SBIR Gateway

SBIR Insider Newsletter
February 21, 2007 Edition

Dear SBIR Gateway Insider,

The new year has brought many changes. We have a new congress, FY-07 budget chaos, a new FY-08 budget request from the President, and reauthorization challenges for our programs and even an agency. All of these subjects have an impact on the SBIR and STTR programs.

Every year the SSTI publishes an excellent overview on the President's budget request, as it applies to science and technology programs that affect technology based economic development (TBED). You can find this information on their web site at

In this issue:

Costs of War, Tight Budget and a New Congress are Making SBIR Reauthorization a Tough Challenge

The SBIR program is authorized to run through FY-08 and will sunset unless a reauthorization bill is passed. An attempt to reauthorize SBIR was included in an SBA reauthorization bill last year that failed.

Congress and the Administration are providing a lot of talk about American Competitiveness and are highlighting programs to strengthen it, but we are not seeing a lot of talk concerning SBIR being a part of the solution. In fact, it's amazing to find out how many in congress don't know about the SBIR/STTR programs.

The SBIR program is not held in high esteem by the administration, and through its Office of Management and Budget (OMB) has started to re-circulate their 2003 negative findings on the DoD and DOC SBIR programs that were evaluated by the administration's Performance Assessment Rating Tool (PART). At that time, OMB's findings on the DOD SBIR/STTR included:

  • A rating of Results Not Demonstrated (RND) indicates that a program has not been able to develop acceptable performance goals or collect data to determine whether it is performing.
  • Provides funds to small businesses, but has poor controls on unproductive spending.
  • Continues to provide funding to companies with track records of poor performance.
  • Overestimates commercial successes resulting from Federal support by counting additional investment on par with product sales as measures of success. Product sales are the ultimate measure of success in the marketplace.

An RND rating by the PART makes a program a target to being zeroed out. It should be noted that the DoD has implemented corrective measures to the PART's concerns. However, at more than $2 billion, the SBIR budget is now firmly on the radar screen and vulnerable to attack. Although support by the Senate and House Small Business Committees is strong, much work is needed to convince the majority in both houses of congress of the overall value and need of the SBIR/STTR programs.

The House Committee on Science and Technology (S&T) has not been as strong a supporter of SBIR as the house and senate small business committees. The house S&T committee evaluates the program from a different perspective, and has brought a new person on board to the Subcommittee on Technology and Innovation who will be monitoring and evaluating the SBIR program. We welcome Mr. Bill Behn as the new "kid" on the block for the S&T subcommittee chaired by David Wu (D-OR). Perhaps some of our Oregonian readers would like to offer their thoughts on SBIR to Mr. Behn or Congressman Wu. If you can convince Wu of the program's merit, he'll be a vocal and enthusiastic supporter.

Congressman Ike Skelton (D-MO), Chair of the House Armed Services Committee talked about DoD budget priorities that would shift funding within the DoD. He cited that in the Army and National Guard, more than 40% of their military equipment was in use in Iraq and Afghanistan, causing a serious shortage in training equipment and reserve backup equipment. He indicated that quite a bit would be needed to replenish the equipment and hinted that it would impact the overall DoD budget. Items like this are likely to impact the DoD's S&T funding.

One thing is for sure, if SBIR survives, there will be significant changes. Many special interests are already fighting for those SBIR dollars, as you will see in the next article.

Proposal to Set Aside 3% of SBIR Funding ($60 million) for Agency Administrative and Other Purposes

Insiders report that there is language in an early draft of a DOD FY-2008 Authorization bill that includes some important changes in the use of SBIR program dollars.

Currently an agency is unable to use SBIR program dollars to provide administrative and programmatic support. As the SBIR budgets have grown, so has the need for support, and the agencies find themselves having to dig deeper into their own mission related funds to support the program.

The draft's language would allow an agency (not limited to the DoD) to utilize up to 3% of its SBIR budget to offset the administrative costs and provide more dollars out of that pool for assistance services, such as commercialization.

If the SBIR budget is to remain around $2 billion, about $60 million would be removed ($30 million for the DoD alone) for these administrative costs. The agencies could certainly use the help, but there is nothing providing policy or guidance as to the spending of this $60 mil. Although this funding could be of benefit to improve the program, one could question if 3% is too high.

All of this does nothing for the SBA's Office of Technology, that has been beaten into the ground with budget and personnel cuts, not to mention previous lack of SBA upper management support. I'm pleased to report that the new SBIR Administrator, Mr. Steven Preston, is receiving high marks from both sides of the aisle, seems to be an SBIR supporter, and employee moral is on the rise.

