[Senate Hearing 113-469]
[From the U.S. Government Publishing Office]
S. Hrg. 113-469
SBIR/STTR: MEASURING THE EFFECTIVENESS
OF THE REAUTHORIZATION ACT
AND MAXIMIZING RESEARCH DOLLARS
TO AMERICA'S SMALL BUSINESSES
=======================================================================
ROUNDTABLE
BEFORE THE
COMMITTEE ON SMALL BUSINESS
AND ENTREPRENEURSHIP
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
DECEMBER 18, 2013
__________
Printed for the Committee on Small Business and Entrepreneurship
Available via the World Wide Web: http://www.fdsys.gov
______
U.S. GOVERNMENT PRINTING OFFICE
89-804 PDF WASHINGTON : 2014
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
Washington, DC 20402-0001
COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
ONE HUNDRED THIRTEENTH CONGRESS
----------
MARY L. LANDRIEU, Louisiana, Chair
JAMES E. RISCH, Idaho, Ranking Member
CARL LEVIN, Michigan DAVID VITTER, Louisiana
TOM HARKIN, Iowa MARCO RUBIO, Florida
MARIA CANTWELL, Washington RAND PAUL, Kentucky
MARK L. PRYOR, Arkansas TIM SCOTT, South Caarolina
BENJAMIN L. CARDIN, Maryland DEB FISCHER, Nebraska
JEANNE SHAHEEN, New Hampshire MICHAEL B. ENZI, Wyoming
KAY R. HAGAN, North Carolina RON JOHNSON, Wisconsin
HEIDI HEITKAMP, North Dakota JEFFREY S. CHIESA, New Jersey
EDWARD J. MARKEY, Massachusetts
Jonathan S. Hale, Democratic Staff Director
Skiffington Holderness, Republican Staff Director
C O N T E N T S
----------
Opening Statements
Page
Landrieu, Hon. Mary L., Chair, and a U.S. Senator from Louisiana. 1
Risch, Hon. James E., a U.S. Senator from Idaho.................. 3
Shaheen, Hon. Jeanne, a U.S. Senator from New Hampshire.......... 27
Witness Testimony
Savoie, Robert ``Bobby,'' CEO, Goecent, LLC, Metairie, LA........ 3
Wessner, Charles, Director, Technology Innovation and
Entrepreneurship, National Academy of Sciences, Washington, DC. 4
Glover, Jere, Executive Director, Small Business Technology
Council, Washington, DC........................................ 4
Rusco, Frank, Director, Natural Resources and Environment, U.S.
Government Accountability Office, Washington, DC............... 5
Jain, Mahendra K., Senior Vice President, Kentucky Science and
Technology Corporation, Lexington, KY.......................... 5
Rinaldi, Chris, SBIR/STTR Program Administrator, Office of Small
Business Program, U.S. Department of Defense, Washington, DC... 5
Gudger, Andre, Director, Office of Small Business Program, U.S.
Department of Defense, Washington, DC.......................... 5
Oliver, Manny, Director, SBIR/STTR Programs Office, U.S.
Department of Energy, Washington, DC........................... 6
Portnoy, Matthew, Director, Office of Extramural Programs,
National Institutes of Health, Bethesda, MD.................... 6
Raghavan, Pravina, Deputy Associate Administrator, Office of
Investment and Innovation, U.S. Small Business Administration.. 6
Sobolewski, Lisa, SBIR Program Director, U.S. Department of
Homeland Security, Washington, DC.............................. 7
Houston, Jenny, Executive Vice President, Warwick Mills, New
Ipswich, NH.................................................... 7
Green, Dave, President and CEO, Physical Sciences, Inc., Andover,
MA............................................................. 8
Alphabetical Listing and Appendix Material Submitted
Chart titled ``FY2012 SBIR Awards by State''..................... 98
Chart titled ``STTR Increase over 6 Years''--differential from
0.3% base...................................................... 100
Chart titled ``STTR Increase over 6 Years''--differential from
2.5% base...................................................... 101
Department of Health and Human Services
Information for the record................................... 116
Glover, Jere
Testimony.................................................... 4
Biographical sketch.......................................... 47
Green, Dave
Testimony.................................................... 8
Biographical sketch.......................................... 58
Outline for SBIR/STTR Roundtable............................. 118
Letter dated September 12, 2013, to Edsel Brown, Jr.......... 120
Gudger, Andre
Testimony.................................................... 5
Biographical sketch.......................................... 51
Houston, Jenny
Testimony.................................................... 7
Biographical sketch.......................................... 57
H.R. 5667........................................................ 184
Jain, Mahendra K.
Testimony.................................................... 5
Biographical sketch.......................................... 49
Letter dated December 16, 2013, to Chair Landrieu............ 106
Landrieu, Hon. Mary L.
Opening statement............................................ 1
Responses to post-hearing questions from:
Robert ``Bobby'' Savoie.................................. 59
Jere Glover.............................................. 60
Frank Rusco.............................................. 62
Mahendra K. Jain......................................... 66
Andre Gudger............................................. 69
Manny Oliver............................................. 75
Matthew Portnoy.......................................... 81
Pravina Raghavan......................................... 86
Lisa Sobolewski.......................................... 92
Dave Green............................................... 96
Map titled ``Geographic Distribution of SBIR Award Dollars--
FY2012''....................................................... 102
Markey, Hon. Edward J.
Prepared statement........................................... 38
Oliver, Manny
Testimony.................................................... 6
Biographical sketch.......................................... 52
Letter dated December 16, 2013, to Lena Postanowicz
transmitting DOE information for the record................ 103
Portnoy, Matthew
Testimony.................................................... 6
Biographical sketch.......................................... 53
Raghavan, Pravina
Testimony.................................................... 6
Prepared statement........................................... 54
Risch, Hon. James E.
Opening statement............................................ 3
Responses to post-hearing questions from Andre Gudger........ 97
Rinaldi, Chris
Testimony.................................................... 5
Biographical sketch.......................................... 50
Rusco, Frank
Testimony.................................................... 5
Biographical sketch.......................................... 48
Report titled ``Small Business Research Programs: Summary of
GAO Reports Since Programs' Reauthorization''.............. 109
Report titled ``Small Business Research Programs: Actions
Needed to Improve Compliance with Spending and Reporting
Requirements''............................................. 122
Shaheen, Hon. Jeanne
Opening statement............................................ 27
Sobolewski, Lisa
Testimony.................................................... 7
Prepared statement...........................................
Savoie, Robert ``Bobby''
Testimony.................................................... 3
Biographical sketch.......................................... 45
Wessner, Charles
Testimony.................................................... 4
Biographical sketch.......................................... 46
SBIR/STTR: MEASURING THE EFFECTIVENESS
OF THE REAUTHORIZATION ACT
AND MAXIMIZING RESEARCH DOLLARS
TO AMERICA'S SMALL BUSINESSES
----------
WEDNESDAY, DECEMBER 18, 2013
United States Senate,
Committee on Small Business
and Entrepreneurship,
Washington, DC.
The committee met, pursuant to notice, 2:09 p.m., in Room
428-A, Russell Senate Office Building, Hon. Mary L. Landrieu
(Chair of the Committee) presiding.
Present: Senators Landrieu, Shaheen, and Risch.
INTRODUCTORY REMARKS OF HON. MARY L. LANDRIEU, CHAIR, AND A
U.S. SENATOR FROM LOUISIANA
Chair Landrieu. Good afternoon to everyone. Thank you for
joining us for this important roundtable on the SBIR and STTR
program, one of the important programs coordinated by the Small
Business Administration that affects all the agencies and
departments of the Federal Government. I want to welcome
everyone here.
I am going to give an opening statement just briefly, and
then I am going to ask each of you to introduce yourself and
give a one-minute name, title, and why you are excited to be
here, what you hope to contribute.
And then, as many of you know who have participated in our
roundtables, we have a very informal exchange of information
that is going to help us to understand how this important
program is working, where it is strong, where it is weak.
We have just been through a six-year authorization and
there will be a lot of back and forth. This is not like a
regular hearing where people read off of a piece of paper and
submit it for the record.
There is going to be a lot of back-and-forth questioning,
and we are going to try to go to about 3:30. If we can exit a
little bit early, that would be good. If you need to go all the
way to 4:00, we are authorized to do so.
But let me again thank you for joining us today to examine
the comprehensive Small Business Innovation Research and Small
Business Technology Transfer Reauthorization Act that we passed
through this Committee and on the House floor two years ago
this month. It is a good time to look back over the last two
years and to see how our new authorization is working.
As many of you know, this program was created back in the
1980s. I always like to go back to our roots in the beginning
with Warren Rudman and Congressman LaFalce. Some of you were
around when it was started, and all of you are familiar with
its beginnings.
The purposes of these programs were as important then as
they are today. They are, one, to stimulate technological
innovation; number two, to encourage greater utilization of
small businesses to meet federal research and development needs
which are quite extensive; three, to foster and encourage
participation by minority and disadvantaged persons in
innovation; and four, to increase private sector
commercialization of innovations derived from federal research
and development.
I think this last point is so important. The Federal
Government spends billions and billions of dollars on research.
How can we take that good research and commercialize it
appropriately, giving small businesses an opportunity to grow
and expand and create jobs in America. There is no sense in
discovering innovations only to have them lay on the shelf and
not create jobs and not get into the marketplace.
So, this is a very important program of the Federal
Government, and I have taken a particular interest in it. So,
as you all know, when I took over as chair of this Committee in
2009, the SBIR program had literally exhausted its
authorization. It was sputtering.
It was reauthorized temporarily 14 times until, with all of
your help, compromise was reached between the House and the
Senate, and between all the stakeholders, so that we could lay
down a longer-term six-year authorization--and increase the
allocations.
