    [Joint House and Senate Hearing, 115 Congress]
    [From the U.S. Government Publishing Office]

      IMPROVING THE SMALL BUSINESS INNOVATION RESEARCH AND SMALL BUSINESS
                          TECHNOLOGY TRANSFER PROGRAMS

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

                                 JOINT HEARING

                                   before the

                   SUBCOMMITTEE ON CONTRACTING AND WORKFORCE

                                     OF THE

                          COMMITTEE ON SMALL BUSINESS

                                    AND THE

                    SUBCOMMITTEE ON RESEARCH AND TECHNOLOGY

                                     OF THE

                  COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                  HEARING HELD
                                  MAY 4, 2017
                                   __________

       [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                Small Business Committee Document Number 115-019
        Science, Space, and Technology Committee Document Number 115-013
                  Available via the GPO Website: www.fdsys.gov
                                       ______

                             U.S. GOVERNMENT PUBLISHING OFFICE

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                       HOUSE COMMITTEE ON SMALL BUSINESS

                          STEVE CHABOT, Ohio, Chairman
                                STEVE KING, Iowa
                          BLAINE LUETKEMEYER, Missouri
                              DAVE BRAT, Virginia
                 AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
                            STEVE KNIGHT, California
                            TRENT KELLY, Mississippi
                                 ROD BLUM, Iowa
                             JAMES COMER, Kentucky
                     JENNIFFER GONZALEZ-COLON, Puerto Rico
                              DON BACON, Nebraska
                        BRIAN FITZPATRICK, Pennsylvania
                             ROGER MARSHALL, Kansas
                               RON ESTES, Kansas
                   NYDIA VELAZQUEZ, New York, Ranking Member
                           DWIGHT EVANS, Pennsylvania
                           STEPHANIE MURPHY, Florida
                            AL LAWSON, JR., Florida
                             YVETTE CLARK, New York
                              JUDY CHU, California
                           ALMA ADAMS, North Carolina
                          ADRIANO ESPAILLAT, New York
                            BRAD SCHNEIDER, Illinois
                                     VACANT

                   Kevin Fitzpatrick, Majority Staff Director
          Jan Oliver, Majority Deputy Staff Director and Chief Counsel
                         Adam Minehardt, Staff Director
               HOUSE COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

                          LAMAR SMITH, Texas, Chairman
                            FRANK D. LUCAS, Oklahoma
                          DANA ROHRABACHER, California
                               MO BROOKS, Alabama
                            RANDY HULTGREN, Illinois
                              BILL POSEY, Florida
                            THOMAS MASSIE, Kentucky
                           JIM BRIDENSTINE, Oklahoma
                             RANDY K. WEBER, Texas
                           STEPHEN KNIGHT, California
                               BRIAN BABIN, Texas
                           BARBARA COMSTOCK, Virginia
                           BARRY LOUDERMILK, Georgia
                          RALPH LEE ABRAHAM, Louisiana
                             DARIN LAHOOD, Illinois
                            DANIEL WEBSTER, Florida
                               JIM BANKS, Indiana
                              ANDY BIGGS, Arizona
                           ROGER W. MARSHALL, Kansas
                             NEAL P. DUNN, Florida
                            CLAY HIGGINS, Louisiana
                          RALPH NORMAN, South Carolina
                  EDDIE BERNICE JOHNSON, Texas, Ranking Member
                            ZOE LOFGREN, California
                           DANIEL LIPINSKI, Illinois
                            SUZANNE BONAMICI, Oregon
                              AMI BERA, California
                         ELIZABETH H. ESTY, Connecticut
                             MARC A. VEASEY, Texas
                           DONALD S. BEYER, Virginia
                              JACKY ROSEN, Nevada
                           JERRY MCNERNEY, California
                            ED PERLMUTTER, Colorado
                              PAUL TONKO, New York
                            MARK TAKANO, California
                             BILL FOSTER, Illinois
                             CHARLIE CRIST, Florida
                            COLLEEN HANABUSA, Hawaii
                    SUBCOMMITTEE ON RESEARCH AND TECHNOLOGY

                     BARBARA COMSTOCK, Virginia, Chairwoman
                            RALPH ABRAHAM, Louisiana
                             FRANK LUCAS, Oklahoma
                            RANDY HULTGREN, Illinois
                             DARIN LAHOOD, Illinois
                            DANIEL WEBSTER, Florida
                               JIM BANKS, Indiana
                             ROGER MARSHALL, Kansas
                          EDDIE BERNICE JOHNSON, Texas
                   DANIEL LIPINSKI, Illinois, Ranking Member
                          ELIZABETH ESTY, Connecticut
                              JACKY ROSEN, Nevada
                            SUZANNE BONAMICI, Oregon
                              AMI BERA, California
                             DONALD BEYER, Virginia

                                C O N T E N T S

                               OPENING STATEMENTS

                                                                       Page
    Hon. Steve Knight................................................     1
    Hon. Stephanie Murphy............................................     2
    Hon. Barbara Comstock............................................     4
    Hon. Daniel Lipinski.............................................     5

                                   WITNESSES

    Mr. Joe Shepard, Associate Administrator, Office of Investment
      and Innovation, United States Small Business Administration,
      Washington, DC.................................................     8
    Mr. John Neumann, Director, Natural Resources and Environment,
      United States Government Accountability Office, Washington, DC.     9
    Mr. John Clanton, Chief Executive Officer, Lynntech Inc., College
      Station, TX....................................................    23
    John S. Langford, Ph.D., Chairman and CEO, Aurora Flight Sciences
      Corporation, Manassas, VA......................................    25
    Mr. Ron Shroder, CEO/President, Frontier Technologies Inc.,
      Beavercreek, OH................................................    26
    Ms. Angela M. Alban, President and CEO, SIMETRI, Inc., Winter
      Park, FL.......................................................    28
    Clinton T. Rubin, Ph.D., SUNY Distinguished Professor and Chair,
      Department of Biomedical Engineering, Director, Center for
      Biotechnology, Stony Brook University, Stony Brook, NY.........    30

                                    APPENDIX

    Prepared Statements:
        Mr. Joe Shepard, Associate Administrator, Office of
          Investment and Innovation, United States Small Business
          Administration, Washington, DC.............................    39
        Mr. John Neumann, Director, Natural Resources and
          Environment, United States Government Accountability
          Office, Washington, DC.....................................    44
        Mr. John Clanton, Chief Executive Officer, Lynntech Inc.,
          College Station, TX........................................    68
        John S. Langford, Ph.D., Chairman and CEO, Aurora Flight
          Sciences Corporation, Manassas, VA.........................    73
        Mr. Ron Shroder, CEO/President, Frontier Technologies Inc.,
          Beavercreek, OH............................................    75
        Ms. Angela M. Alban, President and CEO, SIMETRI, Inc., Winter
          Park, FL...................................................   101
        Clinton T. Rubin, Ph.D., SUNY Distinguished Professor and
          Chair, Department of Biomedical Engineering, Director,
          Center for Biotechnology, Stony Brook University, Stony
          Brook, NY..................................................   122
    Questions and Answers for the Record:
        Questions from Ranking Member Eddie Bernice Johnson, Hon.
          Daniel Lipinski, and Hon. Paul Tonko to Mr. Joe Shepard....   136
    Additional Material for the Record:
        Statement by Chairwoman Barbara Comstock, Subcommittee on
          Research and Technology....................................   140
        Statement by Hon. Eddie Bernice Johnson, House Committee on
          Science, Space, and Technology.............................   143
        Statement by Ranking Member Daniel Lipinski, Subcommittee on
          Research and Technology....................................   145
        Statement by Chairman Lamar Smith, House Committee on
          Science, Space, and Technology.............................   148

      IMPROVING THE SMALL BUSINESS INNOVATION RESEARCH AND SMALL BUSINESS
                          TECHNOLOGY TRANSFER PROGRAMS

