[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
OVERVIEW OF THE SMALL BUSINESS INNOVATION RESEARCH AND SMALL BUSINESS
TECHNOLOGY TRANSFER PROGRAMS
=======================================================================
HEARING
before the
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
MARCH 8, 2022
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 117-048
Available via the GPO Website: www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
46-932 WASHINGTON : 2022
HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA VELAZQUEZ, New York, Chairwoman
JARED GOLDEN, Maine
JASON CROW, Colorado
SHARICE DAVIDS, Kansas
KWEISI MFUME, Maryland
DEAN PHILLIPS, Minnesota
MARIE NEWMAN, Illinois
CAROLYN BOURDEAUX, Georgia
TROY CARTER, Louisiana
JUDY CHU, California
DWIGHT EVANS, Pennsylvania
ANTONIO DELGADO, New York
CHRISSY HOULAHAN, Pennsylvania
ANDY KIM, New Jersey
ANGIE CRAIG, Minnesota
BLAINE LUETKEMEYER, Missouri, Ranking Member
ROGER WILLIAMS, Texas
JIM HAGEDORN, Minnesota
PETE STAUBER, Minnesota
DAN MEUSER, Pennsylvania
CLAUDIA TENNEY, New York
ANDREW GARBARINO, New York
YOUNG KIM, California
BETH VAN DUYNE, Texas
BYRON DONALDS, Florida
MARIA SALAZAR, Florida
SCOTT FITZGERALD, Wisconsin
Melissa Jung, Majority Staff Director
Ellen Harrington, Majority Deputy Staff Director
David Planning, Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Nydia Velazquez............................................. 1
Hon. Blaine Luetkemeyer.......................................... 2
WITNESS
Mr. John Williams, Director of Innovation and Technology, Office
of Investment and Innovation, United States Small Business
Administration, Washington, DC................................. 4
APPENDIX
Prepared Statement:
Mr. John Williams, Director of Innovation and Technology,
Office of Investment and Innovation, United States Small
Business Administration, Washington, DC.................... 33
Questions and Answers for the Record:
Questions from Hon. Velazquez to Mr. Williams and Responses
from Mr. Williams.......................................... 44
Questions from Hon. Luetkemeyer to Mr. Williams and Responses
from Mr. Williams.......................................... 48
Questions from Hon. Fitzgerald to Mr. Williams and Responses
from Mr. Williams.......................................... 52
Questions from Hon. Van Duyne to Mr. Williams and Responses
from Mr. Williams.......................................... 53
Additional Material for the Record:
Bipartisan Policy Center..................................... 38
Letter from multiple organizations to Congressional Leaders.. 41
OVERVIEW OF THE SMALL BUSINESS
INNOVATION RESEARCH AND SMALL
BUSINESS TECHNOLOGY TRANSFER
PROGRAMS
----------
TUESDAY, MARCH 8, 2022
House of Representatives,
Committee on Small Business,
Washington, DC.
The committee met, pursuant to call, at 10:01 a.m., in Room
2360, Rayburn House Office Building and via Zoom, Hon. Nydia
Velazquez [Chairwoman of the Committee] presiding.
Present: Representatives Velazquez, Golden, Davids, Mfume,
Phillips, Bourdeaux, Chu, Evans, Houlahan, Kim of New Jersey,
Craig, Luetkemeyer, Williams, Stauber, Meuser, Tenney,
Garbarino, Young Kim of California, Van Duyne, and Fitzgerald.
Chairwoman VELAZQUEZ. Good morning. I call this hearing to
order.
Without objection, the Chair is authorized to declare a
recess at any time.
I would like to begin by noting some important
requirements. Standing House and Committee rules will continue
to apply during hybrid proceedings. All Members are reminded
that they are expected to adhere to these rules, including
decorum.
House regulations require Members to be visible through a
video connection throughout the proceeding, so please keep your
cameras on. Also, remember to remain muted until you are
recognized to minimize background noise.
In the event a Member encounters technical issues that
prevent them from being recognized for their questioning, I
will move to the next available Member of the same party and I
will recognize that Member at the next appropriate time slot
provided they have returned to the proceeding.
For those Members and staff physically present in the
Committee room today, in accordance with the attending
physician's most recent guidance, masks are optional and no
longer required.
Thank you to everyone for being here for this timely
hearing. Today, we will be discussing the SBIR and STTR
programs, two of the federal government's most important
initiatives when it comes to driving innovation. This is our
third in a series of hearings on this topic.
SBIR and STTR create partnerships between federal agencies,
public research institutions, and our nation's best and
brightest small businesses to develop technologies that are
important to our country and later have commercial application.
The SBIR and STTR programs meet these goals by leveraging a
small percentage of extramural federal R&D spending through
highly competitive awards. For fiscal year 2020, the most
complete year of SBIR and STTR data, these programs resulted in
nearly $3.9 billion out of an extramural federal R&D budget of
about $108.5 billion going to small, high-technology firms.
Over the years, SBIR and STTR have leveraged this small
amount of federal R&D funding to launch some of our nation's
most innovative enterprises and develop products that have
become household names.
Companies like iRobot, Sonicare electric toothbrushes,
23andMe, LASIK Eye Surgery, and Qualcomm wireless
communications were all helped along by SBIR and STTR.
More promising ideas are in the works. In fiscal year 2020
alone, 11 agencies leveraged SBIR and STTR awards to back more
than 4,000 small businesses and 7,200 projects.
Given the importance of SBIR/STTR to our innovation
economy, I am pleased that we are working together to
reauthorize these programs before they expire on September
30th. A program lapse would have severe implications for
American entrepreneurs.
