[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



                                                   S. Hrg. 102-000 deg.

HEARING ON THE PRESENT AND FUTURE STATUS OF SBIR, FAST, & MEP PROGRAMS
                                   

=======================================================================

                                HEARING

                               before the

      SUBCOMMITTEE ON WORKFORCE, EMPOWERMENT & GOVERNMENT PROGRAMS


                                 of the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                      WASHINGTON, DC, MAY 6, 2003

                               __________

                           Serial No. 108-11

                               __________

         Printed for the use of the Committee on Small Business


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house


                                 ______

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                      COMMITTEE ON SMALL BUSINESS

                 DONALD A. MANZULLO, Illinois, Chairman

ROSCOE BARTLETT, Maryland, Vice      NYDIA VELAZQUEZ, New York
Chairman                             JUANITA MILLENDER-McDONALD,
SUE KELLY, New York                    California
STEVE CHABOT, Ohio                   TOM UDALL, New Mexico
PATRICK J. TOOMEY, Pennsylvania      FRANK BALLANCE, North Carolina
JIM DeMINT, South Carolina           DONNA CHRISTENSEN, Virgin Islands
SAM GRAVES, Missouri                 DANNY DAVIS, Illinois
EDWARD SCHROCK, Virginia             CHARLES GONZALEZ, Texas
TODD AKIN, Missouri                  GRACE NAPOLITANO, California
SHELLEY MOORE CAPITO, West Virginia  ANIBAL ACEVEDO-VILA, Puerto Rico
BILL SHUSTER, Pennsylvania           ED CASE, Hawaii
MARILYN MUSGRAVE, Colorado           MADELEINE BORDALLO, Guam
TRENT FRANKS, Arizona                DENISE MAJETTE, Georgia
JIM GERLACH, Pennsylvania            JIM MARSHALL, Georgia
JEB BRADLEY, New Hampshire           MICHAEL MICHAUD, Maine
BOB BEAUPREZ, Colorado               LINDA SANCHEZ, California
CHRIS CHOCOLA, Indiana               ENI FALEOMAVAEGA, American Samoa
STEVE KING, Iowa                     BRAD MILLER, North Carolina
THADDEUS McCOTTER, Michigan

         J. Matthew Szymanski, Chief of Staff and Chief Counsel

                     Phil Eskeland, Policy Director

                  Michael Day, Minority Staff Director

                                  (ii)
?

                            C O N T E N T S

                              ----------                              

                               Witnesses

                                                                   Page
Hairston, Darryl, Small Business Administration..................     4
Nichols, Mike, SBIR, FAST, & MOFAST Director, Missouri...........     6
Albers, Rolf, Albers Manufacturing...............................     8
Stoller, Barbara, Technology Ventures Corporation................    10

                                Appendix

Opening statements:
    Akin, Hon. W. Todd...........................................    21
    Udall, Hon. Tom..............................................    24
Prepared statements:
    Hairston, Darryl.............................................    27
    Nichols, Mike................................................    35
    Albers, Rolf.................................................    44
    Stoller, Barbara.............................................    48

                                 (iii)

 
        PRESENT AND FUTURE STATUS OF SBIR, FAST, & MEP PROGRAMS

                              ----------                              


                          TUESDAY, MAY 6, 2003

                  House of Representatives,
        Subcommittee on Workforce,Empowerment, and 
                                Government Programs
                               Committee on Small Business,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to call, at 10:10 a.m., in 
Room 2360, Rayburn House Office Building, Hon. Todd Akin 
[chairman of the Subcommittee] presiding.
    Present: Representatives Akin, Udall, Bordallo, and 
Faleomavaega.
    Chairman Akin. The Subcommittee on Small Business here will 
get started. I would like to start with an opening statement, 
and then I would ask my colleague, Mr. Udall from New Mexico, 
for his opening statement, and then we will be taking opening 
statements from our different witnesses. We will try and see if 
we can't get that knocked off reasonably quickly to allow time 
for questions. So let's go ahead and get started.
    Good morning. Over the course of the last several months, a 
number of small business groups and owners have expressed their 
concerns to me and my staff regarding the elimination of 
Federal funding from programs such as the Small Business 
Innovative Research program, that is, SBIR; the Federal and 
State Technology partnership program, FAST; and the 
Manufacturing Extension Partnership program, MEP. They have 
encouraged me to seek continued Federal funding.
    Both the SBIR and FAST programs are run out of the 
Government Contracting and Business Development Directorate of 
the Small Business Administration. Since its creation in 1982, 
the SBIR program has supported thousands of companies through 
awards for research and development. When the SBIR program was 
reauthorized in 2000, one of the changes made was the formation 
of the FAST program. The FAST program distributes competitive 
grants to States. This financial assistance is designed to 
enable the States to better support their respective SBIR 
programs. Presently SBA will not be able to fund the FAST 
program and is attempting to make the program workable under 
funding awarded at the State level.
    The Department of Commerce's National Institute of 
Standards and Technology, NIST, runs the MEP program. The 
stated purpose of the program is to increase the 
competitiveness of small- and mid-sized U.S. manufacturers by 
bringing them state-of-the-art technology and helping them 
institute best business practices. At its creation in 1988, the 
MEP program was given a sunset date which has subsequently been 
extended. The President's 2004 budget calls for the elimination 
of funding for the MEP program as originally intended by the 
Reagan administration.
    In large part, I initiated this hearing for the express 
purpose of providing supporters of these programs their day in 
court, so to speak. How successful are the programs? Have they 
met the expectations for which they were originally designed? 
Will eliminating these programs truly have an adverse effect on 
small business? In my mind, these and other questions remain to 
be answered.
    I look forward to hearing the testimony of our guests who I 
hope will answer some of these questions.
    Before we take those testimonies, though, my respected 
colleague, Mr. Udall from New Mexico, I believe has an opening 
statement. And I think he gets three extra brownie points for 
coming here early on Tuesday morning and making that special 
effort to get into town. Thank you very much, Tom.
    [Mr. Akin's statement may be found in the appendix.]
    Mr. Udall. Thank you very much, Mr. Chairman, and I very 
much appreciate you holding this hearing. My belief is these 
are important programs. They have had a significant impact in 
my State and I think also across the Nation. And so I think 
this is an important hearing to hold.
    Today our economy faces an uphill battle. The latest 
figures reveal that the unemployment rate climbed to 6 percent 
in April, with 8.8 million people across the Nation currently 
out of work. One of the small business sectors that has 
suffered the most in this current economic slump is 
manufacturing. The manufacturing sector has been in steep 
decline since the beginning of 2000, with a net loss of more 
than 1.9 million factory jobs. This does not bode well for the 
U.S. economy as a whole, since the manufacturing industry is 
one of its cornerstones.
    Our economy needs the right medicine to heal its ailments, 
and one prescription is small business. Small businesses are 
the lifeline of the American economy. They create three out of 
every four new jobs. They make up half of our GDP, and they are 
largely responsible for innovations in technology. They can 
lead our economy out of the current downturn and back to the 
road to recovery, but we need to give them a little help and 
the right tools in order to do so.
    The right tools exist through Federal programs like the 
SBIR program, the Small Business Innovation Research program; 
the Federal and State Technology partnership program, the FAST 
program; and the MEP, the Manufacturing Extension Partnership.
    Each of these initiatives could help revive many small 
business industries, including the weakened manufacturing 
sector; but in the latest budget, none of these programs 
received any funding, which seals their fate by ensuring their 
failure.
    The SBIR program is testimony to the fact that small 
businesses have been responsible for the most significant 
innovations of the 20th century. The program was created to 
ensure that small businesses would be able to contribute to 
Federal research and development projects.
    Over the years there has been no question the SBIR program 
is beneficial and fully lives up to its mission, but the 
rewards are concentrated in too few States and fail to permeate 
rural and economically depressed areas. To address this, the 
FAST program, a 5-year temporary initiative, was created in 
2000 as a grant program designed not only to increase SBIR 
awards in States that have historically low volumes of them, 
but also to increase awards in low- and moderate-income States 
including rural areas. FAST helps to channel these types of 
opportunities where they are needed most.
    In fact, I am proud to say we have a witness here from my 
home State of New Mexico, Ms. Barbara Stoller, who will talk 
about this program's many success stories, including SBIR--
including a SBIR recipient that is now the largest employer of 
Native Americans in one of the poorest areas of our State. Such 
job creation, innovation, and economic growth in New Mexico 
would not have been possible, Mr. Chairman, without this 
program.
    Another Federal initiative that gives small businesses, 
namely manufacturers, access to tools they need for success is 
the Manufacturing Extension Partnership program created in 
1989. The MEP is a network of more than 400 not-for-profit 
centers nationwide that help sustain entrepreneurial 
development by providing small- and medium-sized manufacturers 
with technical and business solutions. MEP aids businesses in 
areas like process improvement, quality management systems, 
business management systems, human resource development, market 
development, materials engineering, environmental and financial 
planning and e-commerce.
    Manufacturing firms that have utilized the program have 
seen nearly $2.3 billion in new or retained sales, $482 million 
in cost savings and $873 million in new investment.
    Even though these programs are vital to supporting small 
businesses, they give our government the most bang for the buck 
and they make good business sense. Their very existence has 
been threatened by the lack of funding. And I look forward to 
hearing today from all of the witnesses on these programs and 
look forward to the question session, Mr. Chairman. And with 
that, I would yield back.
    [Mr. Udall's statement may be found in the appendix.]
    Chairman Akin. Thank you. I appreciate your opening 
statement. And I am looking forward also to the testimony. I 
thought what we might do would be to allow all four of our 
witnesses to testify first and then go into questions 
afterwards so we can get the flavor of everybody together.
    And so our first witness in panel one is Mr. Darryl 
Hairston. He is the Associate Deputy Administrator for 
Government Contracting and Business Development.
    Now, I guess you would have to tape two cards together to 
get that printed across there, but I have been told that that 
is absolutely right, and you are with the SBA. We are delighted 
to have you, and I think maybe if you go about 5 minutes, 6 
minutes or so, and then we will continue across. Thank you very 
much, Darryl.