                                  ----------

                             THURSDAY, MAY 4, 2017

                      House of Representatives,
                   Committee on Small Business,
             Subcommittee on Contracting and Workforce,
                                 joint with the
               Subcommittee on Research and Technology,
           Committee on Science, Space, and Technology,
                                                        Washington, DC.
        The Subcommittees met, pursuant to call, at 10:02 a.m., in
    Room 2318, Rayburn House Office Building, Hon. Steve Knight
    [chairman of the Subcommittee on Contracting and Workforce]
    presiding.
        Present from Subcommittee on Contracting and Workforce:
    Representatives Knight, Estes, Chabot, Murphy, Clarke, Evans,
    and Lawson.
        Present from Subcommittee on Research and Technology:
    Representatives Comstock, Marshall, Lipinski, and Tonko.
        Chairman KNIGHT. Good morning. Thank you all for coming.
    This is a bit of a historic moment, the first time in a long
    time that the Small Business and the Science, Space, and
    Technology Committees are having a joint hearing. And I think
    that that is something that we can all be proud of, that we are
    working together.
        That being said, we are only going to work together for a
    few minutes, and then we are going to go down and vote. And
    hopefully we will work together there and come back and keep
    this moving.
        But I think what we will do is we will do as much of our
    opening comments as we can and maybe put a bookmark there
    before we get to witness statements. And I don't know if we are
    going to have any stop there.
        So with that being said, good morning, and thank you all
    for being here to examine Small Business Innovation Research
    and Small Business Technology Transfer, or SBIR/STTR, programs.
        Innovation is the engine to our economy. You are going to
    hear me say that probably every hearing that I chair, and I
    think we firmly believe that. Technological breakthroughs and
    the entrepreneurship it spurs builds our economy by finding
    state-of-the-art solutions to difficult problems and
    capitalizing on those new products.
        This correlation is particularly important in the small-
    business arena. Small businesses tend to be more nimble,
    responding to market changes more rapidly than their bigger
    counterparts. They drive innovation. They make us more agile in
    the world economy.
        In this era of globalization, making it easier for small
    businesses to develop and commercialize new, innovative
    products is essential not only for America's competitiveness,
    but for our national security as well.
        This is why we need programs like SBIR and STTR programs.
    These programs, envied and emulated across the world, were
    created based on the premise that small technological-based
    firms tend to be highly innovative and inventive and that this
    innovation should be better harnessed by the Federal
    Government.
        Binding these new developed technologies with our Federal
    R&D efforts was seen as a natural extension to both boost
    small-business participation in Federal R&D activities and to
    solve agency institutional problems at the Department of
    Defense, National Institutes of Health, or the Department of
    Energy.
        All too often, good ideas never materialize because of a
    myriad of obstacles. I think we can say that. It could be lack
    of funding, lack of understanding, or a perceived lack of a
    marketplace for a truly new and amazing technology. And I can
    say that every one of us on this dais has been to small
    businesses and seen great activity and great innovation.
        The SBIR and STTR programs bridge the gap between
    fantastical and the practical, building our economy and
    improving the function of the Federal Government in the
    process.
        Over the past few years I have had the opportunity to meet
    some of the entrepreneurs who participate in these programs,
    and I have seen some of the truly groundbreaking technologies
    they have produced. By visiting small businesses around my
    district and attending some of the national SBIR/STTR
    conferences here in Washington, I have been impressed at how
    technical and pioneering these technologies can be. The small
    businesses that participate in these programs are truly and
    rapidly pushing the boundaries of what is possible in a variety
    of fields.
        Last year, our two Committees worked with the House and
    Senate Armed Services Committee to include a 5-year extension
    of the SBIR/STTR programs. This provided small businesses and
    the participating agency alike with the confidence and security
    to know that those popular programs will continue to be there
    at least through 2022. This year, both our Committees are
    interested in collaborating on legislation making minor
    adjustments and improvements to the programs.
        Today, we have two excellent panels of witnesses to discuss
    these programs and provide the Subcommittees with suggestions
    as to how to make them superior for small businesses and
    participating agencies alike. I am looking forward to hearing
    those ideas and working with my colleagues on both Committees
    to draft legislation we will all be proud of.
        Again, I want to thank you all for being here. I now yield
    to the ranking member for the Subcommittee on Contracting and
    Workforce, Mrs. Murphy of Florida, for her opening remarks.
        Mrs. MURPHY. Thank you all for being here.
        And thank you, Mr. Chairman.
        The Small Business Innovation Research program, or SBIR,
    and the Small Business Technology Transfer program, or STTR,
    were established to spur innovation and job creation throughout
    the country. Since their inception, these programs have awarded
    over $40 billion to small innovative firms. Today, SBIR is one
    of the Federal Government's largest technology development
    programs.
        Research conducted by SBIR and STTR awardees has helped to
    address our country's most important research and development
    challenges. As a direct result of these programs, breakthroughs
    have been made in a wide range of sectors; in agriculture, in
    energy, and most notably in health care.
        These discoveries, in turn, have generated tremendous
    economic growth and employment opportunities. For example, in
    fiscal year 2013, my home State of Florida received 107 SBIR
    awards totaling $49 million, the 10th most among all
    participating States and territories.
        Florida also received 24 STTR awards, totaling nearly $9
    million, which placed it sixth among participating
    jurisdictions. As reported publicly, there have been at least
    40 awards made to firms in central Florida in 2016 and to date
    in 2017. For many research companies in my district, these two
    programs serve as a gateway to the Federal contracting field.
        The continued success of the SBIR and STTR programs depend
    upon three primary factors. First, the program must remain
    highly competitive. Second, applicants and awardees must have
    access to the financing of all types, including venture
    capital. And third, we must ensure these products make it to
    market.
        The current administrative fee authorization for these
    programs will expire in September 2017, but the full program
    was granted a 5-year extension in the 2017 NDAA. While the
    Committee has seen these programs succeed as a result of
    legislative updates made in 2011, there are still various areas
    of concern that require examination.
        One of the primary outcomes of the 2011 legislation was a
    greater focus on commercialization through sequential Phase II
    awards. This was necessary to ensure that the program remains a
    catalyst for innovation and job creation associated with these
    scientific advances.
        During today's hearing, I look forward to learning more
    about how the reauthorization's various commercialization
    initiatives have played out in Florida and nationwide and if
    they are, in fact, resulting in more successful endeavors.
        Among other notable changes in 2011 were increases in
    permissible award sizes and a Phase 0 proof of concept
    partnership pilot program at NIH. I hope today's hearing sheds
    light on the success of these provisions. I am particularly
    interested in the pilot program given the presence of the
    University of Central Florida in my district.
        While the 2011 reauthorization made several modifications
    to further assist small firms, the needs of innovative
    companies have evolved and so too must these programs. Two
    issues continue to raise concerns.
        First, the programs remain concentrated in just a few
    States. Indeed, the top 10 awardee States receive over half of
    the number of awards and half of the dollars. Specifically, 52
    percent of award dollars for SBIR and 62 percent of award
    dollars for STTR in fiscal year 2013.
        Second, the participation of women-owned and minority-owned
    firms in these programs has been declining. According to SBA's
    SBIR annual report for fiscal year 2013, 15 percent of total
    award dollars went to women-owned small businesses, 6 percent
    to socially or economically disadvantaged-owned small
    businesses, and 4 percent to hub zone-certified small
    businesses.
        I look forward to a frank discussion about the 2011 changes
    and the opportunity for additional program improvements. It is
    clear that the SBIR and STTR programs have promoted our shared
    goal of fostering innovation, but we must continue to provide
    vigilant oversight of these programs to ensure their maximum
    effectiveness.
        I thank the witnesses for being here today and express my
    gratitude to the Chairman for calling this joint hearing with
    our colleagues from the Science Committee.
        Thank you, and I yield back.
        Chairman KNIGHT. Thank you, Mrs. Murphy.
        I now yield to the gentlelady from Virginia, the Chairwoman
    of the Subcommittee on Research and Technology, Mrs. Comstock.
        Chairwoman COMSTOCK. Thank you, Mr. Chairman.
        America's future economic and national security depends on
    global leadership in key areas of science and technology. Basic
    research supported with taxpayer dollars through the National
    Science Foundation, NASA, NIH, DOD, and other Federal agencies
    underpins the key scientific discoveries that have created
    today's world: the internet, wireless communications,
    lifesaving medicines, lasers, and more.
        At the horizons of basic research are breakthroughs in new
    fields like quantum computing, artificial intelligence, and
    bioengineering, breakthroughs that will continue to transform
    our lives and the world we live in.
        If basic research produces the scientific feedstock for
    innovation, risk-taking small businesses are the catalyst for
    converting knowledge into new products and services. They are
    the catalyst for economic growth, for producing 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 DOD and other agencies meet their
    research and development needs.
        Federal agencies with extramural research budgets of $100
    million or more per year offer assistance through the SBIR
    program. They are required to allocate just 3.2 percent of
    their extramural research budgets for competitive grants to
    small businesses, grants that underwrite the businesses'
    technology development and commercialization initiatives.
        The five Federal agencies with extramural research budgets
    of at least $1 billion or more per year comprise the STTR
    program. These agencies allocate an additional 0.45 percent of
    their budgets for STTR grants. Although these sound like small
    percentages--and they are--the total dollar numbers are huge.
    Since Congress first authorized these programs, participating
    Federal agencies have awarded more than $40 billion to small
    businesses.
        This is a huge cumulative taxpayer investment. And this
    continuing investment in the program's potential to stimulate
    needed economic growth makes it particularly important for
    Congress to ensure the programs are being administered
    efficiently and effectively.
        There are many small business success stories in which SBIR
    and STTR assistance have played a key part. Among the thousands
    of small companies and start-ups that have used SBIR and STTR
    to bootstrap their growth are dozens in my Northern Virginia
    district.
        These include 3 Phoenix, an engineering small business in
    Chantilly, Virginia, that uses SBIR assistance to create
    innovative electronic technology solutions to the Department of
    Defense and the U.S. Navy, as well as private industry. The CEO
    of 3 Phoenix, Inc., testified before our Subcommittee last
    year.
        Mosaic ATM, a Leesburg enterprise, has used SBIR to improve
    air transportation efficiency and safety and push the envelope
    on unmanned aircraft systems.
        And Vidrio Technologies, an Ashburn small business, is
    commercializing neuro-imaging tools and microscopes to provide
    a better ``window into the brain.''
        These and other businesses, both in our region and
    throughout the country, are the people who will be able to
    really hit those cutting-edge technologies and grow jobs in
    this important space. I look forward to hearing your testimony
    today.
        Chairman KNIGHT. I thank the Chairwoman.
        Chairwoman COMSTOCK. Oh, I am sorry. If I might, I did want
    to mention also Progeny Systems of Manassas and Aurora Flight
    Sciences of Manassas, Virginia. I did run out of time, but in
    case you are here, those are a couple of others. So, my
    apologies.
        Chairman KNIGHT. Thank you very much.
        And I now yield to the gentleman from Illinois, the Ranking
    Member of the Subcommittee on Research and Technology, Mr.
    Lipinski.
        Mr. LIPINSKI. Thank you, Chairman. And I want to thank you,
    Chairwoman Comstock, and Ranking Member Murphy for holding this
    hearing to consider improvements to SBIR and STTR programs that
    help small-business innovators turn their ideas into market-
    ready products.
        While we need to support strong investment in basic
    research at our Nation's universities and Federal labs, we
    should also support innovative and scalable policies and
    programs to help move this taxpayer-funded research out of the
    lab for commercial and societal you all benefit.
        The SBIR and STTR programs engage innovative small
    businesses in the Federal R&D system and play an important role
    in technology transfer. We need to do what we can to make these
    programs work even better, because America's economic
    development and job growth depend on these small-business
    innovators.
        Eleven Federal agencies invest a total of $2 billion
    annually in SBIR and STTR programs. These programs are a
    critical source of early-stage R&D financing. They give small
    businesses access to nondilutive capital for validation of
    their ideas, product development, and testing, which often
    leads to follow-on private sector funding and market
    introduction.
        Commercialization is one of the ultimate objectives of the
    SBIR program. In last year's assessment of the SBIR and STTR
    programs, the National Academy of Sciences found that about
    half of all the programs' awardees generated commercial sales.
    And in a survey of NIH awardees, about 27 percent of the
    respondents had sales in excess of $1 million.
        SBIR is funded as a carveout from funding for basic
    research, including research carried out by many of the same
    innovators who eventually apply for SBIR funding.
    Unfortunately, for the most part, the overall pot of research
    money is not growing, even as the SBIR program has grown by 30
    percent since 2011.
        We must continue to be sensitive to this balance between
    funding for the pipeline of talent and basic research that
    feeds the idea that an entrepreneur may eventually
    commercialize and funding directly to entrepreneurial activity
    itself.
        Recent assessments of the SBIR program have provided us
    with good ideas on how to make the program more efficient and
    better able to achieve this goal of commercializing new
    products and services. A great proven example of this is the
    Innovation Corps program, also own as I-Corps. I-Corps provides
    entrepreneurial education and other early-stage support for
    innovators.
        NSF launched I-Corps in 2011 and it has since spread to
    other agencies, including DOE, NIH, DOD, USDA, and others.
    Early returns show that entrepreneurs who go through this
    program are more successful in their SBIR applications than
    those who do not.
        I-Corps and SBIR go hand in hand to strengthen the Federal
    R&D ecosystem that connects research institutions and industry.
    I believe we need to expand on the success of I-Corps by making
    entrepreneurial education a central pillar of the SBIR program.
    We need to expand access to I-Corps so it is available to SBIR
    grantees from every agency. We also need to spread the I-Corps
    model of entrepreneurial education throughout all phases of the
    SBIR cycle.
        Just as participating in I-Corps prior to applying for a
    Phase I grant can increase a researcher's success rate,
    participating in a startup accelerator that mentors innovators
    and teaches them how to scale their companies can increase
    their chances of commercial success.
        There are many examples of successful accelerators already
    operating, such as Y Combinator in Silicon Valley or the New
    Venture Challenge at the University of Chicago. The SBIR
    program should adopt a proven accelerator model for Phase II
    grantees.
        In addition to entrepreneurial education, innovators often
    need funding for proof-of-concept work prior to applying for an
    SBIR grant. In the 2011 SBIR reauthorization, I sponsored a
    provision to create a Phase 0 pilot program at the NIH. The
    Phase 0 proof-of-concept partnership pilot program utilizes a
    small portion of the funds from within STTR. The NIH Centers
    for Accelerated Innovations and Research Evaluation and
    Commercialization Hubs, or REACH, are funded by this pilot
    program. I look forward to hearing from Dr. Rubin about the
    REACH Center that he directs at Stony Brook University.
        Relatively small investments by agencies in all aspects of
    pre-SBIR education and innovation could significantly improve
    commercialization outcomes for the SBIR program and for
    federally funded research more broadly.
        Beyond commercialization, there are several other
    significant issues that I know our Federal witnesses will
    address this morning. We will hear from Mr. Neumann about ways
    to better guard against fraud, waste, and abuse in the SBIR
    program.
        The 2011 SBIR authorization included provisions to improve
    agencies' flexibility in making awards to small businesses,
    provide funding for outreach activities and other
    administrative issues, and increase data reporting. I look
    forward to an update from Mr. Shepard on how the agencies have
    implemented these new requirements, as well as feedback from
    the small-business witnesses on what they believe has worked
    and what still needs improvement.
        Your testimony is important and helps us determine what to
    address as we work on additional policy improvements for the
    SBIR program. I look forward to working with my colleagues in
    both Committees to continue updating and strengthening the SBIR
    and STTR programs.
        And I yield back the balance of my time.
        Chairman KNIGHT. I thank the gentleman.
        Okay. If Committee members have an opening statement
    prepared, I ask that they be submitted for the record.
        I would like to take a moment to explain the timing lights
    for you. You have 5 minutes. We like to keep you two as close
    to 5 minutes as we can. We will be very flexible. But as the
    light starts to get going on the yellow light, you have a
    minute left, and as the red light comes, you stop. We will give
    you a little bit of flexibility there, but please try and keep
    it as close as you can.
        We are going to keep moving, because they are keeping on
    moving on the floor. So our first witness is Mr. Joe Shepard,
    Associate Administrator of the Office of Investment and
    Innovation at the SBA. Prior to his appointment, Mr. Shepard
    was most recently a partner and managing director of the
    Archway Capital Management and was previously a director of
    Bank One Capital Markets, the investment banking and private
    equity bank group of Bank One Corporation, now JPMorgan.
        In both positions, he was responsible for evaluating and
    processing direct equity and mezzanine investments, as well as
    providing merger, acquisition, advisory, and investment banking
    services. In addition to his private sector accomplishments,
    Mr. Shepard is beginning his second stint with the SBA, as he
    was previously the associate administrator for investment from
    2007 to 2009.
        Thank you for your participation today, Mr. Shepard. I am
    going to get through both, and then we will start back.
        Our second witness is Mr. John Neumann, Director of Natural
    Resources and Environment at the United States Government
    Accountability Office, or GAO. He has 25 years of experience
    with the GAO and currently manages a diverse portfolio of
    audits in science and technology, food safety, and agriculture
    areas in the Natural Resources and Environment team.
        Other areas of his expertise include defense industrial
    base and government-wide contracting issues. He has produced a
    range of reports and testimonies on topics such as federally
    funded research and development centers, defense supply chain,
    protection of critical technologies, and, of course, the SBIR
    and STTR programs.
        We thank you, Mr. Neumann, for testifying today.
        And we are going to go back to Mr. Shepard, and you have 5
    minutes, and we welcome your comments.

