SBIR Gateway

SBIR Insider Newsletter
Comments to SBA
October 14, 2012

Dear SBIR Insider,

The commenting period for the SBIR and STTR policy directives (PD) closed on October 5, 2012 and the fur is flying from the 80 published comments from about 35 people and/or organizations. There are probably more comments, but that's all that was published at this time.

All of us, including the agencies, are struggling with the new rules, regulations and administrative burdens brought about by the legislation and the SBA's policy directives. The extent of the SBIR comments are beyond the scope of this publication, but I'll give you some highlights as well as links to the full text of some.

In this issue:

The Undertaker Weighs In

Sam Graves, chair of the House Small Business Committee was thoughtful enough to send SBA a comment letter on the PD, speaking of "Congressional Intent."

First a disclaimer: I must tell you that (totally irrespective of who was right or wrong on the issues) I was very displeased with the antics of the Vice President's laughing, grinning and general disrespect of Congressman Ryan in their recent debate. However, after reading Congressman Graves' letter to SBA, I suddenly identified with Biden's type of reaction!

Although Mr. Graves made some helpful suggestions, he "once again" displayed his ignorance and contempt for American small businesses participating in SBIR and STTR. His letter to SBA claims that Section 5107 of the NDAA (the bill that includes SBIR reauthorization) "statutorily overturns a 2003 determination by the Office of Hearings and Appeals of the SBA that dramatically limited the ability of small firms with investments from venture capital companies ineligible to participate in the SBIR program." If his statement is true, the rest of the bill's VC language is "inoperative" (thank you for that term Mr. Nixon). VC's would be virtually unrestricted as to participation in SBIR.

Then Mr. Graves went on to state: "Despite what some views may be of the original progenitors of the SBIR program at the National Science Foundation in the late 1970s, the program instituted by Congress in 1982 made it clear that SBIR grants should, all else being equal in consideration of two grant applications, go to the applicant that secured additional private funding including funds from venture capital firms. Section 5107 simply returns the program to the intent of the original congressional authors of the program."

Not only is this inaccurate (i.e., malarkey), Graves' statement is a slap in the face to American small business heroes such as Roland Tibbetts and Milton Stewart. There is no such "clarity" in PL97-219, Mr. Graves! I think you are confusing the way you propose laws, where the deep pocket is your selection criteria, vs SBIR where we are dealing with technical merit.

To help dispel your charade, VCs were always able to participate in SBIR, but NEVER at majority ownership level. (That doesn't mean some companies didn't "game" the system and get away with it, but those were few and far between).

Although SBIR was the brain child of Roland Tibbetts, the program required champions to get congress and the White House behind it. That's where Milt Stewart (and his protégés) were so important in educating congress. Senator Edward Kennedy was already a strong small business supporter and loved the program, but the Senate was in Republican's hands. He worked across the aisle with Warren Rudman who also became a strong supporter, and with a lot of work and persuading, got the Senate on board. The House was Democratic and it was important that Speaker Tip O'Neill would be friendly to the bill, and be able to work with the Senate (not an easy task). The bill became bipartisan and bicameral Then there was President Reagan who enthusiastically signed the bill into law saying:

"Small Business is a tonic for what ails this country. By passing and signing this Act, we're showing our resolve to unleash this most innovative sector.

The Small Business Innovation Development Act recognizes that we in government must work in partnership with small business to ensure that technologies and processes are readily transferred to commercial applications.

Now we face the difficult task of implementing this program in several agencies of the government. Let me assure you of this Administration's strong commitment to this program. We will direct the rest of the government to cooperate fully and speedily in putting it into effect."

It may be interesting for you to know that Mr. Graves' continued assault on the SBA's 2003 ruling, was actually SBA's ruling on a case where two foreign firms had majority ownership of a company seeking SBIR funds, which SBA denied, and clarified why.

Therefor it is fair to ask Mr. Graves, are you supporting taxpayer funds to be given to foreign entities to buy American small businesses? In the SBA's recent size standard of proposed rulemaking, it defined "domestic small business" in such a manner to make foreign ownership of a small business legal for SBIR funding (see NY Times and read the 20+ comments).

BIO Adds its Comments

The juggernaut Biotechnology Industry Organization (BIO) who loves to posture itself as an organization of mostly small business biotech companies, is actually the world's largest biotechnology organization! The bulk of its funding comes from big pharma, domestic and international. Is it any wonder why they supported SBA's size standard change to allow foreign ownership?