It is very important, in my view, to have the Federal
Government be sensitive that there are some very high-quality
small businesses out there inside this Beltway and outside this
Beltway that are extraordinarily well positioned to bring value
to the taxpayer, to commercialize new products. This
partnership I think is one that should be encouraged.
I want to particularly give special credit to Jere Glover,
who is here as a strong supporter of this program, Dr. Chuck
Wessner, Dr. David Green, our program managers and state SBIR
directors like Dr. Jain, who are also here with us today.
Now, there were challenges to the reauthorization. I do not
want to review those now. You all know what they were. But the
important take away from today is, is that it seems, in the
last two years in particular, the overall SBIR program is
exceeding its goal by over $100 million in 2011 and over $200
million in 2012.
We also have some information about agencies that are not
quite, or departments, meeting their goal, but overall the
numbers of the last two years look particularly encouraging.
Ranking Member Risch has come. I just want to see if there
is anything else that I want to add.
Let me say during today's discussion, I look forward to
hearing from many of you about the real-life impact of the
changes that we made to the SBIR and STTR program, how they are
impacting your sphere of influence, how many more research and
development dollars are getting to small firms, and what some
of the agencies can do to increase that pipeline to small
businesses.
We need to be perfectly clear, though, that the allocation
that we have in our law is a minimum, not a maximum. We want
people to understand that because the Federal Government
believes, and the members of Congress on both sides of the
aisle, that small businesses have a great deal of expertise and
value to bring to the Federal Government and it is not just
large businesses that make all of the discoveries. In fact, the
record would show the opposite.
So, let me turn to Ranking Member Risch for opening remarks
and then I want to acknowledge additional SBIR program managers
who are here to listen, even though they are not on the panel--
John Williams from the Office of Naval Research, Mary Clague
from the National Institute of Standards and Technology, Alan
Rhodes from the National Oceanic and Atmospheric
Administration, Natalie Seiling from Defense Logistics Agency,
Rachel Sack from the Department of Transportation, and Ed Metz
from the Department of Education.
So, they are not on the panel but they are here listening.
We have many, many other people focusing in through the web and
we appreciate their participation as well.
Let me turn it over to my Ranking Member for any opening
remarks that he might have.
OPENING STATEMENT OF HON. JAMES E. RISCH, A U.S. SENATOR FROM
IDAHO
Senator Risch. Thank you, Madam Chairman.
First of all, I apologize. I cannot stay. I have other
commitments this afternoon but this is an important hearing for
all of you who are here to address these issues.
These goals are not a suggestion. If the board of directors
of a private entity gives the executing authorities direction
as to what to do, the board of directors expects that those
directions will be followed; and so, I kind of view this
hearing as what is wrong here, how come we are not getting to
where we need to be.
So, for those of you who are not getting to where you are
required to be, I will be really interested to hear why and I
will be interested to hear what the plans are to get there.
And particularly, I know how things work in the government.
Promises are wonderful but what I am looking for is some very
specific statements and facts as to how everybody intends to
get where the board of directors has said that you need to be.
So, thank you very much.
Chair Landrieu. Thank you, Senator. We appreciate your
participation. Let us begin with Dr. Bobby Savoie, a very good
friend and a constituent from Louisiana.
Thank you, Bobby, for being here and please again one
minute. I know how you can be.
[Laughter.]
No. I am just teasing him. He is very efficient. Just one
minute and then we will go around the room.
Mr. Savoie. Thank you----
Chair Landrieu. You have to lean into your mic to pick up
any volume here. So, if you would just lean into it, that would
be great.
Mr. Savoie. Will do. Thank you, Madam Chairman. My name is
Dr. Bobby Savoie. I am the CEO of a company called Geocent,
headquartered in New Orleans, Louisiana, with offices in
Charleston, South Carolina, Huntsville, the Stennis Space
Center, Baton Rouge, Tulsa, Dallas, and a few other places.
We are primarily an IT and engineering company. This is the
third technology company that I have started and built, all
headquartered in Louisiana, although usually doing a lot of
work elsewhere in the country.
We have done quite a number of SBIRs from Phase I through
Phase III which I am sure we will have a chance to talk about
later.
Chair Landrieu. Good. So, your company has actually
benefitted from an SBIR program. We will come back to that in a
minute.
Dr. Wessner.
Mr. Wessner. Thank you, Senator. My name is Chuck Wessner.
I am the Director of the Technology, Innovation, and
Entrepreneurship program, which I founded at the National
Academy of Sciences, but I wouls emphasize that I am speaking
in a personal capacity.
Thanks to the Congress and with the help of our friends in
key agencies, we have the assignment of assessing the SBIR
program. The good news is that we have brought some empirical
rigor to that assessment and the other good news is that what
we found, after a lengthy assessment led by Dr. Jacques
Gansler, the former Under Secretary of Defense, is that the
program is sound in concept and effective in operation.
We, of course, have suggestions on how the program can be
improved but I think one of the most compelling points is that
the rest of the world is copying the program for their own use.
I look forward to the discussion and thank you for the
time.
Chair Landrieu. Thank you, Doctor, for your input.
Mr. Glover.
Mr. Glover. Our members have several concerns. One is the
capital access. It is still critically hard for small business
venture capitalists really have withdrawn from an early stage
and seed fundings.
Lending is still very tough, very hard. The patent
legislation that is pending in the House and coming over to the
Senate is very anti-small business and small businesses are
very concerned about that for the future of innovation. Things
like the Transfer Act, which is taking basically 22 percent of
the STTR program away from small business.
Again, those are all major concerns. But when we look at
the SBIR reauthorization where Congress took a great step
forward, we are going to do a much better job of transitioning
SBIR technology into the commercial space and especially at
DOD. The law was very specific requiring goals, requiring
incentives, requiring plans, requiring accountability--all of
those things would help fill some of the gaps that venture
capital pulling out of the market has created and lending has
been challenging.
Unfortunately, that has been slow in transitioning. It is
just not happening very quickly and our members are very
concerned. They think that compliance with the law should be
happening much better, much faster, and we should see the
agencies much more involved in transitioning this technology.
Chair Landrieu. Thank you, Jere, I appreciate it.
Mr. Rusco.
Mr. Rusco. Thank you, Madam Chairman. I am Director of
Natural Resources and Environment of the US GAO. As you know,
in the past number of years we have written a number of reports
on various aspects the SBIR and STTR programs, and most
recently we have, responding to mandates in the Reauthorization
Act, reported on fraud, waste, and abuse on data protections
and also on spending requirements and agencies' adherence to
those.
Chair Landrieu. Good. We will look forward to getting some
of that information today.
Dr. Jain.
Mr. Jain. Thank you, Madam Chair. My name is Mahendra Jain
and I am Senior Vice President of the Kentucky Science and
Technology Corporation. It is a nonprofit, 501(c)(3)
organization that works with all the faculty and all the small
technology businesses throughout the State.
Kentucky has been very fortunate to have had the Kentucky
Innovation Act passed in 2000 that created several programs, a
couple of which fall into my portfolio--Kentucky Science and
Engineering Foundation and Kentucky Commercialization Fund.
But on top of these is the SBIR/STTR program that I have
been leading since 2001 in the State. I have been the host of
two national conferences. One of these was the National SBIR
Conference in 2006. That was when NSF used to underwrite the
conference and then last year in 2012 when I hosted in Kentucky
the NIH National SBIR Conference. And I have continued to work
with that program.
Chair Landrieu. Thank you very much.
Mr. Rinaldi.
Mr. Rinaldi. Thank you, ma'am. My name is Chris Rinaldi. I
am the DOD SBIR/STTR program administrator.
As you may be aware, DOD represents over half of the SBIR
program in the Federal Government. We have 13 program managers,
some of whom you named when you listed the attendees.
In DOD, although we have 13 program managers, I am
responsible for implementation policy for the reauthorization,
which we have been working vigorously to achieve.
SBIR is a bright spot and I think that when we see the
public discussion of how Congress and the Federal Government is
not working, SBIR is one program that we can point to as
working well.
Chair Landrieu. Great. You have a big part in that, so we
thank you. We will come back to what you all are doing because
your numbers look very, very good.
Mr. Rinaldi. Thank you.
Chair Landrieu. Mr. Gudger.
Mr. Gudger. Yes, thank you, Madam Chairwoman, and thank
you, Ranking Member Risch. I am the Director of Small Business
and Senior Advisor to the Secretary of Defense on matters of
small business.
I would like to thank you for your support. I think Chris
was exactly right about the quantum leap in the right direction
over the past few years that we have taken in infusing some of
our more innovative programs into programs of record and
getting more small business involvement.
We made tremendous strides with several big policy
initiatives over the past couple of years that aligns with the
direction that Congress set forth for us. I think that we have
seen tremendous positive results as a result of you getting
feedback from all the folks that you named earlier as well as
industry. So, thank you for that.
Chair Landrieu. Okay. Thank you.
Mr. Oliver.
Mr. Oliver. Thank you, Senator. I am Manny Oliver, the
Director of the SBIR and STTR programs at the Department of
Energy. I joined the department about three years ago and I
come from the private sector and was looking forward to
bringing a new approach to the way we run the programs at DOE.
I got here before reauthorization and have been caught up in it
and made a lot of changes to be both responsive to small
businesses as well as improve the outcomes for the Department
of Energy.
Chair Landrieu. Thanks.
Mr. Portnoy.
Mr. Portnoy. Thank you, Madam Chairwoman. My name is Matt
Portnoy and I am the Director of the NIH, National Institutes
of Health, SBIR and STTR program in the Department of Health
and Human Services.
So, we have been working amongst ourselves, with our
colleagues at agencies and with the SBA vigorously over the
past two years to implement the provisions of the
Reauthorization Act, and we have made a good deal of progress,
and we are happy to continue to talk about that.