    STATEMENTS OF MR. JOE SHEPARD, ASSOCIATE ADMINISTRATOR, OFFICE
      OF INVESTMENT AND INNOVATION, UNITED STATES SMALL BUSINESS
        ADMINISTRATION; AND MR. JOHN NEUMANN, DIRECTOR, NATURAL
       RESOURCES AND ENVIRONMENT, U.S. GOVERNMENT ACCOUNTABILITY
                                 OFFICE

                        STATEMENT OF JOE SHEPARD

        Mr. SHEPARD. Very good. Thank you, sir.
        Chairman Knight, Chairwoman Comstock, Ranking Member
    Murphy, and Ranking Member Lipinski, and other distinguished
    members of this Committee, thank you for inviting me to be here
    today to this joint hearing on ``Improving the Small Business
    Innovation Research and Small Business Technology Transfer
    Programs.''
        On March 22, 2017, 43 days ago, SBA Administrator Linda
    McMahon announced my appointment as the SBA's associate
    administrator for the Office of Investment and Innovation, and
    I am honored to be at the SBA and honored to be here today with
    all of you.
        The SBA Office of Investment and Innovation, which oversees
    the SBIR and STTR programs, provides a front row seat to
    observe the risks and challenges entrepreneurs face in their
    attempts to bring innovations to the market. As a former
    investor and intermediary in venture capital and early-stage
    financings, I have seen these challenges firsthand in the
    private sector. So I am excited to be part of an agency, to be
    part of an office that can help make improvements to ease the
    challenges and increase the likelihood of success for our
    Nation's innovators.
        Since joining SBA, I have started to familiarize myself
    with SBA's oversight responsibilities for the SBIR/STTR
    programs, which involve policy, outreach, collection,
    maintenance, and publication of data, monitoring program
    implementation, and reporting to Congress, agency improvement
    suggestions, and coordination of the FAST program.
        Like Administrator McMahon, I am committed to improving the
    effectiveness, efficiency, and accountability of the SBIR and
    STTR programs. I look forward to with working with Congress,
    the Federal agencies, and all current SBIR/STTR program
    participants so that SBA can fulfill its oversight role and
    improve the programs.
        A previous program improvement that has been beneficial to
    the SBA and the Federal agencies is the 3 percent
    administrative funding pilot that was introduced in the 2011
    authorization. The pilot has entitled SBA to improve its
    ability to gather data from the Federal agencies through the
    SBIR.gov business intelligence platform and to raise program
    awareness through several outreach activities.
        In regards to outreach, SBA seeks to improve participation
    by women, minorities, and underrepresented communities through
    SBA's web-based training modules, train-the-trainer programs,
    and the SBIR Road Tour. Through the SBIR Road Tour, program
    managers from 11 participating Federal agencies, together with
    SBA, will have made 53 bus stops in 35 States by the end of
    2017. Past and current tours will have engaged over 10,000
    innovators from throughout the U.S.
        A major partner in SBA's outreach activities and efforts
    have been universities. More than half of SBA's outreach
    efforts have occurred in university facilities. SBA is working
    with NASA on their outreach to Historically Black College and
    Universities and other minority-serving institutions to raise
    awareness about the opportunities that exist so that SBIR/STTR
    programs can be accessed. These programs are an ideal tool for
    the universities to commercialize their basic science and then
    transition public investments to the marketplace.
        A particular priority for Administrator McMahon and for
    many members of these respective Committees here today is to
    ensure that women innovators are aware of and are competing for
    SBIR/STTR awards. This resonates with me as well, since my
    wife, her degree and career is in the STEM field. SBA has made
    increasing the participation of women in SBIR and STTR programs
    a priority. SBA will continue to coordinate program outreach
    activities with all 11 Federal agencies.
        To conclude, for more than 25 years, these programs have
    encouraged innovation and entrepreneurial activity in our
    Nation. Today small businesses, through the current SBIR/STTR
    programs, continue to be encouraged to develop and
    commercialize their innovative products.
        Also, as a father of an 11-year-old son with an interest
    and an aptitude in science and technology and engineering and
    math, I am keenly aware of the importance of these programs for
    the next generation, the next generation of American
    entrepreneurs, of small-business owners, and university
    researchers, who will seek to make meaningful contributions
    that will help our economy grow and strengthen in the future.
        Thank you.
        Chairman KNIGHT. Thank you very much, Mr. Shepard.
        And we will go to Mr. Neumann.

