SBIR Gateway

SBIR Insider Newsletter
January 16, 2011

Dear SBIR Insider,

Our new year starts with a significantly new congress, new leadership in the House, new challenges, and of course, the Tucson tragedy. Our hearts go out to all the victims and their families, and there's little I can say that hasn't already been expressed.

The main topic for us now is to keep the SBIR/STTR programs alive as they approach their January 31, 2011 expiration date. In the final hours of the 111th congress, a compromise SBIR/STTR Reauthorization bill was passed in the Senate but ran out of time in the House.

The Senate Committee on Small Business and Entrepreneurship (SBE) under the leadership of its chair, Mary Landrieu (D-LA) and ranking member Olympia Snowe (R-ME) worked their hearts out to broker a compromise on an 8 year SBIR reauthorization. Their staff worked tirelessly to strike a compromise between the two major opposing factions, the Small Business Technology Council (SBTC) and the Biotechnology Industry Organization (BIO). Amazingly, for the first time ever, a compromise was achieved and agreed to by both sides, and the SBIR reauthorization bill, S.4053 was passed in the Senate.

With little time remaining on the last day of congress, the House Small Business Committee (SBC) did nothing but block the Senate's efforts. They were not in support of this bill.

In this new 112th Congress, we have a stable SBE, but lose Senators Kit Bond (R-MO) and Evan Bayh (D-IN) who chose to retire from the Senate. Both were strong SBIR supporters and we will miss them. In the House, we have a new chair in the form of Sam Graves (R-MO), who has been the ranking member of the SBC, and tended to shadow and support Nydia Velazquez (D-NY), former chair, now ranking member of the committee.

The question is: "Where do we go from here?" Read on.

In this issue:

The Status Of SBIR/STTR Reauthorization

Unfortunately with time being so short and so many high profile items for congress to rapidly address, there is no chance of SBIR reauthorization prior to the January 31, 2011 expiration.

For this reason the focus should now be (and congressionally is) on getting another continuing resolution (CR) to extend the SBIR/STTR programs. The Senate is not back in session until January 25, 2011. They are in their state work period mode, which means you may be able to see or contact them in your district. There will be no votes on a CR in the Senate before the 25th. The House is off until January 18, and stay in session until January 31, so you should contact your representative asap on the subject of passing an SBIR CR.

Once again we are facing a difference between the House & Senate on the duration of a CR, with the Senate (SBE) wanting a longer CR, perhaps 6 months to a year, while the House (SBC) wants something short like 30 to 90 days.

With a new congress, a proverbial "reset" button is pushed pertaining to unpassed legislation, so things (including bill numbers) start from scratch. However, the efforts of a prior congress's work on a bill such as the Senate's SBIR/STTR reauthorization compromise, need not be wasted, and can be incorporated into a new bill for this 112th congress.

It is important that you reach out (in a supportive and friendly manner) to your Representative and your Senator asking them to support the SBIR/STTR program CR and ultimately its reauthorization. Although a CR is likely, it is not automatic. Without it, new and pending SBIR activity may (and most likely will) cease. Remember that most government funding programs are "subject to the availability of funding." An award can be suspended or terminated for the convenience of the government, if funding is no longer available.

CR Will Include The Commercialization Pilot Program (CPP)

Behind the scenes there has been a big question mark as to whether the type of CR that has been used to extend the SBIR/STTR would apply to the DoD's Commercialization Pilot Program (CPP). In fact, word on the street suggested that the DoD was in preparation to shut down the program at the end of the month of a CR didn't include CPP.

The good news is that it has been determined that an SBIR/STTR CR would in fact keep the CPP alive and running. The CPP will continue if congress passes the SBIR/STTR CR.

Budget Mess & SBIR/STTR

The SBIR Insider has been hearing from many SBIR companies claiming to be in the position of "SELECTED TO BE AWARDED" but "ON HOLD" as a status concerning their selection. The big question being asked (paraphrasing): "Are the agencies messing with us?"

The simple answer in most cases is "No." Government agencies are prevented by law from making unauthorized expenditures, or spending money they don't have. We are now into double digits in the number of short term CRs keeping SBIR/STTR funding and authorization going, and consequently there is little stability in the program. That's why the Senate insisted on an 8 year SBIR reauthorization in addition to other important elements, that would restore stability to the program and insure a reasonable duration for funding.

Due to this current instability, an agency may want what you have to offer, but are not in a position to appropriate funds at this time. Usually, if an agency tells you something to the effect of "we're interested but have to hold off at the moment.." it's a good sign because if there was no interest, the agency would usually say "no thank you.." or words to that effect.

SBIR is not alone in this area of uncertain funding, as our entire country is running on a short term CR that expires March 4, 2011. We also have the debt ceiling vote coming up soon and failure to reach agreement on either of these issues could result in a shutdown of most of the government (including stop work orders to awardees).