Thank you.
Chair Landrieu. Okay. I am not sure in my data, staff, do
we have the NIH broken out from HHS; and if not, if we could
get that data that would be good.
Overall the department is up, you know, over the required
allocation.
Mr. Portnoy. That is right. NIH is around 98 percent of the
HHS program and we are meeting and exceeding our set-aside.
Chair Landrieu. Right. Okay. If you would turn your
placards a little bit toward me so I can recognize you.
Ms. Raghavan.
Ms. Raghavan. Thank you, Chair Landrieu and Ranking Member
Risch. My name is Pravina Raghavan. I am the Deputy Associate
Administrator for the Office of Investment and Innovation at
the SBA.
I extend my apologies of our Associate Administrator Javier
Saade. Unfortunately, he was not able to attend today, but he
looks forward to working with all of you.
As you correctly said, the SBIR and STTR programs are
extremely important for small businesses in America. Over $38
billion has been provided in funding and it has funded
companies like QUALCOMM and Symantec but also funded research
that would not normally be commercialized like GPS which is now
an award-winning and a tremendously competitive industry.
The reauthorization was extremely critical, and the SBA has
been supportive of it, and actually has made it one of its top
priorities, in fact, including moving me down from New York to
sit here and help with the transition.
We have been working diligently with all the agencies. We
have done a lot but we have a lot more to do, and we look
forward to working with them in a collaborative manner as they
have been in getting some of these issues tackled and making
sure that we all hit and exceed our goals.
Thank you.
Chair Landrieu. Thank you very much.
Ms. Sobolewski.
Ms. Sobolewski. You got it. Great.
I certainly appreciate the opportunity to be here. My name
is Lisa Sobolewski. I am the Director of the SBIR program
within the Department of Homeland Security. We have two
programs within DHS.
One is in my directorate, the Science & Technology
Directorate. The other one is in the Domestic Nuclear Detection
Office, and we coordinate very closely with the two. But I am
really passionate about helping small businesses meet their
dreams, and especially that dream of getting to Phase III. I
think our directorate is pretty successful in helping companies
get there, including Geocent.
We utilize the SBIR program within DHS to actually meet the
needs of the DHS components, the FEMAs, the ICE, the Coast
Guard, the Secret Service, because we are an operational
department and so small business that provide those innovative
solutions are very important to us.
So, I work with my colleagues very closely to make sure
that we implement the program in such a way to get good
technology solutions for those components.
Thank you.
Chair Landrieu. Excellent. Very well said.
Ms. Houston.
Ms. Houston. Thank you, Senator. I am Jenny Houston from
Warwick Mills in New Hampshire. I have been with the company
for 18 years and we have done several SBIR projects--two Phase
IIs, one with the Navy and one currently with NSF that we are
on the brink of commercializing.
Warwick Mills is a manufacturer and an engineering company
of high-performance, flexible materials that are used in body
armor for both military and law enforcement both in the U.S.
and internationally.
We also do recreational and industrial protective garments
and we do quite a bit of aerospace including the successful
crash bags that were used for NASA's missions.
So, we view the SBIR program as a very important leg up and
a partnership with the agencies that we are working with. Every
technological innovation has its roots somewhere, and we feel
like the advancements that we have made in our SBIR programs
have been very important in our commercial programs and feel
like it is a very good program.
Chair Landrieu. Thank you.
Dr. Green.
Mr. Green. I work for Physical Sciences, a science and
engineering company that takes ideas from concept through to
demonstration and sales.
We have performed SBIRs for a great many agencies. As the
technology matures, we most often partner with either venture
or large businesses to transition the technology effectively.
We thank you for your strong leadership in the
reauthorization of 2009. What I would like to talk to today is
the definition of success. What are those metrics? Is it
revenue, is it patents, is it jobs, is it of a societal
benefit? I hope to have time to illustrate a number of success
stories that we would share with you.
Chair Landrieu. Excellent point. Let us begin. I am just
going to make a note that one of the key goals of the
reauthorization, one of my personal goals, was to get a longer
reauthorization so that we all had a chance to do our best work
on behalf of the taxpayer and the small businesses that we are
trying to work for.
I would remind you all that if we had gotten the two-year
authorization which some people wanted, we would be finished
right now instead of really just getting started.
So, I think we were proven correct, those of us who held
out for a six-year authorization. The wisdom of that. I would
have loved to have had an eight-year authorization. We tried a
14-year authorization. Could not get that far. But we did get
past two years which is really, really important to this
particular program.
I am going to continue to push hard for a longer
reauthorization because this is a long lead time and you have
got to get through the politics from one administration to the
next and try to focus like a laser on the technology, what the
market is, how the market is moving, et cetera, and what
opportunities there are.
So, let me start with you Dr. Wessner. The way this works
is, I am going to throw out a question. If you want to comment
or if I do not call on you and you want to comment, just put
your plaque up like that and I will call on you in as fair an
order as I possibly can when I recognize that you want to
speak. If you want to ask a question or respond to someone, put
up your plaque as well.
We are going to go for about an hour, maybe a little bit
longer.
But Dr. Wessner, let me start with you because I think you
have one of the biggest overviews of this program. What can you
tell us about in the last two years, based on the tweaks that
we did in the reauthorization? What are some of the things that
you are seeing that are really paying off, either in a
particular agency or a particular best practice or a particular
method that is emerging that is promising to you. And then I am
going to ask you if there is anything that you see that is
concerning to us that we should focus on now.
And again, you have to speak into your mic.
Mr. Wessner. Well, thank you, Senator, and let me join Dave
Green in emphasizing that, while I am speaking in a personal
capacity, it is unquestionable that the Nation owes you a great
debt in having this program reauthorized, and getting it
reauthorized with a timeframe that provides the necessary
stability to let it actually work. This stability, of course,
is one of the attributes of the program.
Thanks to this program, our war fighters in the field are
better served, as are those suffering from health challenges.
Valuable products are going into the market that would not
otherwise be going into the market.
Also the program is a great way of improving our nation's
procurement. It increases competition both in quality and price
and, as you know, our procurement system is, to put it mildly,
a little bit sclerotic. So, having new companies come in with
new initiatives is really important and we thank you for that.
There are a number of things that I think you will hear
about. One of the problems that you managed to eliminate was
the question on venture capital firms where an effective
compromise was reached.
But with your permission, I always take these invitations
very seriously and we have a number of quick points that we
would like to make.
Chair Landrieu. Go ahead.
Mr. Wessner. If I may, I want to demonstrate some figures
and it is hard to do that.
Chair Landrieu. That would be terrific. If you want to do
that. I do not know if everybody can see this.
Mr. Wessner. It is on both sides.
Chair Landrieu. Okay.
Mr. Wessner. It is just a quick couple of points. In a
sense, what I am really interested in, Senator, is encouraging
the Committee to take a broader view of innovation and
entrepreneurship other than SBIR per se. The SBIR program is a
key part but it is only one part of our innovation system.
These are a couple of quick points.
I am going to cut this presentation back. There is a good
news, bad news story here. The red is the good news. The other
challenge is China, but China was not there 10 years ago in any
meaningful way. And there has been this huge surge in their R&D
spending.
[GRAPHIC] [TIFF OMITTED]
Chair Landrieu. Let us make sure we get that onto the audio
record. Go back and let me just put that into, go back, okay.
The United States has 28.3 percent of the global share of R&D.
China has a 14.7 and they were not there 10 years ago.
Mr. Wessner. You see Germany and Korea are spending huge
amounts of money and it is interesting. You have those
challenges from East Asia but you also have mature economies in
Europe which are really putting in the money.
What I want to emphasize is that sometimes you hear a
debate which is fundamentally silly is whether the public
sector or the private sector should do it and it is sort of the
importance of mothers versus fathers. There is no versus. They
are both essential.
Federal research is a public good particularly basic
research which provides the foundation for future innovation.
Some people question whether it is a worthwhile investment.
[GRAPHIC] [TIFF OMITTED]
And that is, of course, it is a good investment. It drives
growth. It actually generates directly employment, and the
innovations that you have the list of there, I mean, one of the
funniest things I remember hearing here up in the Senate was a
young staffer once asked me, why do you think semiconductors
are so important. Well, what do you think is in this box. [Cell
phone]
[GRAPHIC] [TIFF OMITTED]
But if I could go on, there is some troubling news here and
the most troubling is that recently there has been a relatively
steady decline in the U.S. R&D position. You hear a lot of
people talk positively about the Reagan years. Well, during
those years, the U.S. was spending significantly more on public
R&D as a proportion of GDP. Perhaps we should return to that
public level of investment in R&D. I do not think the world is
that much safer than it was then.
[GRAPHIC] [TIFF OMITTED]
If you go to the next one, this is the most disturbing. If
you look at this just briefly, Germany under Chancellor Merkel
has been pushing very hard. They have a goal of 3 percent of
GDP for R&D and 7 percent for higher education.
On the other hand, the UK is coasting and not in a good
direction. But if you look at Finland, a small country, with
major high-tech industries, there has been a huge increase.
Look at Japan. Large country, large increase. Look at China and
Korea, shooting right up off the map. These are really major.
[GRAPHIC] [TIFF OMITTED]
I do not like a position where we are flat in terms of our
R&D expenditures and other countries are moving up their
investments really fast. That is not a promising situation.
What is key about this is it is a question of what are we
going to give our children. In 20 years, if God forbid there is
another war, what kind of equipment are we going to have. Let
me go on there very quickly.
Chair Landrieu. Let me just ask you though to clarify, and
if someone has a question to Dr. Wessner because we do want to
move around and I will give you just a few more minutes.
But is this data from just government funding or is it a
combination of government and private sector funding and
university funding in those countries, what you just showed us?