                       STATEMENT OF JOHN NEUMANN

        Mr. NEUMANN. Chairman Knight, Chairwoman Comstock, Ranking
    Members Murphy and Lipinski, and members of the Subcommittee,
    thank you for the opportunity to be here today to discuss our
    work on the Small Business Innovation Research and Small
    Business Technology Transfer programs.
        As you know, Federal agencies award about $2 billion a year
    through these small business research programs, and SBA and the
    11 participating agencies each play an important role in
    ensuring that these programs are working efficiently and
    effectively.
        With that goal in mind, over the last 5 years GAO has made
    a total of 20 recommendations to SBA and the participating
    agencies. To date, about one-third of those recommendations
    have been implemented.
        Today, I would like to briefly highlight three areas where
    we have made recommendations to improve the oversight and
    implementation of the SBIR and STTR programs: reporting
    requirements, the administrative pilot program, and fraud,
    waste, and abuse prevention requirements.
        Over the last 5 years, we have made a number of
    recommendations to SBA and the participating agencies to
    improve their compliance with reporting requirements. For
    example, SBA is required to report annually to Congress on the
    agency's compliance with spending and other reporting
    requirements for the SBIR and STTR programs.
        In each of the last 4 years, we found that SBA had not
    submitted timely reports to Congress. The most recent required
    report that SBA issued was in March 2016 that covered spending
    for fiscal year 2013. SBA officials have told us that they have
    taken some actions to improve the reporting process, but they
    have yet to submit the required reports to Congress for fiscal
    years 2014, 2015, or 2016. We believe that providing Congress
    with timely annual reports will improve oversight of these
    programs.
        We have also made several recommendations to SBA to improve
    the implementation of the administrative pilot program. In
    response to one of our recommendations, SBA has taken steps to
    get better information from the participating agencies on how
    they use the administrative funds rather than just the total
    amount they spend on the program.
        SBA has yet to implement another recommendation we made to
    evaluate the potential constraints that have hindered some
    agencies from participating in the administrative pilot
    program. SBA's evaluation would be useful if Congress decides
    to continue the program beyond this fiscal year.
        Lastly, we made four recommendations to SBA to improve the
    implementation of fraud, waste, and abuse prevention
    requirements for the SBIR and STTR programs.
        Agencies that participate in the programs are required to
    implement certain activities to prevent fraud. For example,
    agencies are required to list information on their SBIR program
    websites on successful prosecutions of fraud in the programs.
        While SBA has updated its guidance to the agencies in 2012,
    we have found that they have taken few actions since then to
    oversee the agencies' implementation of these requirements. We
    recommended that SBA, in its oversight role for the program,
    take steps to ensure that agencies are clear on the fraud
    prevention requirements and are implementing them. In addition,
    we recommended that SBA evaluate the requirements to determine
    if they are appropriate and meeting the intended purpose of
    preventing fraud in these programs.
        We look forward to reviewing SBA's progress in implementing
    these important recommendations.
        This concludes my prepared remarks. I am happy to respond
    to any questions you may have.
        Chairman KNIGHT. Thank you very much, Mr. Neumann.
        And we will continue on. We are getting very close to
    voting on the floor, but I think we will continue on and try to
    get through my questions and maybe the ranking member's.
        What we will try to do is keep our questions down to 5
    minutes and move this through the panel as quickly as we can,
    because we would like everyone to be able have a chance to ask
    questions if they would like to.
        So, Mr. Shepard, I will start off. In the past agencies had
    a less than favorable view of SBIR programs because it was
    statutorily mandated that no SBIR funds from the allocation
    could be used to administer the programs, leaving agencies to
    find the money somewhere else. The 3 percent administrative
    funding pilot included in the 2011 reauthorization attempts to
    alleviate those concerns.
        Do you feel that by allowing agencies to administer the
    program with SBIR funds it has perhaps changed the perception
    of the program and allowed it to grow in popularity within
    agency circles? And if not, how can we?
        Mr. SHEPARD. Thank you for your question, Mr. Chairman.
        Absolutely, the administrative funding pilot and the fees,
    I think the response that I have heard so far from the SBA team
    is that the different Federal agencies that have that are doing
    a good job of utilizing that. It has been very helpful for them
    in terms of their outreach efforts.
        And it has been very helpful for the SBA as well in terms
    of coordinating with them in terms of outreach primarily, and
    also helping with the flow of data and the communication back
    and forth in terms of the data-collection effort that is
    necessary and the timely transmission of that data to SBA.
        So I think it has been a very helpful component to the
    program.
        Chairman KNIGHT. Good. I find that many people don't know
    what SBIR is, or STTR, and when they do, they like what it
    brings. It brings a value of innovation from small companies
    that might have been, I am not going to say overrun by the
    system of maybe bigger players, but it allows that innovation
    to come to the forefront. And sometimes you don't know what you
    don't know. And we want that to happen. We want that to be able
    to come forward.
        So, Mr. Neumann, in your most recent April 2017 report, the
    GAO states that over the last 7 years the offices of inspector
    generals at participating agencies have investigated 110
    instances of potential fraud in these programs. Of the 110
    instances, only 14 were found to be actual cases of fraud.
        It seems like a very low number, meaning the SBIR program
    is run pretty efficiently from a waste, fraud, and abuse
    standpoint.
        Comparatively, how does the SBIR program stack up to other
    programs in this regard?
        Mr. NEUMANN. Well, we didn't compare the SBIR fraud
    prevention to other fraud prevention programs. But in talking
    to the OIGs, they certainly have higher priorities for some of
    their larger-dollar-value programs. For example, DOD is more
    interested in pursuing contracting fraud. With the limited
    resources of the IG they tend to pursue that. But,
    nevertheless, they didn't see that there was significant fraud
    in the SBIR program.
        And out of the time period you cited there, the 110
    investigations over a 7-year period, that is out of 38,000
    awards. So they view the SBIR fraud as being a relatively small
    problem. But, nevertheless, they did want to devote resources
    to that to make sure that they can prevent any future fraud.
        Chairman KNIGHT. Absolutely. And we are always looking to
    lower all waste, fraud, and abuse, of course, in government as
    a whole. But we are looking at 12 percent here of cases found
    that were actually fraud and abuse. So I think that that is a
    fairly low percentage.
        Obviously, we would like to get that down to zero, of
    course, but as we are looking at these types of organizations
    and maybe bureaucracies and government issues across the board,
    if we were at 12 percent across the board, I think that in many
    regards we would consider that somewhat of a success.
        So I am going to move on to the ranking member so that she
    can get her questions in. And if we have time at the end, we
    can always go through with a second. But I will yield to the
    ranking member.
        Mrs. MURPHY. Thank you, Mr. Chairman.
        Let me first say, Mr. Shepard, that as a parent of a 6-
    year-old boy and 3-year-old girl, I appreciate and share your
    commitment to fostering STEM opportunities for the next
    generation.
        My question for you is that the 2011 reauthorization allows
    agencies to help facilitate the commercialization of the
    research through the use of Phase III awards, including sole-
    source contracts. However, we are hearing from small businesses
    that agencies are not using this tool.
        Mr. Shepard, why is there such a reluctance in awarding
    sole-source contracts?
        Mr. SHEPARD. I know that my focus so far with the team,
    commercialization is essential, obviously, and it is the intent
    of the program to take us from innovation to commercialization.
        I know that the discussions that we have had with program
    managers, the discussions that I had with the team at SBA have
    really focused on trying to educate--we talked about
    entrepreneurial education earlier in Congressman Lipinski's
    comments--is to educate those entrepreneurs that have made it
    to the Phase II process, that you are going to come to the end
    of that, of that Phase II process quickly. It can be within a
    year, if it is a million-dollar grant.
        And they need to start preparing for that really at the
    beginning of that process to start preparing for
    commercialization. So we have talked about raising awareness
    for that. We have talked about bringing in a business
    development person to help them and to get them to that
    commercialization point.
        To your specific question, I am going to have to look into
    that more in terms of any kind of reluctance. But we certainly
    meet with and work with our program managers on a regular
    basis, and that is easy to investigate, easy to look into, and
    we will do so on your behalf.
        Mrs. MURPHY. Great. Thank you. I would appreciate that.
        Then my next question is for both Mr. Neumann and Mr.
    Shepard.
        One of the statutory objectives of the SBIR program is to
    increase the participation of minority- and women-owned
    businesses in the R&D arena. Yet, we are seeing participation
    decrease. For minority-owned firms, percentages are in the
    teens, and the percentages are in the single digits for women-
    owned firms. Why this objective so challenging?
        Mr. SHEPARD. I will go first. That is obviously
    frustrating, and it is one of the mandates of the SBIR, is to
    reach out to those groups. And the only thing that we have
    continued to talk about, again, during my short time has been
    awareness, awareness, awareness, to make them realize that that
    access is available to them. I had mentioned in my opening
    comments about our work with the universities and going
    specific to universities.
        We have started to make, and I think you will see in some
    of the activities and awareness activities certainly, where we
    will start to raise the awareness level, and I hope that it is
    visible. But it is a challenge, and it is something, again,
    that we talk with the program managers at all of the Federal
    agencies about addressing. And it needs to be addressed, and
    certainly during our time we will make efforts to do so and
    raise that awareness.
        Mrs. MURPHY. Great. Thank you.
        Mr. NEUMANN. GAO has been mainly focused on expenditure
    compliance and the fraud prevention requirements based on
    congressional direction. But we would be happy to work with the
    Committee staff to do additional work in this area if that
    would be useful to you.
        Mrs. MURPHY. I think that I would be interested in seeing
    more information about that. Thank you.
        Again, a question for both of you. The SBA has published
    guidance on benchmarks for Phase I to Phase II transitions. The
    goal of these benchmarks is to prevent the same companies from
    continually winning Phase I awards without progressing to Phase
    II.
        Are agencies enforcing these benchmarks? And if so, have
    there been any cases where a company was made ineligible for
    the year?
        Mr. NEUMANN. Well, I can tell you that we just began work
    last month for Chairman Smith of the House Science Committee on
    how SBA has developed benchmarks and what agencies do to ensure
    that they are not making awards to ineligible companies. We
    expect to have this preliminary work done by the end of May,
    and we will plan to brief the staff at that time, and we will
    work with your staff on getting information to you as well.
        Mrs. MURPHY. Great. Thank you.
        Mr. SHEPARD. And I am not sure about that specific report.
    We will certainly work with the Committee, and we will work
    with our colleagues in GAO to assist in that effort and visit
    with our program managers to make sure that that compliance
    issue is addressed.
        Mrs. MURPHY. Great. Thank you.
        I yield.
        Chairman KNIGHT. And I thank the gentlelady.
        We are going to take a short recess. We have a three-vote
    series, and we are about 7 minutes away from the first vote
    ending, which means we have about 15 or 20 minutes on that
    vote. And we will probably be back in around half an hour. So
    we will take a short recess.
        [Recess.]
        Chairman KNIGHT. Okay. Thank you all for that brief recess,
    and we will be back.
        And we are going to continue with questions. Ms. Comstock
    had to leave the room for a meeting real quickly, so we are
    going to go to the ranking member, Ranking Member Lipinski, for
    his questions--and we are going to put a bookmark there.
        Chairwoman COMSTOCK. It is okay. You go ahead.
        Chairman KNIGHT. Okay. We are going to continue on.
        Mr. Lipinski, you have the floor.
        Mr. LIPINSKI. Thank you, Mr. Chairman.
        I thank our witnesses for being here and waiting us out
    there. I am sure we will make it worthwhile here.
        I had, as Mr. Shepard, you had mentioned in answer to
    another question, I had talked about commercialization efforts.
    The 2011 reauthorization required agencies to increase their
    efforts to help commercialized technologies. So I was wondering
    what you could tell us about what the participating SBIR
    agencies have done to meet the goal of increased
    commercialization at each phase of the SBIR program.
        Mr. SHEPARD. I appreciate the question, Congressman
    Lipinski.
        You know, as I have been in, again, a short period of time,
    started to look at some of the reports and some of the dialogue
    that takes place between SBA and the program managers, I know
    it is an important focus of ours and will continue to be in the
    oversight role that the SBA has.
        That is one I don't have specific information in terms of a
    report, in terms of conversions, which I think would be
    interesting to see. We do have some information--I don't have
    the data in front of me now--in terms of conversions from Phase
    I to Phase II, obviously, but then that focus on Phase II into
    the commercialization.
        I do know one of the challenges--and, again, we will
    address it as best we can--is the self-reporting factor that
    you have from the small businesses who actually leave the
    program, go out and commercialize, and then making sure that
    they report back. But we will be in contact with your staff in
    terms of a followup on that.
        Mr. LIPINSKI. And how do you feel about what I had talked
    about in my opening about having, sort of, maybe, accelerators
    give mentoring to Phase II grantees to spread, sort of, what we
    have right now with I-Corps early on but have that at the Phase
    II level, some sort of education and maybe through some of the
    successful accelerators that we already have out there?
        Mr. SHEPARD. Yeah, I appreciated and understood the comment
    about entrepreneurial education that you made and, certainly,
    in the university setting, where you have scientists that might
    not have a business development perspective about their product
    that is coming out of Phase II and is going to be
    commercialized.
        So having that component in terms of the educational
    awareness, the educational training, be it in the accelerator
    model or as part of the Phase II, is going to be important for
    those, certainly, in the academic setting, to be able to
    transfer their ideas and their innovation as they start going
    to market and try to commercialize that. So I think it is
    absolutely an important thing to focus on.
        Mr. LIPINSKI. Well, as we move forward in this
    reauthorization, I think it is something that I am going to
    continue to work on and work with my colleagues--I would like
    to work with you, Mr. Shepard--and figure out the best way we
    can do this.
        I think there is widespread support, bipartisan support,
    for SBIR and STTR, and we all want to make it work as well as
    possible and succeed. And I think adding more of an educational
    aspect could be very helpful. I-Corps certainly has proven to
    be successful.
        As a former academic, I know that these are things that are
    not taught as you are going through grad school and certainly
    not something that you know as a professor, no matter how good
    you are in your field and how well you are doing your work. You
    may have great discoveries and great ideas but may not know how
    to actually move that forward. And that is what these programs
    are all about, is finally getting to a good outcome--a new,
    innovative small business.
        So thank you very much.
        Mr. SHEPARD. I agree, Congressman. Thank you.
        Mr. LIPINSKI. And I yield back.
        Chairman KNIGHT. Thank you very much.
        And we are going to the Chairwoman of the Subcommittee on
    Research and Technology, Ms. Comstock.
        Chairwoman COMSTOCK. Thank you, Mr. Chairman.
        How do we measure success under SBIR and STTR? Is it
    patents awarded, small business revenue, employment growth,
    that ability to get to that next stage? What are some of the
    success markers that we should be looking for?
        Mr. SHEPARD. Very good question, Congresswoman. I think all
    of those that you mentioned, obviously, are good markers. You
    know, the transition percentages from--you know, obviously, the
    ultimate objective with meeting the research and development
    needs of our country, inspiring innovation, and then
    commercializing, any kind of markers we can put down for that.
        As a new administration, we will look and see if there are
    some metrics that we need to add. We are fully committed, as
    you heard from Administrator McMahon, to making sure these
    programs are efficient, to make sure that they are effective,
    and to make sure that programs are meeting the types of
    outcomes that they are intended to meet.
        So adding additional metrics is something that we can look
    at to make sure that we are measuring appropriately, and then
    working with Congress and the program managers, obviously, as
    they report back to the SBA in its oversight role to make sure
    that we are measuring correctly.
        Chairwoman COMSTOCK. All right.
        And Mr. Neumann?
        Mr. NEUMANN. We haven't looked at the metrics in the work
    that we have done. We have mostly focused on, you know, the
    spending compliance and the fraud prevention requirements in
    the work. But, certainly, those are important metrics, and we
    would be interested in considering looking at that in future
    reviews.
        Chairwoman COMSTOCK. Okay.
        And then we have heard from some of our folks who have been
    involved that get in there at that entry level and then they
    aren't supported in going to that next level, or they feel like
    their good ideas may be otherwise appropriated throughout
    agencies, and then they don't get that credit and opportunity.
        Do you see that? And how do we provide the incentives for
    people to come in and know that, well, if this takes off, you
    are going to be a beneficiary, it is not going to be
    appropriated by others?
        Mr. SHEPARD. That is, again, an excellent question. You
    want to engage the entrepreneurial community to make sure, if
    they come in for a Phase I, that they have some assurance that
    there won't be, certainly, a hindrance with the program moving
    into a Phase II.
        I don't have data on that. I can certainly look into that
    and report back. But we certainly want to have the program run
    in a way that there isn't a hindrance to moving from Phase I to
    Phase II for those innovators that are part of the program.
        Chairwoman COMSTOCK. Okay. And I might have some followup
    questions, because we have had some folks talk to us about
    that. I don't have all the details right in front of me, but
    that has been a concern----
        Mr. SHEPARD. Yeah, very good.
        Chairwoman COMSTOCK.--that has been raised.
        Mr. SHEPARD. Yeah. We would be more than happy to look into
    those details, those specific cases, and then address them on a
    one-by-one basis and communicate back to the Committee on that.
        Chairwoman COMSTOCK. Okay.
        Mr. Chairman, I will yield back.
        Chairman KNIGHT. Thank you very much.
        And, at this time, I would like to welcome Mr. Estes to our
