[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]


                       SBIR/STTR REAUTHORIZATION:
                    A REVIEW OF TECHNOLOGY TRANSFER

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

                                HEARING

                               BEFORE THE

                SUBCOMMITTEE ON RESEARCH AND TECHNOLOGY

              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             June 16, 2016

                               __________

                           Serial No. 114-84

                               __________

 Printed for the use of the Committee on Science, Space, and Technology
 
 
 [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]


       Available via the World Wide Web: http://science.house.gov
       
                               ____________
                               
                               
                     U.S. GOVERNMENT PUBLISHING OFFICE
20-913PDF                    WASHINGTON : 2017                     
__________________________________________________________________________________________       
For sale by the Superintendent of Documents, U.S. Government Publishing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, 
U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free). 
E-mail, [email protected].  
      

              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

                   HON. LAMAR S. SMITH, Texas, Chair
FRANK D. LUCAS, Oklahoma             EDDIE BERNICE JOHNSON, Texas
F. JAMES SENSENBRENNER, JR.,         ZOE LOFGREN, California
    Wisconsin                        DANIEL LIPINSKI, Illinois
DANA ROHRABACHER, California         DONNA F. EDWARDS, Maryland
RANDY NEUGEBAUER, Texas              SUZANNE BONAMICI, Oregon
MICHAEL T. McCAUL, Texas             ERIC SWALWELL, California
MO BROOKS, Alabama                   ALAN GRAYSON, Florida
RANDY HULTGREN, Illinois             AMI BERA, California
BILL POSEY, Florida                  ELIZABETH H. ESTY, Connecticut
THOMAS MASSIE, Kentucky              MARC A. VEASEY, Texas
JIM BRIDENSTINE, Oklahoma            KATHERINE M. CLARK, Massachusetts
RANDY K. WEBER, Texas                DONALD S. BEYER, JR., Virginia
JOHN R. MOOLENAAR, Michigan          ED PERLMUTTER, Colorado
STEPHEN KNIGHT, California           PAUL TONKO, New York
BRIAN BABIN, Texas                   MARK TAKANO, California
BRUCE WESTERMAN, Arkansas            BILL FOSTER, Illinois
BARBARA COMSTOCK, Virginia
GARY PALMER, Alabama
BARRY LOUDERMILK, Georgia
RALPH LEE ABRAHAM, Louisiana
DRAIN LAHOOD, Illinois
WARREN DAVIDSON, Ohio
                                 ------                                

                Subcommittee on Research and Technology

                 HON. BARBARA COMSTOCK, Virginia, Chair
FRANK D. LUCAS, Oklahoma             DANIEL LIPINSKI, Illinois
MICHAEL T. McCAUL, Texas             ELIZABETH H. ESTY, Connecticut
RANDY HULTGREN, Illinois             KATHERINE M. CLARK, Massachusetts
JOHN R. MOOLENAAR, Michigan          PAUL TONKO, New York
BRUCE WESTERMAN, Arkansas            SUZANNE BONAMICI, Oregon
GARY PALMER, Alabama                 ERIC SWALWELL, California
RALPH LEE ABRAHAM, Louisiana         EDDIE BERNICE JOHNSON, Texas
DARIN LaHOOD, Illinois
LAMAR S. SMITH, Texas
                            C O N T E N T S

                             June 16, 2016

                                                                   Page
Witness List.....................................................     2

Hearing Charter..................................................     3

                           Opening Statements

Statement by Representative Barbara Comstock, Chairwoman, 
  Subcommittee on Research and Technology, Committee on Science, 
  Space, and Technology, U.S. House of Representatives...........     4
    Written Statement............................................     6

Statement by Representative Daniel Lipinski, Ranking Member, 
  Subcommittee on Research and Technology, Committee on Science, 
  Space, and Technology, U.S. House of Representatives...........     8
    Written Statement............................................    10

Statement by Representative Lamar S. Smith, Chairman, Committee 
  on Science, Space, and Technology, U.S. House of 
  Representatives................................................    12
    Written Statement............................................    14

Statement by Representative Eddie Bernice Johnson, Ranking 
  Member, Committee on Science, Space, and Technology, U.S. House 
  of Representatives.............................................    16
    Written Statement............................................    18

                               Witnesses:

Dr. Pramod Khargonekar, Assistant Director, National Science 
  Foundation
    Oral Statement...............................................    20
    Written Statement............................................    23

Dr. Michael Lauer, Deputy Director, National Institutes of Health
    Oral Statement...............................................    27
    Written Statement............................................    29

Dr. Patricia Dehmer, Deputy Director for Science Programs, Office 
  of Science, Department of Energy
    Oral Statement...............................................    38
    Written Statement............................................    40

Dr. Jilda D. Garton, Vice President for Research and General 
  Manager, Georgia Tech Research Corporation
    Oral Statement...............................................    46
    Written Statement............................................    48

Discussion.......................................................    55

             Appendix I: Answers to Post-Hearing Questions

Dr. Pramod Khargonekar, Assistant Director, National Science 
  Foundation.....................................................    72

Dr. Michael Lauer, Deputy Director, National Institutes of Health    80

Dr. Patricia Dehmer, Deputy Director for Science Programs, Office 
  of Science, Department of Energy...............................    88

Dr. Jilda D. Garton, Vice President for Research and General 
  Manager, Georgia Tech Research Corporation.....................   105

 
                       SBIR/STTR REAUTHORIZATION:
                    A REVIEW OF TECHNOLOGY TRANSFER

                              ----------                              


                        THURSDAY, JUNE 16, 2016

                  House of Representatives,
           Subcommittee on Research and Technology,
               Committee on Science, Space, and Technology,
                                                   Washington, D.C.

    The Subcommittee met, pursuant to call, at 9:41 a.m., in 
Room 2318 of the Rayburn House Office Building, Hon. Barbara 
Comstock [Chairwoman of the Subcommittee] presiding.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    Chairwoman Comstock. Good afternoon. The Committee on 
Science, Space, and Technology will come to order.
    Without objection, the Chair is authorized to declare 
recesses of the Committee at any time.
    Good morning, and welcome to today's hearing titled ''SBIR/
STTR Reauthorization: A Review of Technology Transfer.'' I now 
recognize myself for five minutes for an opening statement.
    The foundation of America's future economic success is and 
will continue to be our global leadership in science and 
technology.
    Taxpayer-funded basic research conducted through the 
National Science Foundation, NASA, NIH, DOD, and other federal 
agencies underwrites the breakthrough science and the key 
discoveries that have created today's world: the internet, 
wireless communications, lifesaving medicines, lasers, 
artificial intelligence, and so much more.
    Converting scientific breakthroughs into innovations 
creates new industries, new businesses, and new jobs. Such 
innovation transforms commerce, everyday life and our entire 
society.
    Risk-taking entrepreneurs and small businesses are the 
catalysts for innovation. They are the catalysts for economic 
growth, for generating the family and community-sustaining jobs 
that we need so badly.
    Congress enacted the Small Business Innovation Research, or 
SBIR, program in 1982, followed by the Small Business 
Technology Transfer, or STTR, program in 1992. These two 
programs accelerate technological innovation and 
commercialization of new products and services by small 
businesses. They also help the Department of Defense and other 
federal agencies meet their research and development needs.
    Federal agencies with large extramural research budgets--
more than $100 million a year for the SBIR program and $1 
billion for STTR--award competitive grants to small businesses 
for technology development and commercialization.
    Eleven agencies hit the $100 million research budget 
threshold for SBIR. They are required to set aside three 
percent of their extramural research budgets to support SBIR, 
and that will rise to 3.2 percent in fiscal year 2017.
    Five agencies, including NSF, NASA and DOE, surpass the $1 
billion threshold for STTR. These five agencies also account 
for about 98 percent of SBIR. These five agencies are required 
to set aside 0.45 percent of their extramural research budgets 
for STTR grants.
    Since its inception, participating federal agencies have 
awarded SBIR and STTR contracts and grants to small businesses 
totaling more than $40 billion. A number of companies that use 
SBIR are located in my Congressional district, and I hear often 
about people who are both working in this program, have issues 
on how it can better be utilized, and so I really do look 
forward to that discussion. Just some of the companies I know 
in my district are three Phoenix, Inc., Aurora Flight Sciences 
in Manassas, and Mosaic ATM in Leesburg, Progeny Systems of 
Manassas, Virginia and there are a number of others.
    I do look forward to hearing from our panel of expert 
witnesses this morning, including individuals who lead the 
administration and management of three of the largest SBIR and 
STTR programs and the Vice President of Research from one our 
Nation's most prominent academic research universities.
    [The prepared statement of Chairwoman Comstock follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairwoman Comstock. I now recognize the Ranking Member, 
the gentleman from Illinois, Mr. Lipinski, for his opening 
statement.
    Mr. Lipinski. Thank you, Chairwoman Comstock, for holding 
this hearing to review the SBIR and STTR programs, as well as 
to examine national efforts to support commercialization of 
federally funded research and development.
    Those of you who follow this Committee know that I am 
always focused on finding better ways to promote 
commercialization of research, especially the great research 
funded by the American taxpayers at our universities and 
national labs.
    This hearing is an important step in the reauthorization of 
the SBIR and STTR commercialization programs, which our 
subcommittee has jurisdiction over.
    In the United States, where small businesses create 55 
percent of all jobs, the success of the small business 
enterprise is key to economic growth.
    For almost 40 years, the SBIR program has been funding 
small business innovation across all sectors of our economy. 
There are many prominent success stories from SBIR grants. A 
recent Air Force review of Phase II winners between 2000 and 
2013 found that 58 percent of them had sales in excess of $1 
million.
    Importantly, many of the innovators who create these small 
businesses are educated and trained in our Nation's great 
research institutions, with support from federal research 
dollars. And some even directly commercialize research funded 
by federal dollars. The Federal R&D enterprise is truly an 
ecosystem from basic research to commercialization.
    Unlike any other program that I'm aware of, SBIR and STTR 
are funded using a percentage of participating agencies' 
extramural research and development budgets. That percentage 
has increased by 30 percent since 2011, even as the larger 
budgets have remained flat.
    While the SBIR program has great value, we must look at it 
in the context of overall agency budgets and missions. 
Increasing the set-aside for SBIR and STTR as much as has been 
proposed by some could come at the expense of support for other 
critical research programs.
    Perhaps my biggest concern is harm done to the pipeline of 
STEM talent and innovators by increasingly lower research 
funding levels. This is a difficult choice in tough budget 
times because both research and commercialization activities 
are highly valuable investments.
    We must also look hard at assessments of the SBIR program 
and consider ways to make it more efficient and help the 
program better achieve its goals, and this hearing is a good 
opportunity to talk about other ways to improve the 
commercialization of federally funded research, including the 
very successful Innovation Corps program started at NSF in 2011 
and now expanding to other agencies, as well as the NIH's Proof 
of Concept pilot program. I-Corps is essentially an 
entrepreneurial education program. The I-Corps Node program 
provides this education and other support for innovators at our 
research universities, creating a true interconnected, national 
innovation network.
    I am pleased that Ms. Garton is joining us today, and I 
look forward to her testimony regarding Georgia Tech's I-Corps 
Node program and the challenges innovators face in seeking 
early stage funding.
    In the five years since the I-Corps program has been 
running, it has clearly demonstrated its value in improving 
tech transfer and commercialization, and we are beginning to 
see that it makes the SBIR program more efficient as well. 
Although it takes time to fully realize success in 
commercialization, the early returns show I-Corps-trained teams 
having more success than comparable teams without this 
training. I think the time has come to talk about having some 
kind of I-Corps program at every agency with an SBIR program, 
as the two truly go hand in hand.
    Finally, I want to mention language that I put in the 2011 
SBIR Reauthorization bill which allowed for an NIH Proof of 
Concept pilot program, utilizing a small portion of the funds 
from the STTR set-aside, to give grants to researchers at a 
pre-SBIR stage. This could be called SBIR phase zero.
    Many university researchers are hesitant to start a 
company, which often means leaving their university, so they're 
hesitant without having confidence that the idea can work out. 
The Proof of Concept pilot has led to programs at NIH such as 
the NIH Centers for Accelerated Innovations and the Research 
Evaluation and Commercialization Hubs, or REACH, programs. I 
believe programs like these can be an important part of the 
innovation ecosystem and I look forward to an update on the 
pilot from Dr. Lauer.
    I know the agencies here today are exploring many other 
aspects of early stage commercialization, including how to 
coordinate these efforts better with the SBIR program. I look 
forward to this broader discussion about commercializing 
federally funded research. I also look forward to your 
testimony about how you've implemented new requirements and 
flexibilities in the SBIR program since the 2011 
reauthorization, and what our Committee should consider as we 
take up the next reauthorization.
    I would like to ask unanimous consent to enter into the 
record the Administration's Principles for SBIR/STTR 
Reauthorization and the letter dated May 10, 2016, from a 
coalition of science organizations and universities.
    Chairwoman Comstock. Thank you----
    Mr. Lipinski. Can I get unanimous consent to put those in 
the record?
    Chairwoman Comstock. Without objection.
    [The information was not available at the time of 
publishing. ]
    Mr. Lipinski. Thank you, and with that, I will yield back. 
Thank you.
    [The prepared statement of Mr. Lipinski follows:]
    [GRAPHIC] [TIFF OMITTED] T0916.170
    