     STATEMENT OF DARRYL HAIRSTON, DEPUTY ASSOCIATE DEPUTY 
     ADMINISTRATOR FOR GOVERNMENT CONTRACTING AND BUSINESS 
           DEVELOPMENT, SMALL BUSINESS ADMINISTRATION

    Mr. Hairston. Thank you. And good morning, Mr. Chairman, 
and distinguished members of the Subcommittee. I would like to 
thank you for inviting me to discuss the Federal and State 
Technology partnership program. This program provides technical 
assistance to small businesses that compete for granting 
contracts under the Small Business Innovation Research, or SBIR 
program, and the Small Business Technology Transfer, or STTR 
program.
    I would like to request that my written statement be 
submitted for the record.
    SBIR is a highly competitive program----
    Chairman Akin. Without objection.
    Mr. Hairston [continuing]. That encourages a small business 
to explore its technological potential and provides the 
incentive for the firm to profit from its commercialization. By 
including qualified small businesses in the Nation's research 
and development arena, high-tech innovation is stimulated, and 
the United States gains innovative approaches that meets its 
specific research and development needs.
    STTR is another important program that expands funding 
opportunities for small businesses in the Federal research and 
development arena. A key component of the program is expansion 
of the public/private sector partnership to include joint 
venture opportunities for small business and the Nation's 
premier nonprofit research institutions. These relationships 
promote the transfer of technologies from laboratories to the 
marketplace, thereby stimulating the U.S. economy and 
supporting jobs.
    In the 2000 SBIR Reauthorization Act, Congress authorized 
the FAST program to strengthen the technological 
competitiveness of small business concerns in all 50 States and 
5 U.S. territories. FAST is a competitive program that allows 
each eligible State and territory to receive funding in the 
form of cooperative agreements to provide an array of services 
in support of the SBIR and STTR programs.
    Any individual organization or entity in a State is 
eligible to participate in the FAST program. Congress also 
extended the SBIR rural outreach program which provides 25 
States an opportunity to receive grant funding to support 
statewide efforts to increase their participation levels in the 
SBIR and STTR programs.
    As States receiving less than $5 million in SBIR and STTR 
awards in fiscal year 1995, these States met the participation 
criteria established by Public Law 105-135. A list of the FAST 
and SBIR rural outreach awardees, along with examples of 
program success stories as reported by the States can be viewed 
on the SBA-SBIR Web site. That is at www.sba.gov/sbir.
    SBA continues to support the administration's request for 
fiscal year 2004 funding of $3 million and $500,000 for the 
FAST and rural outreach grant programs respectively.
    The President asked for the same level of funding in fiscal 
year 2003, but Congress did not appropriate any funds. SBA does 
not plan to allocate funds for the FAST and rural outreach 
programs in fiscal year 2003. Therefore, SBA is working with 
the existing FAST and rural outreach grant recipients to 
maximize the use of their existing grant funds to continue 
their efforts to assist small businesses during this fiscal 
year.
    Participating agencies in the SBIR and STTR programs have 
reported a significant increase in the number of proposals 
received for their current solicitations, which we believe is 
attributable to outreach and training provided by FAST and 
rural outreach grant recipients.
    The SBA in partnership with the FAST award recipients is 
helping to create new educational and outreach and mentoring 
programs that will assist States to increase their rate of 
small business growth and success. Many small businesses are 
unsuccessful during the innovation commercialization process. 
While entrepreneurs are technically capable, they often lack 
the business skills and contacts required to bring innovations 
to the marketplace. In addition, the small business risk is 
pushed to extremes in rural environments where access to 
experienced mentors is limited. The combination of innovation 
commercialization challenges and rural dispersion puts many 
small businesses at high risk for failure.
    In its third year of operations, the FAST program continues 
to meet its objectives and impacts the technological 
capabilities of small businesses within the participating 
States while building sound State technology infrastructures 
for innovation and commercialization of products and services.
    In fiscal year 2001, SBA issued 30 awards to eligible 
States totaling $3.5 million and issued 27 awards totaling $2.7 
million in fiscal year 2002. Since the initial FAST program 
announcement was issued in April 2001, only Guam, the Virgin 
Islands, and American Samoa have not submitted a proposal to 
participate in the program. SBA has provided funding to 40 of 
the 55 eligible States and territories in the first 2 years of 
the FAST program.
    SBA has included guidance for the FAST program in the 
revised SBIR and STTR policy directives. As required by law, 
SBA is in the process of drafting more detailed regulations for 
the FAST program. The SBA has taken time to carefully address 
program administration concerns raised since the issuance of 
the first program announcement. SBA plans to release these 
regulations as soon as possible for public comment.
    SBA continues to assist small businesses with the 
challenges they face in doing business with the government. In 
support of the administration's electronic commerce initiative, 
the Department of Defense used an electronic proposal 
submission process to receive proposals in response to their 
two recent SBIR solicitations. However, DOD experienced 
unforeseen system problems which caused numerous small 
businesses to encounter difficulties submitting their proposals 
electronically. As part of our oversight responsibility, SBA 
worked with DOD to resolve this matter and to develop and 
implement backup procedures that can be put in place to ensure 
that this proposal submission process runs smoothly in the 
future.
    SBA, through its program policy directives, will request 
all participating agencies in the SBIR and STTR programs that 
use electronic proposal systems to implement similar backup 
procedures and include them in future SBIR and STTR 
solicitations.
    Chairman Akin. Mr. Hairston, are you submitting that 
testimony to the record also?
    Mr. Hairston. I am.
    [Mr. Hairston's statement may be found in the appendix.]
    Chairman Akin. Without objection. We are about out of time 
for your first block. Is there a way you could just summarize 
what you have left?
    Mr. Hairston. Well, thank you for the opportunity, and I 
will be happy to take your questions.
    Chairman Akin. Okay. Thank you very much.
    Just before I go on with the next witness, Ms. Bordallo of 
Guam--you just mentioned Guam--has joined us, and we are very 
thankful to have you here. And especially, I was just--we are 
giving away extra brownie points for Tuesday morning 
Subcommittee hearing attendees, so you will have to get some of 
those.