    Small Business Committee and to our Subcommittee on Workforce
    and Contracting and ask him to ask questions for 5 minutes.
        Mr. ESTES. Thank you.
        Mr. Shepard, in your testimony, you talked a little bit
    about the administrative funding pilot program. And can you
    talk a little bit about why you see the great value in that and
    what you are getting out of that?
        Mr. SHEPARD. I think the primary benefit that we have heard
    from the program managers at all of the Federal agencies that
    are participants in the programs has been their ability to do
    pilot programs, to raise awareness, and to focus on raising
    awareness for the programs. That has been one of the main
    benefits.
        One of the critical things, obviously, is being able to
    collect data, have timely data submitted. And I know that the
    program offices have also used that administrative funding
    pilot, the proceeds from that, in terms of data collection and
    data reporting.
        And we have seen an increase in that from the team and the
    visits that I have had with them thus far. And so, really,
    awareness and data have been two areas where they have been
    able to focus, that they didn't focus on so much before, with
    the funding that became available through the administrative
    funding pilot.
        Mr. ESTES. I know one of the earlier questions was talking
    about some of the analysis there. I know you have had, what, 43
    days to get up to speed on this. Do you have an approach that
    you are going to use that data to analyze the good and the bad
    with?
        Mr. SHEPARD. There is a lot of data. And, absolutely, yes,
    we will do so. Yes, sir.
        Mr. ESTES. Okay. Thank you.
        Mr. Neumann, what kind of changes are you looking at making
    in your policy directive and some of the thought process that
    you are having in terms of proposed regulations and looking at
    doing some things differently there?
        Mr. NEUMANN. Well, we have made a number of recommendations
    to SBA to make updates to the policy directives on a number of
    issues, and they have been taking steps towards some of those
    things.
        I think, just getting back to the administrative pilot
    question you asked about, I think we see SBA being in a unique
    position to really do a thorough evaluation of how those funds
    are being used and determine if there are constraints to
    agencies being able to use them effectively.
        So I think Mr. Shepard's discussion of evaluating that data
    will be really important to improving the success of that pilot
    if it is extended beyond this fiscal year.
        Mr. ESTES. Okay. Thank you.
        Mr. Chairman, I yield back.
        Chairman KNIGHT. Thank you very much.
        And we would like to go to Mr. Lawson for his 5 minutes of
    questioning.
        Mr. LAWSON. Thank you very much, Mr. Chairman.
        And welcome to the Committee.
        My first question centers around, yesterday, we hosted a
    hearing on the growth of accelerators in the small-business
    space.
        Mr. Shepard, can you describe the connection between the
    accelerators and the SBIR and STTR program and how SBA can work
    hand-in-hand to guarantee that both of these programs can
    coexist with the accelerators?
        Mr. SHEPARD. Thank you for your question, Congressman.
        I have and the SBA has accelerator data from before that we
    are reviewing to see the types of impacts that the program has
    had. And so we are in the process of doing that right now, from
    the previous accelerator program.
        I do know, initially, from the initial look, that having
    accelerator entities throughout the U.S. that understand the
    SBIR/STTR program and being able to educate those communities
    locally about the program--so, again, it is awareness and it is
    education--has really been the primary link that I have seen so
    far in reviewing the information between that linkage you are
    talking about between accelerators and the programs.
        Mr. LAWSON. Okay.
        Mr. Neumann, what changes have you seen over the past
    several years in the small-business spaces that have impacted
    the success of the SBIR and the STTR program? And what changes
    do you see on the horizon for these programs?
        Mr. NEUMANN. Well, in our review of expenditure compliance,
    you know, agencies are generally spending what they are
    required to spend on the program. So we are seeing improvement
    in that. We are seeing improvement in terms of the information
    that SBA is collecting. And we would like to see some
    additional improvements in SBA's evaluation of the constraints
    of various aspects of the program, including the administrative
    pilot program, and also evaluating the effectiveness of fraud
    prevention efforts.
        So I think there is some more that can be done there, but
    we have been seeing improvement overall in at least the
    expenditure compliance side, that agencies are spending what
    they are required to spend for the programs.
        Mr. LAWSON. Okay. Thank you.
        And this question can be to both of you all on the panel. I
    represent Jacksonville and Tallahassee, which includes major
    universities, including Florida State University, which has a
    major innovation hub called Innovation Park, which is not too
    far from where I live.
        And what do you see on the horizon in terms of the
    universities? Because my district also includes two
    historically African American colleges, which you talked about
    earlier, Mr. Shepard, which is Edward Waters and Florida A&M
    University.
        The question is, how can we create a pipeline to HBCUs'--I
    heard you before we took off to go vote--graduates into the
    STEM field that would help these students create their own
    small businesses that can eventually take part in such programs
    like SBIR and STTR?
        Mr. SHEPARD. Very good question and, obviously, in the
    opening remarks, Congressman, a focus and a concern of ours for
    the program managers and then the SBA.
        I think, you know, I have talked about awareness, I have
    talked about education. One of the things that--and visiting,
    being there physically, connecting those universities with the
    small-business development centers that the SBA has. Those
    entities are well-versed in the SBIR/STTR programs.
        We have an increasingly more robust presence through
    sbir.gov for training modules, train-the-trainer tools, that
    allow students, certainly, that are pursuing their
    undergraduate, master's degree, doctorate degrees to go there,
    as well, and use those resources to learn more about the
    program.
        So just a couple of thoughts and a couple of ideas about
    some resources that are currently out there. But, at the end of
    the day, it is really awareness and encouraging them to find
    out more about those programs and use the resources that are
    existing for them to pursue those opportunities that are there
    for them to access.
        Mr. LAWSON. Okay. Thank you.
        I yield back.
        Chairman KNIGHT. Thank you very much.
        And I am proud to have our Committee Chairman for Small
    Business, Mr. Chabot, here, and I would like to give him some
    time to ask questions.
        Chairman CHABOT. Thank you very much. I will be relatively
    brief, Mr. Chairman, because I just stepped in, and I had a
    number of other meetings. But I want to thank you for your
    leadership on this committee. We are very pleased with what we
    see so far, and keep up the good work.
        Mr. Shepard, I just have one question. I will direct it to
    you, if I can. Obviously, one of the Congress' and this
    committee's principal responsibilities is oversight, making
    sure that the tax dollars that the American people send to us
    are used efficiently and that everything is going according to
    plan.
        And I know you have only been in your position for, I
    think, a grand total of, like, 38 days now or so, so not too
    long, so I am certainly not directing this at you. But the
    previous administration was somewhat remiss in getting the
    reports back so we can do the appropriate oversight on
    schedule, shall we say--pretty far behind schedule, I have to
    say.
        When might we expect fiscal year 2014, fiscal year 2015,
    fiscal year 2016 annual reports to come to us so we can do the
    appropriate amount of oversight so we can guarantee that the
    American tax dollars are being spent in the way the American
    people have a right to expect, and that is that they are most
    efficiently spent?
        Mr. SHEPARD. I appreciate the question, Congressman Chabot.
        One of my first questions when I arrived into the office
    and a fiscal year end 2014 report was put in front of me was,
    ``I think there is a problem with the date. I think this should
    say 2016.'' And I soon found out that I had and the
    administration had inherited some tardiness in terms of some of
    those reports.
        In regards to the fiscal year end 2014, we immediately took
    action on that in terms of making sure the appropriate
    clearance process took place inside the SBA. And that is taking
    place now. So we are looking at it internally and hope to have
    that forthcoming.
        We share the concern. There is an intent to--we need to
    report to Congress, and we need to do it in a timely manner. So
    I share the concern; the Administrator shares the concern. And
    we are in the process of doing that with the fiscal year end
    2014 annual report on the program and also have initiated and
    are in process on the fiscal year end 2015 report, as well. So
    both of those are taking place. And then we will soon start on
    the fiscal year end 2016 report, as well.
        So you will see more timely annual reports forthcoming out
    of this office going forward. So I appreciate the concern. It
    is a concern that we share. And it is part of our job to report
    on a timely basis, and we will do so.
        Chairman CHABOT. All right. Thank you. I would, you know,
    as chair of the Committee, strongly urge you to do that in as
    expeditious a manner as possible so that we can do appropriate
    oversight.
        Thank you very much. I yield back, Mr. Chairman.
        Chairman KNIGHT. Thank you very much. And I appreciate the
    leadership from the Chairman.
        And we will now go to Mr. Tonko for his questions.
        Mr. TONKO. Thank you, Mr. Chair.
        As the Science Committee's only New Yorker, I would like to
    start off by welcoming SUNY Stony Brook Professor Clinton
    Rubin.
        Thank you for joining us today.
        He is also director of the Long Island Science Hub and will
    participate in our second panel. And I thank him for educating
    us today but, more importantly, thank him for his passion, the
    passion that he brings to the table and for all of his hard
    work. It is much appreciated.
        I am excited that we are holding this hearing today because
    I strongly believe in the value of the SBIR/STTR program. This
    program has proven to be one of the most successful Federal
    programs for technological innovation in United States history,
    delivering more than 70,000 patents, close to 700 public
    companies, and approximately $41 billion worth of venture
    capital investment, as well as valuable innovations in
    agriculture, in defense, in energy, health sciences, in
    homeland security, in space and transportation and many other
    fields.
        Through Phase I and Phase II SBIR, countless jobs have been
    created in my district in the capital region of New York. It is
    through programs such as SBIR that my district has developed
    the underpinnings of support for a boom in health technology
    innovation and economic development.
        This funding has resulted in cutting-edge technologies,
    well-paying jobs, and overall has been a recipe for successful
    innovation. The capital region is an exponentially growing area
    for clean energy technology and biotechnology, and I want to
    ensure that the support for these areas only continues to grow
    stronger. Smart investments like SBIR and STTR will allow for
    this continued growth to happen.
        I am proud of and inspired by the research and innovation
    in small businesses in the capital region, which are venues
    that have greatly contributed to advances in science and
    technology across the board. From conversations I have had with
    small business leaders, I can see that they value this program.
        Dr. Clinton Ballinger, the CEO of SelfArray, Inc., told me,
    ``My biggest issue as a CEO of a startup is to keep the Federal
    SBIR program funded. The venture capital community has grown
    very risk-averse and simply does not invest until a new
    technology is nearly developed. Some technologies cannot be
    self-funded by the inventors, and this is where the SBIR
    program contributes greatly.''
        I also heard from Ted Eveleth, the CEO of HocusLocus, LLC,
    located in Albany, New York. Ted said that the reality he
    encounters is that companies don't perform research and
    development anymore because it is too risky and shows up as an
    immediate expense. Ted said, and I quote, ``This is true from
    life sciences companies to old line manufacturing companies.
    Without the SBIR program, innovation in the United States would
    come to a screeching halt.''
        While in Austria, Ted listened to a panel discussion with
    representatives from four different countries talk with awe
    about the SBIR innovation program, their machine that they are
    trying to imitate in their own countries. Ted summed up their
    thoughts by saying that ``the SBIR program makes the United
    States the envy of the world.'' I could not agree more.
        So, with that being said, Mr. Shepard, 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 award without having received a Phase I
    award, also known as the Direct to Phase II Pilot. I have some
    concerns that allowing companies to skip Phase I would shut out
    some small businesses from competing for SBIR award funding.
        Can you please elaborate on Direct to Phase II funding and
    efforts to prevent marginalization of some of our small
    businesses?
        Mr. SHEPARD. Thank you for your question, Congressman.
        I am very aware--again, new in the job--about the Direct to
    Phase II. The initial data that I have seen is--and I, quite
    frankly, was a little surprised that it isn't utilized more. It
    has been very, very nominal. We will report on that and
    understand the concern about a skip in the Phase I that might
    occur.
        I will, again, just make sure, you know, that I focus on
    that and that I will be able to communicate back a little more
    data about what is actually occurring. Again, my summary is
    that going direct to Phase II hasn't been as high an activity
    level as one might expect, but we will report back on that.
        Mr. TONKO. Absolutely. I think it is very important to
    review what that impact is going to look like. We don't want to
    wreck a good program. We don't want to marginalize any of our
    small businesses.
        So, with that, I thank you for responding and will look
    forward to the reviews that you will conduct.
        Thank you, and I yield back, Mr. Chair.
        Chairman KNIGHT. Thank you very much.
        And I think we have had a spirited first panel. And I would
    like to take a little bit of time, thank you very much for
    coming in. Thank you for answering the questions in an honest
    and open way.
        This is a good hearing where we are trying to understand
    how this program works, that there are possibilities to make it
    better, but it is working and helping to bring forward that
    innovation that we crave here in America. And we don't want it
    stifled, and we don't want it stamped out. We want to encourage
    that. So I think that these programs do that, and that is part
    of what this panel is bringing forward.
        So, with that, I will thank the panel and excuse them. And
    we will ask for just a very short break so we can bring the
    second panel through.
        Mr. SHEPARD. Good. Thank you.
        [Recess.]
        Chairman KNIGHT. Again, thank you to the first panel.
        And we are moving on to our second panel. We are going to
    go down the line and introduce--I think the Chairwoman will be
    back shortly and she can introduce Dr. Langford, but we might
    skip him on the introductions and wait for her to come back.
        We are not forgetting you. We will get there.
        Just like that. That is how Congress works. We ask and it
    happens. Sometimes.
        Our first witness on the second panel is Mr. John Clanton,
    Chief Executive Officer of Lynntech, Incorporated, in College
    Station, Texas.
        Lynntech was founded in 1987, providing early-stage
    scientific research and technology development for government-
    sponsored initiatives. Key Lynntech projects include high-
    performance fuel cells for the military, enhanced search and
    rescue components for the Coast Guard, and cost-effective
    biohazard detectors for Homeland Security. The company
    currently employs 100 scientists, engineers, and support staff.
        Mr. Clanton has endowed a faculty fellowship at Texas A&M's
    Mays Business School, and he is also an Eppright Distinguished
    Donor to the 12th Man Foundation.
        Thank you for being with us today.
        I will now yield to the Chairwoman of the Subcommittee on
    Research and Technology, Ms. Comstock, for the introduction of
    our next witness.
        Chairwoman COMSTOCK. Thank you.
        I am honored to introduce Dr. John Langford, Chairman and
    CEO of Aurora Flight Sciences Corporation, which he founded in
    1989 and is headquartered in Manassas, Virginia, my district.
        Prior to Aurora, Dr. Langford worked for the Institute for
    Defense Analyses, where he organized and led a series of human-
    powered aircraft projects that shattered the world distance and
    endurance records for human-powered flight. He also worked for
    the Lockheed Corporation as an engineer on the development of
    the F-117 stealth fighter.
        Dr. Langford also cofounded Athena Technologies in 1998,
    serving as CEO and Chairman before the company was sold to
    Rockwell Collins in 2008.
        Dr. Langford received his bachelor's degree in aeronautics,
    a master's degree in aeronautics and astronautics, a master's
    degree in defense policy, and a Ph.D. in aeronautics and public
    policy, all from MIT.
        And we are delighted to have you here today.
        Chairman KNIGHT. Very good.
        Up next is Mr. Ron Shroder, Chief Executive Officer,
    President, and Chairman of the Board of Directors of Frontier
    Technology, Incorporated, or FTI, in Beavercreek, Ohio, a place
    I am very familiar with, growing up at Wright-Patterson.
        Mr. Shroder has nearly 35 years of diversified technical
    and management experience in the Department of Defense,
    commercial, and other Federal markets. During his tenure, FTI
    was award the SBA Tibbetts Award for the very best in Federal
    innovative research. He has been a member of the Governor's
    Ohio Aerospace and Aviation Technology Committee and is the
    former national president for the Defense Planning and Analysis
    Society.
        We thank you, Mr. Shroder, for being here.
        And I would like to now yield to the ranking member of
    Contracting and Workforce, Mrs. Murphy, for her introduction of
    our next witness.
        Mrs. MURPHY. Thank you.
        It is my pleasure to introduce Ms. Angela Alban, president
    and CEO of SIMETRI, a small business that develops and designs
    medical training devices to improve the performance of military
    personnel as well as physicians, nurses, and first responders.
        SIMETRI has received a 2014 Phase I and 2015 Phase II SBIR
    award from the Department of Defense. I am very proud to say
    that Ms. Alban's business is headquartered in my congressional
    district in the city of Winter Park.
        Ms. Alban also serves as the chair of the National Center
    for Simulation board of directors, the charter school board
    chair for United Cerebral Palsy of Central Florida, and a
    member of the Orlando Regional Chamber of Commerce board of
    directors.
        She has a bachelor of science degree in mathematics and
    computer science from Emory University and a master of science
    degree in computer engineering from the University of Central
    Florida.
        Welcome, Ms. Alban, and thank you for testifying today.
        Chairman KNIGHT. Very good.
        And our next witness is Dr. Clinton Rubin, State University
    of New York's Distinguished Professor, Chair of the Department
    of Biomedical Engineering, and the Director of the Center for
    Biotechnology at Stony Brook University in Stony Brook, New
    York.
        Dr. Rubin's work is targeted towards understanding the
    cellular mechanisms responsible for growth and healing. He has
    published over 200 peer-reviewed papers and 50 book chapters in
    his field and holds 22 patents, with 14 pending, in the area of
    wound repair, stem cell regulation, and treatment of bone
    disease.
        We thank you very much, Dr. Rubin, for being here today.
        And, again, it works like a stoplight. And since I was a
    cop for 18 years and not a very good ticket writer, I will be
    very, very lenient. But just know it goes green, yellow, red,
    and that is just the way is. So when you are at red, please
    kind of start to wrap it up.
        And we are going start with Mr. Clanton, and you have 5
    minutes.