    [GRAPHIC] [TIFF OMITTED] T0916.171
    
    Chairwoman Comstock. Thank you, Mr. Lipinski, and I now 
recognize the Chairman of the full Committee, Mr. Smith.
    Chairman Smith. Thank you, Madam Chairwoman, and I 
appreciate both your comments and the comments by the Ranking 
Member.
    The Small Business Innovation Research Act, or SBIR, was 
signed into law by President Reagan in 1982 to help spur 
innovation and increase small business participation in federal 
research and development activity.
    Since then, more than 100,000 small businesses in the 
United States have received SBIR grants to convert taxpayer-
supported basic research discoveries into commercial 
technological innovation.
    The Small Business Technology Transfer program, or STTR, 
was approved by Congress in 1992. STTR's unique feature is its 
requirement for a small business to collaborate with a 
nonprofit research institution in order to bridge the gap 
between basic science and commercialization of resulting 
innovations.
    Both SBIR and STTR are funded through a tax on federal 
agencies' research budgets. The SBIR tax on research began at 
0.2 percent; that tax is now three percent, or 15 times higher. 
Twelve federal agencies--those with annual external research 
budgets of $100 million or more--are currently subject to the 
SBIR tax.
    The five federal departments and agencies with annual 
external research budgets of more than $1 billion are also 
taxed to provide funding for the STTR program. That tax is an 
additional .45 percent on the three research agencies 
represented here today: DOE, NSF, and NIH. These basic research 
taxes currently amount to approximately $2.5 billion each year 
for commercialization grants to small businesses.
    Grant recipients run the gamut. Although about one-quarter 
of the companies are first-time recipients, most participating 
small businesses have received multiple SBIR grants.
    Some former recipients of SBIR assistance have even become 
very large international corporations, such as Qualcomm, 
Sonicare, and Symantec.
    SBIR and STTR companies have created parts for NASA's Mars 
Rover, equipped our military men and women with key war-
fighting innovations, and generated a long list of lifesaving 
medicines and health care treatments.
    SBIR and STTR recipients have thousands of new patents and 
created thousands of new jobs, many in new areas of technology.
    In the leading-edge field of nanoscience, we're learning 
that tiny particles can have very big effects. SBIR support 
enabled Applied Nanotech of Austin, TX, to become a world 
leader in nanotechnology breakthroughs: inventing cheaper, more 
efficient solar energy cells, new materials for blast-resistant 
structures and equipment, and low-cost, high-performance 
metallic inks and pastes for ink-jet-printed electronics.
    Xeris Pharmaceuticals, also Austin-based, has used SBIR 
grants to develop new delivery systems for injectable medicines 
that are not soluble with water. This includes a system for 
injectable glucagon to treat congenital hyperinsulinism that 
affects thousands of infants and young children.
    The current legislative authorization for the SBIR and STTR 
programs doesn't expire until September of next year. The 
Science Committee is holding its first hearing today in order 
to start the process of timely oversight and reauthorization 
consideration.
    There are still ways to improve SBIR and STTR and assure 
taxpayers are getting the greatest return for the investments 
of their hard-earned dollars. Instances of fraud and abuse 
continue to be problematic.
    Objective measurement of results across all participating 
federal agencies is needed. It is also important to examine if 
the current funding level--the taxes on basic research--are 
hurting fundamental scientific research. Any increases would 
necessarily reduce our Nation's primary investments in basic 
research at a time when U.S. global leadership is threatened. 
As the members of this Committee know, China is set to overtake 
the U.S. in R&D spending as soon as 2020.
    Madam Chairwoman, I look forward to hearing from our panel 
of witnesses today, who are all experts in their own right, and 
who represent federal agencies and research universities, about 
these and other issues.
    Thank you, and yield back.
    [The prepared statement of Chairman Smith follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairwoman Comstock. Thank you, Mr. Smith, and I now 
recognize the Ranking Member of the full Committee for a 
statement, Ms. Johnson.
    Ms. Johnson. Thank you very much, and good morning. I'd 
like to thank you, Madam Chair, for holding this hearing today 
to examine the Small Business Innovation Research program and 
the Small Business Technology Transfer programs and related 
technology transfer issues, and I'd like also to thank the 
Chairman of the full Committee for ensuring that Science 
Committee members have the opportunity to weigh in on 
reauthorization of these important programs.
    The United States has long been a nation that nurtures 
innovation. The number of small businesses has grown by 49 
percent since 1982, and today's 28 million small businesses 
make up 54 percent of all U.S. sales. The invigorating startup 
culture we have seen for the last decade and a half has 
contributed to this growth and has given us extraordinary 
economic and social benefits.
    The first SBIR program was at the National Science 
Foundation and was started in the mid-1970s to support small 
high-tech firms' ability to compete for federal R&D grants. 
This program grew to a government-wide program in 1982. Today 
the program receives approximately $2.2 billion from funds set-
aside from the federal research and development budget. The 
SBIR and STTR programs are funded from a set-aside from 
agencies' extramural R&D budgets. They are the only R&D 
programs that are funded in this market. While stability and 
continuity in the programs are important goals, the SBIR and 
STTR programs are just one tool in a much larger R&D toolbox 
that agencies draw from to meet their missions.
    The SBIR and STTR programs were last authorized from fiscal 
years 2012 through 2017. During that time, the programs grew by 
30 percent. In addition, the 2011 reauthorization introduced 
many new requirements and flexibilities for the agencies.
    Before we reauthorize the programs, it is the 
responsibility of this Committee to review how the new policies 
introduced in the last reauthorization have been implemented, 
how well the programs are achieving their goals and how they 
might continue to improve, and how the programs fit into the 
larger federal research and development enterprise. Our job on 
the Science Committee is to help ensure the health and 
sustainability of this entire enterprise.
    One particular issue I hope our witnesses can address is 
women and minority participation. According to the National 
Academies, agencies are doing well in all of the main goals of 
the SBIR and STTR programs except for participation in 
innovation by economically and socially disadvantaged groups. I 
have spent my entire political career working on increasing 
female and minority participation in STEM starting in the early 
1970s, I might add. I'm glad to say that we are not doing much 
better--I'm sad to say that we are not doing much better today 
than when I started.
    SBIR cannot solve disparities created earlier in the 
pipeline. However, we know that women and minorities receive 
less encouragement and support to become entrepreneurs. I'd 
like to hear from our witnesses today how agencies can help 
address this disparity through the SBIR and STTR programs.
    I thank the witnesses for being here today and I look 
forward to their comments and recommendations for future 
legislation.
    Thank you, Madam Chair, and I yield back the balance of my 
time.
    [The prepared statement of Ms. Johnson follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairwoman Comstock. Thank you.
    And now let me introduce our witnesses. Our first witness 
today is Dr. Pramod Khargonekar, Assistant Director for the 
Directorate of Engineering at the National Science Foundation. 
He was appointed to serve as Assistant Director in March 2013. 
In this role, he leads the Engineering Directorate with an 
annual budget of more than $900 million, which funds 
engineering research and development and education, cultivates 
an innovation ecosystem, and develops next-generation 
engineers. He previously served as Deputy Director of 
Technology at ARPA-E at the U.S. Department of Energy and 
served as the Dean of the College of Engineering at the 
University of Florida. He received his bachelor's degree at the 
Indian Institute of Technology-Bombay and a master's in 
mathematics and a doctorate in electrical engineering from the 
University of Florida-Gainesville.
    Our second witness today is Dr. Michael Lauer, Deputy 
Director of Extramural Research at the National Institutes of 
Health. In this role, Dr. Lauer serves as the principal 
scientific leader and advisor to the Director of the NIH on all 
matters relating to the substance, quality and effectiveness of 
the NIH Extramural Research program and administration. Prior 
to joining NIH, he served as a Division Director at the 
National Heart, Lung and Blood Institute as a Board-Certified 
Cardiologist. He received education and training at Albany 
Medical College, Harvard Medical School, and Harvard School of 
Public Health.
    Our third witness today is Dr. Patricia Dehmer, Deputy 
Director for Science Programs in the Office of Science at the 
Department of Energy. The Office of Science supports research 
at 300 colleges and universities nationwide, at DOE 
laboratories, and at other private institutions. She has served 
in a number of positions at DOE where she began her scientific 
career as a postdoctoral fellow at Argonne National Laboratory. 
She received a bachelor of science degree in chemistry from the 
University of Illinois and a Ph.D. in chemical physics from the 
University of Chicago in 1972.
    Our final witness today is Ms. Jilda Garton, Vice President 
for Research and General Manager at Georgia Tech Research 
Corporation at Georgia Institute of Technology. She is 
responsible for financial and business affairs including 
licensing of intellectual property created at Georgia Tech. She 
directs the activities of the Office of Sponsored Programs, the 
Office of Research Integrity Assurance, and the Office of 
Industry Engagement. Ms. Garton currently serves on the Board 
of the University-Industry Demonstration Partnership and co-
chairs the UIDP's Contracts Accords Working Group. She has a 
B.A. in biology from Vanderbilt University and an M.S. in 
zoology from Louisiana State University.
    I now recognize Dr. Khargonekar for five minutes to present 
his testimony.

