SBIR Gateway

SBIR Insider Alert
House Passes SBIR Reauthorization Bill

April 23, 2008 Edition

Dear SBIR Insider,

It's official, H.R. 5819 the SBIR/STTR Reauthorization Act (aka the SBIR/STTR Destruction Act) has passed the house and will be sent to the Senate. We have no timeline yet as to the Senate's movement, or their overall view of the bill.

In what could charitably be called a three ring circus (with apologies to Ringling Bros, and disregarding the issues) this event was a dismal example of the American political system. Yes the bill was passed (on a bipartisan basis), but I fear at great cost to many of you.

The voting on the amendments was a virtual "lovefest" with the results known ahead of time. There was absolutely no opposition on any amendments that were allowed to be offered. BIO's VCs got everything they wanted and more with Sam Graves' amendment to strike Title II (Venture Capital Investment Standards). Two important amendments were withdrawn (because they stood no chance of passage) and a few simply weren't allowed to be accepted by the rules committee.

Other notable issues that are part of this bill include:

  • The set aside remains at 2.5% SBIR and .3% STTR
  • 3% of the 2.5% will come off the top for agency administrative funds
  • Phase I Awards $300k Phase II Awards $2.2m
  • Agencies have the flexibility to award more $$ and consecutive phase IIs as they see fit
  • Ability to apply for a phase II award without having received a phase I award
  • Shortening of the time to receive the award
  • More frequent solicitations and topics (at agency discretion)
  • Notification of the right of a debrief
  • Establishment of an SBIR advisory board
  • Ability to crossover between SBIR and STTR
  • Increase in commercialization assistance funding
  • New FAST program funded at $10m
A host of preferences and priorities including:
  • Areas that have lost major source of employment
  • Preference to organizations making significant contributions towards energy efficiency
  • Priority to veteran companies
  • Special consideration to pressing transportation and infrastructure research activities
  • Special consideration for energy related research topics
  • Special consideration for rare-disease-related research topics
  • Priority to rural areas
  • Preference in FAST awards for SBDC applicants that are accredited for technology services

Many SBIR advocates believe this is a bad bill that will be severely leveraged by the BIO/VC community. However, some other credible sources who deal in the DoD world think I may be presenting too severe of a worst case scenario. Unlike the House Small Business Committee, I don't want to exclude other points of view from qualified sources. The sources below preferred to remain anonymous:

Source #1
"Let's take a deep breath, step back, and assess our position re SBIR. With a two-year reauthorization, it matters little what new program components are mandated or authorized, because SBIR staffing is just too thin to implement new practices in timely fashion. Given the two-year sunset, there won't be enough outcome data for Congress to discuss during 2010 to make decisions on program changes mandated or authorized in 2008. What a two-year reauthorization does do is to give the SBIR community time to get our act together -- starting now -- to develop a comprehensive policy approach to 15 USC 638 and an influencing strategy for the House and Senate that conveys this approach. The most controversial elements can always be debated on the Hill, especially informally. Let's learn from our biggest 2007 misstep, and that is not having been proactive and organized enough to meet a situational imperative."

Source #2:
On the size of award issue, I agree that I was surprised by this but I would also be very surprised if that many of the agencies move all their phase I awards to 300K and Phase IIs to 2.2M, but do it more on a case by case basis. Yes this will lower the number of awards but I doubt by half. I see more benefit from this because it will allow more awards at greater than 750K which I think will help those firms get across the valley of death and thus to a level that allows the firm to bring in non SBIR phase III funding. There are so many good things in the bill and it appears you would rather have no SBIR program than this SBIR program. I just don't see this bill being a bad thing, in fact just the opposite. I've talked to many of the "long time SBIR advocates" and they all support these improvements. I appreciate and respect that you are trying to make the bill the best it can be, but I don't see the doomsday scenarios that you seem to think will happen if the current bill passes out of Congress. And we know there will be changes because the Senate has not yet weighed in.

My Response:
These two sources are very familiar with the underlying bill and the manner by which the DoD agencies work. As soon as the final print of the bill is available, I'll put it together for you in a format that will be easier to identify the changes.

I want to thank these two sources for their comments. Unfortunately anonymity is often necessary due to the sensitivities of one's business and/or position.

I will respond to one point made by Source #2, " it appears you would rather have no SBIR program than this SBIR program." I'm sorry if I gave that impression. This is not my program to cancel, nor would I try. Too many people/companies depend on SBIR/STTR, and will continue to try, even if it degrades.

However, if the program gets too far out of kilter (definition undetermined), I reserve the right to stop providing my support. As a contributor of tens of thousands of dollars, and countless hours (all pro bono) to this program, I feel I have the right to fold my tent. Besides, I promised my readers that if they give me an approval rating similar to that of Congress, I'll get out of this business.

I suspect you're as exhausted on this subject as am I. I'll take Source #1's suggestion and step back, take a deep breath and call it a night.



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

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