact with literally thousands of SBIR competitors, the number of concerns brought to our attention about how Federal labs participate in the SBIR program is dwarfed by the number of companies that have had successful and mutually advantageous relationships with Federal labs and FFRDCs that never would have occurred if the proposed policy was in place. This is not to say that, in such situations, the proposed waiver would not be approved, but the small company would never have gone forward with the proposal because of the uncertainty of whether the waiver would be granted and because of the implicit message that the policy sends which is "SBIR companies should not work with Federal laboratories." That is the wrong message, but it is what the proposed policy directive sends to the small business community.

We also want to quickly address the misunderstanding expressed in Chris Busch's response regarding Federal Labs and CRADAs. CRADAs are simply mechanisms that allow a Federal lab or FFRDC to do business with an external entity such as a small private company. There are no Federal Laboratory funds to cover the costs of the work requested by an SBIR company--if the company wants a Federal laboratory or FFRDC to do work for it under a CRADA, then the small company must pay the Federal lab for that work. Therefore, if small companies cannot use SBIR dollars to fund Federal labs to do work through CRADAs, then this means most small firms will not pursue that SBIR project in the first place. That would be to the detriment of the small company and which ever Federal agency is requesting the SBIR project. It is simply wrong to assume that if SBIR funds are not available that a Federal lab or other FFRDC will use some "other funds" to do the work for the SBIR company. We believe it is this sort of misunderstanding of how Federal labs and FFRDCs work, and how they interact with industry, that has led to this poorly conceived section of the policy directive.

We respectfully recommend that the proposed policy directive be amended to be specific to the case in which a Federal entity inappropriately mandates that an SBIR winner use a particular Federal facility, installation, or other resource. We think that is consistent with [name withheld] position, and we support it. --Gail & Jim Greenwood