              TESTIMONY OF DR. PRAMOD KHARGONEKAR,

                      ASSISTANT DIRECTOR,

                  NATIONAL SCIENCE FOUNDATION

    Mr. Khargonekar. Good morning, Chairwoman Comstock, Ranking 
Member Lipinski, Chairman Smith, Ranking Member Johnson, 
Committee members. Thank you for this opportunity to testify 
regarding the Small Business Innovation Research and Small 
Business Technology Transfer programs at the National Science 
Foundation. My name is Pramod Khargonekar. I am the Assistant 
Director for Engineering at National Science Foundation. The 
SBIR/STTR program at NSF is managed within the Division of 
Industrial Innovation and Partnerships and the Directorate for 
Engineering.
    While NSF's primary mission is to advance the frontiers of 
science and engineering through basic research, the SBIR/STTR 
program is an integral part of the NSF strategy to stimulate 
innovation and address societal needs. This is achieved through 
the commercialization of results of fundamental research. We 
fund small businesses at very early stages when the technology 
risk is high and before the private sector is normally willing 
to invest.
    Since the NSF is not the ultimate customer of resulting 
innovations, the NSF SBIR/STTR research topics are designed to 
address existing and emerging needs of the U.S. marketplace and 
the Nation as a whole. For example, NSF SBIR research brought 
about Symantec, which is now a global leader in cybersecurity. 
It was founded in 1982 by Gary Hendrix, who was funded by an 
NSF SBIR grant. Qualcomm, a world leader in wireless 
communications and computing technologies, also received NSF 
SBIR funding during the 1980s in its early years as a small 
business. Its co-founder, Irwin Jacobs, recently stated, and I 
quote, ``With one of the grants, we developed some of the first 
chips we did at Qualcomm, if not the first. Of course, making 
chips for cell phones is now about 2/3 of our revenue today, 
and that was the base.''
    In the last four decades, NSF has been continuously 
innovating and exploring new approaches to stimulating small 
business-based technological innovations and commercialization. 
In 1998, NSF SBIR introduced a new supplemental program called 
Phase IIB. It is a platform to stimulate NSF-funded active 
Phase II grantees to attract additional private-sector funding 
for further technology commercialization.
    In addition to providing funding in varying stages, we also 
assist awardees by providing them with experiential 
entrepreneurial education based in part on the NSF Innovation 
Corps, or I-Corps program. I-Corps helps entrepreneurs and 
their small businesses understand market needs and customers, 
thus increasing their chances of successful commercialization 
of new technologies.
    Another program closely related to I-Corps is the 
Accelerating Innovation Research, or AIR. We frequently find 
that NSF-funded researchers apply for AIR grants first before 
pursuing I-Corps training. We are seeing strong interactions 
between these programs and our SBIR/STTR program where 
researchers with NSF-funded fundamental research advance to AIR 
first, then go through I-Corps, and then pursue SBIR/STTR 
funding. This pathway is getting strong and working extremely 
well.
    We also many other translational research programs which 
complement our significant investments in fundamental 
scientific and engineering research.
    SBIR and STTR are vital components of NSF's agenda to 
enable commercialization of technology stemming from basic 
research. We at NSF take great pride in having pioneered the 
SBIR program concept and continue to innovate to expand its 
impact.
    Recently, there have been proposals to increase the set-
aside percentages for SBIR/STTR whose ultimate effect will be 
to apportion a greater amount of the NSF research budget to the 
SBIR/STTR program.
    NSF is the lead agency for the support of basic research at 
our Nation's universities. Our budget for basic research has 
been flat during this decade, and any further diminution will 
reduce the very discoveries that our country needs to remain an 
economic powerhouse and a global leader. We do support future 
growth in SBIR/STTR programs but urge that such growth be 
enabled through an overall budget increase for NSF.
    NSF strongly supports a permanent reauthorization of SBIR/
STTR and recommends that the annual set-aside percentages for 
the programs be maintained at fiscal year 2017 levels.
    Lastly, I should note that NSF participated in interagency 
process to detail principles all the SBIR/STTR agencies can 
support for reauthorization, which include permanent 
reauthorization, growth in program through overall extramural 
research growth, and maintaining flexibility.
    Madam Chairwoman, this concludes my testimony. On behalf of 
the National Science Foundation, the SBIR/STTR program, and our 
awardees, I want to thank you for this opportunity to highlight 
a program that provides small businesses with the means to keep 
America on the forefront of innovation and stimulate U.S. 
economic growth. We greatly appreciate the opportunity to work 
with you on reauthorizing SBIR and STTR. Thank you.
    [The prepared statement of Mr. Khargonekar follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairwoman Comstock. Thank you.
    Now we'll hear from Dr. Lauer.

                TESTIMONY OF DR. MICHAEL LAUER,

                        DEPUTY DIRECTOR,

                 NATIONAL INSTITUTES OF HEALTH

    Dr. Lauer. Good morning. Chairwoman Comstock, Ranking 
Member Lipinski, and members of the Subcommittee, it is an 
honor to appear before you today to talk about how the SBIR and 
STTR programs fit within the overall context of the NIH 
research portfolio.
    NIH has been advancing our understanding of health and 
disease for more than a century. Scientific and technological 
breakthroughs generated by NIH-supported research are behind 
many of the improvements our country has enjoyed in public 
health. Many recent breakthroughs stem from our Nation's 
commitment from investing in basic research, which lays the 
foundation for advances in disease diagnosis, and prevention 
and is generally not supported by the private sector.
    NIH supports a broad research portfolio that includes basic 
science, translational science, clinical research, and 
population-based research at universities, academic health 
centers, and small businesses. Like any other investment 
portfolio, the key to success is diversity, which maximizes the 
likelihood that we will come up with transformative cures.
    It is important to remember that many years and financial 
resources are necessary to bring medical innovations into the 
practice of medicine. It has been estimated that it takes 11 to 
14 years and approximately $2.6 billion to bring a new drug to 
market.
    While basic science lays the foundation for advancing our 
knowledge about the nature and behavior of living systems, this 
knowledge must then be applied and translated and later 
approved through the regulatory system before patients can 
benefit. The small business community benefits form all of the 
formative research supported by NIH.
    Among the 11 federal departments and agencies that 
participate in the SBIR and STTR programs, the NIH is the 
second largest funder. Examples of the types of research that 
we support include but are not limited to drug discovery, 
medical devices, biosensors, nanotechnology, imaging, and 
bioengineering. A successful example of a technology developed 
through our programs is Lift Labs' Liftware, which creates 
stabilizing technologies to help people with essential tremor 
and Parkinson's disease.
    Our programs have grown significantly with the increases 
provided by the 2011 Reauthorization. Between fiscal years 2011 
and 2016, the NIH budget increased by about 4.5 percent, while 
our SBIR and STTR budgets increased approximately 30 percent, 
or six times as much.
    We are grateful for the financial and human resources 
support provided through the administrative fund pilot 
authority. We have used this authority to bolster and diversify 
our program outreach efforts, reaching more than 24,000 
individuals from all states in the past several years, 
including 940 women-owned and 650 socially and economically 
disadvantaged small businesses. Through these and other 
efforts, we anticipated increased applications from these 
groups in the future, further diversifying the programs.
    The NIH strongly supports the SBIR and STTR programs. For 
decades, these programs have served as vital sources of federal 
funding for innovative American small businesses. The program 
should be permanently reauthorized to provide us all with much-
needed long-term certainty.
    However, future growth in SBIR and STTR programs should be 
realized through overall extramural budget increases for each 
agency. For example, the Congress provided NIH with a $2 
billion increase this past year, which meant that our SBIR and 
STTR budget increased by 12.4 percent from the previous year, 
nearly twice the agency's increase.
    Scholars have noted that the biomedical research enterprise 
now suffers from hypercompetitiveness with increasing numbers 
of researchers competing against each other for relatively 
fewer available dollars. Historically, NIH success rates have 
been about one in three, and they are now down to less than one 
in five. We are concerned that dedicating an ever-increasing 
proportion of NIH's extramural research dollars to these two 
specific programs would threaten the diversity of the research 
portfolio, a portfolio that succeeds precisely because it is so 
diverse. In our judgment, it would be more effective for 
overall R&D budgets to increase so all programs benefit.
    Furthermore, it is imperative that NIH and other federal 
agencies participating in the program be provided with the 
resources necessary for effective administration, oversight and 
outreach as well as reasonable flexibility on award size and 
sequencing consistent with the diverse needs of small 
businesses in different industries and technology areas.
    This concludes my statement. Thank you for your attention, 
and I look forward to answering any questions you may have.
    [The prepared statement of Dr. Lauer follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairwoman Comstock. Thank you, and we'll now hear from Dr. 
Dehmer.

