SBIR Gateway

SBIR Insider Newsletter
August 27, 2009 Edition

Dear SBIR Gateway Insider,

Focusing on SBIR, this has been a sad week with the passing of Senator Edward Kennedy. It's not my intent to get political, but there is some historic significance to the SBIR program and Senator Kennedy. We have some other important issues for you to consider, so hopefully you'll want to read on.

Note: We have just received a document from Arthur Obermayer, a colleague of Senator Ted Kennedy, and a gentleman who played an important role in SBIR for many years. Mr. Obermayer wanted to share the little known story about Kennedy's involvement in the birth of SBIR. [Ted Kennedy and the Birth of SBIR]

In this issue:

SBIR Community Mourns the Passing of Senator Edward Kennedy

Over the coming days and weeks you will hear many stories about the late Senator Edward M. (Ted) Kennedy. One of the accomplishments you're not likely to read about was his involvement with the Small Business Innovation Research (SBIR) program.

Whether you were a supporter of Senator Kennedy, and there were many, or an opponent, and there were many, it could not be argued that the Senator played a key role in the establishment and overall support of the SBIR program.

Most of you are familiar with the name Roland Tibbetts, the father of SBIR, and a few are familiar with Milt Stewart, the godfather of SBIR. It took these two great gentlemen, with an excellent supporting cast, to bring the SBIR idea into a form that might be of interest to the U.S. Congress.

SBIR was a unique and risky idea that would not be an easy sell to the congress. Milt Stewart had penetration into the congress like no other small business advocate before or since. But this idea needed a champion from within Congress. Enter Senator Kennedy (D-MA) and Senator Warren Rudman (R-NH). These two senators knew how to work across the aisle in bipartisan fashion in order to get a project they believed in across the "finish line," and finish they did! The result is history.

In October of 2007, both Kennedy and Rudman received a special Tibbetts SBIR Pioneer Award, a prestigious award reserved for outstanding service to the SBIR community from the earliest days of the program.

Rudman accepted his award at the 2007 Tibbetts Awards ceremony, hosted by the Small Business Technology Council in Washington DC, but Kennedy was unable to attend. He did create a video with remarks prepared especially for you, the SBIR community.

Below is Senator Kennedy's message to you. We also have it on our sister web site at

To many people of my generation, the passing of the last Kennedy brother marks the end of an era, an odyssey whereby truth eclipses fiction. We bore witness to a family that was part and parcel to the highest of highs and the lowest of lows in all of life.

Although SBIR may be only a footnote in the Kennedy saga, SBIR probably wouldn't have happened without Ted Kennedy's robust support. Regardless of one's personal feelings toward Kennedy and his politics, the SBIR community owes him a debt of gratitude. May Senator Edward Kennedy rest in peace.

The Continuing Saga Of SBIR Reauthorization

You may recall that both the House and Senate had passed their own SBIR reauthorization bills in July. Although the bills were vastly different, it was hoped that compromise could be made as the bills came to conference. In this case the conferees (mainly staffers) agreed to keep their deliberations quiet and not talk to the press or other insiders, including us.

Congress knew there was not enough time to have new legislation passed before July 31, so they passed a new CR that extended the SBIR program through September 30, 2009. Of course the big question is, can congress reach a compromise and pass SBIR reauthorization before the deadline?

With the conferees being extremely closed-lipped, it's hard to tell, but the smart money says "No," there will have to be another CR. The biggest sticking points are still the VC eligibility, the award amounts, the length of reauthorization, the direct to phase II path, and a litany of preferences.

You have to believe that when congress returns on September 7, they will be recoiling from items such as grass roots revolts to what the late Senator Lloyd Bentsen coined "astroturf lobbying." As you know, some of our politicos took a pretty good beating out there on health reform and the deficit. It seems highly unlikely that congress will devote the time and attention to SBIR before the deadline, which is also the close of the fiscal year.