Mr. Wessner. What we are showing you is a combination of
private R&D expenditure and of public R&D expenditure----
Chair Landrieu. And public R&D.
Mr. Wessner [continuing]. On this last slide which is from
the OECD, an international organization.
Chair Landrieu. All right.
Mr. Wessner. And a key point there is that you need both,
and often public expenditure in R&D drives private R&D.
One of the things I wanted to mention just very quickly is
that there is sometimes a discussion of SBIR versus
universities, and I would simply argue that that is again a
mistake. The universities are the sources of many innovations,
but the private sector excels in bringing those to market.
[GRAPHIC] [TIFF OMITTED]
One of the things that we have to work harder at is growing
the SBIR/university link. I have been out recently to some of
the leading institutions like Carnegie Mellon University and
Case Western in Ohio, and it is just discouraging to see how
few SBIR applications are coming from these top-notch
universities. So, we need to have a better outreach there and I
would be eager to hear how we can do better.
[GRAPHIC] [TIFF OMITTED]
One of the things I want to emphasize is that we need to
pay more attention to the manufacturing element in the SBIR
program, and there are two ways to do that.
One is, I just want to breakthrough the idea that we can
put less emphasis on manufacturing and rely on services.
[GRAPHIC] [TIFF OMITTED]
Well, and the point is that in agriculture we feed
ourselves and we export to the world but we are not doing that
in manufacturing.
If we could go to the next one please.
The point is simply that we are losing both in traditional
manufacturing, we are also losing in high-tech manufacturing.
Chair Landrieu. This is the side that is up.
Mr. Wessner. Yes. Exactly. I used to work in Treasury back
here when we were not worried about this; and everybody always
told us, oh, we could lose these. Do you know what low-tech
manufacturing it is is that is where no one in my family works.
That is the usual definition of it.
But up here is where you start to find that where we are
losing at is at the very cutting-edge. So, this is alarming. If
you are interested in national security--well, if we cannot
make things, we cannot defend ourselves. We have to make better
things than anyone else.
And if you want jobs, which we all do, then we have to do
something about that.
Chair Landrieu. When did that red line start to go down, in
what year?
Mr. Wessner. In 2000. But could I suggest that this is a
very nonpartisan process. There are a number of long-term
trends, and this is what I am going to get to next is what the
rest of the world is doing.
You know, people ask, how do the Germans do this? Well,
because they have programs that are long-term, with a high
level focus on manufacturing. That is where this Committee has
been a great strength in focusing on small companies and how to
help them. They have substantial and sustained funding.
There is a huge training component. We talk about
workforce. This is what the rest of the world is doing. They
are training at the high end, they are training at the middle,
and they are training at the lower end.
They offer customized and flexible field services.
[GRAPHIC] [TIFF OMITTED]
If you look at this overhead, Germany has a balanced trade
account with China. Now, German workers make substantially more
than U.S. manufacturing workers make. They have heavy
environmental regulations.
Their unions have representatives on company boards. It is
not an unfettered capitalist environment, and yet they have a
balanced trade account with China. One reason for this is that
they have the Fraunhofer systems, which has over 60 research
institutes and 22,000 employees and is funded at two and a half
billion dollars annually.
[GRAPHIC] [TIFF OMITTED]
These programs are not confined to Germany. Canada, for
example, is one-tenth our size in population and in the size of
economy. Yet, they outspend our Manufacturing Extension
Partnership program two to one.
[GRAPHIC] [TIFF OMITTED]
I would argue that there is a message here. Functionally
speaking, we are trying to compete with a good college team
against the pro-teams; and guess what, that does not work so
well.
So, if you look here at the next slide, we have the problem
that we are home alone. A company with an awful lot of promise
cannot get the support it needs out of the industrial commons,
and the contribution of the industrial commons is something
that has been identified by Professors Pisano and Shih up at
the Harvard Business School.
So, one other thing I want to really bring to your
attention looking forward is how do we find a better way of
supporting an industrial commons. And a second point which is a
real challenge for some of the smaller forum that has been
brought to my attention by the Department of Defense is the
cyber security element.
When a firm wins an SBIR award, that is a signal to some
places of the world to hack them immediately and persistently;
and our firms are entrepreneurial, focused on products and they
are not spending all of their time in cyber defense.
So, we need to have an industrial commons where you can
have a manufacturing institute that provides testing equipment,
that provides advice that you need and at the same time can
provide you advice on how to keep your intellectual properties.
Chair Landrieu. Excellent point.
Does anybody else want to comment? Okay. I see you go
ahead, Ms. Houston, because this has spurred a lot of thinking
in my head. I hope it does for yours.
Go ahead, Mr. Houston.
Ms. Houston. I just want to say how much I appreciate----
Chair Landrieu. You have to speak into your mic. You have
got to lean into it please.
Ms. Houston. I apologize.
Chair Landrieu. That is okay.
Ms. Houston. Small businesses have two choices if they want
to do innovative research. They can do IRDD, internal research
and development dollars, or they can get a program like the
SBIR or other programs.
If you get a Phase I and a Phase II and you have close to a
million dollars worth of research dollars that you are doing,
to be able to fund that as a small company means that you, say
you get, you put aside 10 percent of your profits.
You would have to be making $10 million and spend every
nickel of your profits to get the same amount of research. That
is a very tall order for a small business that only makes 10
million to come up with all of the money toward research.
Without these programs, companies will not do the internal
research and development dollars.
Chair Landrieu. Dr. Oliver.
Mr. Oliver. Thank you. I wanted to comment on the
connection between SBIR and universities. That is something we
have given a lot of thought at DOE, since the science agencies
pump a lot of money into the universities and federal labs.
Something we started last year was trying to reach out to
the tech transfer offices at universities and federal labs. We
fund the basic science but we do not track what happens when it
goes over to the tech transfer office.
Now we are working with the tech transfer offices, both at
Federal labs and universities, and taking some of those tech
transfer opportunities and putting them directly in our
solicitations to help move them out from the universities and
labs into the private sector. Last year we started with the DOE
national labs. This year we have included three research
universities, a total of 12 tech transfer opportunities from
those universities, in our SBIR solicitations.
Chair Landrieu. Mr. Glover.
Mr. Glover. I just want to totally amplify what Dr. Wessner
said. One of the great frustrations for me is this
reauthorization bill did tremendous things to try to encourage
and in some cases require the agencies to do more
commercialization.
My frustration is two years after that bill was passed, we
still do not see the results and things are getting worse
internationally. Exports, high technology exports in the world,
457 billion for China, 221 billion for the United States, less
than half. Germany, 186, almost as much as us and a much
smaller country. Japan, 126, exporting high technology.
Exports are jobs. We are not creating the jobs in America.
If we do not create the jobs in America, the next generation is
going to suffer.
So, when some agencies see my frustration, it is because I
had great expectations. I had great hopes that we could make a
huge transition and prove some of these things can really work,
and we are going to have to do that for the next generation.
Chair Landrieu. Okay. And I am going to ask some of the
agencies present here to specifically respond to this about
what you have done in your agency or what you have not done but
what you plan to do.
But, Dr. Jain, let me respond to you and also, when you are
answering, could you tell me what other states besides Kentucky
have a statewide SBIR program; and if not, if you could submit
that to the Committee within two weeks.
Mr. Jain. I can. There are several states that I talked
with for their input--before I came here including South
Dakota, Wisconsin, Minnesota, Michigan, Louisiana, and
Virginia. And, I also talked with a couple of the service
providers as well.
Of course, Kentucky is doing well as you recognized. But
Wisconsin, for example, has an innovation center, the Center
for Technology Commercialization, that works through the
Wisconsin Entrepreneurs Network throughout the State. They are
working with the University of Wisconsin--WARF--which is very
well known for holding and commercializing the IP by
transferring the technologies.
And so, if you can transfer the technologies out of the
university and somehow create new startup businesses, and then
you work with those companies through programs like SBIR, you
can develop a good link between the university and small
business because the faculty is getting involved there.
In Kentucky, there are two major research universities, the
University of Louisville and the University of Kentucky. I have
been working with those universities for 10 years now.
Now, they have developed and implemented at least for the
last five years, a policy called Entrepreneurial Leave. So, a
faculty who has a technology that can be transferred and
commercialized can go on entrepreneurial leave for six months,
commit 51 percent of their time to the company, and manage the
SBIR/STTR grant. And, during the gap period of Phase I and
Phase II, they can come back to the university.
So, it is a leave policy that is working very well at these
universities and I think other universities can also learn from
their experience and see how their faculty can benefit from
such policies, because they are worried about their benefits.
They are worried about their tenure. If faculty can get credit
for what they do and if they can get benefits, more and more
faculty would look at the SBIR/STTR program.
Chair Landrieu. Interesting, and I really want the staff to
make a note of that. It is sort of a more flexible approach to
kind of a partnership with our professors and inventors on our
university campuses to allow them to do what they want to do
which is to teach but also so that they can promote a
technology that creates jobs and benefits.
And I want to get back to Dr. Green's question to all of us
is how do we measure success in this program? Is it the number
of jobs created? Is it jobs plus wealth? Or is it the general
public's benefit, a greater good or a quality of life? But Ms.
Lisa, go ahead. Ms. Sobolewski.
Ms. Sobolewski. So, I wanted to comment, go back to Jere's
comment about the commercialization. As many of you know, and I
am not here to make excuses for sure; but we had what? Over 40
some provisions of the reauthorization to implement from an
agency perspective, and many of us had solicitations in the
works. So, it took a little bit of time. But what DHS has done
and what I wanted to go on record to say is what is very
important to us is the 10 percent civilian commercialization
pilot program because within DHS especially, we are a medium
size agency.