               TESTIMONY OF DR. PATRICIA DEHMER,

             DEPUTY DIRECTOR FOR SCIENCE PROGRAMS,

            OFFICE OF SCIENCE, DEPARTMENT OF ENERGY

    Dr. Dehmer. Thank you, Chairman Comstock, Ranking Member 
Lipinski, Chairman Smith and Ranking Member Johnson from the 
full Committee, and members of the subcommittee. My name is Pat 
Dehmer, and I am the Deputy Director of the Department of 
Energy's Office of Science, where I oversee all of the science 
programs. The DOE SBIR/STTR Program Office is one of nine 
reporting to me.
    The Office of Science has managed the Department's SBIR/
STTR programs since the formation of SBIR in 1982. We work with 
the six science outlay programs in the Office of Science with 
four applied energy technology offices, with the Office of 
Environmental Management, and with the Office of Defense 
Nuclear Nonproliferation with in the National Nuclear Security 
Administration. These 12 offices together contribute about $200 
million annually to SBIR/STTR, and the Office of Science is 
about 2/3 of this funding.
    Since its establishment as a separate agency within the 
Department of Energy, the Advanced Research Projects Agency-
Energy, or ARPA-E, has managed its own small SBIR program, 
about $8 million annually, with initial awards in 2012.
    During the past few years, we have experimented with some 
new approaches, some resulting directly from the 
Reauthorization Act of 2011, which I'll talk about in a moment. 
But first I want to mention one other program. In 2013, we 
began something called the Technology Transfer Opportunities, 
or TTOs, as part of our funding opportunity announcements. TTOs 
enable small business to use technology that has been developed 
using DOE funding at our national laboratories or at 
universities. TTOs awardees are assigned rights by the 
institution owning the technology to perform R&D on the 
technology during Phase I or Phase II grants. In addition, the 
research institute provides the awardee with a no-cost, six-
month option to license the technology.
    In 2015, 10 Phase I and two Phase II TTO awards were made, 
representing technologies from Michigan State University and 
from four of our Department of Energy National Laboratories. 
When the 2013 cohort, the first cohort completes, we will begin 
an assessment of the outcomes of this particular experiment.
    I'd like to turn now to some important features of the 2011 
Reauthorization Act, particularly as they might relate to your 
consideration of the forthcoming reauthorization. The 2011 
Reauthorization Act created a pilot program that allowed 
agencies to use up to three percent of SBIR program funds to 
improve the administration of these programs. DOE used from .6 
to .9 percent of program funds annually for some very important 
improvements.
    First is the improvement in our award timelines. By adding 
small amounts of funding to accelerate the development of our 
new Office of Science-wide web-based grants management system 
and introducing a few process changes, we were able to reduce 
the time from the close of a solicitation to Phase I actual 
awards by a factor of two from eight months to four months. 
That's a very substantial improvement, and the opportunity to 
have this flexibility was critical to us.
    A second thing that we did with this authorization was an 
important outreach activity. We created a Phase 0 assistance 
program to help under represented small businesses apply for 
SBIR/STTR funding. In this program, we target applications from 
states with historically low SBIR/STTR submissions and from 
women and minority-owned businesses across the Nation. The 
Phase 0 assistance program helps awardees with letter-of-intent 
writing, Phase I proposal preparation, review and submission, 
training and mentoring, communications and market research, 
technology advice, and consulting on areas of intellectual 
property. In just three funding opportunity announcements, we 
received more than 500 applications for the Phase 0 assistance 
program and we provided services to 165 participants. Again, we 
plan to assess the effectiveness of this after a year or so of 
this program being in operation.
    The Reauthorization Act of 2011 also permitted us to make 
sequential Phase II awards. These awards permit us to fund 
additional R&D to complete Phase II research if necessary and 
to assist with transition to commercialization. In 2015, 17 
percent of our Phase II awards were sequential Phase II awards.
    As you think about the reauthorization in 2017, we'd like 
to take this opportunity to present our thoughts. We strongly 
support permanent reauthorization to provide federal agencies 
with long-term certainty and stability. We strongly support the 
existing flexibilities provided on award size and sequencing 
and, for example, that helped us innovate and begin the Phase 
II assistance pilot program and, finally, like my colleagues, 
we support maintaining the SBIR/STTR set-asides at the 2017 
levels, which represent more than a 30 percent increase over 
the fiscal year 2011 level.
    Thank you very much for the opportunity to talk to you. I 
appreciate the Committee's interest in this important topic, 
and I will be happy to answer your questions.
    [The prepared statement of Dr. Dehmer follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairwoman Comstock. Thank you, and I now recognize Ms. 
Garton.

