[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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