    Did you have a comment or anything?
    Ms. Bordallo. I do have a comment, Mr. Chairman, but I will 
wait.
    Chairman Akin. Do you want to wait till we get to the 
question time period?
    What our strategy was this morning was to take the 
testimony of all four witnesses and then go to question at that 
point. Thank you.
    Our second witness is Dr. Mike Nichols, SBIR, FAST, and 
MOFAST director from the good State of Missouri. He was founder 
of three--I think it was three small businesses yourself before 
you got in this business, so certainly it is something that is 
close to your heart. So we welcome you here and are interested 
in hearing your testimony, Dr. Nichols.

  STATEMENT OF MIKE NICHOLS, SBIR, FAST AND MOFAST DIRECTOR, 
                       STATE OF MISSOURI

    Mr. Nichols. Thank you, Mr. Chairman and members of the 
Subcommittee, and I want to thank you for inviting me here to 
testify on the status of the SBIR and FAST programs and why 
they are necessary for us to grow our high-tech economy.
    I am here representing, as the Chairman has said, not only 
MOFAST, Missouri FAST program, but also the University of 
Missouri which sponsors the program as well as the SBDCs, the 
Small Business Development Centers, across the country. All of 
these entities are involved in bring this to a successful 
avenue in bringing high-tech jobs to the marketplace.
    My life, as you have mentioned--this is close to me, 
because I started back in 1985 with a small business and an 
SBIR. I have been involved with the SBIR program since then as 
also a reviewer for NSF, NIH, and other agencies. So I have 
taken that and come full circle, so that now I am back actually 
lending my expertise as a mentor to this program to try and 
develop these businesses. And as I will show today, this has 
been very successful in only our first year.
    You have before you my written testimony, and I would like 
to ask that that be submitted.
    Chairman Akin. Without objection.
    Mr. Nichols. There are some attachments in that that I will 
refer to in this testimony, but let me summarize a few key 
points. FAST is just not a way to get grants between engineers 
and scientists. Actually, what it is is a way to build 
businesses and to build high-tech businesses, knowledge-based 
businesses, the kind that we need to face the problems that we 
are going to have in the future of this economy. What we 
provide is like a boot camp for entrepreneurs. We say as our 
motto, ``Start, sustain, and smile because you are having 
fun''.
    We believe that integration here is the key. It is 
integrating the businesses and the business knowledge with the 
technology. That is what we have to provide. It is not just 
technology. States like Arkansas, Wisconsin, and Missouri use 
the same type of model where they have integrated the SBDC. We 
think that is a very good model.
    Why is FAST necessary? FAST is necessary, because if you 
look at the wealth distribution for FAST grants, as was 
mentioned earlier by Mr. Udall, what you see is over 70 percent 
of the States are at the bottom end of the distribution. They 
receive less than 50 grants. So what you have basically is two 
States that receive 900 or more grants, and you have all the 
rest that are piled at the bottom. You basically have no middle 
class, and it was the middle class that actually took this 
country and moved it through the industrial revolution. And I 
think it is this middle class of knowledge-based economy that 
will actually move us forward and make us competitive in the 
world.
    The FAST program really does reward creativity. If you look 
at the maps that are in my written testimony, you will see that 
things like creativity and patents and inventors are spread 
throughout the entire State, but then when you look at the 
number of SBIR awards classically that have been received in 
Missouri, you will find it is very, very few.
    The two don't match. What we are doing in this program is 
we are connecting the dots, basically. We are bringing those 
people together with the resources that they need at hubs like 
the FAST program in order that we can develop these small high-
tech businesses.
    In 1983 through 2000, Missouri received only 178 awards. 
Some States receive 178 in one year. In 2001, we had 16 awards 
before the FAST program. In 2002, we have 32 awards, a 100 
percent increase. In the first quarter of 2003, we have gotten 
12 awards. When you compare that to historically per-year 
average of 10 to 12 awards for Missouri, we have done that good 
in the first quarter. Basically if you add up during this FAST 
program, in 18 months we have gotten 25 percent of all the 
awards that were given in 18 years. That is how powerful the 
program can be.
    So, again we are connecting the dots. We are taking 
technical knowledge, seed funding, and business assistance and 
starting businesses. One of those dots was an individual who is 
called Tom, and that is also in your package, where in Cape 
Girardeau, a very rural community, he developed a way in which 
to attract both ticks and mosquitos, West Nile virus-bearing, 
and as well as lime disease insects. He has been successful 
already in raising $1.2 million and starting that company in 
Missouri alone. In other words, the money didn't leave 
Missouri. The jobs haven't left Missouri. They have stayed 
there. This is the type of thing which you can access with this 
type of program.
    Let me just tell you also from a personal note, sometimes 
it is very difficult for us to be able to actually measure the 
impact of some of these programs, and one of the things I might 
say is that when I received some of the early SBIRs, they were 
actually for developing materials for implants for cochlear 
prosthesis and things like that, but that actually became very 
quickly a program for the Sandia labs. You may have heard of it 
at one time. It was called "Project Hunters Trophy," and it was 
a way in which we could then determine ways to eliminate 
underground nuclear testing. Those same materials used in the 
brain were used for that type of application. So basically we 
went from SBIR policies to a national policy to a safer 
environmental policy.
    Basically what would happen if the FAST program does 
continue to go away, I think we will go back--and let me just 
use a quote from Churchill that basically when most people find 
innovation, what they do is stumble upon it; they pick 
themselves up and move on. What we do with the FAST program is 
we help them pick themselves back up. We show them the way in 
which to start the business, and then we move on to success in 
the business world.
    I want to thank you.
    Chairman Akin. Thank you very much, Dr. Nichols. I 
appreciate your testimony. We will get back with some 
questions.
    [Mr. Nichols' statement may be found in the appendix.]
    Chairman Akin. Our next witness is Mr. Rolf Albers, 
Chairman and CEO of Albers Manufacturing, a company that is in 
my own district. So I am very happy to be able to see some 
other Missouri people here, and I know that you have your own 
small business that the President visited not so long ago if I 
am not mistaken, and I am interested to hear your testimony, 
particularly as it relates to these programs.
    Mr. Albers.