My S&T directorate SBIR budget is about $14 million; DNDO
is roughly 2- to 4,000,000. So, we are not talking billions of
dollars here. And what myself and my colleague have seen is
that we invest in the technology in Phase I and Phase II and
then we just do not have the funding to take it further with
non-SBIR funds to take it into operation. So, that 10 percent
is really helping us get some of these companies over the hump
and do some further testing and evaluation.
And in response to Jere's question, because of some of the
other priorities that we were all working on with the
implementation, we responded to SBA's request for our civilian
commercialization business pilot program in the July time frame
of this year.
So, yes, Jere, it was a year and a half into it but we had
all these other things that we were implementing at the time.
We did receive approval fairly quickly, and we will be
implementing that starting in 2014, and we already had initial
discussions with several of our technical divisions that will
provide funding into that program to help these companies.
So, I wanted to let you know that that civilian
commercialization readiness business pilot program is extremely
important for DHS especially to be able to use that 10 percent
of our SBIR funds for such purposes.
Chair Landrieu. Great. Dr. Green, and I am going to ask
anybody else who wants to follow up on that comment how this 10
percent is working either at your agency or how you have
observed it at an agency or department that you are familiar
with.
But, Dr. Green, go ahead.
Mr. Green. First, I wanted to return to the comment that
Dr. Wessner did about cyber security.
As part of the reauthorization, there is an increased
amount of training and education for new businesses; and I
think that, in addition to transition philosophy and all,
adding a cyber security component to that to help ``three guys
in a garage'' figure out what the minimum they ought to do
would be a very good course to add for that community.
I wanted to touch again on successes, if I may. Some of
them where you create licenses to another company is a powerful
pathway. We had an NIH-funded SBIR which had to do with
obtaining better images of your retina.
We partnered with a large company. In the last six years,
they sold 12,000 units. There is no way we could have scaled up
to that, and those units perform tens of millions of eye exams.
I really do not know how to quantify that as a societal
benefit or a monetary value but it is something where the
technology has gotten inserted, and I am very proud of that.
Under an EPA SBIR, we have developed a natural gas leak
detector, partnered with another company. They have sold 2400
units. As a result of this, there are now 2000 quality jobs in
49 states surveying the gas lines and in a dozen other
countries.
We won an R&D 100 award. We had a Phase II SBIR but the
revenue in return is rather modest; nonetheless, our partner is
benefitting and society is benefitting by having greater
safety.
One more technology that is on the verge of being a
success: last week I was here in Washington and the EPA gave
out its 2013 Presidential Green Chemistry Awards.
One of our subsidiaries, Faraday Technology, won that award
for a technology that will replace toxic hexavalent chrome
(chrome six) with chrome three.
There is a long way to go but the EPA and the partners are
all advocating that we need to make this change to reduce
carcinogens in our world, and so I am very pleased with that.
Another path we take is to partner with the venture
community once the technology has been matured and developed
and a certain amount of risk removed.
We have spun out five companies partnering with the venture
community most often: A kidney stone lithotriper under NIH
funding; an environmental emissions monitor that is still in
place based on NASA and NSF SBIR, that is in use today
monitoring combustion products; A telecom technology for dense
wavelength division multiplexing which had NASA and Air Force
SBIR funding.
Again, often neither we nor the funding agency can see the
path that will ultimately be the successful commercial
incarnation. We are currently working in digital cinema, based
on an Air Force SBIR; and that is a small company currently
operating in New Hampshire.
It has received 35 million in venture funding, has 30
employees, and is making progress toward reaching the
marketplace.
Chair Landrieu. Okay.
Mr. Green. The third path we follow is whether it is such a
small market that no single-product company could exist. Every
material that has gone into space has been tested in an atomic
oxygen facility that we developed with a NASA SBIR--either at
our facility or in space facilities around the world in Europe
and Japan and in this country.
A company would not exist that could only build those four
devices. So, having a company that is able to do that and many
other things is our goal.
Chair Landrieu. I am going to have to ask you to wrap up.
Those are very good examples of successes; and if anybody wants
to comment about basically this technology transferring to a
larger company that just improves and makes more efficient and
grows and expands and how do we count those and is that the
same as launching technology that grows a whole new business
out of the garage and then may become 10,000.
But let me get the Director of Small Business for DOD. Go
ahead, Andre.
Mr. Gudger. Thank you. There were some very good points. I
mean Jere made some very good points and Dr. Wessner made some
great points as well.
In 2011 when I took over this job, one of my biggest rocks,
I will call it, was to modernize our industrial base. I knew
the importance of our industrial commons in gaining
affordability out of our programs and gaining significant
capability so that we can not only win future or potential
conflicts but we can deter them with that capability.
And I looked at our industrial base and saw where we had
areas of vulnerability and where we could be weak, and I knew
that we had to make those, make a significant change.
So, we started this process called the five-star
transformational process that focused on outreach,
commercialization----
Chair Landrieu. Can you repeat that please? The what
process?
Mr. Gudger. The five-star transformational process.
Chair Landrieu. Five-star transformational process.
Mr. Gudger. And Chris is going to talk a little bit more
about that later. I give him the hard stuff to do.
Mr. Rinaldi. Thank you, sir.
Mr. Gudger. But, you know, the importance of that was
figuring out how do we perform outreach, how do we increase
commercialization, how do we streamline the programs we have,
move them from the 20th century into the 21st, how do we have
reporting and compliance.
And so, one of the first things we did was address capital.
That was a very significant thing since the DOD is not
necessarily a lending institution but we can pay our small
businesses faster. And that is when you saw the accelerated
payments kick in because I knew that small businesses, and we
knew at DOD that small businesses would do more with more.
So getting money in their pockets they would make
investments in technologies, improve their products and hire
the right people because innovation is not just technology.
Sometimes it is people.
And so we have to make investments in our critical
thinking, sequential thinking, personnel so that we can make
tremendous improvements.
Chair Landrieu. Good. I am looking forward, Chris, to you
filling in some of that on some specifics but thank you all. We
will get back to that in a minute.
Mr. Portnoy, you wanted to say something. Go ahead.
Mr. Portnoy. Yes, thank you, Madam Chairwoman.
I would like to bring a couple of points together that were
brought up by both Dr. Green and Mr. Glover about
commercialization in general and what we at the NIH have been
doing and will be doing with newer authorities.
And so, as Dr. Green said, commercialization is not
necessarily a linear path. It rarely is, and it takes many
forms including direct sales from the company that gets the
award but frequently and especially in life science space,
depending on the technology, it is long in time and high in
dollar investment to get technology into the marketplace.
There are frequently partnerships, licensing deals,
strategic partners, FDA clearance, et cetera. All of this can
take a very long time to get technology to the market.
And so, we at the NIH have developed many programs over the
years to help this commercialization along and will be using
newer authority provided under the reauthorizations.
So, we have had what we call a Phase IIB. Many agencies
have Phase IIBs. Everybody's is slightly different. Ours is a
sequential Phase II that we have been doing for nearly 10 years
now to provide a second Phase II to companies that are really
moving their technology by and large towards FDA approval and
that really has helped companies move further along to get them
to the inflection point where they can attract the next level
of investment, be it venture, angel, or strategic partner.
We have had under the discretionary technical assistance
authority both in the former and the current reauthorization,
we have had a Phase I and a Phase II program. Our Phase II
program, called commercialization assistance program, really
helps our Phase II companies learn about to ``B'' in SBIR about
business.
Frequently, many of our companies, especially our new
companies to the program which are around one third of our
companies every year are new, they are great scientists and
they do great research, but they do not quite understand ``B''
in how to take their research and get it into the commercial
marketplace.
So, we provide lots of guidance, training, and principal
advisers to help them along the way, and we are going to be
continuing that program.
We have expanded it to STTR companies as we are allowed to
do and increase the amount per company per the reauthorization,
and we have been excited to do that.
And then just finally, along with the Department of
Homeland Security, we applied to SBA over this past summer to
institute a Civilian Commercial Readiness Pilot Program and
received approval, and we are working on that and hope to roll
it out either later in fiscal year 2014 or early fiscal year
2015 depending on the timing.
Chair Landrieu. And this would be a good time to call on
the SBA because they have got their plaque up, but also I want
to, we have been trying to help them to maintain some ability
within their budget to really promote entrepreneurship,
development, and training based around the country.
So, I am hoping that you all are making the connections
here with some of these companies emerging out of what we are
talking about here, getting them the opportunities for either a
mentorship through the SCORE program which are at 350 chapters
that work voluntarily to do exactly that, to help somebody that
is wanting to start a business, get it up and started or
through some of our partnership programs with the likes of
Goldman Sachs and American Express or with some of our other
programs that you all operate internally.
So, go ahead and maybe you could comment about that.
Ms. Raghavan. Thank you. So, first, I would like to say
that the Civilian Commercialization Pilot Program, we have four
agencies actually apply and all have been approved. So, we are
looking forward to working with them to ensure that we have
more commercialization.
In fact, it is NIST and NASA which are the other two
agencies as well; and it is really based on what DOD has done
with their commercialization so that we can increase more of
these businesses, small businesses in particular, to get to the
next phase.
And everyone is right. The next phase is very different for
different companies. Some it is, some will become the next
Googles of the world, you know, three guys in a garage who then
go and get a billion dollar IPO, and the others will get
bought.
We see quite a lot of that, and one of the things that we
are working with the SBA in conjunction with all the partner
agencies is to figure out ways to get people to understand to
be in business, because it is great to have a wonderful idea,
but then how do we make you commercialize it.
And part of it is that we have monthly webinars where the
actual program managers themselves come all on and talk. The
last one was NIH had over 600 people across the country.
We have been doing these webinars due to travel
restrictions. It is a great way, and people can listen at any
time that they want.
