[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]



 
                        FULL COMMITTEE MARKUP OF
                        H.R. 5819, THE SBIR/STTR
                          REAUTHORIZATION ACT

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

                      COMMITTEE ON SMALL BUSINESS
                 UNITED STATES HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 17, 2008

                               __________

                          Serial Number 110-85

                               __________

         Printed for the use of the Committee on Small Business


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
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                   HOUSE COMMITTEE ON SMALL BUSINESS

                NYDIA M. VELAZQUEZ, New York, Chairwoman


HEATH SHULER, North Carolina         STEVE CHABOT, Ohio, Ranking Member
CHARLIE GONZALEZ, Texas              ROSCOE BARTLETT, Maryland
RICK LARSEN, Washington              SAM GRAVES, Missouri
RAUL GRIJALVA, Arizona               TODD AKIN, Missouri
MICHAEL MICHAUD, Maine               BILL SHUSTER, Pennsylvania
MELISSA BEAN, Illinois               MARILYN MUSGRAVE, Colorado
HENRY CUELLAR, Texas                 STEVE KING, Iowa
DAN LIPINSKI, Illinois               JEFF FORTENBERRY, Nebraska
GWEN MOORE, Wisconsin                LYNN WESTMORELAND, Georgia
JASON ALTMIRE, Pennsylvania          LOUIE GOHMERT, Texas
BRUCE BRALEY, Iowa                   DAVID DAVIS, Tennessee
YVETTE CLARKE, New York              MARY FALLIN, Oklahoma
BRAD ELLSWORTH, Indiana              VERN BUCHANAN, Florida
HANK JOHNSON, Georgia
JOE SESTAK, Pennsylvania
BRIAN HIGGINS, New York
MAZIE HIRONO, Hawaii

                  Michael Day, Majority Staff Director

                 Adam Minehardt, Deputy Staff Director

                      Tim Slattery, Chief Counsel

               Kevin Fitzpatrick, Minority Staff Director

                                 ______

                         STANDING SUBCOMMITTEES

                    Subcommittee on Finance and Tax

                   MELISSA BEAN, Illinois, Chairwoman


RAUL GRIJALVA, Arizona               VERN BUCHANAN, Florida, Ranking
MICHAEL MICHAUD, Maine               BILL SHUSTER, Pennsylvania
BRAD ELLSWORTH, Indiana              STEVE KING, Iowa
HANK JOHNSON, Georgia
JOE SESTAK, Pennsylvania

                                 ______

               Subcommittee on Contracting and Technology

                      BRUCE BRALEY, IOWA, Chairman


HENRY CUELLAR, Texas                 DAVID DAVIS, Tennessee, Ranking
GWEN MOORE, Wisconsin                ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York              SAM GRAVES, Missouri
JOE SESTAK, Pennsylvania             TODD AKIN, Missouri
                                     MARY FALLIN, Oklahoma

        .........................................................

                                  (ii)

  
?

           Subcommittee on Regulations, Health Care and Trade

                   CHARLES GONZALEZ, Texas, Chairman


RICK LARSEN, Washington              LYNN WESTMORELAND, Georgia, 
DAN LIPINSKI, Illinois               Ranking
MELISSA BEAN, Illinois               BILL SHUSTER, Pennsylvania
GWEN MOORE, Wisconsin                STEVE KING, Iowa
JASON ALTMIRE, Pennsylvania          MARILYN MUSGRAVE, Colorado
JOE SESTAK, Pennsylvania             MARY FALLIN, Oklahoma
                                     VERN BUCHANAN, Florida

                                 ______

            Subcommittee on Urban and Rural Entrepreneurship

                 HEATH SHULER, North Carolina, Chairman


RICK LARSEN, Washington              JEFF FORTENBERRY, Nebraska, 
MICHAEL MICHAUD, Maine               Ranking
GWEN MOORE, Wisconsin                ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York              MARILYN MUSGRAVE, Colorado
BRAD ELLSWORTH, Indiana              DAVID DAVIS, Tennessee
HANK JOHNSON, Georgia

                                 ______

              Subcommittee on Investigations and Oversight

                 JASON ALTMIRE, PENNSYLVANIA, Chairman


CHARLIE GONZALEZ, Texas              MARY FALLIN, Oklahoma, Ranking
RAUL GRIJALVA, Arizona               LYNN WESTMORELAND, Georgia

                                 (iii)

  
?