Even a short-term disruption would deliver a substantial
setback to R&D-focused small firms and potentially delay
groundbreaking technological innovations. Small innovators
operating on the cutting edge of their industries need more
certainty and stability to invest time, money, and staff in
applying for SBIR or STTR awards and carrying out the research.
To avoid these consequences, it is my greatest hope that we
can extend and reauthorize the programs in a timely manner. I
look forward to working with the Ranking Member and our Senate
counterparts to take these steps.
At the same time, this moment allows us to make
improvements to streamline and strengthen the programs, as well
as encourage more participation by minorities and women.
Innovation is at the heart of the American economy. Making
SBIR/STTR permanent and working to improve the program is vital
to holding our position as one of the most innovative countries
in the world. Today, I look forward to discussing the
importance of these programs and what Congress must do to
ensure they move forward.
I would now like to yield to the Ranking Member, Mr.
Luetkemeyer, for his opening statement.
Mr. LUETKEMEYER. Thank you, Madam Chair.
Before I get started I would like to just take a moment of
point of personal privilege to inquire of the Chair, now that
we no longer have a mask requirement and we are no longer
social distancing, is it going to be your position that we
continue with hybrid meetings for the rest of the year or do
you at some point believe we will go back to just strictly in-
person meetings? Just for clarification purposes, please.
Chairwoman VELAZQUEZ. I hope that soon we will all be able
to come to Committee hearings and we are going to be discussing
that with the leadership. I hope that pretty soon we will be
back.
Mr. LUETKEMEYER. Okay, great. Thank you for that. I just am
curious because we are making progress towards that end. I just
would like to see where we are at.
I appreciate that clarification. And good morning. And
thank you, Madam Chair, for holding this important hearing on
the Small Business Innovation Research (SBIR) and small
business technology transfer (STTR) programs. SBIR and STTR's
mission is to support scientific excellence and technological
innovation for small businesses. These programs are vital to
the success of many small entities and have helped create
thousands of new jobs by fostering innovation and stimulating
the economy through new, cutting-edge research.
SBIR and STTR facilitate public-private partnerships so
that firms have the funding they need to develop new
technologies that help federal agencies meet the research and
development needs. These programs not only create jobs, but
they also lead to a path of commercialization for many
participating firms.
SBIR and STTR are funding awards are behind the technology
in products like iRobot, LASIK Eye Surgery, Qualcomm Wireless
Communications, 23andMe, and rapid improvements to COVID-19
vaccines. These programs are not only essential for America's
competitiveness, but also for our national security. From B-2
bomber technology to threat warning systems, SBIR firms have
played a role in critical technologies used by our servicemen
and women every day.
Further, SBIR and STTR programs are good investment for
American taxpayers returning $22 to the economy for every $1
spent on projects at DoD and $33 for every dollar spent at
National Cancer Institute.
I see Mr. Williams is nodding his head here so that is good
news.
As many of you know, Congress last reauthorized the
programs in 2017 for a period of 5 years. The programs are
currently set to expire on September 30, 2022. While these
programs are not perfect, reauthorizing them will ensure
stability and continued economic growth while Congress works to
streamline and improve the programs. It is our job to better
understand and address the challenges to the program's
effectiveness and guarantee that American taxpayer dollars are
being spent efficiently, effectively, and in a responsible
manner.
I am looking forward to hearing from Mr. Williams on ways
to improve SBIR and STTR for small businesses and participating
agencies alike.
Now for a couple housekeeping items. Number one, while I am
glad Mr. Williams is here today to discuss these important
programs, the Biden administration is still overlooking the
Members of this Committee. We are now 318 days past the April
26th deadline for Secretary Yellen to testify before this
Committee. We must hold Secretary Yellen accountable for the
decision to blatantly break the law.
Furthermore, in yesterday's Washington Post, we have a
picture, an advertisement of Ms. Yellen who is wanting to have
either webinar or some kind of visual discussion with regards
to, and one of the topics is to discuss the COVID hit to our
economy. Would not the PPP program be something that you want
to discuss? If that is the case, why are we not here? Why can
we not get here?
Madam Chair, we have got by law, supposed to have Ms.
Yellen here twice this year. Twice in 2022. I would hope that
she is working with your staff to find a way to schedule those
two events. I am looking forward to it.
Item number two. The Committee is still waiting on
responses from questions for the record submitted to SBA
officials over 9 months ago. I talked about this with Ms.
Guzman in a personal one-on-one conversation I had with the
director about 2 weeks ago and we still have not got those
responses back. Again, I would urge SBA, and Mr. Williams, I
hope you take these measures back to your administration
hierarchy to respond to these questions quickly. These are not
gotcha questions. These are informational requests that
actually round out the things that we are trying to find in
these hearings so it is very important we get this done.
And with that, Madam Chair, I yield back the balance of my
time and look forward to today's discussion.
Chairwoman VELAZQUEZ. Thank you, Mr. Ranking Member. The
gentleman yields back.
With that, I would like to introduce our witness, Mr. John
Williams, the director of Innovation and Technology for the
Office of Investment and Innovation within the Small Business
Administration. Prior to joining the SBA in 2014, Mr. Williams
served as the Director of the Navy SBIR and STTR programs,
building a reputation for running the most successful SBIR and
STTR programs in government.
Welcome, Mr. Williams. You now have 5 minutes to make your
opening statement.
STATEMENT OF JOHN WILLIAMS, DIRECTOR OF INNOVATION AND
TECHNOLOGY, OFFICE OF INVESTMENT AND INNOVATION, UNITED STATES
SMALL BUSINESS ADMINISTRATION
Mr. WILLIAMS. Good morning, Chairman Velazquez, Ranking
Member Luetkemeyer, and distinguished Members of the Committee.