Also, we are trying to kind of marry what is going on in
the commercialization process with other resource partners. So,
involving our SBDCs, our SCORE, Women's Business Centers, for
them to understand what an SBIR company is and how can they
help them get through the business cycle.
And then on top of that, we are trying to do demo days
where we actually bring in SBIR recipient and have them mentor
with accelerators across the country because it is sometimes a
local touch that you need. It is not, okay, I am going to
listen to a webinar. I know how to do a website, and I can
figure out how to do a business plan but who is that person who
is actually going to accelerate my growth in the next six
months.
And so, working with those accelerators who also have
funding mechanisms which is very important so that these
businesses can get additional funds.
Chair Landrieu. Well, the SBA has a very important role,
coordinating, cheerleading, facilitating, et cetera, in this. I
want to hear from the Department of Defense.
But, Jere, your plaque has been up for a while. So, do you
want to comment?
Mr. Glover. Just quickly. Dr. Green's examples where all
things that would, under the DOD commercialization achievement
index, would be counted as follow-on funding. The law is very
clear. Anything that logically flows from or extends SBIR
technology counts. I have been told informally by SBA that they
are going to use that broader DOD definition.
So, I think all of that will be included hopefully. That is
what we have been told and that is the way the instructions
will be reading.
Pravina is nodding yes so I think some of your concerns
have already been alleviated. So, thank you.
Chair Landrieu. I would love to hear from the Department of
Defense and then we will get back to you, Dr. Wessner. You
started all of this conversation with your excellent
presentation.
But can Defense talk about some of the successes that you
all have had, and Chris, we really thank you for your
leadership on that.
Mr. Rinaldi. Well, let me see if I can put it in the
context of the reauthorization, which may be helpful.
I want to begin by saying you were corect in getting the
longer-term reauthorization. The longer term was most helpful
because it gave us time to steer this big ship. The DOD is a
huge ship and it takes time to change direction.
Let me walk you through quickly what happened since
Congress put the reauthorization in place. The reauthorization
is quite voluminous and it added many new positive revisions to
the program but it increased the complexity by an order of
magnitude.
Then on top of that, the SBA put out a large SBA policy
directive which also put good things in place, but also
increased the complexity of the program.
Fortunately, the basic program is still intact, Phase I,
Phase II, Phase III, the way we have been doing it for years.
But as we go through the implementation, we may encounter
unintended consequences.
To responsibly implement this program across the
department, we separated out tactical imperatives from
strategic imperatives, which I would like to describe.
The tactical imperatives are upgrades that we needed to
make in the department to keep the ball rolling, and they were
things such as processes, IT systems, and websites.
We completely rewrote our solicitation so that it complied
with the legislation and the FAR and the DFAR requirements. We
had to keep the program going. We were flying the plane and
building it at the same time.
Since the reauthorization, we put out a year's worth of
solicitations: five of them, and that amounts to about 700
topics, 11,000 proposals, and 3,000 awards. So, we successfully
kept everything moving.
And DOD SBIR implementation is a high priority
notwithstanding sequestration, furloughs, and budget
challenges.
Now, we are talking about strategic imperatives that are in
the reauthorization legislation. This represented excellent
strategic foresight, which is why Andre mentioned the five-star
program.
The five pillars are outreach, commercialization,
streamlining, reporting, and policy compliance; and to really
understand how this program works, we need to understand the
interrelationships between all of them.
If we do outreach well, we are going to get new people into
this program, and we are going to get new ideas. DOD currently
gets roughly 30 percent of new businesses in every single
solicitation. So, we are creating businesses at the rate of
about 30 percent.
Streamlining. When we talk about getting money out the door
to small businesses, streamlining is very important. We have to
make sure that we get awards and money out as quickly as
possible.
Commercialization. I know Jere is big on commercialization.
Jere's model is to sell Phase III back to DOD. I believe the
broader model is: have small businesses work on megatrends that
sell to the world. That is what I think the broad model is, and
the gentleman who spoke earlier, Mr. Green, pointed that out
exactly.
Chair Landrieu. But this is an important subject to think
about why the model is, and maybe there is one best model or
maybe there are several equal models.
Let us talk a little bit about that. And I want to come
back. I do not mean to interrupt you, Chris.
Mr. Rinaldi. Yes, ma'am.
Chair Landrieu. If there are portions of our law that are
more complicated than they need to be, please let us know. Just
submit that in writing. I mean, our goal, and I really want to
welcome Senator Shaheen, who has been an absolutely spectacular
partner and former governor, and former chief economic
development officer of her State. She understands this very
well.
I mean, you do need to have some kind of organizational
structure in an industrial commons. I love that term. An
industrial commons. There have got to be some rules as to how
people operate in that commons so that it works well but you
want to have as few rules and regulations as possible, as much
freedom and flexibility to reach the goals. So if there is
something in our reauthorization that you think is
unnecessarily complicated, please let us know.
Dr. Wessner, let me get to you. His presentation was
extraordinary. He is going to give it to us. I may have you
come speak to the whole Senate about this. I think the whole
Senate would be interested, but go ahead, Doctor.
Mr. Wessner. Well, thank you, ma'am. I am always very
pleased when a Senator is pleased.
Chair Landrieu. Yes, it is good to keep Senators happy
because when we are not, we get very grumpy.
[Laughter.]
Mr. Wessner. Let me make this one very quick overview
observation. I think that one key question that has arisen here
is what are we doing for the innovation ecosystem around the
SBIR award winners, how can we improve that industrial commons.
And there are three things that are worth mentioning. One
is we just completed a study which is outside the door in the
Manufacturing Extension Program and the answer of that
evaluation was that that program works pretty well but it is
123 million in a 16 trillion economy; and our competitors, as I
illustrated earlier, are outspending us vastly.
Secondly, Senator Brown and Senator Blunt have introduced
legislation for a network for manufacturing innovations and
that would be a way of addressing this.
You know, in the 1960s we had the missile gap which was
more or less real. We certainly have a manufacturing support
gap that we need to address if we are going to compete.
Thirdly, you mentioned accelerators or several have
mentioned accelerators and incubators. We would like to do some
work. We just approved that on our board on Science Technology
and Economic Policy, to figure out what works.
You could put a lot of money in an incubator and not
accomplish much. So, we need to be very careful about what best
practice is. But my point is that there is a whole series of
things with a network that the Senators have proposed, with
strengthening MAP, getting a better grasp on best practice to
support.
You raised a very good question. Is there one best practice
model or equal models? And I would submit that there are many
appropriate models.
The diversity of the agencies is what it is. Just the--very
quickly, you asked the question of Dr. Green about metrics. You
can look at publications, patent applications, patent granting
and licensing. That is one group.
The second group that you can look at is commercialization.
About 60 percent in our last study of the SBIR firms actually
reach the market.
Now, in some cases that may mean they sold their mother
one; but in other cases, 3 to 5 percent of those, they are
making serious money and that is normal.
You know, our joke that the venture capitalist with all
their money and all their expertise, they succeed 2 out of 20
times whereas our poor colleagues here only succeed one out of
10. So, you see the difference.
Chair Landrieu. Yes.
Mr. Wessner. The other is that I think it is important to
understand that with the commercialization you get the cost-
effective procurement that you do not get otherwise.
You get the hard mission solved. I mean, I think, ma'am, I
just have enormous respect. You know, we would like to throw a
small car under the planet Mars and could you figure out some
way of cushioning that. I mean, that is the most amazing task.
Yes. And successfully being a key point.
Ms. Houston. A very difficult public display of R&D that
did not go well. It would have been quite hard on the company
of whose fault it was that it went splat.
Mr. Wessner. The way things usually go it would have been
hard on the president in many cases.
Ms. Houston. That is true.
Mr. Wessner. The other thing that I think Dr. Portnoy
raised which is really important to understand is the
unexpected outcomes. I mean, the LASIK eye surgery. You had a
technology designed to hold spacecraft together and in so
naturally that was going to end up in LASIK eye surgery. I mean
no one had any idea.
And that is one of the great geniuses of the systems is
that you put these technologies out there and the private
sector picks them up and enables them.
So, let me stop there but I really want to emphasize the
importance of the broader ecosystem. We cannot just drive SBIR
companies and then have a foreign power come in and hack their
stuff and take it away. I really like the idea that you
suggested of operational----
Chair Landrieu. Absolutely. We need a security, we need a
parameter, we need a perimeter around this. We have to think
through that and we need this ecosystem which our Committee
talks a lot about.
But, let me recognize Senator Shaheen for some comments and
she may have a question for some of you.
Senator Shaheen. Well, thank you very much, Senator
Landrieu, and thank you all very much for being here, and I
want to recognize Jenny Houston, who is the Executive Vice
President at Warwick Mills in New Ipswich, New Hampshire.
It is very nice and clearly you have already let the panel
know all of the great things you do at Warwick Mills. I could
tell by the response from Mr. Wessner so I do not need to say
more about what you are doing there.
But let me also recognize Dave Green from PSI as well
because you have a facility in New Hampshire also, Laser Light
Engines. So, we are delighted to have both of you here.
I am sure you all have spoken to the importance of SBIR and
STTR and innovation. I could hear it just since I came in and
the remarks that I had a chance to hear you talk about.
I am especially proud of this program from New Hampshire
because Senator Warren Rudman was the author of the legislation
originally from New Hampshire, and so we have been watching it
closely, and New Hampshire companies have benefitted greatly
from the legislation.
I think that speaks to the innovation that is going on
there. And one of the things that we have heard, Senator
Ayotte, my other Senate colleague from New Hampshire and I did
a small business hearing when we were working on
reauthorization for SBIR.