Will a New York Liberal be the One to Rescue SBIR from a Soviet-Style Fate?

No, this is not an aberration, this was a question posed in a recent Forbes magazine article referring to Congresswoman Nydia Velázquez's (D-NY chair of the House Small Business Committee) support for the VC eligibility issue.

The article championed by the National Venture Capital Association (NVCA) interviewed two people, Emily Mendell of the NVCA, and Steven Lazarus, co-founder of ARCH Venture Partners in Chicago. They are both strident supporters for VC owned and controlled companies to be exempt from current SBA size standards, so they can compete in SBIR.

It is interesting that the interviewees compare the SBIR program to a Soviet style of government, but I give Mr. Lazarus credit for being one of the few BIO/VC supporters to admit that "The rule on 51% ownership by individuals wasn't strictly enforced until the last few years." This is much more on target than the claim by BIO and others that the SBA changed their interpretation.

On the SBIR VC issue, Ms. Velázquez has struck a tone similar to Senator Kit Bond (R-MO), by showing strong support for the VC size exclusion as presented by the Biotech Industry Organization (BIO). Unlike Bond, who pressured SBA, attempted to quash the opposition, introduced BIO/VC legislation in the 108th and 109th Congress, and tried to "sneak" his bill in at the 11th hour to the omnibus appropriations in the 108th, Velázquez has thus far been up front.

The deep pockets of both BIO and NVCA make it possible for them to frame an issue to reflect their wishes and pass it on to the press and congress with an authority that is difficult to offset by smaller concerns. If you observed last year's congressional dog and pony show put on by BIO, you would understand the power and emotion of their brilliant, yet disingenuous effort. One was left to believe that cures for everything from cancer to dandruff hung in the balance of the VC SBIR issue.

The Forbes article is available at:

Compromise No More

There was a major compromise on the VC issue as part of an attempt to reauthorize SBIR last year. The bill died as did many issues in the last congress. The compromise would allow a small business that had majority ownership by VCs to compete in SBIR, but capped the eligibility to not more than 25% of the overall SBIR award dollars (around $500 million).

Because of the pending uphill battle to reauthorize SBIR, it is necessary to get as much support as possible. The word on the street is that the big Biotech guys will only get behind SBIR if they get unlimited access (do away with the 25% compromise).

If You Pass it, They Will Come

This was the behind the scenes call for the signing and passing of H.J.Res. 20 in to Public Law 110-5, Making further continuing appropriations for the fiscal year 2007, and for other purposes. The President signed the bill into law on February 15, 2007, thus keeping the government funded through the end of this fiscal year, September 30, 2007.

H.J.Res. 20 was the band aid approach to the 109th Congress' failure to pass 9 of the 12 appropriations bills to fund the government for FY-2007. This quick fix, under the design and control of House Appropriations Chair, David Obey (D-WI) and Senate Appropriations Chair, Robert Byrd (D-WV), basically kept most agencies at flat FY-06 funding levels, but made some important adjustments to increase funding for some needed programs.

Some of the funding increases were made at the expense of stripping FY-07 "earmarks" in bulk, leaving both valuable earmark programs and nonsensical "pork" to die on the vine. The earmark busting language contained in Title I, Section 112 states:

Any language specifying an earmark in a committee report or statement of managers accompanying an appropriations Act for fiscal year 2006 shall have no legal effect with respect to funds appropriated by this division.

Future earmarks will come! In turn for the support of H.J.Res. 20, there will most likely be a supplemental appropriations bill, perhaps in March that will backfill many of the "important" earmarks. However, any thoughts of a supplemental must wait until an earmark reform bill is passed. Efforts are in the works via such bills as H. R. 631, H.RES.6, S.1, S.192, and S.230. This is reminiscent of vaudeville giant Jimmy Durante's saying: "Everybody wants ta get in ta da act!"

The results of these budget adjustments have a direct relationship to the agencies' funding levels of the SBIR/STTR programs.

SBA Gets Reauthorization Extension

The SBAs previous reauthorization extension expired on February 2, 2007 and congress had to enact another. The House created a bill that would keep it going until December 31, 2007, but Senate Small Business Committee chair John Kerry (D-MA) wanted to push the date up so as to force the issue to move faster and obtain a new and improved SBA reauthorization. Kerry's amendment was passed and the SBA's extension is now good through July 31, 2007. In his statement Kerry said:

"I thank the House for acting so quickly to pass the temporary reauthorization of the SBA. Over the next six months I'm committed to working with Administrator Preston, Ranking Member Olympia Snowe, and our colleagues in the House, to pass comprehensive reauthorization legislation. There is no reason for additional delay on this legislation to provide the agency with critical tools to help America's entrepreneurs succeed. Last year, Sen. Snowe and I laid out a good bipartisan plan that was blocked. Mr. Preston has made great strides in improving the beleaguered agency and I am confident that working together we can get it done by July 31st."