Thank you for the invitation to discuss the nation's Small
Business Innovation Research (SBIR) and Small Business
Technology Transfer (STTR) Programs, and the role SBA has in
leading them.
I have had the personal pleasure of devoting 35 years to
public service, including 15 years as the director of the
Navy's SBIR/STTR, and Technology Transfer program offices.
During my time at the Navy, my primary focus was on helping
SBIR firms transition their technology and commercialize it
into Navy platforms. I am proud to note that the Navy lead the
DoD in Phase III funding throughout my tenure.
In December 2014, I excitedly accepted the opportunity to
serve as the Director of Innovation and Technology at SBA. My
office supports SBA's mission and our nation by ensuring that
U.S.-based innovative startups have the tools, resources, and
support to start, grow, and expand.
Our role is to build a national innovation ecosystem that
supports all innovators wherever they live so that the best and
brightest have the opportunities to succeed. The SBIR and STTR
programs, which we like to refer to as America's Seed Fund,
function as the heart of this ecosystem.
America's Seed Fund provides competitive opportunities for
small businesses to pursue high risk, research, and development
with a focus on commercialization. These programs are a
critical component to our national innovation ecosystem. They
facilitate job creation, de-risking of technologies, while also
addressing significant societal and national defense needs.
America's Seed Fund represents the nation's largest source
of nondilutive seed funding, meaning these investments do not
require companies to sacrifice equity. Annually, across the 11
participating agencies, more than $4 billion is provided
through competitive awards to U.S.-owned and operated companies
with less than 500 employees. There are winners in every state.
The structure requires that 3.2 percent of an extramural R&D
appropriation of an agency is applied to SBIR, and for agencies
with an R&D exceeding $1 billion, an additional .45 percent for
STTR. The program's structure means that the SBIR and STTR
programs do not require a separate appropriation and therefore,
do not result in additional costs to the taxpayer.
The funding is provided in phases with multiple layers of
competition. Importantly, over the last year, nearly 46 percent
of the participating firms were first-time award winners.
Bringing in new entrants, especially from underserved
geographic and demographic communities is a priority. Since I
started at SBA, the percentages of new entrants has increased
by 30 percent, and multi-award winners has gone down by 25
percent.
For nearly 40 years, the SBIR and STTR programs have served
as a critical need funding source for the U.S.-based advanced
technology firms. The National Academies of Sciences have
completed 20 studies and continue to document that these
programs are highly competitive and a critical tool that
converts America's research into next-generation technologies.
The program increases competition within the federal research
and development community as it creates a level playing field
for small businesses to participate.
Companies such as Qualcomm, Intuitive Surgical, Illumina,
23andMe, Sonicare have all received funding and the Department
of Defense has also found a 22:1 return on investment from
their SBIR investments.
Under the current law, the program expires on September 30.
The time for solicitation opening to the time of awards being
made is 6 to 12 months. We are now within 7 months. My concern
is if Congress does not extend these programs soon, agencies
will start to delay solicitations and awards. Due to the
potential program expiration with no fiscal year 2023 funding
clearly available under those programs. The impact results from
this uncertainty and instability will fall most heavily on
small business innovators, especially those new to the program.
Through an extension of the programs, you will provide
stability and certainty around America's Seed Fund and provide
time or Congress to develop and implement a comprehensive
reauthorization. America's Seed Fund attracts and supports some
of the brightest innovators and provides innovative cost-saving
capabilities to the public and our national defense.
I thank you for the opportunity to appear today and I thank
the Committee, especially Chairwoman Velazquez and Ranking
Member Luetkemeyer to the support to ensure that SBIR and STTR
programs and their current pilots are extended as is while the
Committee continues to work on a full reauthorization. Thank
you for your time.
Chairwoman VELAZQUEZ. Thank you, Mr. Williams.
Now I will recognize myself for 5 minutes.
Basically, you almost ended your opening statement with my
concern regarding the effects of a long-term impact of a
program lapse, or the threat of a lapse on small businesses and
the agencies, particularly given the data that you are just
providing where there has been an increase in new participants
into the program. What effect will a lapse or a threat will
have?
Mr. WILLIAMS. So a lapse would be catastrophic. It would
mean $4.2 billion to the fund, 4,000 companies actively, 7,000
awards would really go to large prime contractors, the big
universities, back to the federal labs. So, it would really
decrease competition in federal R&D funding. And I would not
result in cost savings and that is the big thing because,
again, this is appropriated money that is already there. It is
just being made sure that it goes to small businesses.
I think the threat of that lapse then is the agencies are
going to start to gear back, start to not put out new
solicitations because it will be next year when those things
take place and they really should not be getting companies
involved in something that they do not have funding for.
Chairwoman VELAZQUEZ. So the lack of certainty provided by
continuing resolutions will have an impact on the agency?
Mr. WILLIAMS. Absolutely.
Chairwoman VELAZQUEZ. I will ask unanimous consent to
submit for the record letters of support from 117 small
businesses, universities, and economic development groups
supporting the clean extension of the SBIR and STTR programs.
Without objection, so ordered.
One of my top priorities for the upcoming reauthorization,
Mr. Williams, is to improve the participation of minority and
disadvantaged persons in SBIR and STTR and to increase the
geographic diversity in this program that has been my quest for
the last 20 years.
In your experience, what strategies have worked and what
challenges remain?
Mr. WILLIAMS. Sure. So, increasing geographic and
demographic diversity is a priority of mine. It is the mission
of SBA. It is certainly a priority for Administrator Guzman. My
experience is that the leveraging and coordinating of a variety
of private and public partnerships really works. There is not a
``one size fits all.'' You need support locally. I think we can
push national programs and education, but then locally you want
to have programs like our Fast and Growth Accelerator really
make a difference and so more of that I think will allow us to
help more people at that local level in those areas.