      STATEMENT OF ROLF ALBERS, CHAIRMAN AND CEO, ALBERS 
                         MANUFACTURING

    Mr. Albers. Thank you, Mr. Chairman and members of the 
Subcommittee. Thank you for inviting me to address this 
Subcommittee and tell you about a subject that I feel is of 
critical importance to manufacturers in our State and Nation.
    Our plant is located in O'Fallon, Missouri, which is just 
west of St. Louis, and I also serve on the board of the 
Missouri Chamber of Commerce and the National Federation of 
Independent Business. I am also currently involved in the 
formation of a new organization called the Missouri Association 
for Advancing Manufacturing, or MAAM, to be a united voice for 
those Missouri companies on the front line of manufacturing.
    At Albers manufacturing, we currently have 35 employees and 
manufacture a variety of electrical equipment for industry. I 
am here today to testify on behalf of my company to recommend 
that you continue funding the Manufacturing Extension 
Partnership, MEP. I have no personal experience with SBIR or 
FAST. However, over the last 10 years I have had many occasions 
to use the services of the Missouri Enterprise Businesses 
Assistance Center which manages the Manufacturing Extension 
Partnership here in Missouri.
    Missouri has lost over 77,000 jobs over the last 18 months. 
In my opinion, there are many reasons for this, but in general 
it has to do with the way Missouri supports manufacturers and 
small businesses. In my opinion, Missouri is not as business-
friendly as it should be.
    The State of Missouri has joined the Department of Commerce 
in funding the Manufacturing Extension Partnership. If Federal 
or State funding were to be reduced, companies like mine would 
lose a valuable resource. The Manufacturing Extension 
Partnership has made it possible for me to purchase a variety 
of services at reasonable rates. Without the Manufacturing 
Extension Program, my company probably would not have been able 
to afford them. In fact, we might not have had access to them 
at all, because they are not--some of them are not offered in 
any other way.
    For example, Albers used a Manufacturing Extension 
Partnership to search for an ERP software package--that is the 
Enterprise Resource Planning software--suitable for the needs 
of a small manufacturer. MEP had the capability to help define 
our needs and select the most suitable package. We chose a 
software package called Job Boss, which has served us well over 
the last 5 years. It has made Albers more efficient because it 
puts all of our information in one single user-friendly 
database. Previously, four different and unconnected software 
programs handled many of our functions. New orders were entered 
in three different database programs. Now quotations and orders 
are all entered once. Shop floor scheduling is included as well 
as inventory control and all accounting functions. We can now 
print job travelers and control our jobs on monitors placed on 
the shop floor. This reduced our overhead and enabled us to 
stay more competitive.
    When Albers decided to implement an ISO-9000 quality 
management system, training and seminars conducted by the MEP 
helped my employees understand the subject and the process. We 
were able also to implement such techniques as Kanban, 5-S and 
others, known as lean manufacturing, all of which contributed 
to improved efficiency and our competitiveness.
    The Manufacturing Extension Partnership also assisted 
Albers Manufacturing when we needed to expand and reorganize 
the factory layout. The experts from MEP provided the special 
know-how required for an efficient floor plan.
    All of these valuable technical services were available to 
us at a cost we could afford, because the MEP partnership is a 
true public/private partnership that is specially designed and 
structured to assist small- and medium-sized companies that, as 
Mr. Udall pointed out, employ over 60 percent of the workforce 
in the U.S.
    MEP experts are all experienced, talented, and dedicated. 
They have not only talked the talk but walked the walk. It is 
the role of the Manufacturing Extension Partnership to 
collaborate with public and private leadership to reverse the 
flow of jobs out of our State and our country. Some of Albers 
Manufacturing employees, me included, have participated in 
seminars sponsored by the MEP. Again, these services are either 
not offered by anyone else, or if they are, they tend to be 
priced beyond our means.
    We have lost over 60 percent of our business in the last 2 
years because most of our customers were in the 
telecommunications industry, which, as you know, is 
experiencing a major downturn. In an effort to locate new 
customers in different industries, we have had to rely on the 
resources provided by MEP to help us rethink our marketing 
approach and diversify our product line.
    I am almost finished.
    I know that Federal budgets are tight. However, the 
techniques, technologies, and training available to small 
companies like Albers Manufacturing by the MEP are of critical 
importance. Companies like ours need this assistance to improve 
our efficiency and compete with foreign competition. Our 
ability to create and maintain sustainable manufacturing jobs 
in Missouri and the rest of the U.S. is at stake, and there is 
no question that organizations like the MEP partnership are 
desperately needed.
    Summarizing, I urge the members of this important 
Subcommittee to consider the situation facing thousands of 
companies like mine and to support the MEP with full funding as 
the fiscal year 2004 budget process moves ahead. I ask that 
this testimony be submitted, and thank you for inviting me.
    Chairman Akin. Without objection, and thank you for your 
testimony, Mr. Albers.
    [Mr. Albers' statement may be found in the appendix.]
    Chairman Akin. Our final panelist and witness is Ms. 
Barbara Stoller. She is Director of SBIR Outreach Center, 
Technology Ventures Corporation, and hails from Mr. Udall's 
district in New Mexico. Barbara, a pleasure to have you here.