               TESTIMONY OF DR. JILDA D. GARTON,

                  VICE PRESIDENT FOR RESEARCH

                      AND GENERAL MANAGER,

               GEORGIA TECH RESEARCH CORPORATION

    Ms. Garton. Good morning, Chairwoman Comstock, Ranking 
Member Lipinski, Chairman Smith, and members of the 
Subcommittee. My name is Jilda Diehl Garton, and I serve as the 
Vice President for Research and General Manager of Georgia 
Technology Research Corporation at Georgia Tech.
    Georgia Tech is a comprehensive public university with more 
than 25,000 undergraduate and graduate students. We reported 
more than $765 million in research expenditures in 2015 with 
research funding from a variety of federal and non-federal 
sponsors. Private industry sponsors about 13 percent of the 
total research activity at Georgia Technology, and includes 
several dozen SBIR and STTR subcontracts. And we do a little 
tech transfer at Georgia Tech. Georgia Tech is among the top 25 
universities in the number of U.S. patents granted in 2014, and 
over the past five years, 81 companies have been formed based 
on Georgia Tech technologies.
    SBIR and STTR programs are important to universities 
because these are important to our technology transfer 
ecosystems. America's universities create amazing new 
inventions every day. My own institution will receive about 350 
invention disclosures this year alone. As creators and stewards 
of these inventions, we have an obligation to make them 
available to the public in the form of new products, new drugs, 
new assistive technologies and new services. University 
technology transfer works with the private sector to move 
technologies from the laboratory into companies that can 
develop them, invest in them, and commercialize them. It's this 
ecosystem that we want to develop.
    Universities value the SBIR and STTR programs, and we 
generally support their permanent reauthorization at their 
current set-aside levels, and that's because these are 
important parts of that ecosystem.
    In thinking about how to discuss our experiences with the 
SBIR and STTR programs, I thought it might be helpful to offer 
an example that illustrates how the SBIR program in particular 
interacts with other parts of the innovation ecosystem on my 
campus to support new ventures that are trying to bring new 
technologies onto market. I've given you a couple of examples 
also in my written testimony including one woman-owned company.
    Pindrop is an Atlanta-based company that markets a way to 
combat telecommunications fraud through something they call 
acoustic fingerprinting. The technology resulted from 
Department of Defense-funded research that was conducted by a 
professor in the College of Computing and to students. The 
invention was closed to GTRC in 2010 and licensed to a new 
company in 2011. Pindrop's management participated in and was 
mentored by Georgia Tech's NSF I-Corps program. We're very 
proud to have been one of those original three nodes.
    The company went on to work with our SBIR assistance 
office, which helps companies that are formed in our 
environment reach out and identify opportunities in SBIR and 
STTR programs at various agencies and prepare proposals and 
submit them in a way that will help them get funded. Pindrop 
won one of those SBIR awards, and went on to develop their 
technology, and in January 2016, Pindrop received Series C 
investment from Google Finance. They're on their way to being a 
major company in this space.
    Pindrop's story shows how development inside the university 
readied the technology for the marketplace and de-risked it. 
SBIR funds increased the likelihood that the company would 
become successful. As it developed its technology, it became 
more attractive for private-sector investment. Pindrop's story 
also demonstrates how long it takes and how much investment is 
actually needed.
    You've asked us for advice in areas of potential 
improvement as you consider the reauthorization of these 
programs, and I would be remiss if I did not point out that 
Pindrop would not have been possible without basic research. As 
the federal investment in research and development conducted at 
U.S. universities is constrained, it's important to acknowledge 
that funding basic science and engineering has to be a priority 
because that's what fills the pipeline of discoveries that feed 
the innovation ecosystem.
    Universities are interested in seeking balance. If I have 
one thing to offer for your consideration, it would be to focus 
on the overall fiscal budgets for the research funding agencies 
and ensure robust investment in basic and applied research to 
support the highest quality peer-reviewed research.
    It remains the case that there's a funding gap that 
sometimes prevents universities from moving new discoveries and 
technology into the marketplace. Accordingly, members of the 
higher education community have recommended creating the SBIR 
program that would focus on commercialization that we often 
call Phase zero. These awards could be used by universities to 
engage in prototyping, mentoring, and supporting market 
readiness initiatives.
    Finally, I would like to suggest that we could all benefit 
from additional information about the federal SBIR and STTR 
funding. Dr. Lauer and Dr. Dehmer have talked about a number of 
efforts at their agencies to analyze the success rates of the 
programs and how the companies perform after award. These 
objective measures of performance and indicators of performance 
would be very welcome.
    I'd like to thank the Subcommittee for the opportunity to 
provide our insights from the university perspective on the 
important question of reauthorization of the programs, and I 
look forward to answering your questions.
    [The prepared statement of Ms. Garton follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairwoman Comstock. Thank you.
    I now recognize myself for five minutes for questions.
    I guess this is a question to all of you. How do we measure 
success with the SBIR and STTR programs? Is it things like job 
growth, employment growth, patents? How do you judge it and 
what are you looking at?
    Dr. Khargonekar. I mean, that's an excellent question, and 
the National Academies study does talk quite a bit about 
metrics for success of the SBIR/STTR programs. We look at it as 
a program as a whole, which is really aimed at taking discovery 
in the lab to the real world, and we also think about I-Corps 
and other innovation programs as part of the overall ecosystem.
    So in that regard, it's Phase II, Phase IIB funding which 
really makes it possible for the company's technology to become 
a real-world company with employment and revenues, and there 
the numbers are quiet encouraging. The vast majority of Phase 
IIB companies go on to become very successful companies and 
have revenues many years out into the future. We also look at 
intellectual property generated by these companies, and 
probably most importantly, it's the people because the people 
who go through these experiences then go on and start new 
companies throughout their careers. So I think one has to look 
at the whole system and look at the metrics from that point of 
view.
    Chairwoman Comstock. And I know a lot of you had used the 
word ``ecosystem'' which I think is very important, how we 
create that innovative ecosystems so with our universities, 
with our businesses, and how do we get that ecosystem, you 
know, getting the input from the private sector too so as we're 
investing in these things, there's sort of a leveraging factor 
that gives it that extra oomph to start doing things. You know, 
how do you all see that playing out in what you're doing?
    Dr. Lauer. So for NIH-funded research, there are some 
additional components of the ecosystem that are important for 
success metrics, and those would include moving products on to 
clinical trials, getting them through the regulatory system, 
working with CMS and other payers to see whether or not a 
product once eventually successful will be reimbursed in 
clinical practice, and then also working with professional 
societies to realize the incorporation of new technologies into 
standard clinical practice.
    Chairwoman Comstock. Good point. Thank you.
    Dr. Dehmer. Well, we've had quite a bit of experience over 
the last five to ten years of looking at success of non-
traditional research programs. We started something many years 
ago called the Energy Frontier Research programs, and how do we 
measure their success? We do it in part by the standard metrics 
of counting publications, licenses, things like tech transfer 
and how many small businesses and industries are involved. In 
reality, it's an extremely topic to measure success of non-
traditional research and development programs. Not only have I 
been involved with that, but for the past five years I've been 
involved with measuring success of programs that do STEM 
workforce development training, very difficult.
    So one of the things that we've done actually in the last 
year is bring a new person into the SBIR/STTR program, a Ph.D. 
researcher, whose function is going to be to look at how we 
measure success and to follow on with some of the programs that 
we've started and that the traditional SBIR or STTR programs 
do.
    Chairwoman Comstock. Thank you.
    Ms. Garton. One of the ways that we look at measuring the 
success of our technology transfer efforts is to look at 
whether or not our patents or our licensed intellectual 
properties are being utilized at various points after they've 
either been protected by patent or licensed under other 
circumstances and ensuring that those technologies are still 
being used at three, five and seven years after the license, 
and I think that's one of the measures rather than counting the 
numbers of patents per se but looking at whether or not those 
technologies are being used by the private sector and being 
used to either do additional research or being used and 
incorporated into new products and services, so looking at 
whether or not the intellectual property we're creating is 
being used is one of the important metrics for success both of 
the university technology transfer but also of the SBIR 
receiving company because it will itself begin generating 
intellectual property and we want to see if that's being used 
as well.
    Chairwoman Comstock. So I'm running a little over my time 
but I did want to give a shout out to my local technological 
community, the Northern Virginia Technology Council. It's very 
good at working with all of our technology companies but they 
also highlight emerging companies and doing things like that 
and they're very good at publicizing it within communities, and 
that in turn kind of helps get more support there. Are we 
seeing that utilized too, having the kind of leverage there 
that--or maybe since my time is up I'll just ask, is there any 
way that we can have others such as, you know, NVTC in my 
community that is very good at it but maybe I'd recommend, you 
know, others to use that as a model because I think they're 
particularly helpful in highlighting the whole ecosystem, and 
that's what they're all about is that ecosystem and supporting 
it. They support STEM education. They support the emerging 
companies. They exist by virtue of a lot of support from the 
big companies but really, everyone in it is driving the 
ecosystem, and I know they work a lot with their universities 
too, so looking at that as a model, I just throw that out 
because they're a great group for us to work with.
    I'm recognizing Ms. Johnson. We're going out of order here 
so Ms. Johnson can have her questioning, and thank you.
    Ms. Johnson. Thank you very much.
    I'd like each of you to respond to the forth statutory 
purpose of SBIR and STTR programs is to foster participation in 
innovation and entrepreneurship with socially and economically 
disadvantaged persons. The National Academies have consistently 
found that agencies are struggling to achieve this. My concern 
over the years has been integrating these populations. It's now 
become of more concern because that's our growing population in 
this country, and I'm concerned that a lot of our brain power 
is not being utilized.
    So could you comment on what you're doing or whether it's 
difficult or what we could do to attract that population more?
    Dr. Khargonekar. So I think that's a really excellent and 
difficult question. We at NSF are very focused on this topic. 
Our latest initiative, NSF Includes, which is a Foundation-wide 
initiative, is aimed exactly at attracting women, 
underrepresented minorities, people with disabilities, people 
from low socioeconomic status, into science and engineering 
fields. In addition, in the SBIR program, this has been a 
really major area of focus and concern. As you correctly noted, 
the progress has been quite slow.
    There are several things we are doing. One of the ways in 
which we use our administrative fee is for very strong outreach 
programs with our program officers and there is a group of 
program officers whose full-time job it is to run our SBIR/
STTR, go out to these communities in terms of outreach. The 
Phase 0 program at NSF, it has two objectives, one of which is 
explicitly to reach out to women and underrepresented 
minorities in terms of forming companies.
    So this remains a major priority for the Foundation, for 
the SBIR program, and we would love to see faster and more--and 
stronger progress, and we will continue to work on this problem 
until we achieve success. Thank you.
    Ms. Johnson. Thank you.
    Dr. Lauer. Thank you, Congresswoman. This is a very high 
priority for NIH. On an NIH-wide level, we've set up an Office 
of Workforce Diversity, which his specifically focused on this. 
The National Institutes of Minority Health has--is expanding 
its RO-1 program. The--some of the institutes like the NHLBI 
have actually set up specific units that are devoted to 
increasing our profile in disparities research, and then within 
SBIR, we also are engaged in using administrative funds for 
extensive outreach efforts. The Phase 0 programs are also an 
opportunity to bring in previously disadvantaged groups into 