Chairwoman VELAZQUEZ. Okay. NSF and NIH offer supplemental
grants to SBIR and STTR to provide paid fellowships for
underserved students. Can you briefly explain how these
fellowships work and the impact they have had?
Mr. WILLIAMS. Sure. So, NIH has a program where they use a
supplement to the award and they give it to the company to
bring in a diverse researcher. And then with NSF, they use a
third party that then finds and connects post-docs with small
businesses.
Chairwoman VELAZQUEZ. Do you think this approach is worth
expanding to other agencies?
Mr. WILLIAMS. So I think the approach is worth expanding.
But I think also there is a lot we can do, and should be doing
to try to link students as young as possible to the excitement
of what and small business does in tech. And so, I think there
is a lot of opportunities. I have seen companies really get
excited in bringing in students and summer hires and things
like that even at the high school level. I think it gets people
involved in STEM.
Chairwoman VELAZQUEZ. Where should funds for fellowships
come from? For example, should we use the base SBIR and STTR
funds like NIH, those? Or the 3 percent administrative dollars?
Mr. WILLIAMS. So the current legislation allows both and I
think there is flexibility in having that flexibility for the
agencies.
Chairwoman VELAZQUEZ. Have the staff and budget for the
Office of Innovation kept pace with the growth of the program
over the years?
Mr. WILLIAMS. The total funding for the SBIR programs has
increased as we have noted, as has the responsibilities for
SBA. The resources at SBA have not increased. I have got an
amazing team that does treat stuff with what they have but,
yes, if we had additional resources I am confident that we
could do a lot more to help, and especially the underserved
communities in getting out there and bringing on more----
Chairwoman VELAZQUEZ. If Congress legislated SBIR agencies
to transfer a portion of their 3 percent administrative funds
to SBA, how would that help your office administer the program?
Mr. WILLIAMS. So it would expand a lot of the things we do.
More outreach, more train the trainer, more coordinating with
our Growth Accelerator and our FAST to provide information.
More getting them together, building out our website. So again,
it is easier to get access, better data handling so that we
could push out information. So, there are a lot of areas. I
think mentor networks. There are a lot of areas and I would be
glad to talk to you about them.
Chairwoman VELAZQUEZ. Thank you. My time has now expired.
The Ranking Member is now recognized for 5 minutes.
Mr. LUETKEMEYER. Thank you, Madam Chair.
Mr. Williams, you indicated you had some service in the
military with the Navy. Thank you for your service, sir, to our
country. The programs that you oversee seem to have been very
successful the last several years and I thank you for your
leadership on that.
Along those lines though I have got a couple of questions
here. In 2011, to address Congress's concerns, the SBA created
a commercialization benchmark to better determine the
eligibility for the SBIR and STTR programs or awards I should
say. However, according to GAO, SBA and I quote, ``The SBA and
the participating agencies assessed small businesses against
the commercialization benchmark only once in 2014 because of
challenges in collecting and verifying the accuracy of data.''
I guess let me start with this. Whose responsibility is it
to provide the assessment and why did the SBA measuring small
businesses against the benchmark only occur once in the last 10
year span?
Mr. WILLIAMS. Well, we do do it now. But I will go back to
the history. So, the legislation came forward. There are
performance metrics. One is Phase I to Phase II transition and
then the other commercialization Phase II to Phase III. Phase
III information is cumbersome and DoD does collect it or had
been collecting it for many, many years. And so, what we wanted
to do was to move to a single source. We did not want to have
11 agencies collecting the same data and putting the burden on
small businesses. DoD was the primary one but other agencies
also collected that information. And the legislation really
required that those agencies implement a standard.
And what is important to note is that even without that,
the potential to commercialize the past history of Phase IIs,
that goes in every proposal and every agency evaluates in one
of the main three criteria on the potential to commercialize.
So, has that company done a good job with that in the past?
That is what they are measured on. And so, the information is
being looked at on every proposal and has been. Now we have
actually implemented, we have taken over the DoD system and we
have a central system at SBA starting in 2020 that all firms
now have to put, and it is a single source for all Phase III
information.
Mr. LUETKEMEYER. So basically what you are saying, it has
been the responsibility of other agencies to collect this
information and do the benchmarking up to this point?
Mr. WILLIAMS. So we have transitioned to that because it
just did not make sense. So, we set the requirement of what a
transition benchmark would be with coordination across all the
agencies. And then as we work to do it, they were then
evaluating on whether they felt these firms----
Mr. LUETKEMEYER. Okay. So, we can anticipate in the future
this information is going to get to us?
Mr. WILLIAMS. Yes. Yes.
Mr. LUETKEMEYER. That is necessary for our oversight.
Mr. WILLIAMS. Absolutely.
Mr. LUETKEMEYER. I mean, it is not something that is, you
know, it is in law. It is supposed to be addressed.
Mr. WILLIAMS. Yes. No, we have a system that does and we
can provide that information.
Mr. LUETKEMEYER. Okay. All right. Great.
In your testimony, you mentioned some stats about 46
percent increase in the last few years with new people coming
into the program. And that is a 30 percent increase from when
you took over. So, can you explain to me just a little bit
about how this works from the standpoint that existing
businesses are getting repeat awards? Is there a point in time
when they get weaned off of this assistance? Why are the
existing businesses continuing to get these awards and maybe
pushing out some new businesses? Can you explain the situation?