Another dimension to the conference debate stemmed from a letter by a significant number of powerful congressmen, led by Representatives Edward Markey (D-MA) and Niki Tsongas (D-MA). They sent Senator Mary Landrieu (D-LA), Senate Small Biz chair, a letter on July 27, urging Landrieu and the Senate conferees to stay strong on the Senate bill's language on the VC eligibility compromise, award amounts, length of reauthorization, and mandatory phase I inclusion.

This is a bipartisan letter including signatures from prominent Republicans that are very familiar with the SBIR program such as Donald Manzulo (R-IL) who for many years was the House Small Business chair, and Roscoe Bartlett (R-MD) who served many years on the House Small Business committee as well as the Science & Technology committee. We have a copy of this letter at

Of course the Small Business Technology Council (SBTC), The American Small Business League (ASBL) National Small Business Association (NSBA) as well as BIO and NVCA have weighed in, but now we're hearing of a letter from another organization. This time from the National Defense Industrial Association (NDIA), primarily DoD focused. The NDIA is mostly involved in medium to large entities but they also have a small business division.

The NDIA (draft) letter to Senator Landrieu prefers the House bill as it pertains to the VC expansion, and broadening the focus on commercialization but has concerns about the kind of preferences in the types of companies (native American etc.), the direct to phase II, and the high award levels. For the Senate bill they like the increase in the allocation, and the rural outreach.

Senate SBIR Waste, Fraud & Abuse Hearing

In an action held very close to the vest till the last minute, on August 6, 2009, the Senate Committee on Commerce, Science and Transportation held a hearing on waste, fraud and abuse problems within the SBIR program. The Committee, chaired by Senator Jay Rockefeller (D-WV) delved into allegations of fraud including criminal convictions as well as civil actions against companies and individuals in SBIR.

Traditionally this committee stayed away from the SBIR program, but they have been quietly looking into these problems for some time and have now felt the need to act. Senator Rockefeller has in essence fired a warning shot across the bow of SBIR companies.

Those of you who attended Dave Metzger's presentation at the 2009 Navy Opportunity Forum, may recall his salvo about upcoming legal challenges that small businesses needed to be aware of (Metzger is a partner in the law firm of Arnold & Porter LLP in McLean, VA). Jere Glover, (Executive Director of the SBTC, and a lawyer at the Brand Law Group in Washington, DC) has been making similar statements. Over a year and a half ago, Gregory A. Smith of Cooley Godward Kronish LLP in Reston, VA, wrote an excellent article about the false claims act and how it could affect small SBIR businesses.

Rockefeller's timing for his hearing was unfortunate in that it conflicted with the final Senate vote for confirmation of Sonia Sotomayor as Supreme Court Justice. This type of vote requires the Senators to be present and in their seats at the time of the roll call. Consequently the only committee members to show (other than staff) were Senators Rockefeller and Claire McCaskill (D-MO). McCaskill was an interesting addition in that her background was as a felony prosecutor and a state auditor.

The witnesses were Mr. Alfred J. Longhi Jr., a whistleblower formerly with Lithium Power Technologies, Mr. Thomas J. Howard, acting IG for NASA, Ms. Allison Lerner, IG for NSF and Ms. Patricia A. Dalton, GAO.

Due to the vote, the hearing was split into two sections, and in spite of only two Senators, the testimony and Q&A were quite compelling. The committee staff worked hard to compile substantive information, and in their work they found the most frequent type of fraud was in the area of "Duplicative Proposals". There are a number of cases showing that some SBIR awardees have managed to receive multiple payments from different SBIR-awarding agencies for the same research project.

Also noted were "False Billing and False Representations," i.e., companies that have misrepresented themselves, the qualifications of their researchers, presented plagiarized data as their own, and/or forged signatures on proposals in order to win grants or contracts.

Then Rockefeller turned up the heat on the IGs. He let them have it with both barrels blazing, wanting to know how these misrepresentations were allowed to get through the agencies. The answer and scapegoat was quite simple and unanimous. It's the SBA!! Unfortunately there was no one there from the SBA to try and balance things out.