One of the concerns that we heard was around the accounting
and regulatory compliance and you may have already addressed
this in your discussions but what we heard was concern that the
different federal agencies have different standards and was
there a way to make all of those standards compliant in a way
that would reduce the unnecessary paperwork and overhead.
I do not know if anybody has had an experience with that
and you want to speak to that but that is my question. Is there
a way for us to be able to reduce the paperwork to make the
programs easier for small businesses who, as you know, often do
not have a lot of people who do compliance but we want the
people that they have working on innovation as opposed to
working on paperwork, and so what can we do to streamline the
programs in a way that make them work better for small
business?
Chair Landrieu. Anybody. Jere.
Mr. Glover. Well, Senators Landrieu and Shaheen, I want to
commend you folks for drawing attention to a concern. Your
staff and armed services staff met with DCAA. That agency in
particular was having trouble being consistent with itself.
Things small businesses had done two or three years ago
that were perfectly acceptable now are not, and so your staff
had a meeting with them. SBTC has had five meetings with them
now, SBDC has, and I am pleased to report that DCAA is
recognizing that they should not be applying the same standard
to a small business that they do to Boeing.
They should not be doing the same kind of auditing, the
same kind of concerns on small business that they do with big
companies. DCAA has 1,000 new auditors to train. This is a
success story.
Senators, you focused the attention on them. SBTC has met
with the head of DCAA five times, explaining the problems. They
are working with us. Hopefully, we are going to see some real
positive results coming out of that.
So, thank you Senators Landrieu and Shaheen for drawing the
attention. Thank you for having your staffs and Armed Services
staff meet with DCAA. I am pleased to say at this stage we have
had five meetings and they are very promising.
Chair Landrieu. Okay. Senator, another question?
Senator Shaheen. No.
Chair Landrieu. Do you want to comment?
Ms. Raghavan. I was just actually going to say that
simplification is a very important part and all of us have been
looking at it--at reauthorization.
And one of the things from doing the Interagency Policy
Committee reports and working together is that we have decided
to have working groups start off in the new year to look at
some of the other aspects, and one of them is looking at
simplification and how do we actually get to more companies and
make it easier for them and is it using technology that we
already have such as using things that make it just easier to
read a solicitation or just having at one place and really
looking at that and all the agencies have been great on coming
on board and working on these groups to make sure that we do
make it easier for small businesses to participate and actually
become successful.
Chair Landrieu. Okay. We have about 10 or 15 minutes left.
We are going to end our meeting a little bit shorter than 4:00.
But let me call your attention to the graph which you can see
are in Mardi Gras colors. We are in great anticipation of Mardi
Gras celebrations soon in Louisiana and other places, other
lucky places.
You all can see that the green states are the states that
receive the most number of awards. That would be Washington
State, California on the West Coast, New York, Massachusetts,
Virginia, North Carolina on the East Coast, Texas, South.
Then, of course, the yellow are the middle 16 states, and
then the bottom 18 are in the purple which would be
unfortunately Louisiana, Mississippi, South Carolina, West
Virginia, four of our poorest states in the union, and then up
towards the north central part of our country.
I want to ask each of you representing a department or
agency here. What are you doing to meet the new goals of our
reauthorization which were to reach out more aggressively to
some of these states? And whoever wants to start with what you
have done or what you are planning to do would be very helpful.
Go ahead, Manny.
Mr. Oliver. Yes, I think that there are a couple of things
we have done and one thing that we are planning to do with
regard to outreach. In terms of what we have done, I think
Pravina mentioned webinars before. Starting in 2012, we
implemented webinar-based outreach; and over the last two
years, we have reached almost 3,000 potential applicants
through that program. This is much greater than the number of
people we meet through National SBIR Conferences.
Applicants from every state in addition to D.C. and Puerto
Rico have attended those webinars. So, we are getting to those
underrepresented states. For how DOE defines underrepresented
states, about 30 percent of the webinar participants have come
from those states. So, webinars are a much more cost-effective
way to do outreach, and we align them with our solicitations.
When you go out and do outreach, if you do not have a topic
ready for somebody to apply to, it just goes to the back of the
mind and then they forget about it. So, we time our webinars to
occur when we release topics. We get our program managers in
front of applicants to tell them what they are looking for in
terms of technology and try to make it a much more personal
process even though it is still a webinar. We have found that
to be very successful.
For particular states, we have also reached out to the
SBDCs, the Small Business Development Centers, and also other
organizations. For DOE, a lot of the clean tech organizations
exist in some of these states and we have gone out to those
states to do personal visits and talk to those communities.
Now, we have not visited all the underrepresented states but we
are working our way through the list.
Finally, what we are planning to do for this year with the
administrative funds is to implement a Phase Zero assistance
program similar to that in Kentucky. That program is focused on
applicants from Kentucky but we would like to include all of
the underrepresented groups. These include the minority-owned
businesses, woman-owned small businesses, and especially first-
time applicants to government R&D.
Chair Landrieu. All right. That is at the Department of
Energy. Are there any other departments that want to speak up
about what they are doing or planning to do?
Go ahead, Mr. Portnoy.
Mr. Portnoy. Thank you. So, at the NIH, we have been doing
many of the similar things; and in fact, I would say also we
are and will be coordinating with SBA on both webinars and on
more or less an outreach plan across all agencies.
But we have also been working with our IDeA program, the
Institutional Development Award program which represents within
NIH the 23 states plus D.C. and Puerto Rico which are
underrepresented in NIH funding and coordinating with that
program to present at their regional meetings in the purple
states across the country.
In addition, we held our large annual conference this past
year a few months ago in Sioux Falls, South Dakota, a
purposeful attempt to hit both geographically regions of the
country we do not get to and also to a place where we do not
have a lot of awards.
The conference was one week after the shutdown so we lost
attendees but we did manage to get all of us out there and we
did have over 370 plus attendees. Of course, quite a number
from South Dakota, over 100, and other various places.
Chair Landrieu. That is a very good strategy too, holding
your conferences in the purple states to just give them more
exposure. That is a good idea.
Mr. Portnoy. Thank you.
Chair Landrieu. Homeland Security.
Ms. Sobolewski. Sure. Thank you, Senator.
Along with Manny from DOE and Matt, we are doing very
similar things with webinars. We reach out to several women-
owned small business organizations and try to leverage some of
that and some of the socially and economically disadvantaged.
We go out and speak or do webinars or webcasts to any
organization that reaches out to us including states.
What is more puzzling to us in some of those purple states
because I firmly believe you can send me to, I will not pick
one but any one that does not typically do Homeland Security-
type of technologies and we would not get one proposal.
But what is puzzling to us are states like Ohio or Florida
or Idaho that we know have technologies that are as strong as
in some of these other agencies, and for some reason they are
submitting proposals to us but they are not being successful.
And so, we are trying to scratch our heads and figure out
how can we communicate our needs better so that they have
higher success rates along that way too.
So, we reach out to underrepresented groups and in states
as well but also those states that we think should be having
more success with DHS but for whatever the reason are not.
Chair Landrieu. Okay. Dr. Jain.
Mr. Jain. Madam, as I was indicating earlier, 2006 was the
last year when federal agencies really were underwriting the
National SBIR Conference. NSF used to underwrite the national
conference.
After that year, holding the National SBIR Conference fell
upon states. States do not have resources to hold these
conferences. They require a big commitment: financial and
personal. Very few states can make these commitments. Certainly
not those states that are in purple and even in yellow on the
map. They do not really have enough manpower or resources.
Yes, agencies have been doing their own conferences. For
example, Kentucky hosted the annual NIH conference in 2012 but
I know did not get any financial support from NIH. It is hard
to come up with a program that can be supported financially.
You make commitments for hotels, you make commitments for
speakers and for other things. For the last two years or
beginning this year (2013), the national SBIR conference is
being held here in Washington, D.C., thanks to the leadership
of John Williams, who has been named the SBIR person of the
year. He has taken the lead to coordinate the national SBIR
conference also in 2014.
But for a small business person to come to D.C. for four
days, is nearly impossible. There are a lot of travel costs for
him or for her.
I think we need to bring back the conferences in the fall
and the spring. These can be held at different geographical
locations, and I think you will see a lot more businesses will
come.
Outreach has taken a hit. Yes, the SBIR funding level has
gone up. The SBIR/STTR program reauthorization is now there but
I think that outreach has been overlooked. That part has to be
taken up by all the agencies.
I agree that webinars are good and have a place, but they
are not the alternative for in person contact at national
conferences. I know what happens in Kentucky and how we have
been successful. We meet with people one on one, hold their
hands, and tell them their ideas can work.
If there is a high risk, Federal agencies will take that
risk for you but you need to develop your proposal. We teach
them how to do this. We bring them on board.
They do not listen to me anymore because I repeat things
like a broken record. But they will listen to the federal
agencies because they know that they control the purse. That is
where the money is coming from.
Yes, we got support from the governor and the legislators
in Kentucky. We have a Kentucky Matching Funds Program that is
supporting our businesses but first they have to win the
federal SBIR/STTR program before they can apply for that. That
is number one. So, federal agency ownership is missing here for
the national conference.
The second one is the SWIFT tours that we used to have at
one time. There was a bus tour that program managers used to
take to go to specific geographical locations. A couple of
program administrators will board on the bus and they would be
in one city today, another the next morning. The tours brought
managers together but at the same time they used to cover the
area that otherwise would not be covered through the National
SBIR Conferences. By holding national conferences in a city
with good airline connections and with big hotels you miss
other geographical areas.
Chair Landrieu. Those are excellent points because we
really have to make this a national program, all 50 states, all
communities, urban, suburban, rural, minority, and women; and
that is a big focus on the leadership of this Committee.
Mr. Jain. One more minor point if I can add it here.
Chair Landrieu. Yes, go ahead, one more and then we are
going to get Dr. Wessner.