Mr. WILLIAMS. Sure. So, I am going to go back to my Navy
days. And this is not an assistance program. This program is
designed to make sure that when we develop R&D by an agency and
so it is the DoD and I have specific R&D's needs, I have to go
to a small business instead of the major primes that typically
is what happened. So, in the DoD, it is----
Mr. LUETKEMEYER. So you are soliciting that individual
business yourself rather than them coming to DoD with a bid to
bid on their project; is that what you are saying?
Mr. WILLIAMS. So I will give you an example. Progeny
Systems had I think over 300 awards over a 20-something year
period. They now build all the torpedoes for the Navy. They are
still a small business. That is not a capability that really
existed. So, the SBIR program, by awarding companies multiple
times, we are bringing in companies into a program. As you
probably know, the DoD, there are only a few big players now.
And so, when we were in the Navy, when I was at the Navy, we
used the program to bring in competition. And it was not that a
company would get one or two or three or five awards and then
we would never need to continue to fund the R&D. We continued
to fund them because we wanted that additional capability. And
sometimes in areas that no one was interested in because it is
not economically viable to develop some circuit board for us
because there was only five of them needed. Same with NASA. You
are building three products. One to blow up, one to put on the
space shuttle, and one to have as a backup.
So, I think it is important to understand that it is not
the same for all. Now, NSF is different where they would not do
that. They do look at funding companies a couple times and then
they want to see those transitions. So, it is not a ``one size
fits all.''
Mr. LUETKEMEYER. I appreciate the clarification. Thank you,
sir.
Mr. WILLIAMS. Thank you.
Mr. LUETKEMEYER. With that I yield back.
Ms. DAVIDS. I will now recognize myself for 5 minutes.
First of all, thank you to the Chairwoman and to our
Ranking Member for holding this hearing today.
The reauthorization of the SBIR and STTR programs is
definitely one of the most important tasks in front of the
Committee this year and is, of course, of critical importance.
The SBIR, STTR, and the FAST partnership program, as well as
the Growth Accelerator Fund competition offer critical
opportunities for innovators and entrepreneurs to develop their
technologies and to build their businesses as we have been
hearing today. But especially in the tech space. And I know it
can be hard for entrepeneurs outside of tech hubs on the coast
to find investors and partners and we heard the Chairman
earlier reference geographic diversity as being kind of
critical to the work we are doing here.
So, Mr. Williams, I would love to hear from you how the
various programs we are talking about today are able to reach
more entrepeneurs or businesses and research institutions
outside of those tech hubs in places like the Midwest or the
Kansas 3rd. We do have a couple of SBDC, women's business
centers and those sorts of things, but I am just curious how
you all are thinking about it and what we can be doing.
Mr. WILLIAMS. Sure. You know what is unique about the
programs that have been funded that I manage with FAST and
Growth Accelerator is that they really target the unique needs
of a tech entrepreneur which is very different than kind of a
traditional company. They are non-revenue generating at that
time. They cannot really get loans. And so, I think what we
found is it is not a ``one size fits all.'' It is really about
bringing connections. And so, we want our FAST and Growth
Accelerators to leverage the SBDCs and their capabilities.
Reach out to the district offices. And so, we do a lot of
training to the SBDCs and others to let them know about the
program and that there is a group out there. And it is usually
at a research innovation hub outside the university that has
really taken that university research that we would then fund.
They will bring in venture capital. And again, there is more
money out there that is small that is teaming with these
accelerators and innovators and so we see that as kind of, it
is not a one size. It is bringing all these parties together.
Ms. DAVIDS. And then I am curious, this is actually to
follow on from Mr. Luetkemeyer's questions about the data
collection. You kind of started to talk about the new system
that you are implementing where the SBA is kind of the
repository of information versus the various agencies. I am
curious how you are looking at that and how are you taking into
account demographic information and geographic information?
Mr. WILLIAMS. So, there are a couple of pieces of
information. We gather information on Phase III directly is
what I was talking about there. But then all the information
from the awardees comes to us by each agency and in that the
company is supposed to tell us, woman-owned, demographic data,
and then we track that. So, in our annual reports, we list the
awards per state, the awards by women, the proposals by women,
the awards by women. We are also starting to now link to SAM so
that we can kind of validate that. So that is a role that we
play is to gather all that data together and then look across.
And absolutely, that is one of the areas we measure.
Ms. DAVIDS. And I think I will stop there. I do not have
enough time to get into the next set of things.
Mr. WILLIAMS. And I will just say that data is available on
our website at all times. It does not have to be in the annual
report. Our data is current on fiscal year 2021. We are
probably 80 percent full and you can pull down woman-owned and
you can sort and it is Excel. And so that information is always
available and we are trying to push it out.
Ms. DAVIDS. Okay. Thank you, Mr. Williams. And thank you
for the work you all are doing. It is certainly an improvement
over the years. So, thank you.
Mr. WILLIAMS. I appreciate that. Thank you.
Ms. DAVIDS. I yield back.
I am yielding back. The Ranking Member--oh, sorry about
that.
Mr. Fitzgerald is now recognized for 5 minutes.
Mr. FITZGERALD. Thank you, Madam Chair.
Mr. Williams, thanks for being here today.
Fiscal year 2022, the NDAA extended the pilot program for
streamlining the awards for innovative technology projects,
such as awards under SBIR, until 2024. Under the pilot program,
and maybe you can give me a little bit more detail, any
contract or subcontract valued at less than $7.5 million is
exempt from certain costs. So, I am not sure why the $7.5
million was the magic number. It could be just congressional
wisdom. I am not sure. But we could not track that down. But
there is no pricing data disclosures per se.