 STATEMENT OF BARBARA STOLLER, DIRECTOR, SBIR OUTREACH CENTER, 
                TECHNOLOGY VENTURES CORPORATION

    Ms. Stoller. Thank you, Mr. Chairman, members of the 
Committee. I am Barbara Stoller. I am the Director of the New 
Mexico SBIR outreach program. That is an activity of Lockheed 
Martin's Technology Ventures Corporation and funded by the Los 
Alamos and Sandia National Laboratories and the FAST program.
    The SBIR program represents a phenomenal opportunity for 
high-technology entrepreneurs, engineers, and scientists. The 
SBIR program enables them to obtain seed capital to demonstrate 
the feasibility of their innovations and to begin to mature 
their technologies into commercial products.
    Unfortunately, knowledge of the SBIR program does not reach 
many segments of the high-tech business community or to the 
engineering and scientific fields. In addition, even when the 
existence of the SBIR program is known, dealing with the 
Federal Government and the SBIR participating agencies is often 
a frustrating and overwhelming task for those businesses and 
individuals unskilled in this craft.
    As a consequence of these two issues, the lack of knowledge 
of SBIR and the fear of dealing with the Federal Government, 
our Nation suffers loss of unknown innovations that could 
significantly benefit our country, and this is the major 
problem the FAST program is designed to solve.
    The objective of the FAST program is to conduct SBIR 
outreach and to get to that very large and dispersed community 
of high-tech small businesses and entrepreneurs who either are 
not informed about THE SBIR program or are afraid to attempt to 
participate in this.
    These often present overwhelming barriers to participating 
in the SBIR program for the high-tech businesses and the 
entrepreneurs who lack that information of dealing with the 
Federal Government. This is the very community that the FAST 
program serves. The mission of the FAST program is to assist in 
bringing innovations to the commercial and government markets 
which otherwise would never see the light of day through 
expanded implementation of our SBIR program.
    FAST allows the 27 participating States to do a number of 
outreach activities. We can educate the technical community 
regarding the existence of the SBIR program and the different 
variations of the 10 Federal agencies. We provide training 
conferences with national experts regarding the process of 
writing competitive SBIR proposals. We develop experienced 
mentors who act as advisers to the community of 
nonparticipating businesses and entrepreneurs, providing them 
hands-on guidance and advice on the lessons learned and how 
they have participated successfully in SBIR.
    We are able to provide the critically needed information on 
the administrative and financial aspects of doing business with 
the Federal Government, and this achieves compliance with 
Federal acquisitions regulations. We are also able to implement 
a proposal-writing experts panel to manage the proposal writing 
process.
    By way of State background, New Mexico is number 13 in the 
State rankings of SBIR successes. In the year 2001, we had 94 
awards totaling $22 million coming into our State. New Mexico 
is a technology-rich State because of the DOE and the DOD 
national laboratories, but these national laboratory clusters 
exist within an economically depressed State.
    Similarly, in dealing with the Federal Government and 
knowing about the SBIR program, New Mexico also has clusters of 
government-savvy businesses and entrepreneurs dispersed 
throughout this much broader community that does not possess 
this information.
    Here are a few examples of how New Mexico, assisted by the 
FAST, funding has contributed to the development of innovation 
in our State. One company started from an SBIR award, and they 
are now manufacturing photovoltaic cells. They are widely 
deployed to provide power on commercial satellites. Another 
company has developed a unique multispectral camera that is 
being flown in space for military and commercial projects.
    A New Mexico SBIR start-up recently acquired by Boeing has 
become a major developer of components in the airborne laser 
program.
    A New Mexico start-up that started up with SBIR performs 
demilitarization of munitions, and it is one of the largest 
employers of Native Americans in one of the poorest counties in 
our State.
    Given the technology resources within New Mexico, these 
companies still are too few in number. The universities and 
other industries within New Mexico also represent economical 
potential that is too often inadequately exploited or 
developed. But FAST is helping. New Mexico's SBIR outreach 
program housed at Lockheed Martin's Technology Ventures 
Corporation was initially funded 2 years ago by the Sandia and 
Los Alamos National Laboratories. New Mexico received its first 
FAST funding just 6 months ago.
    So far the New Mexico SBIR outreach program has had some of 
the following accomplishments:
    We have provided three SBIR basic courses to three 
different locations around the State in addition to our two 
quarterly proposal writing events.
    We hosted the National SBIR Conference just in March of 
this year. It became one of the largest ever held. We had 645 
registrants, and we had 43 States represented in New Mexico.
    We assisted 107 companies with one-on-one counseling in 6 
months. We initiated an electronic newsletter that reaches 700 
technologists. Already in 6 months we are achieving success.
    A one-person start-up, after attending just one SBIR 
training session, wrote a SBIR proposal to NIH for an 
innovative power source concept for a wheelchair. The proposal 
was funded and now engineering prototypes are being 
manufactured locally. This company also received the 2002 
Tibbits Award. The social benefit is a more maneuverable, 
controllable, and powerful mobility device that will increase 
safety and freedom of power wheelchair users. Without FAST 
funding, this innovation might have been lost to society 
because the SBIR program represented this entrepreneur's only 
access to seed capital.
    Another small company was making digital video recorders. 
They wrote one SBIR proposal, received a Phase 1 award from the 
Air Force. They have developed an instantaneous retrieval 
system for realtime surveillance. It is used in airports, 
unmanned aerial vehicles, and atmospheric science.
    These are all----.
    Chairman Akin. We are getting close here on time.
    Ms. Stoller. A half page. They are all in the handouts that 
I have submitted.
    Chairman Akin. Those are, without objection--we have those 
in the record as well.
    Ms. Stoller. I am aware of dozens of SBIR proposals that 
have been submitted by companies and individuals who never 
before were involved in the SBIR program. So as a result of the 
additional FAST funding, they attended training sessions.
    What major contributions to society await the maturation of 
these innovations? The FAST program is allowing knowledge of 
the SBIR program to be spread throughout the State. In 
addition, the engineers and scientists now are interacting with 
farmers, ranchers, miners, and environmentalists, all of which 
have innovative technology ideas and all of which could benefit 
from SBIR.
    How many of these innovations and success stories will be 
lost if FAST funding is discontinued?
    [Ms. Stoller's statement may be found in the appendix.]
    Chairman Akin. Thank you very much, Ms. Stoller. We have 
another panelist--not another panelist, but another member here 
that I would like to introduce, and that is Mr. Faleomavaega 
from Samoa. And I have mentioned to the other members here, 
Eni, that you get the extra award for Subcommittee hearings 
before noon. So you are really doing well today, starting the 
week off well.
    We have heard from all of our witnesses, and the next part 
of the procedure will be we will be able to ask some questions. 
I am going to forego some of my questions. I have quite a few, 
but I am going to go ahead and turn to our minority leader 