the fold and increase the likelihood of their success.
    Ms. Johnson. Thank you.
    Dr. Dehmer. Well, thank you for that question. In the 
Department of Energy, we have a particular challenge with women 
and underrepresented minorities because the work that we do is 
primarily physical sciences, and the pipeline for bringing 
those folks into physical sciences has never been cracked to 
the extent that I would like to see it. And by the way, my own 
personal time with this goes back to yours in the 1970s.
    Within the SBIR/STTR program, we're doing several things. 
We're definitely increasing our outreach to everyone as my 
colleagues have mentioned, and one of the reasons we've started 
the Phase 0 assistance program, which is somewhat different 
than the other Phase 0 programs described, is specifically to 
target women and socially and economically disadvantaged 
persons. It's a huge challenge in the physical sciences. You 
know, I've observed in my own career, which dates back to the 
early 1970s, thanks to my bio, which didn't expunge the date of 
my Ph.D., I can remember when I was a student and my 
colleagues, who were women and minorities, talked of quotas for 
medical school and other kinds of professional schools, very 
small quotas, in the few percents, not double digits. Today, 
medical schools graduate 50 percent women. Veterinary schools 
graduate nearly 100 percent women. But the physical sciences 
have not kept pace at all with that. So that's one of the 
things the Department of Energy is particularly keen to crack, 
and we've done so both in the core research programs and our 
workforce development programs and in our SBIR/STTR programs.
    Ms. Johnson. Thank you.
    Ms. Garton. Georgia Tech as a public institution really 
takes its mission in economic development in Georgia very 
seriously. We have what we call the Enterprise Innovation 
Institute, which has a number of offices. The Advanced 
Technology Development Center is one of the oldest university-
based incubators in the country, and it is open to companies 
from our entire area. Within EII, we also have the SBIR 
assistance office, which helps small businesses identify SBIR 
and STTR opportunities, learn about the programs, and learn how 
to apply to those programs, so that is an office that's 
available to support all companies that are created in the 
environment access SBIR and STTR funding. We also operating the 
Manufacturer Extension Partnership, which helps businesses in 
Georgia become more competitive and sustainable.
    Ms. Johnson. Thank you very much. My time's expired.
    Chairwoman Comstock. Thank you, and I now recognize Mr. 
Westerman for five minutes.
    Mr. Westerman. Thank you, Madam Chair, and thank you to the 
witnesses for sharing with us today.
    Ms. Garton, you shared the success story of Pindrop, and I 
appreciate your testimony because it gives us a real-life 
example that makes it easier to understand the importance of 
research.
    Bill Gates once said--who is obviously one of the great 
innovators of our time. He said that governments will always 
play a big part in solving big problems. They set public policy 
and are uniquely able to provide the resources to make sure 
solutions reach everyone who needs them. They also fund basic 
research, which is a crucial component of the innovation that 
improves life for everyone.
    Having an engineering background and sitting on this 
Committee, I've really enjoyed getting to go see where this 
research is being done. I made a trip out to the Berkeley 
National Research Lab and I saw some very exciting research 
there in biofuels and creating economical methods to use our 
bioresources to make all kinds of fuels and chemicals. I saw 
some innovative research with nanotechnology with a material 
that it's envisioned that if you could create a filter out of 
this material, you could essentially clean the entire stack 
emissions from a coal-fired plant, very exciting stuff.
    In my home state, the institutions of higher learning are 
doing some neat research. The University of Arkansas Institute 
for Nanoscience and Engineering Technology, just amazing some 
of the things that they are doing.
    What I would like to ask you, we've talked about some 
success stories but could you share with us maybe one exciting 
new innovation that's on the horizon that's taking place at 
your organizations and how close are we to seeing those become 
reality, and I'll start with you, Dr. Khargonekar.
    Dr. Khargonekar. I think one of the areas that we are very 
excited about in the Engineering Directorate is our focus on 
advanced manufacturing. First of all, historically, NSF has 
made pioneering contributions in that area. The whole 3D 
printing industry came out of NSF-funded research in the 1980s. 
In recent years, last two or three years, we've been investing 
in cyber manufacturing that will shape the factories of the 
future by leveraging cyber technologies, communications, 
computation, networks and things of that nature. We are 
investing in cellular biomanufacturing, so as cells become 
therapies, how do we manufacture those? So we are sort of 
creating basic research in manufacturing of cells.
    And a third area we are making some very exciting 
investments is in scalable nanomanufacturing, so we invested a 
lot of funds in nanotechnology and nanoscience, and the 
question we are asking is, how will we manufacture the products 
at scale and at cost. So one example is, we funded some 
research that will use roll-to-roll printing as a way to 
manufacture this product, which if it works will be extremely 
cost-effective and produce products that will have big impacts. 
So these are some of the examples that we are very excited 
about.
    Mr. Westerman. Thank you.
    Dr. Lauer?
    Dr. Lauer. Thank you, Congressman. This is a very exciting 
time for biomedical research, and two themes are high 
throughput technologies and big data, so looking at complex 
systems and taking advantage of current exploding information 
technologies.
    So some examples include three-dimensional mapping of 
neurons within the central nervous system in health and 
disease, quantification of DNA and gene sequencing 
technologies, drug screens for rare diseases, there are 
literally millions of political compounds that could be 
effective for diseases, and we're now being able to figure out 
ways in which we could identify potentially beneficial targets 
in a short period of time.
    And then another interesting one from a different side, 
from a purely clinical side, would be the incorporation of 
patient-reported outcomes into electronic health records.
    Mr. Westerman. Thank you.
    Dr. Dehmer. Well, in preparing for this hearing, I looked 
at a number of examples of outcomes from SBIR investments. I 
don't see them all because I don't look at them day to day, but 
one of them struck me as extremely important, and that is a 
small company in Lansing, Michigan, near Michigan State 
University called Niowave Incorporated. They received a number 
of SBIR/STTR awards over the last ten years or so to build 
superconducting linear accelerators, which sounds kind of 
techy, but one of the things that they did in 2015, they 
produced Molybdenum-99, Moly-99, by fissioning uranium using 
one of the superconducting linear accelerators. So the decay 
product of Moly-99 is Technetium-99, and that's used in 30 
million diagnostic imaging procedures annually. The United 
States has no production of Moly-99. It's all imported. And so 
Niowave is going to begin, I hope, in a couple of years, 2016 
or 2017, producing Moly-99 using this linear accelerator 
technology. If so, it would be a remarkable achievement. So 
that's the one that struck me as potentially the most 
impactful.
    Ms. Garton. Well, as you can imagine, at Georgia Tech there 
are technologies emerging all over the place. As with Dr. 
Dehmer, it's hard to keep up with all of them. A couple of the 
areas where we really see the next technologies emerging that 
we're all going to be talking about in 5 or ten years or areas 
like cell-based manufacturing where we're beginning to be able 
to reduce these technologies to practical application. Some of 
the numbering technologies for carbon sequestration, similar to 
the examples that you cited, are probably going to go a long 
way toward helping us deal with controlling the emissions out 
of our carbon-producing factories and other sources of carbon 
in the atmosphere. And there's other technologies that are 
closer to the market like our new drug delivery technologies 
that will allow us to deliver vaccines across the world using 
delivery methods that don't require refrigeration and can be 
self-administered. So there's technologies that are emerging 
all across the spectrum that are just waiting to burst out 
there.
    Mr. Westerman. Thank you.
    Thank you, Madam Chair, for indulging a little extra time. 
I yield back.
    Chairwoman Comstock. Thank you.
    I now recognize Mr. Lipinski.
    Mr. Lipinski. Thank you. I mentioned in my opening that 
early returns show that Innovation Corps, I-Corps teams have 
shown more success in the SBIR program. So I wanted to ask the 
witnesses what they could tell us about what they have seen or 
their thoughts moving forward, and I'll start with Dr. Lauer 
because I know that you are using--you are making I-Corps 
available to SBIR grantees at NIH.
    Dr. Lauer. Yes. Thank you, Congressman. So, so far 38 
companies have gone through the I-Corps program. We've had two 
cohorts. Our next cohort is kicking off on June 19th with 21 
companies, and we're planning an additional two cohorts in 
2017, and what we would say so far, it's still too early on in 
the program to talk about long-term outcomes but the responses 
have been quite positive. Over 90 percent of the participants 
have considered the experience to be worthwhile or excellent, 
and we've seen some interesting examples. One is a company 
called Cross Life Technologies, which is working on diagnostic 
tests for viruses like dengue, and some of the work that 
they're doing may also apply to Zika as well.
    Mr. Lipinski. Thank you.
    Dr. Khargonekar, do you have anything to add to that? I 
know you mentioned where that sort of fits in what a lot of 
researchers will do.
    Mr. Khargonekar. So we have been very excited about the I-
Corps program. It is having tremendous impact on the research 
community. We constantly hear that those who have gone through 
the program are transformed by the experience and they think 
about their research quite differently than they did before. We 
are partnering with a number of federal agencies to share what 
we have learned about I-Corps including NIH and DOE but many 
others. We are also scaling it nationally. We have--has plans 
for up to eight to nine nodes, and 71 sites and 230 teams. The 
State of Ohio has adopted I-Corps methodology. So we feel that 
there is tremendous opportunity for the Nation to take the 
learning from I-Corps and the program that NSF has pioneered 
and really make it available to all scientists and engineers 
who want to take part in it.
    Mr. Lipinski. Ms. Garton, do you have anything to add about 
how I-Corps can help those SBIR grantees?
    Ms. Garton. I believe the I-Corps program actually is a 
good entree to entrepreneurship for a lot of faculty and 
graduate students who have an invention and are trying to think 
about a way to commercialize it. So the I-Corps program really 
does provide that entree for those individuals who are 
developing the technology in the direction of creating a 
startup company and launching it, so I think that's a very good 
way to pull people into the program that leads to SBIR funding. 
And so I really view that as a piece of the continuum of the 
development of technologies.
    One of the most exciting things I think I've seen really 
comes out of the Pindrop example where we have a laboratory 
that successfully launched a startup company, developed it 
through the I-Corps program, received SBIR funding, and then 
went on to be successful in the private sector. The graduate 
students who are coming along as the next cohort of students in 
that laboratory are bringing invention disclosures forward. 
They've got philanthropic funding and other funding that 
they're taking advantage of, and they're going to be your next 
I-Corps cohort, so you've created an example that others can 
follow.
    Mr. Lipinski. And Dr. Dehmer, I know you--the National Labs 
don't have I-Corps but something very similar, Lab Corps. Have 
you seen the impact of this, or what do you hope to be the 
impact?
    Ms. Dehmer. Well, actually, we're also a participant in I-
Corps. Early on, the Office of Energy Efficiency and Renewable 
Energy, which is one of the largest contributors to SBIR, 
signed a one year MOU with NSF to participate in I-Corps. They 
subsequently extended that to five years, and they've been 
sending cohorts to that for the past few years. That same 
office also began Lab Corps, and it's my understanding that 
it's been very well received and very popular with the 
laboratory scientists. So yes, we're part of both I-Corps and 
Lab Corps.
    Mr. Lipinski. Very quickly, another connected subject. Ms. 
Garton, NSF has come out with a solicitation to continue 
funding for the I-Corps nodes. I'm glad that this is 
continuing. However, it's noteworthy that the solicitation--in 
the solicitation, the funding for nodes drops to a small 
fraction of its original amount by the fifth year of the award. 
I understand the idea is that other sources of funding for the 
nodes will step in as federal funding declines. I have some 
concerns about this. I was wondering what your thoughts were on 
this. Has Georgia Tech identified other sources of funding for 
its node that could step in if federal support declines?
    Ms. Garton. We certainly would endeavor to work in that 
direction is that is the direction for the program, and I would 
have to get back with you specifically and talk with the folks 
that are developing the proposal about specific sources of 
funding that have been identified. Maybe I could take that 
question for later, but we would certainly--if those are--if 