So as this Committee kind of does its due diligence on this
before we vote to extend on SBIR and STTR, is there any better
metrics that you are aware of or is there any better way of
measuring this, especially when you get down into that, below
that threshold? It seems like it should be a critical piece of
legislation before we would actually take that step and
reauthorize.
Mr. WILLIAMS. So unfortunately, I am not as aware with that
piece of legislation on the NDAA.
Mr. FITZGERALD. Yeah, I think because some of the pilot
programs were part of the NDAA, and I think ultimately that
final, when that final appropriation package comes before us
that there is going to be kind of this question about I think
the level of funding. And that is why I was just looking if
there is some better metrics that we should be looking at, or
better set of numbers.
Mr. WILLIAMS. So, I will be glad to follow up and really
get into it because I want to make sure I give you a proper
answer. The amount for a Phase II is set at like $1.8 million.
They can go above that by 50 percent. Anything past that they
have to come to SBA for a waiver request. And then we approve
those on a case by case basis. And so, there are certain
agencies, the Air Force to be an example, where they were
coming in with additional matching dollars from a Department of
Defense weapon system, so non-SBR being added to SBR money. And
even outside money. And that encouraged me to then allow them
to make higher awards. And we did that on a pilot. So, there
have been some pilots to experiment that certain technologies
just takes more money and they need it quicker. Instead of
doing six Phase IIs over a 3-year period, would it be better to
do a larger Phase II if other dollars came in during that
development process? And that is what we have been approving.
And it has to come through SBA to approve those waivers.
Mr. FITZGERALD. I gotcha.
I will put something together and make sure that you get
it. I have very specific questions.
Mr. WILLIAMS. Yeah, absolutely. I would appreciate that.
Mr. FITZGERALD. The second question I had was in and around
semiconductors. And I think the chip stuff. So, I think that is
going to come up, and I know there are other Members who are
going to talk about that. So, I would yield back. Thank you.
Chairwoman VELAZQUEZ. The gentleman yields back.
Now we recognize the gentlelady from Pennsylvania, Ms.
Houlahan, for 5 minutes.
Ms. HOULAHAN. Thank you, Madam Chair. And thank you, Mr.
Williams, for your testimony today and for your role
administering the SBIR and STTR programs.
I am an entrepreneur and an engineer myself, and I, as a
result, do understand how important America's Seed Fund is to
all aspiring innovators and small businesses and to research
institutions across our country.
I believe this Committee must have an eye for consistently
improving the SBIR and STTR programs, particularly when it
comes to commercialization. Across the 11 participating
agencies, only about half of the SBIR and STTR awards result in
products that are commercially sold. Furthermore, delays in
decisions and disbursement of funds or patents can present
particular challenges for small businesses who are seeking to
translate their investments into marketable products and
services.
To address these challenges, I have worked across the aisle
with my colleague, Representative Balderson, to introduce the
Research Advancing Market Production (RAMP) for Innovators Act.
This bipartisan and bicameral piece of legislation would ensure
that our federal government is prioritizing research with the
highest commercialization potential, significantly reducing the
time agencies must take to make a final decision on proposals
and establishing an annual commercialization impact assessment
at every agency to monitor the program's success and more.
So, Mr. Williams, I was hoping that you might be able to
speak to the importance of enhancing commercialization outcomes
through SBIR and STTR programs, and particularly, I am
interested in hearing from you about how changes, such as those
that might be provided by RAMP, would allow American
entrepreneurs the support that they need to get their products
on shelves and increase the economic impact of the programs at
large.
Mr. WILLIAMS. So anything we can do to help on the
commercialization side is obviously important. And that was a
big thing that I did at the DoD. And again, I think some of the
challenges, like I mentioned, the commercialization of DoD is
very different. Sometimes we do not want anyone selling
products of the DoD. So, it is a criteria for evaluation. So,
there are basically three criteria. The value of the
technology; the team, how good they are at it; and then the
potential to commercialize that. And so, I think it is always
valuable, that those are important factors and that they are
all there. And I think some of the RAMP Act, make sure that the
right people are helping in that evaluation process and there
are some resources with USPTO who we work with very closely.
Patents are an issue, so things that can reduce the cost of
patents. All those things can help small businesses and those
are challenges they run into.
Ms. HOULAHAN. I 100 percent agree with you having struggled
through those kinds of processes myself. It is a race in many
cases to get something to a shelf or into a store or into
somebody's hands and I think that time matters and expertise
matters. So, I appreciate your insight into that.
Given that the proven value delivered by SBIR and STTR is
demonstrable, I have heard from a lot of stakeholders and
businesses who have asked that Congress should address the
uncertainty that is associated with what I have seen here in my
few years, frequent and very sporadic reauthorization of
programs. They have shared that it would be better if we would
be able to have a more reliable stream of reauthorization and
it would result in less fraud, waste, and abuse. So, from your
experience in the ONR, the Office of Naval Research, could you
please speak a little bit about how the SBIR and STTR programs
have delivered valuable research back to the 11 participating
agencies and how would a longer term authorization or
permanency of the program allow for relationships and benefits
for the American people to be able to continue and grow?
Mr. WILLIAMS. Sure. Anything that creates continuity. And
so, there is a lot of, especially in commercialization, people
relying on that part. So, the DoD, if we were going to be part
of a missile system that was a 10-year program and we were
funding it for 4 years and that went away and they was not sure
that it was going to be after that, they would not include that
as part of the program. That is a design risk that just would
not be done. So, the goal is to try to get these systems,
especially the DoD, which is half the program, into these
weapon systems, into these programs. And if there is not a
guarantee then that is a risk. And the same with the private
sectors. Investors are not willing to invest. But we have seen
more incubators and others established that are using the SBIR
program funds as a tool, which we want them to do, but if it is
not going to be there, are they going to provide the resources
to train people to really understand what the program is, to
build the relationships with the program managers? So, there
are a lot of pieces to this and stability in longer term just
creates more stability that we can plan for. And at program
offices, you cannot hire people and things like that if it is a
2-year program. So, it feeds it in a lot of different ways.