Note to the committee staffers: What is the only agency that suffered 7 years in a row of budget cuts, lousy upper management, whipped their best horses into the ground and resulted in the lowest employee moral in the federal government? Bingo, it's the SBA! I'm not an SBA apologist and sometimes I get ticked off by their seeming incompetence, but lets fix what has been broken over the last decade. Let's help raise moral by providing better leadership and support. Clear out the deadwood that would rather protect their own fiefdom than serve the small business community.

One point that unfortunately wasn't mentioned was the fact that the number of these fraud and abuse cases are very small in comparison to the thousands of SBIR awards made each year. Also the rate is very low when compared to most other government programs.

Nevertheless, a simple oversight, misstatement, misunderstanding/accusation from a disgruntled employee can cost you a fortune, even if it is frivolous. We want to catch the bad actors out there but there are also significant numbers of prosecutors more interested in conviction than obtaining the truth. Some of these cases are in the range of millions of dollars!

We're trying to make a short session on this topic (not just me, but with seasoned barristers) at the Beyond Phase II Conference in Orlando Sept 21-24, 2009 ( as well as the National SBIR Conference November 2-5, 2009 in Reno, NV. Many of you need to know what precautions you can take to minimize your exposure.

The proceedings of the Senate Hearing are available on their web site at:

Bay Area Meet & Greet Opportunity (Free)

The Federal Laboratory Consortium (FLC) Far West and Mid-Continent Regions are holding their annual meeting at the Hyatt Regency San Francisco Airport Hotel Sept 1 & 2, 2009.

On Tuesday, Sept 1 from 3:30 to 5:00, the FLC is sponsoring a no charge session on Federal Programs/Opportunities & Leveraging Technology Transfer [Grand Peninsula A&B].

This session is free to registrants from high tech businesses, universities and state outreach organizations but space is limited so please register early at

The session consists of:

Federal Programs/Opportunities & Leveraging Technology Transfer

Moderator: Rick Shindell, Zyn Systems

Proposed changes in SBIR

NIST's SBIR and SBIR-TT programs - Using SBIR to market lab technologies - Clara Asmail, NIST

Technology Innovation Program (TIP) - Clara Asmail, NIST

DOE's Office of Energy Efficiency and Renewable Energy Programs (EERE) - Wendolyn Holland, DOE/EERE

Entrepreneur in Readiness Program - Erik J. Stenehjem, Lawrence Livermore National Laboratory

After the session there will be a short informal "Meet & Greet" reception where you can meet technology representatives from some of the nation's premier federal laboratories such as Lawrence Livermore, NASA Ames, Lawrence Berkeley, Los Alamos, Sandia, Air Force Academy, Air Force Research Lab, Idaho National Lab, Naval Surface Warfare Center, Pacific Northwest National Lab, and more.

Registration is free, however you must register by August 31, on the FLC meeting web site at: .

The Hyatt Regency SFO is located at 1333 Bayshore Highway, Burlingame, CA and the session will be held in the Grand Peninsula A&B. If you have questions about the session send an email to me at [email protected] with the subject "Meet & Greet."

Changes To SBIR Due To Stimulus Funding

As many of you know, some of the SBIR solicitations are somewhat different than usual. We see this in DOE, NASA and some others. Most of these modifications are made by the agencies to conform to the statutes that guide the stimulus spending.

For this reason, please read solicitation instructions carefully because the programmatic changes may be significant.

Major SBIR Conferences

Due to the many changes going on in the SBIR programs, it is recommended that you consider attending one of the major SBIR conferences to learn what's happening, first hand. Coming up quickly are:

Beyond Phase II - Sept 21-24, Orlando, FL -

National SBIR Fall Conference - Nov 2-5 Reno, NV -

Mid-Atlantic Regional SBIR - Early Dec, Morgantown, WV -

These are tough times. The protracted reauthorization process is hard on everyone, including the agencies. The contracting and granting process channels are clogged due to ARRA. We all need to exercise some patience because there will be delays.

The good news is that unlike a year ago when we cautioned you that many in congress never heard of SBIR, now everyone is aware of it and it is acknowledged as a popular and successful government program. As long as you stay active in your support of the program, it will get better and stronger than ever.

Thanks again for your time.



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

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