    STATEMENTS OF JOHN CLANTON, CHIEF EXECUTIVE OFFICER, LYNNTECH,
     INC.; JOHN S. LANGFORD, CHAIRMAN AND CHIEF EXECUTIVE OFFICER,
    AURORA FLIGHT SCIENCES CORPORATION; RON SHRODER, PRESIDENT AND
     CHIEF EXECUTIVE OFFICER, FRONTIER TECHNOLOGY, INC.; ANGELA M.
     ALBAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, SIMETRI, INC.;
     AND CLINTON T. RUBIN, SUNY DISTINGUISHED PROFESSOR AND CHAIR,
      DEPARTMENT OF BIOMEDICAL ENGINEERING, DIRECTOR, CENTER FOR
                             BIOTECHNOLOGY

                       STATEMENT OF JOHN CLANTON

        Mr. CLANTON. Thank you.
        Chairman Knight and Ranking Member Murphy, Chairwoman
    Comstock and Ranking Member Lipinski, members of the
    Subcommittee, on behalf of Lynntech, I would like to thank you
    for the opportunity to appear before you today and offer our
    company's views on improvements to the SBIR program.
        I have included in my statement today a few examples of
    victories that our scientists and engineers have had to give
    you some insight into the daily life and times of a small
    research company.
        The first example is a project to develop a hypoxia
    training device for naval aviators, a project that started
    about 3 years ago. The Navy identified a need for a flexible,
    programmable, and inexpensive device to train aviators to
    recognize the early signs of hypoxia in flight.
        Next week, we will be starting a Phase II.5 contract to
    prepare the device for manufacturing. And the week after that,
    we will be attending an event in Rotterdam at the request of
    several NATO air forces to demonstrate the device for their
    potential procurement.
        As it relates to the SBIR program, first let me say that we
    applaud past efforts to make the SBIR program more flexible.
    Those changes allow agencies to piggyback on prior investments
    and bring technologies to market at a rapid pace. We were
    excited and appreciative to see that the SBIR program was
    reauthorized last year but believe an opportunity was missed by
    not adopting several measures that were being considered for
    inclusion in the program. We are hopeful that these
    improvements can make their way into a new bill going forward
    with the joint support of both the Science and Small Business
    Committees.
        I will summarize our recommendations, which we believe
    would improve the overall success metrics of commercialization.
        First, as has been discussed, several pilot initiatives
    from the 2011-2012 reauthorization are set to expire at the end
    of fiscal year 2017. Two of these initiatives that have had a
    notable impact are the Direct to Phase II awards and the
    addition of the 3-percent administrative pool. We strongly
    believe that both have had a positive impact, and we encourage
    you to make them permanent elements of the program.
        The Direct to Phase II award allows the government and
    industry to capitalize on work previously done in a research
    area and to use that prior work to advance the
    commercialization path for important technologies.
        As it relates to the Direct to Phase II success, Lynntech
    has another project that I want to tell you about. This
    particular project began life as a NASA-funded Phase I effort
    to create an inexpensive and highly precise fluid pump for
    astronaut environmental suits.
        The same underlying technology was used to respond to an
    OSD requirement for an en-route care drug-infusion pump for
    forward-deployed soldiers. Successful work in these past
    projects led the Air Force to award Lynntech a Direct to Phase
    II award to adopt the base technology into a multichannel drug-
    infusion pump.
        The second pilot program, the 3-percent administrative
    pool, has been an effective vehicle to assist acquisition
    managers with improved SBIR transition strategies and movement
    towards Phase III initiatives. We believe that the 3-percent
    pool functions as a productivity lever for the program offices,
    and we ask that you make it permanent as well as clarify
    congressional intent as to using the pool for commercialization
    support.
        Other recommendations that we support include: clarifying
    congressional intent by making it clear that subsequent Phase
    II awards are not subject to a competitive acquisition process
    since the competitive pool was created by the Phase I process;
    allowing Federal agencies to award up to $3 million on Phase II
    awards; allowing Federal agencies to make multiple Phase II
    awards in support of commercialization efforts; and, finally,
    allowing for cross-agency Phase II awards in circumstances
    where small business has received a previous SBIR award from
    another agency. We believe this needs to have clearer
    definition in the SBA policy directive.
        Lastly, I want to emphasize the symbiotic relationship that
    Lynntech and most other SBIR companies have with their
    university partners. Currently, our university partners receive
    nearly 20 percent of our contract awards in the form of
    subcontracts. We believe there are unlimited opportunities for
    universities and SBIR participants to complement each other's
    core competencies in support of the mutual objective of
    transitioning technologies out of the lab and into the
    marketplace without directly competing for taxpayer dollars.
        I appreciate the opportunity to offer Lynntech's position
    on program improvements that will enhance the commercialization
    of SBIR-funded development. I stand ready to answer any
    questions you may have.
        Chairman KNIGHT. Thank you very much.
        And, Dr. Langford, you are now recognized for 5 minutes.

                     STATEMENT OF JOHN S. LANGFORD

        Dr. LANGFORD. Thank you very much, Chairman Knight, and
    thank you, Chairwoman Comstock and other members of the
    Committee. It is a real thrill to be here today to have the
    chance to talk with you about a subject that is near and dear
    to my heart, which is the SBIR program, and also specifically
    to have a chance to talk to you, because I have spent a good
    part of my life building airplanes in the Virginia 10th and
    then flying them in the California 25th and environs. And being
    able to share that experience with you and with the rest of the
    Committee is very, very meaningful.
        I think it is best summarized by the fact that, last week,
    in Dallas, our company was announced as a partner with Uber in
    their latest program called Uber Elevate, which is an attempt
    to deploy by early in the next decade a series of electric,
    vertical-takeoff and -landing, passenger-carrying, autonomous
    vehicles. These are things that you could imagine using an app
    on your cell phone, like the standard Uber app, and being able
    to summon in the third dimension a vehicle that would carry a
    couple of passengers in the urban environment on demand.
        And our ability to participate in a program like that is
    partly the result of dozens, literally, of SBIR programs over
    the last 20 and 30 years, which were not ever specifically
    aimed at such an application but which illustrate the fact that
    commercialization is not a linear process, right? It is
    something that happens out of a combination of planning and
    performing the research, and then the applications occur in
    different ways.
        Our first award as a business was from NASA back in 1989,
    and it was for an electric aircraft application, the particular
    one of fuel cells for airplanes. That led to a series of DARPA-
    funded initiatives that were aimed at developing quiet ducted
    fans. And that led to a non-SBIR program called the XV-24 that
    DARPA is running that we were able to defeat four major
    established companies to win and is now being built today in
    Manassas. And then that program has led directly into our
    ability to commercialize that technology into programs like
    what Uber is pursuing.
        In turn, the fact that Uber chose the electric VTOLs for
    these urban mobility activities will also, I predict, be
    transferred back into the government sphere. Organizations like
    the Marine Logistics Organization are very interested in
    similar types of vehicles for moving cargo efficiently back and
    forth over distances, say, between amphibious ships and the
    shore.
        Since I started the company in 1989, we have won over 200
    SBIR programs, totaling about $59 million, which has been a
    relatively small fraction, under 5 percent, of the revenues
    that the company has been able to generate, about $1.2 billion
    to date, however the SBIR funding has been critical seed
    funding because it really does serve as sort of publicly funded
    venture capital, as people on this committee have talked about
    and acknowledged.
        And I particularly wanted to echo the comment earlier from
    the gentleman from New York about the important international
    element of this, that everyplace I go overseas people are
    amazed to hear about the SBIR program. They literally can't
    believe that the U.S. Government will give you money to start a
    company.
        And the SBIR plays a really unique role, because you can't
    run a company just on the SBIR program; it is a supplement, it
    is a piece, it is a tool in a toolkit of what allows a culture
    of innovation. And it is an area that we still lead the world
    in.
        We spend a lot of time as a society talking about
    government programs that don't work or don't meet their
    expectations, and it is really refreshing and I think we should
    all celebrate the fact that in SBIR we have a program that
    really does meet its original goals, that has, I think, stood
    the test of time. It is an important part of maintaining this
    country's international competitiveness, and deserves
    everyone's continued support.
        I look forward to being able to discuss any questions.
    Thank you.
        Chairman KNIGHT. Thank you very much.
        And, Mr. Shroder, you are now recognized for 5 minutes.

                        STATEMENT OF RON SHRODER

        Mr. SHRODER. Chairmans Knight and Comstock and Ranking
    Members Murphy and Lipinski and the two Subcommittees, thank
    you for the invitation to speak. It is quite an honor.
        Before I begin, I believe it is critical to talk about how
    a strong R&D culture is so important to our country and how the
    SBIR and STTR programs are such an important piece of that
    culture. If in doubt, go back to the Air Force 2014 impact
    study and the recent Navy study to see the incredible metrics
    that make this program probably the best small-business program
    ever in the history of the country.
        The entire community owes a great deal of debt and
    gratitude to the original founders of this program. It was
    almost a ``Shark Tank''-like concept that was created 35 years
    ago that we can all be so proud of. Major corporations like
    Qualcomm, Amgen, Symantec, iRobot are just the rockstars of
    that culture that many of us today want to be a part of.
        In addition to that, Congress has played an incredibly
    important role in that. Your adjustments over the years, not
    only the continued reauthorization but trying to cut down the
    delays between Phase Is and Phase IIs, looking at the size
    standards and how you can deal with that when it comes to
    commercialization, strengthening the intellectual property
    rights, have all been incredibly important for small businesses
    to be successful in this program.
        Having said that, I think as we look at improvements for
    the program we have to go back to the core and the intent of
    the program, and that is stimulation of technological
    advancements, small-business innovation in the Federal R&D
    sector, participation by the socially and economically
    disadvantaged businesses, as well as commercialization of the
    technologies into economic growth.
        There is a great deal to be proud of in each one of those
    areas. There are also some changes that can be made to improve
    each one of them, as well. Today, I would like to focus on the
    commercialization. That is where my passion is, and that is
    where Frontier Technology that I represent today has had the
    most success.
        What I find is it is an incredibly great opportunity. We
    were founded by an entrepreneur that believed the researchers
    should be part of the ownership of the company. We convinced
    those great entrepreneurs and R&D people to come in and be a
    part of our company, be an owner. And then we found ourselves
    located in locations like southwestern Ohio, Virginia, the
    southern California area, northern Alabama, where we were
    fortunate enough to be with real R&D superstars in the Federal
    Government. When you combine those two, you have an
    entrepreneurial opportunity that is enormous.
        Having said that, what we found is that the Phase Is, Phase
    IIs, the CPPs the Phase II-1/2s, et cetera, the RIFs, were all
    like ``Shark Tank'' funding; they helped you, but they were not
    the answer. They really were associated with short-term job
    opportunities and short-term durations. Where you really needed
    to be successful to give these employees and owners a long-term
    job was in the Phase III commercialization. And that is where
    we focus most of our time.
        The problem is, when you go to implement that, you are
    going to find out that it is much harder than what most people
    think. I am sure it is harder than what your intent is. Because
    what happens is the SBIR community recognizes that they know
    about SBIRs. They come away with an insight from SBIRs that
    generally come from their interaction in Phase Is and Phase
    IIs. But do most realize that Phase Is and Phase IIs are almost
    the exact opposite of Phase IIIs?
        Phase Is and Phase IIs are R&D money. Phase IIIs are any
    kind of money. Phase Is and Phase IIs are competitive. Phase
    IIIs are sole-source. Phase Is and Phase IIs are limited dollar
    amounts. Phase IIIs are unlimited.
        When you take your opportunities for Phase III
    commercialization to the people that think they understand
    SBIRs and you talk about those variations in Phase IIIs, you
    typically get a response that involves ``it is almost too good
    to be true.''
        And so, today, as we go forward and try to do the
    commercialization, what we have found is the efforts that you
    have done to educate the community are the most important
    things you can do to help us as small businesses be successful.
    The Navy manual for Phase III guidance has had a huge impact.
    The Air Force manual for Phase III guidance has had a huge
    impact. It has educated a community to say that it is real; it
    is allowed; let these small businesses take these technologies
    and grow.
        And so, today, as you look at improving the programs, I
    would say definitely continue the 3 percent. And make sure that
    3 percent is structured in a manner that prioritizes what you
    care the most about, which is going to be that
    commercialization. Make sure there are ombudsmen. Make sure
    there is education for the socially disadvantaged organizations
    that need to get into the program. Make sure that the agencies
    have Phase III offices that facilitate the knowledge of Phase
    III contracting to those people that want to tie into the
    technology.
        With those kind of changes and your existing laws that
    require them to report appropriately when implemented, as we
    heard today, at a fullest extent, I think you will see an
    incredible growth in the opportunities that come out of Phase
    III commercialization and the intent of this program.
        I look forward to questions.
        Chairman KNIGHT. Thank you very much.
        And, Ms. Alban, you are now recognized for 5 minutes.