Ms. HOULAHAN. Thank you. I have run out of time and I yield
back, Madam Chair.
Mr. WILLIAMS. Thank you.
Chairwoman VELAZQUEZ. The gentlelady yields back.
Now we recognize the gentleman from Pennsylvania, Ranking
Member of the Subcommittee on Economic Growth, Tax, and Capital
Access, Mr. Meuser, for 5 minutes.
Mr. MEUSER. Thank you very much, Madam Chair. And thank
you, Mr. Williams, for being with us. And as Ranking Member
Luetkemeyer said, thank you for your service, your work for our
country, and in your work you clearly have the knowhow and
dedication. So that is great to see.
First, Madam Chair, I do want to bring up what Ranking
Member Luetkemeyer has mentioned a number of times and that is
the absence of Secretary of Treasury, Janet Yellen. It is kind
of inexplicable that the law states and the requirements are to
appear before this Committee within timeframes and yet the
requests seem ignored. And so, I just want to go on the record
saying that is really irresponsible and kind of hard to
believe, actually.
But moving on. Moving on. So, Mr. Williams, hearing you
out, it sounds like you have got a very focused plan and you
are there for all the right reasons, to figure this out. It is
a pretty bit operation you are running. What are your goals for
this year? What are your macro or micro goals, within 60
seconds if possible for the year?
Mr. WILLIAMS. Sure. I am an office of four. I am not a big
organization. So, my goal would be to actually grow that and be
able to provide more resources. Really, on the underserved,
there is, again, this trick, goal is to get legislation making
sure because, again, that is something that now I have to spend
a lot of time on. And then if we know there is FAST and Growth
Accelerators, because those will be the programs that we really
believe we can get to underserved states, if we have those
funds that we would then need to manage and execute and get
those awards out quickly.
So potentially on the 11th, I am going to have a budget of
some type, and then once I get that, my job is to execute that
as quickly as possible because the money does not do any good
in Treasury. It has got to get to helping small businesses.
Mr. MEUSER. You have an office of four. So, but you have
how many clients? How many----
Mr. WILLIAMS. Well, I have a lot of clients. I guess it
depends on how you look at it. I consider you my client. We
have the small businesses, the agencies.
Mr. MEUSER. Business clients.
Mr. WILLIAMS. So we deal less directly with the companies.
Our goal is to build this national innovation ecosystem so we
have 84 Growth Accelerators that we work with that are funded
this year. We have 33 FAST awardees. So those are groups that
we work with, that we have contracts with, and that we monitor.
And then we have an ecosystem. We just have calls and we
connect with people we do not fund but that we try to provide
information to them. Our goal is to kind of share the
information in one place and push it to those that need it.
Mr. MEUSER. Is it possible for me to get a list of the
number of businesses that have accessed and utilized and gained
support from----
Mr. WILLIAMS. So, I mean, there are 7,000 awards made,
33,000 proposals submitted every year, about 4,000 to 5,000
companies. Our website is over a million hits every year. But I
can give you any more detail.
Mr. MEUSER. In Pennsylvania or just in my district for that
matter?
Mr. WILLIAMS. Yeah, I can give you that information.
Actually, it is on our website. SBIR.gov. You can pull up each
year, each agency. But I can get you that, too. Absolutely.
Mr. MEUSER. All right. Good. I will do that. Thanks.
So, you do see, and I am sure you are aware of this and are
focused on doing everything you can to change it in a
reasonable way. But certain areas of the country utilize the
program far more than others, such as the northeast and the
West Coast, as well as some companies receive upwards of 50
Phase I awards in a single year. That is not necessarily a bad
thing. It could be a good thing. But how would you explain
that? It seems a little lopsided?
Mr. WILLIAMS. I will have to look into the 50 Phase I
awards. I mean there are a couple reasons why certain places in
the country do not get as much awards. VC funding goes to five
states, 80 percent of it. There are infrastructure issues that
exist and so that is why we really believe there are great
universities throughout the country, that that is a good place
for us to lock into. FAST and Growth Accelerated established,
they are now much more focused in transitioning to research
that they were not really years ago and it is that forming of a
kind of translational side of NSF where we are really going to
start funding more of that basic research. The small businesses
are the glue to that. Those are the ones that are going to be
motivated to take that and then they will stay locally. And so,
I think that is what we need to do is more programs to put some
boots on the ground in those places and help them get access to
this program. It is still a government program. Government
programs are not always the easiest and so we want to train new
people.
Mr. MEUSER. Real quick. You probably will not have time to
answer this, but provide us, or me, any specific
recommendations you have that we can help you improve the
program because it sounds important.
Mr. WILLIAMS. Stability. And I think some of these resource
programs that we talked about so we can do more would help.
Mr. MEUSER. I yield back, Madam Chair.
Chairwoman VELAZQUEZ. The gentleman yields back.
Now we recognize the gentleman from Minnesota, Chairman of
the Subcommittee on Oversight, Investigations, and Regulations,
Mr. Phillips.
Mr. PHILLIPS. Thank you, Madam Chairwoman. And thank you,
sir, for being with us today.