                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page

Velazquez, Hon. Nydia M..........................................     1
Chabot, Hon. Steve...............................................     2
Graves, Hon. Sam.................................................     3

                                APPENDIX


Prepared Statements:
Velazquez, Hon. Nydia M..........................................     8
Chabot, Hon. Steve...............................................    10
Graves, Hon. Sam.................................................    11

                                  (v)

  

                        FULL COMMITTEE MARKUP OF
                        H.R. 5819, THE SBIR/STTR
                          REAUTHORIZATION ACT

                              ----------                              


                        Thursday, April 17, 2008

                     U.S. House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 12:52 p.m., inRoom 
1539, Longworth House Office Building, Hon. Nydia M. Velazquez 
[Chair of the Committee] Presiding.
    Present: Representatives Velazquez, Shuler, Grijalva, Bean, 
Cuellar, Lipinski, Altmire, Braley, Clarke, Ellsworth, Johnson, 
Sestak, Hirono, Chabot, Bartlett, Graves, Akin, Musgrave, Davis 
and Buchanan.

           OPENING STATEMENT OF CHAIRWOMAN VELAZQUEZ

    Chairwoman Velazquez. I am pleased to call this afternoon's 
markup to order.
    Today, the Committee will address legislation that will 
modernize and reauthorize the Small Business Innovation 
Research and Small Business Technology Transfer programs. These 
programs, which help spur innovation and job creation 
throughout the country, were last updated 8 years ago.
    Research conducted by SBIR and STTR awardees have helped 
address our country's most important research and development 
challenges. This includes strengthening our national security 
and our public health infrastructure.
    The continued success of the SBIR and STTR program is 
dependent on three primary issues: First, the program must 
remain highly competitive. Second, applicants and awardees must 
have access to financing of all types, including venture 
capital. Small firms must not be penalized for accepting the 
investment they need to advance their R&D efforts. Third, more 
needs to be done to bring these breakthrough products to the 
market. We must promote greater commercialization in these 
initiatives.
    The reauthorization legislation that we will mark up today 
is an important step toward securing the future success of 
these important programs. We have worked closely with our 
colleagues on the Committee on Science and Technology. To this 
end, we have taken the legislation they marked up yesterday 
afternoon and incorporated it into the consolidated bill before 
us today. We have also included amendments from Representatives 
Wilson and Smith that were adopted in the Science Committee's 
markup yesterday.
    The most notable legislative changes to the programs are 
increases in the set-asides for both SBIR and STTR. These will 
allow more firms to participate in Federal R&D activities. This 
is especially important for SBIR, where we raised the set-aside 
level from 2.3 to 3 percent.
    The bill also raises award sizes but places substantial 
notification and reporting requirements on agencies seeking to 
exceed these limits. This will ensure that jumbo awards are 
being reviewed and overseen.
    Perhaps most importantly, the legislation restores the 2003 
eligibility rules, permitting small businesses with venture 
capital investment to qualify for SBIR awards. This is not a 
ground-breaking change. We are simply reinstating the policies 
that were in place up to 2003. We have done so in a balanced 
manner and included important safeguards and protections.
    Small businesses are the focus of this policy. A single 
venture capital firm cannot own a majority of an SBIR awardee, 
nor can they have a majority of seats on its board of 
directors. In addition, limitations are placed on the venture 
capital company, including its size and its control by larger 
corporations. Overall, this once again gives entrepreneurs, not 
Washington bureaucrats, the final say on how their company 
should be financed.
    H.R. 5819 takes steps to develop the next generation of 
small research firms. It will do so by providing resources to 
increase SBIR and STTR applications from rural areas and from 
those owned by women, service-disabled veterans and minorities, 
as recommended by Congressman Cuellar.
    It makes resources available that small businesses need to 
transition SBIR-funded research from the laboratory to the 
marketplace. This includes making commercialization a priority 
and supplying the resources for transition assistance program 
expertise, mentoring activities and the facilitation of key 
business partnerships.
    H.R. 5819 will enable more small research companies to 
advance innovations that have made our economy so diverse and 
vibrant. It has the support of the Biotech Industry 
organization and the National Venture Capital Association.
    In passing this bill, we will ensure that SBIR and STTR 
awards remain competitive from top-notch research and produce 
cutting-edge breakthroughs. Doing so will continue to help 
create high-paying jobs, reduce our trade deficit and emphasize 
the importance of math and science education to America's 
students.
    I will now like to yield to Ranking Member Chabot for his 
opening remarks.