                      STATEMENT OF ANGELA M. ALBAN

        Ms. ALBAN. Good morning, Chairman Knight, Chairman
    Comstock, Ranking Member Murphy, Ranking Member Lipinski, and
    members of the Subcommittees. My name is Angela Alban Naranjo,
    and I am founder and president/CEO of SIMETRI, a small, woman-
    owned, minority-owned business based in Winter Park, Florida,
    and currently participating in the SBIR program. Thank you for
    allowing me to share my experiences with you this morning.
        The program affords me and has afforded me the opportunity
    to grow our team and capabilities, make us more competitive,
    and achieve our mission statement, which is to improve medical
    outcomes through innovative training technology.
        I would like to give you some background on our business
    and how I start the company so you can understand how this
    program has and can continue to transform lives and
    communities.
        I was born in Colombia and emigrated to the United States
    when I was 5 years old. I decided to become an engineer, and,
    after 14 years as a simulation engineer in central Florida, I
    decided to start a company, SIMETRI, in 2009.
        This program, the SBIR program, has allowed me to hire more
    staff and develop foundational processes, methodologies, and
    technologies that have prepared us for future work. Today, we
    employ 12 people, and we are achieving our company's mission.
        The U.S. Army's research lab in Orlando, the Advanced
    Training Simulation Division, helps us develop new technologies
    to address training gaps in the ability to train new, emerging
    medical procedures accurately and effectively. They created an
    SBIR topic to which we responded, and we received both a Phase
    I SBIR and Phase II award in 2015.
        We developed a capability to accurately teach a lifesaving
    procedure called the humeral head intraosseous insertion. Our
    design focused on affordability, realism, and sustainability. I
    am grateful most of all for the government counterparts at ARL
    that has resulted in us now being awarded a second Phase II.
    And they are allowing us to take this training device to market
    and transition it to the warfighter.
        Due to the highly competitive nature of the SBIR and STTR
    topics, however, the probability of win is often not enough in
    some cases to justify the resources required to prepare a
    proposal. Small businesses have to maximize their offering,
    often partnering with universities and industry, making the
    smaller budgets even that much smaller.
        The SBIR and STTR programs are also not sufficient enough
    to commercialize technology, as many of my panelists have
    mentioned already, into a long-term and sustainable product. I
    have to actively build a network around me to facilitate growth
    and transition of our technology.
        Fortunately, I live in a community that is rich in a lot of
    these different services and ecosystems that support
    entrepreneurs. I have participated in many programs, to include
    the University of Central Florida's incubator program, Rollins
    College ATHENA PowerLink program, GrowFL economic gardening
    program, and also the DOD's Velociter Program. We have also
    received matching grants through the Florida High Tech Corridor
    to enhance the small amounts of funding that we can share with
    universities.
        These organizations have helped grow 34 companies, in the
    case of the incubator, to deliver actually 130 Phase I SBIR
    awards and 60 Phase II SBIR awards. The ATHENA PowerLink
    Program has helped over 40 female entrepreneurs in central
    Florida to grow their businesses 30 percent both in revenue and
    in staff. GrowFL has assisted more than 900 companies
    throughout the State of Florida, resulting in 16,000 additional
    jobs, direct jobs, throughout the State, with over $3.4 billion
    in revenue. And the Florida High Tech Corridor has helped 360
    companies across 1,400 research projects, generating more than
    $900 million in quantifiable impact.
        I am fortunate to live in a region that enables me to
    commercialize and transition technology. I ask you to consider
    continuing similar programs at the Federal level to provide
    these opportunities across the Nation. I do not believe that
    these programs are available and this type of an environment is
    available in every community. I also invite you to study the
    resources that are available in central Florida for
    entrepreneurs as a model for other communities.
        My colleagues at Aptima, another small business, have been
    participants in the program for over 20 years. Because of this
    program, they anticipate 15- to 20-percent growth annually for
    the next 2 to 3 years, much of that happening in central
    Florida.
        This growth could be greater, however, but there is a
    disconnect between the SBIR and STTR pipeline with the POM
    process. As technology matures, Phase III funding decisions
    often require being represented as a program in the POM prior
    to that, which fails to recognize the natural phasing of this
    technology and the way that we can transition it successfully.
        There are no tangible incentives to transition technology,
    because this often results in risk. We must change the way we
    view failure in acquisition programs and instead embrace these
    as opportunities to leverage all there is to learn and to move
    forward into the next iteration.
        It is clear that, also, continuing resolutions and the
    resulting unstable funding affect force readiness. I would
    submit that this threat is especially felt in small businesses
    performing this type of research. And we cannot absorb the
    breaks in program funding that often occur under these
    circumstances.
        In conclusion, I want to reiterate that, not only as a
    participant but as a taxpayer, I believe in this program. We
    are at a critical time in our Nation's history, and it is now
    more imperative than ever to continue to be a world leader. A
    shift has occurred that puts us at risk in our ability to drive
    technological change and revolution. We have opportunities to
    expand and improve health care, communications, computations,
    cybersecurity, and many other crucial technologies required to
    defend the freedoms that we hold dear.
        This concludes my statement. Thank you for your attention,
    and I look forward to any questions that you may have.
        Chairman KNIGHT. Thank you very much.
        Dr. Rubin, you are now recognized for 5 minutes.