here. And, Tom, if you would like to start out. We will do 5 
minutes' worth of questions. Then if you want, we can come back 
for a second pass just depending on what your schedules look 
like timewise.
    Mr. Udall. Great. Thank you very much, Mr. Chairman, and 
once again, let me tell you how much I appreciate you having 
this hearing and highlighting these three I think very 
important programs.
    Before I start, let me also recognize, as you have said, 
Barbara Stoller, from New Mexico is here today, and has been 
one of the witnesses. Her boss and the president of Technology 
Ventures Corporation, Sherman McCorkle, is back there in the 
back. Sherman, raise your hand so everybody can see what a 
distinguished gentleman you are. Anyway, Sherman, it is a 
pleasure having you here, and this company is a dramatic 
example of how you take these programs, SBIR and others, and 
create jobs in New Mexico. And I believe Barbara has outlined 
that very well.
    I want to thank all of the panelists, because I think each 
one of you in your testimony has highlighted the fact that 
these are important programs, they should continue, and that 
you would like to see them continue.
    Now, turning to Mr. Hairston's testimony here, in your 
written testimony you talk about how you are going to support 
the administration's request for 2004 funding to the tune of $3 
million for FAST and $500,000 for the rural outreach grant 
programs, but there is no funding in 2003, the Congress didn't 
appropriate funds.
    And then you say in your testimony, the SBA does not plan 
to allocate funds for the FAST and outreach programs in fiscal 
year 2003.
    Do you have the ability to allocate funds from other areas 
if you choose to?
    Mr. Hairston. We are fortunate in that we have the ability 
to carry over funds from prior-year funding, and our records 
indicate right now that about 80 percent of our State 
recipients at this time have come in for what we refer to as 
no-cost extensions to carry over funds from fiscal year 2002 to 
be able to provide that assistance in 2003.
    At this point, I am not certain of our ability to reprogram 
any other decision in funds. I am not certain of the 
availability of additional funds that would be available for 
reprogramming at this time, but we do know we have at least 80 
percent coverage from our prior-year funding.
    Mr. Udall. Well, I would just like to say that the panel 
here today I think has made a very good case for these programs 
and the continued funding, and I hope you would look and see if 
you have that reprogramming authority. And clearly, you need to 
look at the big picture and look at all of the programs under 
the purview of the SBA, but I think these are three that really 
give the American taxpayer the bang for the buck.
    What are we talking about in terms of money for the 
carryover monies that you are talking about?
    Mr. Hairston. I am not sure. I don't have that information 
exactly today, but I can make certain that we provide you with 
that information.
    Mr. Udall. Do you have a rough range of the carryover 
monies at all?
    Mr. Hairston. About 750,000 total.
    Mr. Udall. Okay, good.
    Turning to Barbara Stoller, Barbara, you gave us a couple 
of examples of success stories, and I think you said at one 
point that the SBIR program was for a company the only access 
to seed capital. So in that particular case if the company 
hadn't had this assistance, they wouldn't have been able to 
create jobs and go forward with their innovation; is that 
correct?
    Ms. Stoller. That is correct. I have a few other examples. 
The State of West Virginia, they have only received three 
awards from the SBIR program. What one was was an electronic 
life listen line, which is a sensor system that goes into the 
helmet of firefighters, and it tracks their vital signs so that 
they get out of the building if their health is threatened and 
that they can be tracked. That was from one SBIR program--one 
SBIR award.
    Another is from the State of Iowa, where they have had a 
program since 1994 where they received four awards totaling 
$245,000. This year they received--in 2001, they received 33 
awards at $7.5 million. So this State of Iowa has been 
implementing a great deal of work and is paying off with 
awards.
    Mr. Udall. Thank you. I see my time is exhausted, and thank 
you very much, Mr. Chairman.
    Chairman Akin. Thank you, Mr. Udall.
    And Ms. Bordallo.
    Ms. Bordallo. Thank you very much, Mr. Chairman, and our 
minority leader here, Mr. Udall. To all the witnesses, first of 
all, I don't think this is something we should be discussing 
when the economy--you know, we are suffering such a cut in the 
economy all over, all over the States and in the territories as 
well. So it is truly not the time to discuss discontinuing very 
successful programs such as these.
    And in the first--I think it is you, Mr. Hairston, that 
commented on the territories, and of course that sets up the 
red flag for me, and I am sure any here too. It says since the 
initial FAST program announcement was issued in April 2001, 
only Guam, the Virgin Islands, and American Samoa have not 
submitted a proposal to participate in the program. Why is 
this? Do you have any idea?
    Mr. Hairston. Well, I asked that same question myself, and 
what I have been advised on that, at this point they have not 
developed enough interest within the territories themselves to 
pursue that type of funding. I understand that there is some 
activity going on, particularly in--I believe it was in 
American Samoa where there has been some expression of 
interest. We would certainly welcome the opportunity to work 
with organizations within those territories----.
    Ms. Bordallo. So they have been receiving the proper 
notification? You have heard back from them? Is this--because I 
am going to confront SBA in Guam about this immediately. We 
have 20 percent unemployment right now, and there are many 
small entrepreneurs that just haven't been able to--since the 
economy, since the war, since the typhoons and everything else 
that hits the islands out there, you know, they have gone out 
of business. And it seems to me that these are innovative 
ideas, assistance, and we could certainly use it. So I would 
ask, Mr. Chairman, if you have any correspondence that you have 
had with Guam SBA?
    Mr. Hairston. I am not certain that we actually do, but I 
can--any information or any correspondence that we do have, I 
can certainly make sure that we can get that to you.
    Ms. Bordallo. Very good. Very good. Because I don't want 
them to come back to me and say they weren't informed or 
whatever. So whatever you have, I would appreciate it if you 
could send it over to my office as soon as possible. I am going 
to take this matter up immediately.
    Mr. Hairston. I do know that we make public notice--when we 
do put out the information regarding the grants, we make public 
notice regarding the available of the grants. So we will make 
sure you get that information.
    Ms. Bordallo. Thank you very much. Thank you, Mr. Chairman.
    Chairman Akin. Thank you very much. Eni.
    Mr. Faleomavaega. Thank you, Mr. Chairman. I am pleading 
basically ignorance on the fact that I am the newest member of 
the Committee on the Small Business Administration, and I have 
gone through your written statement, Mr. Hairston. And I just 
wanted to get some basic information and facts so that I can 
better relate to my own questions I wanted to ask.
    Our total budget proposed by the administration this year 
for the SBA is approximately how much?
    Mr. Hairston. I don't know exactly.
    Mr. Faleomavaega. In the billions perhaps?
    Mr. Hairston. A little under $800 million.
    Mr. Faleomavaega. Now, my ignorant mind tells me that small 
businesses throughout America make up 98 percent of the private 
sector business, if I am correct in that piece of information. 
And I wanted to ask Mr. Hairston if the amount of allocation 
that the government is giving to developing the private sector 
in the small business area where 98 percent of our entire 
economy seems to have its dependence, at least to promote 