                OPENING STATEMENT OF MR. CHABOT

    Mr. Chabot. Thank you, Madam Chairwoman.
    Good afternoon. Thank you all for being here as we mark up 
legislation to reauthorize the Small Business Innovation 
Research program and the Small Business Technology Transfer 
program, or SBIR and STTR programs respectively.
    These two programs are an example of highly successful 
Federal initiatives to encourage economic growth and innovation 
within the small business community by assisting in the funding 
that is critical to the start-up and development stages of 
small business companies. Not only does it spur growth in 
individual companies, the program stresses the importance of 
this Committee's and the entire Federal Government's commitment 
to expand and diversify research opportunities to small 
business.
    Small businesses drive innovation. It is of the utmost 
importance that we continue to foster growth in this segment of 
our economy. This is especially important in the new world 
economy where the technology and technological advantage the 
United States has had on the rest of the world is not as large, 
unfortunately, as it used to be.
    It is said that nobody has a patent on good new ideas. 
While that is true, it can be difficult for a small company 
with limited resources to take that idea and manufacture it 
into a product or process. Programs like SBIR and STTR provide 
a bridge between product conception and marketability, a bridge 
of vital importance for innovative ideas to become reality. The 
new technologies and discoveries that come out of this program 
go a long way toward keeping our competitive edge in the world 
marketplace. The SBIR and STTR programs are the kind of public-
private partnership that is essential to the continued growth 
of our economy.
    The legislation we have before us goes a long way toward 
strengthening these two programs. Among other things, the 
legislation requires greater oversight by agency heads and 
better reporting of information to Congress. The bill also 
increases the maximum award sizes to allow grant winners 
greater ability to develop their new technologies and provides 
agencies even greater flexibility to administer their programs.
    That said, I believe the bill is, of course, not perfect. 
Compromises have been made by both parties in both committees 
with jurisdiction. The Chairwoman and I have continued to work 
together, along with our staffs, who have also I think worked 
very closely together this year and last year in a strong, 
bipartisan manner in an effort to craft a bill that truly 
represents a victory for American small businesses; and I thank 
her for that. I would request that, as she has done since the 
beginning of Congress, that the Chairwoman continue to work 
with us as this bill moves forward through the process.
    Again, I thank everyone for being here today, the members, 
the Chairwoman and everyone here, and I yield back the balance 
of my time.
    Chairwoman Velazquez. Thank you, Mr. Chabot.
    Now I would like to recognize the regional co-sponsor of 
the legislation, Mr. Graves, for a statement on this 
legislation.

                OPENING STATEMENT OF MR. GRAVES

    Mr. Graves. Thank you, Chairwoman Velazquez and Ranking 
Member Chabot. I appreciate you giving me an opportunity to 
make just a few comments on the SBIR reauthorization.
    As you know, the Small Business Administration provides 
start-up funding to small businesses in a variety of ways. One 
such program is the Small Business Innovation Research program, 
the SBIR program, which allocates a specific percentage of all 
Federal research and development of grant monies to small 
business applicants. The program allows for cutting-edge, 
innovative research that may not in its earliest stages attract 
funding from other sources.
    American innovation is what drives this country, and the 
SBIR program helps stimulate innovation. Creating an 
environment that will keep American innovation in the forefront 
of the global market is a priority of mine, and I am very 
confident this bill will help meet those goals. I strong 
believe in the SBIR program and what it does for small 
businesses. Thank you for helping me remove barriers to 
participation in this program, and I look forward to its 
passage. Thank you.
    Chairwoman Velazquez. Thank you.
    Are there any other members that wish to be recognized for 
the purpose of making a statement on the legislation?
    The Committee now moves to consideration of the bill H.R. 
5819. The clerk will report the title of the bill.

    The Clerk. To amend the Small Business Act to improve the 
Small Business Innovation Research, SBIR, program and the Small 
Business Technology Transfer, STTR, program, and for other 
purposes.

    Chairwoman Velazquez. I ask unanimous consent that the bill 
in its entirety be open for amendments at this time. Does any 
member seek recognition for the purpose of offering an 
amendment?
    The Chair recognizes herself for the purpose of offering an 
amendment. I have an amendment at the desk. The clerk will 
report the amendment.
    The Clerk. Strike title II of the bill and insert the 
following.
    Chairwoman Velazquez. I ask unanimous consent that the 
amendment be considered as read. Without objection, so ordered.

    Chairwoman Velazquez. The amendment under consideration 
reflects feedback we have received from the House Science and 
Technology Committee. The amendment is a technical correction 
that clarifies the role corporate-owned venture capital 
companies can play when investing in SBIR-eligible companies.
    Under current law, corporate-owned venture capital 
companies can invest in SBIR eligible companies. The amendment 
clarifies that this is still the case under Section 201 of H.R. 
5819 and sets up the structure governing this investment. As a 
safeguard against potential abuse, the amendment limits both 
the ownership percentage and the number of corporate-owned 
venture capital firms that can invest in an SBIR-eligible 
company.
    The amendment was developed in conjunction with and is 
supported by Mr. Chabot. I urge adoption of the amendment.
    Are there any other members who seek to be recognized on 
the amendment?
    Mr. Chabot. Madam Chair, move to strike the last word.
    Chairwoman Velazquez. Without objection.