that's the direction we want to go, that's what we will try to 
do, but it will be a challenge.
    Mr. Lipinski. Thank you.
    I'm way over time. I yield back. Thank you.
    Chairwoman Comstock. Thank you.
    I now recognize Mr. Palmer.
    Mr. Palmer. Thank you, Madam Chairman.
    Mr. Khargonekar, the idea for the Small Business Innovation 
Research is to fund innovative technologies that the private 
sector may not be inclined to fund, in other words, address the 
problem of underinvestment in R&D. Is the program serving this 
purpose of it is focusing on proposals that are based on 
commercial viability, technical merit, or an agency's agendas?
    Dr. Khargonekar. So the NSF SBIR program is very much 
focused on technology risk, very early stage where there is a 
discovery or invention that has some commercial potential but 
it's very far from being worthy of private-sector investment. 
So that's where we come in and put funding to the Phase I, 
Phase II, Phase IIB to be sequenced to see if the technology 
risk can be reduced or even eliminated, and once that happens, 
private sector feels more comfortable coming in because that 
risk has been removed, so I would say absolutely. Our 
investments have been very much focused on reducing the 
technology risk and making the technology more mature so that 
private sector at that point can come in and scale the 
technology and commercialize it.
    Mr. Palmer. But are any of these grants grants or research 
dollars the private sector would have provided? Are you 
displacing private-sector investment?
    Dr. Khargonekar. In my opinion, no. I mean, I think a great 
example of that is our Phase IIB programs. Let's say you are an 
inventor or a discoverer. You come up with something. You go 
through the Phase I and Phase II. In Phase IIB, we require a 
two-to-one match, so it's only at that point that the private 
sector is brought in--the private sector feels that they can 
come in but the risk has been reduced substantially, and so I 
don't think it's displacing the private sector, at least at NSF 
because we are at such early stage of the technology creation.
    Mr. Palmer. Is any of it driven more by an agency's agenda? 
And Dr. Lauer, you can respond to that as well.
    Dr. Lauer. Thank you, Congressman. There has been some work 
that's been done looking at whether or not NIH support is 
crowding out private investments, and we'd be happy to share 
some of that with you in follow-up, but it seems that most 
people are concluding that the answer is no and that the work 
that NIH is supporting is indeed work that otherwise would not 
have been supported by private sector.
    Our primary goal is to enhance our understanding of the 
knowledge of living systems and then apply that knowledge to 
improve health and reduce burdens of disease. That's our 
agenda, and as best as we can tell, we're meeting that.
    Mr. Palmer. Thank you.
    Dr. Dehmer, are any of the grants primarily determined by 
the Department of Energy's agenda or are they strictly looking 
at the research or the project?
    Dr. Dehmer. The way that we determine topical areas that 
are funding opportunity announcements is----
    Mr. Palmer. Can you get a little closer to the microphone?
    Dr. Dehmer. The way that we determine the topical areas for 
the funding opportunity announcements is by going out to all of 
the programs and having them suggest the topical areas and the 
subtopics that we put out in the FOAs. I can't speak to all of 
the subtopics but certainly in the Office of Science, there are 
a number of topics that probably the private sector wouldn't be 
investing in in the very early stages.
    Mr. Palmer. This is a question for all of you. The 
Inspectors General at federal agencies seem to identify and 
pursue instances of fraud and abuse in these programs with a 
fairly high degree of regularity. Are there facets of the 
programs that seem to invite wrongdoing? Are there identifiable 
characteristics that you look for for bad-apple applicants? Is 
there a way to vet these applicants to avoid fraud?
    Dr. Khargonekar. We at NSF certainly are very focused on 
this and try to do our very, very best to make sure that the 
amount of fraud is as minimal as possible. We have an extensive 
process of vetting the companies and looking at the financials 
and making sure that these are legitimate businesses with 
accounting and so on and so forth, so we can give you more 
detail about the process we follow at NSF to ensure that our 
recipients are worthy companies.
    Dr. Lauer. I would say the same. Our SBIR grants go through 
the same rigorous vetting and review and oversight as all the 
grants at NIH.
    Dr. Dehmer. Yeah, I'll echo that. I actually engaged in a 
discussion on this with the Director of the SBIR/STTR programs 
office just this week, and it's a complicated topic. We'd be 
happy to get back to you on that if you like.
    Mr. Palmer. What I'd like to know, Madam Chairman, in these 
cases where there have been abuses of the program, what our 
remedies are, if there's any effort to recover this, because we 
are talking about oversight over taxpayer money ----
    Chairwoman Comstock. Okay. Thank you.
    Mr. Palmer. --without----
    Chairwoman Comstock. We're going to have votes here at 
11:15 to 11:30 so I'm going to have to move on.
    I now recognize Ms. Bonamici.
    Ms. Bonamici. Thank you, Chair Comstock and Ranking Member 
Lipinski, for holding this hearing.
    To our witnesses, the SBIR and STTR programs have helped 
universities and small businesses not only in my State of 
Oregon but of course across the country. TomegaVax is one 
example, an Oregon Health Science University-based startup 
that's received funding from the programs. They are developing 
vaccines and immunotherapies for chronic and recurring viral 
infections and they're now based on this research recruiting 
the first human volunteers for a clinical trial on a promising 
HIV vaccine. So great programs, but I had a conversation 
recently with our institutions of higher education and some 
innovative small businesses, and a couple things came up, and 
I'm going to ask you about those.
    First, I heard about a woman who has a Ph.D. in cancer 
biology, decided not to go back to work after her kids were 
born because science funding is complicated and tenuous. I also 
heard from a small business--a creative small business owner, 
very innovative, who said that they don't even look at the SBA 
for funding because application process is complicated and 
time-consuming. This is someone who's a patent attorney with an 
MBA, so if it's not user-friendly to somebody like that, the 
first issue is, what is being done to address the complication 
and the, I guess, tenuous nature of science funding in general?
    The second issue that came up that I'll ask you to address 
is the funding gap between Phase I and Phase II, and we heard 
about up to 6 to 9 months can go by between Phase I and Phase 
II, and if it's a small business with just a couple of 
employees, they don't know what to do for that time, and 
they're really--it's really killing some efforts and what could 
be some very innovative products.
    So I guess I'll start with Dr. Khargonekar, if you could 
discuss the whole process and how complicated it is and 
uncertain and the funding gap, please, between Phase I and 
Phase II. Thank you.
    Mr. Khargonekar. So the Phase I/Phase II gap has been a 
significant focus for the Foundation. Prior to 2015, we added a 
Phase IB supplement to Phase I grantees so that they would have 
some additional dollars so that the gap could be addressed to 
some extent, but in 2015 and 2016, we made a significant 
change. We did several things. We increased the Phase I 
duration to 12 months. We increased the Phase I amount to 
$225,000 from 150 so that gives you more dollars and longer 
runway. And then we changed the deadlines so that you can 
submit the Phase II grant after 8 months of Phase I start so 
that allows--it doesn't completely eliminate the gap but it 
allows it to be much smaller than it has traditionally been.
    And I'll add one final point. We rely a lot on the Phase I 
interim report to know if the technology is really viable 
because we want to be responsible stewards of taxpayer dollars. 
So with these changes and making sure that the Phase I interim 
report guides us in terms of the Phase II decision, we feel 
that we have taken a number of steps that would address the 
funding gap that you point out, and it's an area that we will 
continue to work on.
    Ms. Bonamici. Thank you.
    Dr. Lauer?
    Dr. Lauer. Thank you, Congressman. We do recognize that it 
takes too long for applications to be processed and so 
beginning about a year ago, we made a number of administrative 
steps to streamline the SBIR application process, and we hope 
to have some promising metrics available for you before too 
long.
    Regarding the Phase I/Phase II gap, we have a mechanism 
called Fast Track where one can apply for combined Phase I/
Phase II at the same time. The idea is that if you meet certain 
metrics through Phase I, you automatically move into Phase II, 
and that has been growing. It's now--about 25 percent of our 
Phase II programs go through Fast Track, go straight from Phase 
I to Phase II.
    Ms. Bonamici. Great. Thank you.
    Ms. Dehmer. We've done similar things to what's just been 
described. We have a fast track program, and we've made a 
number of changes in how the awards are handled to reduce the 
gap. Also, in terms of the complications of application, we've 
tried using a new electronic application system to streamline 
that somewhat, and as I mentioned in my own testimony, we 
reduced the time from the close of the FOA to the actual award 
by a factor of two, and so we're trying very hard to make 
things easier for the applicants.
    Ms. Bonamici. Thank you.
    Ms. Garton?
    Ms. Garton. Well, we don't--Georgia Tech as a university is 
not a direct recipient of SBIR funds, so the funding gap is 
less obvious to us. But in our subcontracting practices, we 
certainly do notice the discontinuity between Phase I and Phase 
II and try to work with our SBIR companies that are funding us 
under subcontracts to support their proposal efforts.
    Ms. Bonamici. And are you sensing the same sort of 
discouragement that I heard from a couple of people in this 
conversation about it's so complicated and tenuous? And for the 
record, I was not in Congress when the Budget Control Act 
passed, not part of the sequestration and those, you know, 
across-the-board budget cuts, but are things getting better out 
there or----
    Ms. Garton. It is very, very tough on the basic science 
side. The pay lines are such that it is very hard for faculty 
to get their basic and applied research programs funded, and 
that's really the balance part of the question. Do we have 
enough funding going into overall research programs, and what 
are the pay lines? It is very difficult. I think Dr. Lauer 
talked about it in his testimony.
    Ms. Bonamici. He did. We got that message clearly in Dr. 
Lauer's testimony.
    Ms. Garton. And yes, we are----
    Ms. Bonamici. Thank you.
    My time is expired. I yield back. Thank you, Madam Chair.
    Chairwoman Comstock. Thank you.
    I now recognize Mr. LaHood for five minutes.
    Mr. LaHood. Thank you, Madam Chair, and I want to thank the 
witnesses for being here today and your testimony. I want to 
take a brief moment just to highlight the impact of the SBIR 
program in my home state of Illinois. The SBIR program is an 
important source of investment in new technology for the State 
of Illinois. Since the program's inception, Illinois has 
received over $600 million in SBIR funding, creating thousands 
of new jobs, new products and new services.
    As others have mentioned, the recent National Academy 
reports on the SBIR and STTR program in the civilian agency 
side a very strong record of commercialization and return on 
investment as well as strong linkages to the university and 
basic R&D infrastructure within the country, which is clearly 
evident in the State of Illinois.
    With the past successes of this program in mind, as we look 
to reauthorization of SBIR and STTR, what top recommendation 
would each of you make for improving the SBIR and STTR programs 
to more efficiently and effectively promote innovation and job 
creation? Doctor?
    Dr. Khargonekar. Yes. So we support permanent 
reauthorization. We support maintaining the flexibility in the 
program. That I think has been very, very important, at least 
for the National Science Foundation, to maximize the value to 
society and to the taxpayer of SBIR-funded research. Those are 
some of the top recommendations that I would make is 
maintaining the flexibility in the SBIR program.
    Mr. LaHood. Thank you.
    Dr. Lauer. Yes, I would echo that flexibility, which is 
especially important to biomedical research because of the 
additional challenges of getting a product into clinical 
practice. We also strongly encourage the continuation and 
strengthening of Phase zero, and the administrative support.
    Dr. Dehmer. Absolutely. I echo that completely. The 
flexibility, the option to have a small fraction of the budget 
for administrative support are the key things that we would 
recommend.
    Ms. Garton. I agree. I think the flexibility that the 
agencies have, the ability to continue to expand the Phase 0 
sorts of pilots and make those more generally available, and to 
maintain the set-asides at their current levels would be my 
major recommendations.
    Mr. LaHood. Thank you for that.
    In terms of measuring success or the metrics used to do 
that under both SBIR and STTR, can you comment a little bit on 
how you measure success in those two programs?
    Dr. Khargonekar. So as I described earlier, we think of 
SBIR/STTR as part of a portfolio that connects discovery in the 
lab, invention in the lab, with real-world commercialization. 
So it's a piece of an ecosystem involving Innovation Corps 
program that we talked about earlier in this testimony as well 
as many of our research centers--ERCs, RUCRCs, science and 
technology centers. In terms of success, one has to look at 
ultimately formation of companies, creation of new 