entrepreneurship, get people off the public payroll, get away 
from government employment, get into the private sector 
development--I don't seem to see the--there is a sense of 
balance here. If we are making such emphasis in promoting small 
business and yet we are only allocating $800 million to promote 
the most important factor in private sector development, am I 
wrong in my--am I leading into the next question, Mr. Hairston, 
in this area?
    Mr. Hairston. I would gather from what you are saying is 
you are asking me if SBA believes that----.
    Mr. Faleomavaega. Could we do more with $800 million?
    Mr. Hairston. And one of the things that we are obviously 
doing with respect to all of our programs, we are certainly 
reevaluating all of our programs, determining where our 
priorities should be placed. We are going through a workforce 
transformation process and making certain that we properly 
allocate the resources that we do have available to the 
programs that are most important to the economy and to the 
small business sector.
    Mr. Faleomavaega. See, there is a lot of misinformation and 
misconceptions, even among our own colleagues, especially my 
good friends on the other side of the aisle, that they look at 
us as minority members, Democrats, as anti-business, and I 
would like to submit for the record, Mr. Chairman, this is not 
true at all. If there is anything that I for one as a member 
would like to say more strenuously than ever, we want 
businesses to succeed. We want the private sector to be number 
one, bar none, as far as getting into the job markets. Look at 
now college graduates coming out this year, having a very 
difficult time finding jobs.
    So how can we better promote the environment for private 
sector development? Well, we don't seem to put a high priority 
in putting the resources that are needed for FAST and SBIR and 
all these other programs that I think are excellent areas to 
focus on if our small business community really have needs that 
are not being met. And I for one do not believe in handouts, as 
I am sure that every entrepreneur out there, a business person, 
does not want handouts. All they want is an opportunity, and 
they will even pay back the loans if necessary, but just an 
opportunity to be successful to make that American dream a 
reality.
    And I don't want to put you on the spot, Mr. Hairston. If 
not $800 million, what is your best guess in terms of what you 
really need as far as funding is concerned so that SBA can 
really shine and really show that this one agency is probably 
the least, I would say not only understood, probably 
underutilized.
    Mr. Hairston. Well, I can only answer that by saying at 
this time the administration believes that the $800 million or 
so is the appropriate number for our agency at this time.
    Mr. Faleomavaega. Do you think that there is going to be an 
increase by the administration if we believe so much in private 
sector development?
    Mr. Hairston. I am not aware that there are any intentions 
to increase that, no.
    Mr. Faleomavaega. I see. Well, it is pretty easy to find 
$60 billion to help with the mess that Saddam Hussein has 
created, but to ask for even a billion more to do SBA with 98 
percent of our whole economy depending on small businesses out 
there, I don't see the logic.
    And, Mr. Chairman, I do want to thank you. I just want to 
state that for the record. We on this side of the aisle, we 
absolutely support business development. We want businesses to 
make reasonable profits. At the same time, I think there has 
got to be equity and fairness for the working people out there 
to make sure that they are not underpaid and get it to the 
principles of collective bargaining that are necessary. But 
more than anything, Mr. Hairston, I just wanted to kind of get 
a sense from you if we are not doing our part, what can the 
administration do to help us so that we can be a partnership 
working together to enhance the programs that SBA is espousing, 
especially these four programs that I sense that are very 
important for our small businesses out there in America?
    Mr. Faleomavaega. I just wanted to share that. Thank you, 
Mr. Chairman.
    Chairman Akin. Thank you. I appreciate your thoughts and 
comments. I look forward to having a moment or two, I think 
part of what our job is here today, and we don't have a whole 
lot of time to do it, but at least to ask the questions, and 
there are all kinds of things you can do if you got a certain 
millions of dollars to help businesses. I think the reason we 
are here is to balance the cost versus the return. I think that 
is the question before us, cost versus return. First of all, if 
you were to add these programs up, are we talking about $800 
million? Is that what these programs in total are costing the 
taxpayers?
    Mr. Hairston. The FAST and rural outreach programs.
    Chairman Akin. That is the first thing. How much money are 
we spending on the different programs? You say you have got 800 
million SBA. Is that across the whole board?
    Mr. Hairston. That covers our administrative costs and our 
loan programs, and all of our other programs.
    Chairman Akin. The programs we are talking about more 
specifically here, the MEP, the FAST and those others, what do 
we have in overhead? What is that costing?
    Mr. Hairston. The overhead is probably in the neighborhood 
of $600,000 to administer the SBIR, which encompasses FAST and 
the rural outreach programs. The grant programs themselves are 
about $3.5 million.
    Chairman Akin. And so it is really a combination, too, you 
got administrative costs and you got these different grants 
that are out there.
    Mr. Hairston. Exactly. Obviously that doesn't include the 
MEP program.
    Chairman Akin. MEP is a separate deal under----.
    Mr. Hairston. Under commerce.
    Chairman Akin. How much is the MEP? Anybody happen to have 
that number? What are we putting in terms of dollars?
    Mr. Hairston. I don't know the answer to that.
    Chairman Akin. Most of you, or all of you, really work with 
businesses and small businesses. One of the things you have to 
pay attention to is return on investment when you are doing 
different things. And that is, to some degree, the way that I 
think in reference to this hearing. I am curious. What is our 
return on investment on the money? Is it working out fine? I 
mean, there are other ways to try to create an environment that 
is pro business. We have the undistinguished position, and I 
don't know we could have planned this if I had been working on 
it, to have lost more jobs of any State in the country. We have 
lost more jobs than California has lost. This is just flat more 
jobs lost.
    And we have done that because we have scorned business in 
our State because of the policies of our State government. And 
we have done that because we raised taxes, because we haven't 
dealt with workers' comp. And a number of other things and the 
cost of doing business. People leave because we have created an 
economic environment that is poisonous to business. And that is 
why we have the worst record than any State in the union. And I 
understand that. I came from the business world.
    The thing I am not clear on is to what degree can we add 
and actually help businesses with these Federal programs. Does 
this really help them or would it do better to have less taxes 
and have the programs gone? And I wanted to hear just some 
practical examples. And another thing I would be interested in 
is I would like to see a simple cost justification of the 
different programs. Give us examples of excesses. We know what 
that does for more revenue for government, State and Federal 
governments because you have a successful business. That is 
taxpayers and that is jobs and there is an economic impact to 
that. And that is what we realize is the key to keep everything 
going. What is the benefit there and what is the cost and has 
anybody run numbers like that to justify these particular 
programs? That is an open question for anybody.
    Mr. Hairston. We don't have the ability to quantify the 