    Mr. Chabot. Thank you, Madam Chair. I will be very brief.
    I want to just reiterate what the Chairwoman just said, 
that the minority and majority staffs worked together very 
closely on this, as we did as well, and also with Chairman Wu 
to resolve this issue; and I think we have done it in a 
reasonable and straightforward way which allows us to make sure 
that the interests of small businesses are protected. And I 
want to commend you for working together in a bipartisan manner 
on this amendment and the entire bill.
    I yield back.

    Chairwoman Velazquez. The same goes with the Ranking Member 
Chabot for the collaboration and the understanding and the 
willingness to work together and, particularly, both staffs 
from the majority and minority and also the Science and 
Technology Committee.
    Are there any other members who seek to be recognized on 
the amendment?
    Seeing no members seeking recognition, the question is on 
the amendment offered by Ms. Velazquez. All those in favor, say 
aye. All those opposed, no.
    The ayes have it. The amendment is adopted.
    Are there any other amendments?
    Seeing no amendments, the question is on passing and 
reporting the bill H.R. 5819 as amended. All those in favor, 
say aye. All those opposed, say no.
    In the opinion of the Chair, the ayes have it.
    The clerk will call the roll.

    The Clerk. Ms. Velazquez.
    Ms. Velazquez. Aye.
    The Clerk. Ms. Velazquez votes aye.
    Mr. Shuler.
    Mr. Shuler. Aye.
    The Clerk. Mr. Shuler votes aye.
    Mr. Gonzalez.
    [no response.]
    The Clerk. Mr. Larsen.
    [No response.]
    The Clerk. Mr. Grijalva.
    Mr. Grijalva. Aye.
    The Clerk. Mr. Grijalva votes aye.
    Mr. Michaud.
    [no response.]
    The Clerk. Ms. Bean.
    Ms. Bean. Aye.
    The Clerk.
    Ms. Bean votes aye.
    Mr. Cuellar.
    Mr. Cuellar. Aye.
    The Clerk. Mr. Cuellar votes aye.
    Mr. Lipinski.
    Mr. Lipinski. Aye.
    The Clerk. Mr. Lipinski votes aye.
    Ms. Moore.
    [no response.]
    The Clerk. Mr. Altmire.
    Mr. Altmire. Aye.
    The Clerk. Mr. Altmire votes aye.
    Mr. Braley.
    Mr. Braley. Aye.
    The Clerk. Mr. Braley votes aye.
    Ms. Clarke.
    Ms. Clarke. Aye.
    The Clerk. Ms. Clarke votes aye.
    Mr. Ellsworth.
    Mr. Ellsworth. Aye.
    The Clerk.Mr. Ellsworth votes aye.
    Mr. Johnson.
    Mr. Johnson. Aye.
    The Clerk. Mr. Johnson votes aye.
    Mr. Sestak.
    Mr. Sestak. Aye.
    The Clerk. Mr. Sestak votes aye.
    Ms. Hirono.
    Ms. Hirono. Aye.
    The Clerk. Ms. Hirono votes aye.
    Mr. Higgins.
    [no response.]
    The Clerk. Mr. Chabot.
    Mr. Chabot. Aye.
    The Clerk. Mr. Chabot votes aye.
    Mr. Bartlett.
    Mr. Bartlett. Aye.
    The Clerk. Mr. Bartlett votes aye.
    Mr. Graves.
    Mr. Graves. Aye.
    The Clerk. Mr. Graves votes aye.
    Mr. Akin.
    Mr. Akin. Aye.
    The Clerk. Mr. Akin votes aye.
    Mr. Shuster.
    [no response.]
    The Clerk. Mrs. Musgrave.
    Mrs. Musgrave. Aye.
    The Clerk. Mrs. Musgrave votes aye.
    Mr. King.
    [no response.]
    The Clerk. Mr. Fortenberry.
    [no response.]
    The Clerk. Mr. Westmoreland.
    [no response.]
    The Clerk. Mr. Gohmert.
    [no response.]
    The Clerk. Mr. Davis.
    Mr. Davis. Aye.
    The Clerk. Mr. Davis votes aye.
    Ms. Fallin.
    [no response.]
    The Clerk. Mr. Buchanan.
    Mr. Buchanan. Aye.
    The Clerk. Mr. Buchanan votes aye.

    Chairwoman Velazquez. The clerk will report the vote.

    The Clerk. 20 ayes, no noes.

    Chairwoman Velazquez. The ayes have it. H.R. 5819 is 
adopted and ordered reported as amended.
    I ask unanimous consent that the Committee be authorized to 
correct section numbers, punctuation and cross references and 
to make all the necessary technical and conforming corrections 
on the bills considered today. Without objection so ordered.
    This markup is adjourned. Thank you.
    [Whereupon, at 1:10 p.m., the Committee was adjourned.]

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