The importance and complexity of these and other front burner issues severely subordinate attention to SBIR reauthorization. For this reason alone, an SBIR CR should be for a minimum of 6 months.

SBIR, Tea Party & Budget Hawks (An Education)

All of us know that we are in a financial crisis and the call to reduce the size and scope of government spending is strong among the electorate. Some believe control of government spending is the strength of the Tea Party, and we know these people will be looking to cut, as well as pressure others to do the same. No endorsements implied here, but quite a few republicans with seniority are looking over their shoulders at this new group.

With all of the new representatives in the House, and a few in the Senate, we must distinguish the SBIR/STTR programs from other programs that the budget hawks may target. Here are some important facts that are not well known but you may want to use in educating your Representative and Senators.

Roland Tibbetts' original idea of an SBIR program was embraced and championed by legendary budget hawk, Senator Warren Rudman (R-NH), the same man who co-authored and sponsored the "Gramm-Rudman-Hollings Balanced Budget and Emergency Deficit Control Act of 1985."

Rudman sponsored the SBIR legislation, and with the aid of many of the legendary SBIR pioneers you've heard us talk about, was able to get vast support for SBIR. This included old time conservatives such as Senator Barry Goldwater (R-AZ) and liberals such as Daniel Patrick Moynihan, (D-NY). The House came on board as did President Ronald Reagan who signed the bill into law on July 22, 1982.

Conservatives were not alone in this SBIR support because truth be known, it was Senator Edward Kennedy who first embraced and offered full support for this program. Kennedy felt that the bill may have trouble in a republican congress if it carried his name. Kennedy worked directly with Rudman to get him on board, and subordinate himself so as not to endanger the passage of the legislation. Budget hawk Rudman didn't need much convincing from Kennedy to see this was an excellent program for innovation and job creation in the small business sector.

Bottom line: Between Rudman and Kennedy, they got 84 out of 100 Senators to not only support SBIR, but also sign on as cosponsors of the legislation!

SBIR/STTR are very important to our country in many areas including job creation, innovation, commercialization of unique products and services, and helping to solve many high tech government problems. This program has become legendary, and thus many other countries have chosen to implement their own SBIR programs emulating ours.

Yes, many of our strongest competitors now have or are building their own SBIR program. Can we afford to lose ours?

SBIR Waste Fraud & Abuse (WF&A) Highlighted In The Press

There have been a good deal of articles written recently to address NASA's January 12, 2011 Inspector General (IG) report, NASA’s "Management of Its Small Business Innovation Research Program."

Ever since Senator Jay Rockefeller (D-WV) held a hearing on SBIR Waste Fraud & Abuse back in August of 2009, there has been a big push to root out this problem. No agency was hit at this hearing harder than NASA, and they have been doing their best to recover from the beating they took from the Senator.

All of us want WF&A to be eliminated, and for those guilty of such charges, to be appropriately dealt with. However, is it a fair question to ask if an IG or prosecutor who was accused of being asleep at the switch, would be more interested in convictions than attainment of the truth?

These IGs and their staff are generally good people and should be lauded for much of their work, but we're seeing some issues where a "slight technicality" that could be easily explained and worked out, are subordinated to a thirst for conviction. It's far easier to stomp a small business into the ground than go after the big boys who can afford great legal counsel to defend themselves.

You may be innocent or perhaps guilty of a small infraction, but the costs to defend yourself could put you out of business.

The news coverage of the NASA IG report (not the report itself) makes it sound like 25% of NASA's SBIR program is corrupt. Hold on, is that 25% of the awardees, or 25% of the award dollars, or 25% of the awards?? In truth the report claims NASA awards around $112 million annually, and the report found about $2.7 million in WF&A.

Ok, here's where the news media the 25%. The report claims it surveyed 67 companies and found that 17 of these companies included unallowable or unsupported costs (that's the 25%). Of this, 6 companies had unallowable equipment costs, 7 had unallocable costs, 2 had unsupported costs, and 4 companies had unallowable travel costs (about $9,255 for all 4).

A big target (although not the focus of this report) is one where a company is charging more than once for the same work effort (i.e. get a separate award from two agencies for the same job). Sometimes this is easy to spot, but there are some occurrences where the topic may be the same, but the technical approach is totally different and separate.

To the unscientific eye this point may be missed, and indeed we have seen instances where one company won two SBIR awards on the same topic in the same solicitation that employed two separate approaches (and work effort) to the problem. This is allowable but the small business better keep good records!

Among the good news for NASA is that the report found that the SBIR technical proposals submitted to NASA were appropriately evaluated, thus upholding the spirit of a merit based selection.

Again, I'm not faulting NASA or the IG report for the way some of the news media chose to represent the report. You should know that some will read these media stories and comment about corrupt special interest government programs.

In our August 2009 SBIR Insider, we included an article on WF&A (see )

Hope 2011 will be a great year for you and we'll be back with you later this month when we have news on the status of the SBIR CR.



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

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