result. I think we measure results at this point in what we see 
in terms of the data we are getting back from the participating 
agencies, which indicates that there is a significant increase 
in the number of proposals that are being submitted. Across the 
United States, we are seeing greater participation level from 
States that previously were low participants. We are seeing 
more awards per agency. This year----.
    Chairman Akin. So you are measuring progress in terms of 
number of awards?
    Mr. Hairston. We are looking at the overall impact. We are 
seeing an increase in the number of proposals that are being 
submitted. We are seeing more small businesses participating. 
We are seeing more awards throughout the agencies themselves 
and among more States. And we are seeing--and we are being 
reported at substantially increased quality in the proposals 
that are being submitted. I don't think we have actually done 
any real quantitative look at what that real return is in terms 
of the dollars that we are actually putting in at this point. I 
think what we are seeing now is just the last 2 years we are 
actually seeing substantial increase in the dollar awards.
    Chairman Akin. Is there any control on the businesses that 
are taking those awards? Is there a cost to them for taking 
that award or is that, in a sense, just free money for them?
    Mr. Hairston. The phase 1 award is basically a grant. And 
they are basically--they are expected to produce a deliverable, 
which is a concept. Phase 2 similarly is to carry----.
    Chairman Akin. Do they have to pay that money back?
    Mr. Hairston. No, they don't.
    Chairman Akin. So if they don't have to pay the money back, 
there is an incentive who wants to get a business going to get 
that free money and use it to help develop your business, 
right?
    Mr. Hairston. I don't think it works that way because they 
are responding to a technical proposal. And if they don't 
demonstrate the ability to be able to meet the requirements of 
that technical proposal--it is not a giveaway or a free grant. 
There is an expectation.
    Chairman Akin. There is an expectation based on it. I am 
still trying to get to the cost justification. It would be 
interesting to take your numbers rather than just number of 
grants to actually see now 5 years later what happened to those 
grant recipients, what is the status of those businesses. Did 
we, at a critical point, come alongside of them and put another 
small business on the map, or was this just an expensive 
Federal program in terms of how much money it is costing? It 
would be interesting to have a little bit better data rather 
than just the number of grants. I don't know that that measures 
success.
    Examples, Dr. Nichols, I know you are coming from a guy who 
started three of them yourself. What is your sense of this? We 
got a certain number of taxpayers dollars. Is this a good use 
of them?
    Mr. Nichols. I think it is a very good use of them. What 
you need to keep in mind, even on phase 1 for small business, 
that $100,000 is not going to keep that company sustained. That 
is a very small part of the overall budget for that company. 
And depending on the company and depending on the resources, it 
may be a third or a fifth of what they really need to maintain 
that company.
    So, one of the biggest problems we found was people getting 
phase 1's and then not being able to act on the phase 2's 
because they didn't have the resources available to them. One 
of the things I pointed out in my testimony is that we are also 
tying these people to other sources of income in our State. For 
instance, venture capital. So this becomes really something 
that people can use then as credibility, in other words, by 
getting a phase 1. It's not so much the money as it is that 
credibility that they can take to other markets to get funding.
    Chairman Akin. Do you have built into your program, then, 
the ability to analyze technologically whether we are dealing 
with something that is going to repeal the law of gravity, or 
is that something that kind of gives them the good seal of 
approval?
    Mr. Nichols. Exactly. And just like the review that I will 
be in tomorrow at the National Science Foundation, there will 
be 10 or 12 of us sitting around the table to review the 
proposals not only from the scientific aspect, but also from 
business aspect. The other thing I might mention to you, what 
was the Ballistic Missile Defense Organization did quite a bit 
of study on the success of these companies down the road. And 
for a basic investment they had made, about $5 million, that 
became about $50 million in actual returns and revenues. I 
might also mention there is a report out----.
    Chairman Akin. Who made the 5 million investment?
    Mr. Nichols. The SBIRs.
    Chairman Akin. This is for the missile defense program.
    Mr. Nichols. They track that and I can get those figures 
for you. I might mention to you in some of the States, like 
there is a report that was put out by the Southern Growth 
Conference called Innovation U, and they tracked a number of 
universities that were able to utilize these programs as well 
as the small businesses. And what they found was States like 
Utah, for example, they get a large number of SBIRs and they 
are able to take those SBIRs and create approximately $500 
million in general revenue back to the State.
    So there are 44 businesses. So that particular number I do 
remember. So that is the kind of return you can get. And the 
same number is held true in that BMD study. What I would say in 
Missouri right now for the $300,000, basically you get $100,000 
for the FAST program and $200,000 had to come out of the 
university's own budget. For that $300,000 we upped the amount 
of money that came into the State by $3 million. So that is a 
10-to-1 return, and that is a good investment for anyone. And I 
think those numbers are available and I can provide more of 
them for you.
    Chairman Akin. Speaking for myself, that is of interest as 
we look at this question to try to balance it out. And anybody 
else want to piggyback on that? Mr. Albers or----.
    Mr. Albers. You asked if there are other things we should 
give more priority to that would help business, and my answer 
is we need both. You mentioned workers' comp. Simplification in 
Missouri. Definitely needed. Might have a bigger impact in any 
of this. But I firmly believe that these types of programs that 
the level they are funded now are necessary and a good 
investment. I wouldn't say that you should triple them or 
something like that. I think in Missouri, the MEP is funded by 
both the State, and I think some of the money comes from NIST. 
And if I remember correctly, and I don't have the exact amount, 
but the Missouri budget is 1.3 million or something like that 
for MEP. And I think it is a damn good investment.
    Chairman Akin. Thank you. Last comment.
    Ms. Stoller. You talked about return on investment. I am 
glad you mentioned 5 years. The Harvard Business Review states 
7.5 years to be able to calculate a return on investment for a 
company. Another time issue is that a phase 1 proposal--you 
have 6 months to perform your feasibility of it. Now, depending 
on which agency and when their next deadline is, a phase 2 
allows you 2 years to build prototyping. That sounds like 2\1/
2\ years, but based on deadlines, et cetera, it could be 3\1/2\ 
to 4 years just to get through the SBIR process. So New Mexico 
is working on this tracking, but there is a time issue. I have 
only been involved in the FAST program for half a year. So I 
can't give you strong numbers until I have some experience with 
it. Cutting it off now cuts all my momentum.
    Chairman Akin. I appreciate everybody's testimony this 
morning. Thank you for coming in for the interest--eager 
interest, I might say. And perhaps some of you might have a 
couple of minutes. If we have individual questions, we can meet 
with you after the hearing. So this concludes the hearing.
    [Whereupon, at 11:20 a.m., the subcommittee was adjourned.]

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