Mr. Jain. The FAST program that we were fortunate to get
but it is just a $2 million program covering only 20 states. As
you are showing there, there are many more states that need
help, particularly for businesses in rural areas, the women-
owned businesses, and other targeted businesses.
Every state needs money. My state may contribute some money
if we get federal money. We need to increase the FAST funding
level to cover more states, not just 20. This program is for
every state.
Thank you, ma'am.
Chair Landrieu. Thank you.
Dr. Wessner.
Mr. Wessner. Thank you, Madam Chairman.
I would just like to elaborate quickly. It is not only a
geographical challenge but we have a volume coming out from our
meeting last February on minorities and women outreach.
And we have a growing cohort of women engineers,
particularly in the biomedical space, and we do not seem to be
able to capitalize on that. I mean a part of the problem seems
to be you may be familiar with that joke about, particularly
these days, about the old guy who keeps praying every night to
win the lottery; and finally there is a flash of light and a
request for a little help, buy a ticket.
Women, if they are going to win the awards, have to apply;
and that seems to be where one of the problems is. So, we need
to have a targeted outreach both in geographically
disadvantaged areas. But even in some of the leading schools,
we are simply not getting the applicants we need. I think with
modest sums, we could address that.
Lastly, could I just invite both of you Senators and your
staff and my colleagues here, on February 5 we are organizing a
meeting at the National Academies on the SBIR/STTR and the
commercialization of university research where we want to
highlight the crucial role this program plays in moving
research from the university and into the market.
Chair Landrieu. Thank you.
Mr. Wessner. We would be deeply flattered if either of you
could join us.
Chair Landrieu. Thank you. I would love to. I will mark it
on my calendar now. So will Senator Shaheen, and we will see if
we can be there. We will try to get other members of our
Committee.
I think this is a really important subject for the whole
country, not just this program but the ramifications of
research and development and commercialization for the future
economy of our Nation and in keeping us competitive with the
rest of the world.
Now, Mr. Rusco, you have not said anything.
Dr. Savoie, you have not added anything. I do not want to
close this meeting without giving you a chance. Did you want to
add anything from your perspective on any of the things that we
have mentioned?
Mr. Rusco. Thank you. As you know, GAO is performing
oversight of this program and we are nibbling on the edges of
it because the program essentially is achieving many of its
goals. We have reported on that over the years.
There are some areas that we think could be improved, and I
would like to just name a couple right now. There is some
confusion in some agencies as to how to calculate the required
spending, and only three of 11 agencies over a six-year period
from 2006 through 2011 actually achieved the full spending of
their requirements.
Some of the reasons we got when we asked the agencies this
was that they were saying, well, we average it over two years.
Well, that is not what the law says. It is a yearly thing.
Others say, well, you know, as a program manager I am told
to spend this amount and they think of it as what they are told
to spend, a maximum, not as a minimum.
It is a cultural issue. I can see their point. If you are a
program manager and you are told to spend $3 million or $30
million, you are not going to go back to your boss and say I
spent $35 million, give me a raise.
So, there are some issues there that are not at the program
level, that are at the agency level and they need to be
addressed.
Secondly, and I think this maybe ties in to the outreach
and as well as measuring the effects of the program and the
benefits of the program.
SBIR.com needs some work. There are still many, many areas
where you have data that are inconsistently input or missing
data about awards or types of recipients and/or
commercialization.
These things have been problems for the program for many,
many years and I think it would help to have a better database
that would allow people to act on that.
Chair Landrieu. Who is responsible for that? Which agency?
Is that Small Business?
Ms. Raghavan. [Indicating.]
[Laughter.]
Chair Landrieu. There she goes. All right. But thank you
and we will get your full report.
Bobby Savoie. Dr. Savoie.
Mr. Savoie. Well, I did not say much because most of the
conversation was focused on Phase I or even Phase II SBIRs. I
would like to focus more on Phase III.
We did receive a Phase I SBIR from the Department of
Homeland Security to develop an open source common operating
picture because post-Katrina many of the agencies were not able
to speak to one another or exchange information.
So, we developed a geospatial information system that
allowed information on a geospatial level to be exchanged
between agencies.
As you mentioned, the Department of Homeland Security is
not in a position to really fund a lot of Phase III grants.
However, we were able to obtain a Phase III SBIR grant from the
Navy to tie in their METOC, meteorological and oceanographic
data, which we developed for the Navy and tied that into our
Opencop program and then were able to provide that information
to not just the Navy but multiple other entities.
That is now led--we also, I should say, used that same
program to tie together a number of very different geospatial
entities, or asset lists would be the best way to describe it,
during the BP oil spill.
The reason I bring all of that up is that has now led to a
joint venture that we are working with a small company to tie
in weather data with a geospatial system to look at the impact
of, say, a hurricane, the damage from flood versus wind. It is
now a requirement to determine that to a certain degree of
certainty which is not possible without some additional
information.
So, we are currently working on that, and I bring that up
because I am very familiar with the Fraunhofer system in
Germany. We do not have any such thing here unfortunately.
However, I have found that the Phase III SBIRs do provide
small businesses with the ability to take technology to the
next level and possibly even approximate some of what
Fraunhofer system does in Germany. It does not get us anywhere
near as good as the Fraunhofer system is but it is a good
start.
The issue here is that numerous people in the different
agencies do not really know what a Phase III SBIR is all about.
So when we go forth and talk to different program managers and
they love the technology and they love the way we can pull data
together, but they do not realize that they can use the Phase
III SBIR to issue a contract for that work. They may have the
money and the need but then we get stuck.
Again, I am not trying to propose that as a replacement for
a Fraunhofer-type system but it is something that would be very
helpful to larger small businesses that know what the ``B''
stands for and know how to take something to market but would
need that little extra push. It is also something that could be
of great value to other agencies where we are sharing
information that we developed for the Department of Homeland
Security with the Department of Defense, in this case the Navy,
and the Army is very interested in the same thing for its
helicopter program.
Eighty percent of the crashes in Afghanistan are due to
non-enemy fire. They are due to lack of power via the changes
in weather, and that is something that the system we have would
address.
So, my only, and again I did not bring that up because we
were primarily focused on Phase I and Phase II, but if we focus
more on Phase III, I think we can generate more of a commercial
output.
Chair Landrieu. Thanks. And Senator Shaheen wants to follow
up on that, and this may be our last word.
Senator Shaheen. Well, thank you. Mr. Gudger, this is
actually a question for DOD and it has to do with the Phase III
awards because Section 5122 of the Defense Authorization Act in
2012 requires the Secretary of Defense to establish goals and
incentives for DOD and its large prime contractors to increase
the number of Phase III SBIR awards to small businesses.
It is my understanding that DOD to date has not put in
place the incentives and goals that are required by that
legislation. Do you know if that is the case and what is being
done to address that?
Mr. Gudger. First, that is a great question but that is not
the case. In 2012, the Secretary of Defense added in his
defense planning guidance specific language that goes out. This
is a classified document but it goes out to the Chairman of the
Joint Chiefs, the directors of field agencies and activities
and the military departments.
It specifically called out the development of our goals and
incentives for SBIR and STTR, and we further implemented that
here----
Senator Shaheen. For Phase III?
Mr. Gudger. For all phases but Phase III in particular.
And we further implemented that guidance with our DOD 5002,
just released here recently, where we were very specific not
only to develop goals and incentives for industry but we also
are working with our PEOs, our program executive offices, where
program managers sit that oversee these Phase IIIs. It is very
deliberate, very clear language and it is going well.
Senator Shaheen. Good. Well, I am very pleased to hear that
because, as you know, that could make a difference for
thousands of small businesses across the country.
Mr. Gudger. It is a quantum leap in the right direction.
Senator Shaheen. Good. That is great.
Chair Landrieu. Okay. I just am going to conclude with,
just to stay on this Phase III, because in our legislation
there was a requirement for all of the agencies to provide some
accountability on this subject.
I sent a letter in March regarding the commercialization
section of the law to get an update from all of you on how you
have established your Phase III goals, are the acquisition
agencies complying with the SBIR/STTR preference and sole
source, you know, requirements.
So, we will get some more information about that. I am
going to get a brief with the members of the Committee that
want to from our GAO specifics about weaknesses in the program
that we have to strengthen, and we will follow up very
specifically on all of the very good suggestions that you all
made today on making sure that we are really squeezing every
benefit we can out of this federal program but recognizing that
universities--and let me just say this before we close--are
funded primarily by the states.
You know, the United States government does not have a line
item for universities. There are line items in every state
budget for the University of New Hampshire, the University LSU,
the university here, and we are seeing some very tough budget
cuts coming down from the states to the universities.
I want to say we have seen it unfortunately more than I
would like to in the State of Louisiana, which is really
affecting the bottom line here because the Federal Government
is a partner. State governments have to be a partner, and then
local, you know, economic development, Chamber of Commerce,
local incubators, accelerators that are sometimes and very
often at the local or county level, not just at the state
level, are a big part of creating this ecosystem.
While we may not be as organized as Germany is right now on
this and we may not even want to organize ourselves the way
they do, it is important that we recognize the trend lines that
are worrisome, Dr. Wessner in this regard for the future
economic growth of this country.
Our Committee has a certain role to play. We are, of
course, not the only Committee but I think we have a
particularly important role to play in this space.
So, I really thank Senator Shaheen. She has just been a
terrific partner and many of the other members have expressed a
great interest in this program.
So, keep them briefed as you all go about your business and
we will follow up with you all sometime in the months ahead to
see where we are headed.
All right. Thank you all so much and the meeting is
adjourned.
[Whereupon, at 3:42 p.m., the Committee was adjourned.]
APPENDIX MATERIAL SUBMITTED
[GRAPHIC] [TIFF OMITTED]