DOT Opens FY-07 SBIR - Important Changes in Submission Procedures

The Department of Transportation has released its 2007 SBIR, opening February 15, 2007 and closing May 1, 2007. This solicitation is somewhat larger (topic wise) than 2006, with 17 topics. DOT claims they will make 19 awards.

DOT accepts electronic submissions via email. The following is SBIR Gateway guidance and not DOT: Although security is an important issue in email (never send credit card or banking info), it is not likely that your SBIR proposal will be of much interest to the "bad guys." However, in these days of extreme email spam and overloaded servers, there is a reasonable chance that your email will not get to its destination, either on time, or perhaps at all! For this reason, we suggest that you check with the DOT SBIR office to make sure your submission was received. Allow several hours or perhaps a day before you check (unless you are nearing the deadline).

Note: DOT has a new proposal submission procedure for electronic submissions requiring advanced registration by April 17, 2007. Complete instructions for submittal are available at:

NIH Seeks Comments about a National Survey on SBIR

The NIH posted a notice on the Federal Register asking for comments regarding: Proposed Reinstatement of Collection With Changes; Comment Request; Second National Survey To Evaluate the National Institutes of Health (NIH) Small Business Innovation Research (SBIR) Program.

NIH will seek OMB approval to reinstate this information collection with changes with the primary objective to assess the extent to which the SBIR program goals continue to be met, particularly those dealing with the commercialization of research products, processes or services and the uncovering of new knowledge that will lead to better health for everyone.

Written comments and/or suggestions from the public and affected agencies are invited on one or more of the following points: (1) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (2) The accuracy of the agency's estimate of the burden (including hours and cost) of the proposed information collection; (3) Ways to enhance the quality, utility, and clarity of the information to be collected; and (4) Ways to minimize the burden of the collection of information on respondents, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology.

Interested parties should read the entire announcement located on the Federal Register at or use the easy way from our SBIR Gateway at

SBIR in Rapid Transitions, a Conference on DoD's Commercialization Pilot Program (CPP)

On March 6, 2007 the SBTC is hosting a conference at the Wyndham Washington DC Hotel on this very important DoD program.

The DoD's CPP is one of the least known but most serious SBIR programs to date. It is not yet a year old, and the agency components (Army, Air Force, Navy, et al.) are still developing and fine tuning their versions of the program.

In a letter dated June 27, 2006 to the DoD's agency components, DoD Under Secretary Kenneth Krieg stated:

The purpose of the CPP is to accelerate the transition of SBIR-funded technologies to Phase 111-specifically into systems being developed, acquired and maintained for the warfighter. This can be done through activities that enhance the connectivity among SBIR-firms, prime contractors, and DoD science & technology and acquisition communities. It can also be accomplished by improving a SBIR-firm's capability to provide the identified technology to the Department, directly or as a subcontractor. Since leveraging the SBIR program to meet identified technology needs is a goal of the Department, I request that you develop a CPP utilizing this new authority.
This conference is a "must attend" for serious DoD SBIR players. Last year's conference was sold out. The agenda and all conference details are on the web site at

The early bird discount for registration has been extended to close of business Friday, February 23, 2007.

Registration Open for the National SBIR Spring Conference at Research Triangle Park, NC.

Registration is now open for the 2007 National Spring Conference to be held April 30 - May 3, 2007 at Research Triangle Park, NC. This is the first of the non-NSF funded national conferences and the folks at the North Carolina SBTDC and their partners are working hard to give you a first rate national conference.

Even without the benefit of the NSF funding, the NC team has managed to put together a national conference at very attractive rates. The registration for non-NC residents is $299 advance until 4/10 and $399 after.

The conference web site is located at:

Tibbetts Awards for 2007

The revival of the Tibbetts Awards last year was a great success and as such there will be a 2007 Tibbetts Awards competition. The schedule is currently being worked out and the awards ceremony will be held October 10, 2007 at the Wyndham Washington, DC hotel located at 1400 M Street. Complete details will be posted soon on the Tibbetts Awards web site at

Sorry to be so long winded. Thank you for your interest and I look forward to your comments.



Rick Shindell
SBIR Gateway
Zyn Systems
40 Alderwood Dr.
Sequim, WA 98382
[email protected]

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