technologies, and I really emphasize people. I mean, ultimately 
it's people who go through these programs, they become lifelong 
contributors and inventors and discoverers that will add to the 
economic competitiveness of the Nation. So I would look at 
people who are changed by these programs.
    Mr. LaHood. Thank you.
    Dr. Lauer. I would say in addition to the traditional 
metrics for biomedical research, we would consider two 
important factors. One is incorporation into clinical practice; 
does it actually benefit real patients in the real world. And 
then the second is, some of our SBIR work goes into developing 
tools for research researchers can use to advance science, and 
we have seen examples where tools have led to advances in 
knowledge that otherwise could not have happened.
    Mr. LaHood. Thanks.
    Dr. Dehmer. One of the things that we've done in our STEM 
education--science, technology, engineering and mathematics--
workforce development is to set up systems that will track 
students, participants over a long period of time and enable us 
to look at outcomes five, 10 and more years down the road, and 
I think if you really want to do these kinds of assessments 
properly, you can't look at short-term outputs; you have to 
look at the long term. And so those would be my 
recommendations.
    Mr. LaHood. Thanks.
    Ms. Garton. And I think one of the major purposes of the 
SBIR and STTR programs is to help universities, at least from 
our perspective, is to help us get the research results, the 
things that come out of our laboratories, into the marketplace 
so that the public can benefit from them. So I look at whether 
or not the technologies that we create and we launch through 
these companies are actually being used and are they available 
to the public.
    Mr. LaHood. Thank you.
    Those are all my questions, Madam Chair. Thank you.
    Chairwoman Comstock. Thank you.
    And I now recognize Ms. Clark for 5 minutes.
    Ms. Clark. Thank you, Chairwoman Comstock and Ranking 
Member Lipinski, for this hearing, and thank you to all of our 
witnesses today. We are delighted to have you, and I think your 
testimonies have underscored the immense value of the SBIR and 
STTR in making sure we're taking that research out of the labs 
and into the private sector. We're very grateful for you being 
here.
    Dr. Dehmer, I'd like to go back to a program that you 
mentioned, which is the Phase 0 assistance program. As we see 
women increasingly--we're up to 30 percent of women who are 
owning their own businesses, and it's one of the fastest 
growing sectors, but we're not where we should be, especially 
with women of color, and I wondered, as one of the primary 
focuses of these programs is to encourage participation women 
and minority-owned businesses, I wondered if you could go into 
a little more detail on how the Phase 0 program benefits 
businesses that may be submitting a proposal for the first time 
and how you see the Phase 0 encouraging women and minority-
owned businesses.
    Ms. Dehmer. Well, so there's two parts to that. The first 
is outreach to women and minority-owned businesses, and we're 
working hard to increase our outreach through various 
mechanisms, through physically getting on the road, through 
webinars and so forth, and the second is enabling people 
through small investments to be better prepared to write 
successful SBIR grants for the first time, and I think that's 
very important. This actually goes beyond just SBIR. This goes 
to enabling people who have never submitted a research grant to 
be able to do it successfully, and so our Phase 0 program--
there's many different Phase 0 programs so they're not all the 
same. But ours specifically provides people with help in 
navigating the federal system, the application system, and 
giving them help in letter-of-intent writing. If you don't 
write a good letter of intent for the programs, you're out 
right away, at least in some of the research programs, how to 
write a Phase I proposal, how it gets reviewed, how you're 
going to submit it, communication and marketing research, 
technology advice and so forth.
    So what I've personally observed with young people 
submitting proposals for the research programs, and that 
applies to first-time applicants to SBIR, is that they will 
need help navigating the federal system and learning the basics 
of how to do something successfully, and frequently they aren't 
successful just because they don't know.
    Ms. Clark. Do you know how many Phase 0 program 
participants have been successful in securing SBIR or STTR 
awards?
    Ms. Dehmer. Yeah. So it's--so it's a new program, and the 
only thing we know so far is that the success rate for people 
who have been through the Phase 0 program is about the same as 
the success rate for others, and at first blush, you might 
think that that wouldn't be the case because the people 
submitting for the first time would be less successful. But I 
think it's actually going to take a lot more statistical 
analysis with control groups and so forth to know for a fact 
that the Phase 0 program is helping, but we do know that the 
success rate is about the same for first-time applicants who 
have been--or for recent applicants who have been through the 
Phase 0 program compared to those who do not.
    Ms. Clark. Thank you.
    And Dr. Lauer, the National Academies 2015 assessment of 
the SBIR/STTR at NIH found that women and minority 
participation is ``low and declining.'' Are you aware of any 
changes or approaches that are being taken at NIH to address 
this problem?
    Dr. Lauer. Congresswoman, yes. We are aware with the 
finding in the NAS report and we are quite concerned about that 
as well. Our SBIR office is engaged in a number of outreach 
efforts, which I mentioned specifically in my opening 
testimony. We're also looking, similar to my colleague here, at 
how the Phase 0 programs can help, and we'd be happy to follow 
up with some more details.
    Ms. Clark. Thank you very much.
    And just very generally, Dr. Khargonekar, have you seen the 
discrepancy between NSF's overall funding level increases and 
the SBIR/STTR funding? Has that had an effect on NSF's mission?
    Mr. Khargonekar. I mean, I think what it has done is, since 
the growth in our basic research budget has not been as strong, 
it has reduced the amount of funding we have available for 
funding over core research programs in all areas of science and 
engineering, and that's the reason why we are saying that let's 
not increase the set-aside percentages as a way to increase the 
SBIR/STTR program, let's grow the entire research budget, which 
allows SBIR/STTR to grow. So yes, it has had impact.
    Ms. Clark. And I agree with you. I think we need to 
increase the pie, not reallocate the slices.
    But thank you all. Thank you for your testimony and your 
work, and I yield back.
    Chairwoman Comstock. I now recognize Mr. Tonko for 5 
minutes.
    Mr. Tonko. Thank you, Madam Chair.
    I for one am excited that we're holding this hearing today 
because I very strongly believe that reauthorization of the 
SBIR/STTR program is of the utmost importance. In fact, it 
should be broadened and extended and enhanced. I so much 
believe in it. This program has proven to be one of the most 
successful federal programs for technological innovation in our 
history, delivering more than 70,000 patents and valuable 
innovations in agriculture and defense and energy, health 
sciences, homeland security, space transportation and other 
fields. You can't get better results than that.
    Through Phase I and Phase II, SBIR countless jobs have been 
created in the capital region of New York that I represent. It 
is through programs such as SBIR that my district has developed 
the underpinnings of support for a boom in high-technology 
innovation and economic development. I would cite International 
Electronic Machines Corporation in Troy as a stellar example of 
all of that.
    Let me begin with Dr. Lauer. The 2011 reauthorization 
allows NIH, DOD and the Department of Education to conduct a 
pilot program to allow a small business to receive a Phase II 
without having received a Phase II award, also known as the 
Direct to Phase II pilot. I have some concern that allowing 
companies to skip Phase I would shut out some small businesses 
from competing for SBIR award funding. Can you elaborate, 
Doctor, on Direct to Phase II funding and efforts to prevent 
marginalization of some small businesses out there?
    Dr. Lauer. Thank you, Congressman. I think part of the 
reasoning for that is that we've observed that it's rare that a 
project goes from Phase 0, Phase I, Phase II, Phase IIB and 
then final approval and marketing. The process in the real 
world is not that linear, and often there are, for example, two 
Phase II awards that ultimately lead to development of a 
product. So the idea of Direct to Phase II was to consider 
other pathways by which a product may eventually make it.
    Mr. Tonko. So there shouldn't be a risk of marginalization?
    Dr. Lauer. Well, we certainly don't want that to happen, 
and that, I think, gets to the point that a number of your 
colleagues have made, which is that we have to track metrics 
very carefully, and that we are doing.
    Mr. Tonko. Okay. I appreciate that.
    The research and development of technologies in the biotech 
field, the energy sector, as well as other technology areas 
require large investments of capital in the range of hundreds 
of thousands if not to millions of dollars. The 2011 
reauthorization provides increased flexibility to agencies in 
the amount of funding they award to small businesses under 
SBIR.
    Additionally, I'm informed that the timeline for innovation 
does not necessarily fit neatly into the Phase I, Phase II and 
Phase III approach used by our SBIR program. The last 
reauthorization also allows agencies more flexibility to 
structure the funding award at their discretion. So I would ask 
each of our witnesses, how have each of your, you know, 
agencies or sections, your divisions, implemented these new 
flexibilities?
    Mr. Khargonekar. As I mentioned earlier in this testimony, 
we certainly have used the flexibility. For example, we've 
increased the Phase I award size. We have increased the 
duration of Phase I. We have increased the Phase II and Phase 
IIB sizes. We have used Phase IIB to attract more private-
sector funding through the two-to-one match requirement. So if 
you want to get Phase II funding from NSF, private sector has 
to come in with the two-to-one--twice the amount that NSF would 
provide. So we certainly have used the flexibility that have 
been afforded to us to increase the overall impact of taking 
discovery and invention and commercializing it to the real 
world.
    Mr. Tonko. Thank you, Dr. Khargonekar.
    And Dr. Lauer?
    Dr. Lauer. So at NIH, two examples would be the Phase IIB 
awards as well as the bridge awards, which the National Cancer 
Institute has implemented, and these awards enable up to three 
years of funding, a million dollars a year, and this is 
particularly important when you're trying to move a product 
into clinical trials.
    Mr. Tonko. Thank you. And Dr. Dehmer?
    Ms. Dehmer. Yeah. I think you've heard a lot of examples 
from me in DOE and from my colleagues. I think the bottom line 
here is that increased flexibility enables an agency to do 
experiments that are targeted at the kinds of small businesses 
that the agency wants to develop, and without that flexibility 
that allows experiments, you simply are going to be locked into 
a structure which may not fit everyone. I've observed in my own 
research career and in my management career at DOE watching 
several groups of the same kind that are funded at very 
different places evolve in different ways because we allow them 
the freedom to evolve, and what you find are best practices and 
innovation, and that then can be ported from one group to 
another. So the flexibility to allow experimentation is 
extremely critical in this program, and the 2011 authorization, 
which provided that, was terrific.
    Mr. Tonko. Thank you.
    And Ms. Garton?
    Ms. Garton. The flexibility that the agencies are using 
helps our companies. The companies that we create follow a non-
linear path, as somebody just said. It really is variable 
across a sector and across the technology development pathway 
because things come up in the development of those 
technologies, and having that flexibility to have a second 
Phase II, to have bridge funding, that's really critical for 
those companies because that gives them flexibility.
    Mr. Tonko. Well, I think harnessing the intellect of this 
Nation in the midst of an innovation economy is an awesome 
assignment. You're doing that and doing it very well.
    And with that, Madam Chair, I yield back.
    Chairwoman Comstock. Thank you, and I'd like to thank the 
witnesses today, and thank you for your passion, for your 
important work, and the importance of basic research and our 
role in that, and really appreciate your support for the 
innovation economy and how we're going to do that, and I did 
note that we have a number of students here. Are these students 
that we have? If you're a student, raise your hand. Great. It's 
been very nice to have students here, and I hope you appreciate 
all the good work that's going on here, and see a lot of the 
support, and if you're science students and STEM students in 
any of those fields, we are definitely interested in making 
sure you stay in those fields. We need you in those fields, and 
these are the leaders that you'll want to be watching over the 
years and hopefully joining.
    So thank you, students, for being here today, and again, 
thank our witnesses for all they do in this very innovative and 
exciting field, and we are now adjourned.
    [Whereupon, at 11:22 a.m., the Subcommittee was adjourned.]

                               Appendix I

                              ----------                              


                   Answers to Post-Hearing Questions


[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
                                 
                                 [all]