Wants Comments for Additional Changes
Updated January 19, 2005
(Updates in Red)
On December 3, 2004 the SBA issued a new "Final Rule" pertaining to SBIR size standards and eligibility for participation in the SBIR program. In this case the term "Final Rule" describes an action that the SBA has taken to formally enact the rule change by publishing it in the Federal Register. This serves as a legal notice of a change to the Code of Federal Regulations (CFR), specifically 13 CFR § 121.702, which goes into effect January 3, 2005. The term "Final Rule" does not constitute a permanent status, or even a guarantee of longevity. In fact, this final rule may already be in jeopardy even before it takes effect.
Welcomed Changes to a Hot Button Issue
The main issue to this expanded eligibility is that the entity with majority ownership must itself be at least 51% owned and controlled by individuals who are citizens of, or permanent resident aliens in the United States AND together with its affiliates, not have more than 500 employees. Although the SBA makes no distinction between VCCs and any other for-profit entities, this rule will allow a VCC to own and control an SBIR awardee, as long as the VCC is itself at least 51% owned and controlled by U.S. citizens and permanent resident aliens and the SBIR awardee, together with its affiliates, meets the 500-employee size standard.
BIO, NVCA and Other Large VCs Not Satisfied with the Final Rule
Small Businesses, small VCCs, and others who are opposed to the BIO/NVCA initiative, want Congress to hold hearings in order to adequately present their side of the story. The SBIR Gateway will soon be featuring an article called Truths & Myths of VC eligibility.
Big Money Lobbyists Put Pressure on SBA, New Final Rule in Jeopardy
Concurrent to the release of the Final Rule announcement in the Federal Register (FR), the SBA also issued an Advance Notice of Proposed Rulemaking in the FR that deals with many SBA size standard issues. The majority of these issue have nothing to do with the SBIR program but there is one very important SBIR item listed. The SBA is seeking public comments on whether it should provide an exclusion from affiliation for venture capital companies (VCC) in size determinations for eligibility for the SBIR Program. Under such a policy, VCCs that invest in SBIR participants would not be considered affiliates of the SBIR participant and their size would therefore not be included in determining the size of the participant.
The SBA has several concerns that they would like comments on, including:
This VC exclusionary issue is much broader than just VCCs. If this proposed effort gets off the ground it can and most likely will change the entire complexion of the SBIR program. Even SBA fears that an exclusion for VCCs only cannot be supported, and perhaps that will open up the doors for non-profits to play. How would one of the big VCCs like to compete against an organization like Battelle, or an educational institution such as MIT or Johns Hopkins?
The SBIR Gateway has heard from several small VCCs who are not in favor of the BIO/NVCA position. Although these small VCCs are very pleased to be able participate in the SBIR program, they realize that they could not compete well against the big VCCs with their virtually unlimited resources.
The SBA needs to hear from you concerning these matters, pro or con. Jere Glover of the Small Business Technology Coalition (SBTC), a non-partisan, nonprofit industry association of companies dedicated to promoting the creation and growth of research-intensive, technology, believes that your comments should also be sent to your Senators and Congressmen. Congress does have the power to override the efforts of the SBA by creating legislation to satisfy the big BIO/NVCA lobbyists.
How to Provide Comments
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