BIO offered a 17 page behemoth comment to SBA and there are a couple of important instances in the PD that BIO doesn't support and it probably won't surprise you.

BIO is unhappy (along with many of you) with the new certification processes (yes I mean plural).

BIO states: "BIO is sympathetic to the SBA’s need for data collection but urges the agency to revise the Policy Directive with minimal certification requirements that incentivize, not potentially discourage, small business participation. In revisiting certification requirements, the SBA should hue closely to the provisions outlined in the Reauthorization, requiring minimal certification and leaving agencies discretion.

Unfortunately, as outlined above, the Policy Directive establishes multiple standards for certification and does so in a confusing and disjointed manner. As certification is addressed in a number of places throughout the Policy Directive, the SBA should put forward clear and consistent guidance throughout the document on how agencies should address certification requirements in the least burdensome and most understandable form possible. These requirements should balance the need to protect against fraud with promoting the SBIR program’s stated mission to enable commercialization of funded research projects. Unfortunately, the Policy Directive confuses certification requirement, phrasing guidance differently in various sections and providing conflicting instructions to agencies.

On the VC issue, the language of the legislation gives the agencies the flexibility to make awards to VC majority owned companies up to a certain threshold (25% NIH, NSF, DOE and 15% all others). In that flexibility, the agencies MAY choose NOT to make awards to these entities. Yes, the language in the bill is MAY and not SHALL. This is troubling to BIO who disagrees with the interpretation of congressional intent. BIO states on the PD:

Language stating "if the agency elects to use the authority" to make awards to majority-owned firms is ambiguous. BIO believes it was the intent of Congress that companies majority-owned by VCOCs, hedge funds and private equity firms be allowed to compete in the SBIR program at the established set-aside amounts. However, the Policy Directive inexplicably makes it appear as if opening up the SBIR program to these firms is a matter of agency discretion. While BIO appreciates the role of the participating SBIR agencies in administering the SBIR program—the decision to allow the participation of majority-owned firms has been made by Congress and should not be relitigated at the agency level.

In this case BIO is way off the mark. Section 6 (a)(2) of the SBIR PD "Eligibility and Application (Proposal) Requirements" seems to be dead on target with the legislation.

However, BIO will not go down without a fight and they have sent letters to each SBIR agency head urging them to send a letter of "determination" to the SBA, House & Senate Small Business Committees, and the House Science, Space and Technology Committee, explaining how these [VC] firms will induce similar and additional funding of small business innovations, contribute to the mission of the agency, demonstrate a need for public research, and otherwise fulfill the capital needs of small businesses for SBIR projects. This letter must be done before an agency can make an SBIR award to a majority VC/Hedge Fund/Private Equity owned firm.

Other Comments on the PD

Although you can go to the web site and scrounge through the comments, we have taken some of the longer comments of importance and posted them on our SBIR Insider site to make it easier for you. The documents are:


Sam Graves -

Jim Greenwood -

All the comments on -!docketBrowser;dct=PS;rpp=100;so=DESC;sb=docId;po=0;D=SBA-2012-0011

Air Force Rapid Innovation Fund (RIF) Announcement

The Air Force has released their FY12 Air Force Defense Research and Development Rapid Innovation Fund (RIF) solicitation. The due date for the required White Paper is November 27, 2012 by 3:00 p.m. If your White Paper is judged to be technically acceptable as evaluated against criteria published in this BAA, you will be allowed to submit a proposal, due February 8, 2013.

Total program value is $50.0M; however, no individual award is anticipated to exceed $3M, and the AF expects to offer 16 or more awards.

This opportunity is listed on both at:

and FedBizOpps at:

National SBIR Conference - Portland OR / Nov 13 - 15, 2012

The early bird registration discount ends close of business Monday, October 15, 2012, save $100. Early bird is $450 and regular registration is $550. Go to

If you are an SBIR Insider reader you know that this is no longer your father's SBIR program. There are many changes taking place as we speak, and these are important for novices, intermediates, and now even advanced to understand.

The agenda is not yet posted on their web site but will be soon. I've seen the working agenda and it's very good. All the SBIR program managers will be there, and unlike past years, the agency overviews will be very different.

You have new requirements, the agencies have new rules they must adopt, there are new opportunities, and of course the all important feature of having one-on-one conversations with SBIR program managers and staff. Also the networking component and the quest to find potential partners is a major reason to attend.

Closing Thoughts

As of this time, there are no other future National SBIR conferences planned. This is unprecedented and I'm hoping the agencies will do something about it but it takes time to plan a national conference.

I hope to see you in Portland.



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

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