                     STATEMENT OF CLINTON T. RUBIN

        Dr. RUBIN. Thank you, Chairman Knight, Chairwoman Comstock,
    Ranking Members Murphy and Lipinski, and Committee members for
    the opportunity to talk about, rather than Phase I, II, and III
    SBIR/STTR programs, Phase 0, proof-of-concept centers.
        I am very fortunate to be the director of the Long Island
    Bioscience Hub, which is one of three of the NIH programs that
    is intended to sort of harness the great biomedical research
    that is done at our universities and help facilitate and
    transfer them out into the real world.
        I am giving you this perspective as a hardcore basic
    scientist. I actually study stem cells as means of treating
    osteoporosis, obesity, and diabetes. And through my research
    and my--every scientist's passion and goal to see their
    research actually help health and society, create new
    therapeutic diagnostics, medical devices. The challenge is in
    this translational research, this bench-to-bedside, the
    challenges that we need to recognize that these innovations,
    these discoveries, this science needs to be commercialized in
    order to ultimately impact our health.
        It is from this perspective that I would like to try to
    make four points this morning.
        The first one is this translational research. At medical
    schools around our country, we tend to think of translational
    research as innovations that come to the bedside to help
    health. Again, let me emphasize that, without young companies
    or established biotech and pharma companies, this research
    actually will never actually see the light of day. It needs to
    be protected with intellectual property; it needs to be
    shepherded through to the commercial sector.
        The second point is that all of our universities, certainly
    in your districts and certainly within New York, as represented
    here by my colleagues at the table; there are many
    entrepreneurial faculty out there, but they are a very, very
    small percentage of our university beds. I will be generous and
    say that it is 2 to 3 percent. That means that there is so much
    research out there that remains untapped, this primordial soup
    of really robust, cutting-edge innovation that basically never
    sees the Phase I, II, and III of the SBIR/STTR program.
        That is really where the robust, the really principal
    opportunity of a Phase 0 program comes in. Where the
    infrastructure is developed to help faculty and students
    recognize the potential of their research and to translate it
    through the commercial sector to the bedside.
        It was raised a number of times this morning about students
    and STEM fields and what our next-generation entrepreneurs will
    be. And I would say that these Phase 0 concept centers are
    really excellent environments for the students, working with
    faculty and postdoctoral fellows, to be exposed to and
    experience the thrill of seeing science become innovation.
        So if we are worried about our next generation becoming
    entrepreneurs, the universities are great places to have it
    happen and to drive it into whoever will be applying SBIR or
    STTR programs in the future.
        Let me speak very briefly about the REACH program itself.
    It is the Research Evaluation and Commercialization Hub. As I
    said before, we are one of three. We have been in existence for
    just 2 years. We have already used these funds to fund over 33
    projects. We have submitted over 30 disclosures for new
    intellectual property. We have actually submitted SBIR
    programs, some of which have now been funded, from this
    technology that would have never gone down the commercial path.
    This Phase 0 program is really, effectively, harnessing the
    potential of discovery to bring out to business.
        And I will also point out that companies are being formed.
    So, rather than thinking of this as a competition for SBIR
    programs--again, my colleagues here that expressed the passion,
    the impact so well--it is the future applicants for STTR/SBIR
    programs that these Phase 0s support.
        I will also point out that it does not dilute the impact of
    our university environments. We have heard this morning about
    the potential of the university being the economic engine for
    our communities. It is really an attractant for great, new
    companies to start. And I believe that these Phase 0 programs,
    which--I think the vision of your committee instituted them. I
    would encourage you to continue them, because they are really
    changing the nature of how we think of our science and actually
    implementing the abilities for these discoveries to become
    therapeutic.
        Thank you very much.
        Chairman KNIGHT. Thank you. And on the Small Business
    Committee, we always thank you for the opportunities and for
    the employment that you provide.
        I am going to go to the Chairwoman for Research and
    Technology, Mrs. Comstock, for her questions.
        Chairwoman COMSTOCK. Thank you, Mr. Chairman.
        And I really appreciate hearing your testimony and your
    passion about this in the culture of innovation that you all
    are supporting.
        So what I wanted to ask of each of you is what top
    recommendation would each of you make for improving SBIR and
    STTR programs to promote innovation and really get those
    cutting-edge things like you all have been involved in? And
    then what are some additional examples of what we can see in
    terms of getting that culture of innovation really thriving?
        Mr. CLANTON. Well, I believe from our standpoint, the two
    pilot programs being extended past the current year are kind of
    at the top of the list. And the reason is they both have
    demonstrated usefulness to a degree, and we believe
    continuation of those would be probably one of the easiest
    steps that could be taken to promote innovation.
        Chairwoman COMSTOCK. Dr. Langford?
        Dr. LANGFORD. I would say continuity of support. I think
    one of the most disruptive things in our businesses and in
    innovation is where things get started and then a program gets
    stopped and restarted, whether it is in defense, it goes to the
    importance of having the defense budget and things like that.
    Continuity in the program, and you have done an excellent job
    of that, and I would encourage you to continue.
        The other would just be educating people to the fact that
    the program exists and to its potential. I think there are
    still a lot of folks to be reached out there in the STEM
    programs, the next generations coming up, because this is such
    a fabulous opportunity for them to pursue their ideas, their
    dreams, their ambitions. And also in the government itself,
    because what we tend to find is that some people are very aware
    of the program and how to use it effectively and others have
    never heard of it or don't pay much attention to it. So
    education about the program and the access to it.
        Mr. SHRODER. I would say the reporting. I believe that the
    Phase III success path could be dramatically increased if
    Congress understood the Phase III results that are coming out.
    And right now, you are kind of hamstrung with no ability to see
    the reports that are there.
        When you guys have asked for the Phase III aspects, we have
    literally had Defense Department organizations call us and say:
    Do you have customers that want your technology, because we
    need to award a Phase III to align with the congressional
    requirements?
        So if you can get that 3 percent to put together the
    reporting aspects, and I will call it the recognition of what
    the Phase III is about, I think the jobs and economic growth
    will come naturally.
        Ms. ALBAN. For me, I think it is continuation in funding,
    that is one of the most important things. And then also
    partnership between R&D and acquisition, at least in terms of
    the DOD, and educating both sides of that to be able to work
    together and facilitate that transition.
        Dr. RUBIN. I think any way that you can harness the
    university research pool to bring out innovation, like the
    Phase 0 programs, to continue and even expand and deepen the
    funding of them would be very, very powerful ways to bring out
    technologies that otherwise would never see the light of day.
        We academics were a resistant, ornery group of people, and
    I think that cultural shifts are hard for us. But I think it is
    opportunities like this where we actually realize that our
    science matters.
        Chairwoman COMSTOCK. Great. Thank you so much. I appreciate
    all the comments.
        Chairman KNIGHT. Thank you very much.
        And we are going to do a little bit of chair shuffling
    here. I have to take a meeting in just a couple minutes. So I
    am going to ask the ranking member to ask her questions and
    have Mr. Estes come up and take over for just a few minutes.
        Mrs. MURPHY. Thank you.
        Ms. Alban, many small businesses have complained that the
    current SBIR application process is very arduous and costly.
    And in fact in your testimony you talked a bit about how in
    some cases filling out the application costs more than the
    amount businesses would receive in funding.
        In other instances, the wait is just simply too long, that
    research staff might leave to work on other projects. It is
    hard to sustain that, especially if you are a small business.
        What would you change in the SBIR program to help alleviate
    some of this hardship and specifically for women- and minority-
    owned businesses?
        Ms. ALBAN. Thank you for the question.
        I definitely think that the part of the process that takes
    the longest is not so much the application process. It
    typically is when you have been notified that you have been
    selected for award, I don't know if it is the FAR or if it is
    the queue in which the contracting officers are working to get
    these contracts awarded. Sometimes it could take 6 to 12 months
    to get a contract awarded. So that is a pretty long period of
    time for you to wait, as you mentioned.
        As far as it being costly, it is in the case of smaller
    businesses such as ours where we have to fortify or backfill
    the capabilities that we aren't as strong in, if you will, and
    we have to subcontract or to partner with universities. At
    times what is left for us is not enough for us to be able to
    actually make it a profitable venture and sometimes have to
    invest some of our own funding.
        So I would like to see possibly a tailored version of the
    FAR or the ability for these contract awards to be expedited,
    because I think that would at least make a big difference or an
    impact for us.
        Mrs. MURPHY. Thank you.
        And then just one other follow-up on your testimony. You
    had talked a bit about the CR and sequestration and its impact.
    How does not having a Federal budget affect your ability to
    plan and run your business?
        Ms. ALBAN. Thank you for that question.
        For us, it is extremely difficult, because we have to
    juggle the resources that we have to sometimes provide enough
    employment to keep them on staff, as you mentioned. And at
    times we have had to work and collaborate with other businesses
    and other projects to try to keep them employed in time for
    those contracts to be awarded.
        We have a lot of phased efforts that are not necessarily
    SBIRs or STTRs in the R&D field that sometimes have to wait for
    the budget and for funding to come into the agencies in order
    for us to continue not new starts, but continue current
    efforts. So that is actually a big challenge for us. And
    currently, this summer I think is going to be a challenge for
    us. And, thankfully, this week we have gotten some good news.
    So I am very happy about that.
        Mrs. MURPHY. Great. Thank you.
        And this question is for the entire panel. Firms often face
    a disconnect when attempting to transfer their SBIR
    technologies to acquisition programs. If agency procurement
    officers were more directly involved, there could be a better
    match between SBIR research and an agency's need.
        Wouldn't it make sense to directly incorporate acquisition
    personnel into the SBIR programs in terms of research
    solicitation and technical assistance?
        Mr. CLANTON. From our standpoint, I agree with that
    strongly. I think that is one of the biggest gaps in
    understanding the value of the SBIR program, is that of
    acquisition officers, who are accustomed to the day in and day
    out acquisitions of pencils and paper clips, now having
    something special coming out of the SBIR program, and I think
    their inclusion and their understanding earlier in the process
    would be a big benefit.
        Dr. LANGFORD. I would agree with that. I think the
    contracting process is one of the most challenging parts of the
    Federal Government in general. And if you wanted to focus on
    one thing that would promote efficiency, it would be there.
        The Air Force, it is like 300 days on sole source awards
    between the time that they can make a selection and get a
    contract done, and they are proud of that number because it has
    been coming down. It is just staggering to people on the
    private sector side.
        So, yes, contracting efficiency both in SBIR, where we tend
    to be sort of the low priority compared to some of the larger
    awards, is huge, but it goes across the entire system.
        Mr. SHRODER. You asked the question this morning to our
    government counterpart, and I think it was critical. And the
    key is, the acquisition people have learned the SBIR program
    through ones and twos. And the rules that are there, as I said
    earlier, just are not the same.
        And so when you go, even if you--I hope you do bring them
    into the process, but when you do, you really need to educate
    them as to what the law says. Because when you start talking
    about major dollars, sole source, Phase III, et cetera, it is
    good that their reaction is, ``Wait a minute, we can't do sole
    source, we don't have that authority,'' or whatever. Well, yes,
    you do. And the sooner you bring them in, the less the delays
    will be, because we spend a great amount of time educating the
    community what is legally allowed.
        Ms. ALBAN. And I will ditto that. It is definitely an issue
    of culture. I think it would be extremely helpful to have
    acquisition involved in the R&D process, especially since they
    are directly investing in a sense. I think that there would be
    a lot less resistance to doing so, and I think, certainly, that
    there would be a lot more advancement even in the technology
    and integration into the platforms.
        Dr. RUBIN. Just so everyone knows, I don't know what an
    acquisition officer is, but I will say that the funding agency
    for us is actually NIH. You had the foresight to enable NIH to
    oversee the NCAI and the REACH program. And not only have they
    been very, very effective partners and mentors for this, they
    have actually synthesized across all institutes to fund these
    programs.
        So in reality, it is a reflection of everyone's commitment
    to seeing these technologies move forward. So if NIH is my
    acquisition officer, I think they are great.
        Mrs. MURPHY. Well, it sounds like we are in violent
    agreement about needing to address this gap.
        And I yield back the remainder of my time. Thank you.
        Mr. ESTES. [Presiding.] Thank you.
        Mr. Shroder, in your experience how many technologies need
    an additional Phase II process and how many go straight to
    commercialization are there?
        Mr. SHRODER. For our Phase II's, what we have found is the
    ones that do get a second Phase II, those are the ones that are
    really ripe for the Phase III commercialization. We have had
    six Phase III awards within the last couple of years and most
    of those, I think, related to ones that had received multiple
    Phase II awards.
        So that extra investment from a venture capital perspective
    has been critical, because it also gives you the time to
    communicate the value of the technology to the rest of the
    world. We are not going to rely, necessarily, on the POM to
    fund the Phase III commercialization. We think it is our job to
    go get those customers and line them up.
        But once we have shown the technology is worthwhile, and it
    has matured enough that they can trust it, we think they will
    invest the dollars that are already there to use it. Now we
    just need the ability for them to use it through the
    contracting officers.
        Mr. ESTES. I will maybe open this to other members of the
    panel. Do you have similar or have comments around that
    question?
        Dr. LANGFORD. My comment would be, just so you know how it
    works in the real world on Phase III's, they are often in our
    experience used just as contract vehicles and they often have
    little or no relationship to the Phase II because it is so hard
    to get a new contract established in the general contracting
    process that government authorities who want to get something
    done, one of their questions is, ``Hey, do you have a Phase II
    open that we could put this onto as a Phase III?'' And in our
    experience, that has been the primary way Phase III's get used.
        Mr. ESTES. Which, actually, goes back to the ranking
    member's question previously about the contracting.
        Dr. LANGFORD. It goes back to Representative Murphy's point
    exactly. I wouldn't say that is an abuse of the system, it is
    just how the system gets used, because the mainline contracting
    process is so cumbersome that people on both sides of the table
    are looking for ways that are fully within the law to get
    things done.
        Mr. ESTES. Which is an interesting point. And kind of my
    background prior to running for public office was try to look
    for ways to make things more efficient and effective. So that
    is one of the reasons why I ran for office, was to look to do
    some of these things.
        Dr. LANGFORD. Thank you. Thank you on behalf of all of us.
        Mr. ESTES. Thank you.
        I would like to call on Ranking Member Lipinski now.
        Mr. LIPINSKI. Thank you.
        Dr. Rubin, you talked very eloquently about how helpful the
    NIH REACH program has been. Is there anything that you would
    like to see change, any improvements that you would suggest to
    that program?
        Dr. RUBIN. Thanks for the question and the support for
    REACH. I think that, if I remember the application process
    through an NIH RFA, there were a lot of universities entrusted
    in this mechanism, the idea of taking their science and seeing
    it come out into the real world.
        So the easy answer to your question is to expand the
    program, because I think that all the universities across the
    country, if we rely only on those faculty who are protecting
    their discoveries with intellectual property and relying on
    tech transfer officers to move it out into the real world, we
    are just missing a huge opportunity from the investment the
    Federal and State governments make in our research enterprise.
        So I would encourage your Committee to consider ways of
    expanding the program both in terms of breadth across the
    country, but also in terms of time. And the NIH REACH and NCAI
    programs are biomedical in their very phenotype, their
    definition. And the problem with biomedical challenges is it
    takes a long time to go from proof of concept translated to
    applied science into the commercial sector.
        So having a little more, a longer leash, I think, would be
    very important to us. I think we are fully accountable. We are
    very milestone driven. NIH has been a good shepherd, but also
    good keeping us on track.
        So I think that if I were to do anything, if I were sitting
    in your shoes, I would see if the power of the university
    environment could be expanded dramatically by expanding the
    program.
        Mr. LIPINSKI. And do you think that this could be expanded
    into other areas across SBIR, not just through NIH? And that is
    your area, but can you see this easily translated all across?
        Dr. RUBIN. I think it would just be a superb way of taking
    all the great engineering science outside of the biomedical
    field, material science, thin film, and software. These are,
    again, it is research that we as taxpayers are investing in. I
    am very proud of the innovation of our country and of our
    universities.
        But I am frustrated a little bit by the absence of a
    cultural shift within our university communities to recognize
    the potential that is there. And I think that not so much a
    stick, but the carrot of expanding the program to other
    disciplines, I think would have a profound impact on the
    universities as economic engines in our communities.
        So, yeah, I would applaud that as a great idea.
        Mr. LIPINSKI. And do you have any experience or also
    anything to say about the role of I-Corps, something else that
    I had mentioned in the opening, about potentially having
    accelerators or have that be part of Phase II in SBIR? Do you
    think that would be helpful?
        Dr. RUBIN. Well, I would just suggest to members of the
    Committee that I am an academic, so I have something to say
    about anything. So for sure.
        Mr. LIPINSKI. I understand that. I am an academic myself.
        Dr. RUBIN. I should also point out that in addition to the
    REACH program through NIH, we were very fortunate to secure an
    NSF I-Corps program as well as a Department of Commerce i6
    Challenge, which is basically the synthesis of many distinct
    Federal agencies to move forward entrepreneurialism. And I
    think that as members and statements from this desk have been
    made about who are the future entrepreneurs, it is the I-Corps
    program not only for the faculty entrepreneurs, but the
    graduate students and undergraduates that are interested in
    seeing their science move out to the commercial sector.
        So I think the fusion, the synthesis of these distinct
    programs really has great potential for the future. I think
    they are great, and we were very fortunate to secure these
    awards.
        Mr. LIPINSKI. Thank you.
        And I am almost out of time, so I yield back.
        Mr. ESTES. Thank you.
        And now Representative Lawson, you have 5 minutes.
        Mr. LAWSON. Thank you very much, Mr. Chairman.
        And you all, welcome to the Committee. And during the ones
    that testified before you, I asked a question that I will
    probably ask the same question, because I have a great deal of
    interest in it.
        I represent probably three or four universities within the
    district. One of the major universities is Florida State
    University, which has a hub in Innovation Park and the home of
    the magnetic lab, which is very significant. And I am happy to
    see that the State of Florida reinvested in the lab, because
    there were other States around that were very interested in
    providing the funding that it needed to keep the lab going.
        So the question centers around pipeline to Historically
    Black Colleges to get involved in STEM. There are two, one is
    in my district, which is Edward Waters College and the other is
    Florida A&M University, which is in the State university
    system. And we have a joint program in engineering between
    Florida A&M University and Florida State University which has
    gone on for a number of years, and they are producing more
    students that are candidates to be involved in the STEM field.
        My question: Can we create that pipeline for graduates in
    the STEM field that would help these students create their own
    small businesses that can eventually take part in programs such
    as SBIR and STTR? And that is for the whole panel.
        Ms. ALBAN. Congressman Lawson, I can tell you that at the
    University of Central Florida in Orlando there is such a
    program for students. It is called LaunchPad, I believe, the
    Blackstone LaunchPad. And I recently actually went and spoke to
    a group of students to talk to them about all the opportunities
    in what we call our ecosystem for entrepreneurs. And the
    University of Central Florida is doing a very good job of not
    just creating entrepreneurs, but also entrepreneurs within the
    STEM field.
        I could find that information out for you and certainly get
    it to you, but I know that it has been a very successful
    program. And a lot of those students as they graduate then
    transition into the incubator program that the university also
    has, which then also educates them on how to write the proper
    proposal for the STTR and SBIR program and how to pursue even
    the Phase 0's, the Phase I's, and the Phase II's. So I would be
    happy to share that information with you.
        Mr. LAWSON. Okay. That is great.
        Anyone else care to elaborate on that?
        Mr. CLANTON. We do a lot of collaboration with Texas A&M
    University, and through both their engineering and business
    school they have a number of outlets for new ventures in
    entrepreneurship, very similar to what Ms. Alban was saying.
    And we have also been encouraging the discussion of some type
    of mentor protege program specifically for SBIR companies to
    help young, first-time business owners with SBIR applications
    in the process.
        Mr. LAWSON. Okay. And I just have one other question,
    because I heard you all talk about the application process. So
    if you had to recommend one thing to Congress about how long
    does it take to go through the contracting process, what would
    that be?
        Mr. SHRODER. Metrics. I think if you had metrics that made
    you understand the speed or lack thereof in the reporting that
    comes through, you might guide it slightly differently. Because
    the reality is, I think we at one point mentioned that some
    awards have taken nearly a year. In those kinds of cases, I
    don't think that is at all what your intent is.
        And when you are a small business and you have got some
    pretty high-tech people that you are blessed to have as
    employees sitting on your bench, if you don't have other work
    for them, by the time the award occurs, they are not even your
    employee anymore.
        So if you could get your metrics to report each agency's
    performance along those lines, I think it would change the
    culture.
        Mr. LAWSON. Yes. And, Mr. Chair, just before I yield back,
    I think that is very, very, very significant, and that we
    should with the staff try to find out how can we improve that
    process.
        And I yield back.
        Mr. ESTES. Thank you.
        Well, I will make a closing statement now. Again, I would
    like to thank all our witnesses for being with us today. I
    think both panels provided us with some excellent thoughts on
    these successful programs.
        Whether we are doing new software programs or tracking
    contract payments, a new medical device to help with cancer
    treatments, or a new piece of technology that might save lives
    on the battlefield, the SBIR and STTR programs have
    consistently delivered results across all Federal agencies.
    They are worthy programs that are worthwhile and doing what
    they are supposed to do.
        But we can always do better. We are going to take some of
    your suggestions and thoughts that you provided today and work
    to incorporate them into legislation that our two Committees
    are working on.
        I do want to thank you for your testimony.
        I will ask unanimous consent that the hearing record be
    open for 2 weeks for additional written comments and written
    questions from members. And without objection, so ordered.
        This hearing is now adjourned.
        [Whereupon, at 12:45 p.m., the Subcommittees were
    adjourned.]

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