Both SBIR and STTR are examples of government policy that
in my estimation aid, not obstruct, private sector initiatives,
which I celebrate, specifically for R&D. They are programs that
drive competition between small businesses to develop
innovation in both products and services. We all know that
every large enterprise began as a small startup, including such
iconic Minnesota companies like 3M and Medtronic just to name a
few. They were innovators which developed new technologies in
their industries and grew into two of the world leaders in both
medical devices and manufacturing. They are the types of
successes to which America should aspire and which we, in
Congress, have to support. And of course, they did not do it
alone. No business does it alone. Federal investment in R&D and
commercialization of new technologies plays a really meaningful
role in generating success. So good government policy should
incentivize those best practices in the private sector.
So, Mr. Williams, you well know, many countries around the
globe are rapidly increasing their investment in government
funding dedicated to small business R&D. I know you have worked
with SBIR and STTR and the small businesses that have used them
for many years during your career. So, I would like to get a
sense from you, what is the ROI on every dollar that both SBIR
and STTR distributes?
Mr. WILLIAMS. So the only measures that we have are a DoD
study. And I am going to get the years wrong but it was a 10-
year timeframe that I think ended in--well, I will not quote
it. But it was a 10-year timeframe. And that was the 22:1 ROI.
And then the Cancer Institute was the other major one. Navy has
done a study but the Cancer was 33:1. These studies are
expensive and so there have not been a ton of ROI studies but
those are two landmark ones. And then the Academy of Sciences
has done some studies that have all shown substantial ROI. But
I think one has to be careful of not just focusing on ROI
because, again, this program is designed to address the mission
needs of that agency, and to that agency, having the research
done, and sometimes having research fail is of value.
Mr. PHILLIPS. Yeah, agree.
But fair to say that increasing the percentage of R&D
budget set aside for both SBIR and STTR would surely help drive
innovation in small business; true?
Mr. WILLIAMS. I think so. Yes.
Mr. PHILLIPS. Yeah. I think it is also fair to say that
programs like these really have a complementary relationship
with VCs. Ms. Tung, VP of Research at 23andMe, a company that
was aided by SBIR, described that in a hearing that we hosted
last spring. Are there ways that you believe we can encourage
more public-private sector collaboration in both programs?
Mr. WILLIAMS. So I think if we had some more resources. I
do not know if you know but we have a program in my sister
office, the SBIC program. Certainly, that is a program that
could look at investing. But we work with the National Venture
Capital Association. So, I think our ability to get out there
more and to be able to help document the technologies and where
they are in building those bridges would help to kind of bring
that network together.
Mr. PHILLIPS. Okay. Venture capital and SBIR investments
are often directed at different industries and different types
of small businesses, of course. How can SBA more clearly
distinguish between existing small businesses and new high-
growth startups?
Mr. WILLIAMS. Well, the ones all listed under the SBIR
program on SBIR.gov I would consider all high growth. And so,
they are available on that site. We are always looking at
better ways to provide more information but there is a lot of
information on our website that talks about those companies.
So, I think that is the best place.
Mr. PHILLIPS. Okay. And lastly, something on all of our
minds is fraud and abuse in all federal programs. Is there
anything that you might share with the Committee on how we
could aid both oversight and fraud prevention in these
programs?
Mr. WILLIAMS. I think the legislation that came out in 2011
set into motion a couple of things that we have done. Setting
up these 10 requirements that each agency must implement. I
worked closely with the IGs. We developed that with the IGs. We
post fraud, waste, and abuse issues on our website. We have
training on fraud, waste, and abuse. So, I think a lot of the
things are out there and they are being implemented.
Mr. PHILLIPS. All right. Well, thank you, sir. That is all
I had and I appreciate your time with us today.
Mr. WILLIAMS. Thank you, sir.
Chairwoman VELAZQUEZ. The gentleman yields back.
Now we recognize Mr. Williams, Vice Ranking Member of the
Committee from Texas.
Mr. WILLIAMS of Texas. Thank you, Madam Chairman. I
appreciate that promotion. And there are more Williamses in
here than not in here today. I appreciate that.
In 2017, I helped pass the Tax Cuts and Jobs Act which
provided historic relief for small businessowners and Americans
across the country. This bill revitalized the U.S. economy,
making it more globally competitive, and unfortunately, a
critical provision of this bill expired at the beginning of
2022, and now businesses will no longer be able to deduct the
cost of research and development from their taxable income in
the year they incur the cost. This will reduce tax benefits for
companies investing in R&D and will result in less domestic
innovation, fewer jobs, and SBIR and STTR programs were
established to increase participation of smaller companies and
fairly funded research and development. So, without this tax
benefit, there will be a dramatic reduction in business
incentives to invest in R&D.
So, Mr. Williams, do you agree that allowing the R&D tax
credit to expire will negatively impact small businesses and
entrepeneurs? And how could less R&D affect American innovation
and competitiveness?
Mr. WILLIAMS. So this is not an issue that I am really
familiar with. It is not something that comes up to small
businesses that they have expressed their concern on this.
Mr. WILLIAMS of Texas. Well, I will just tell you, as a
small business owner, too, any time that you can get a positive
cash flow to invest in R&D or even buy equipment it helps. So,
we need to do everything we can to get that back in the program
and put more cash in the hands of main street.
Now, secondly, during the pandemic, various federal
agencies were tasked with getting money to the American people
as fast as possible. Unfortunately, the SBA was by far the
worst at distributing business savings funds for the last 2
years and now we are hearing that the Biden administration is
calling for more COVID-19 money even as inflation soars and
billions have gone unspent from his last partisan COVID bill.
The administration should be focusing on alleviating the supply
chain crisis, solving the worker shortage, and lowering
regulatory costs because these are the major concerns for small
business owners across the country.
So, my question to you would be part of your responsibility
as a director at the SBA is to advise businesses on how to grow
and succeed. I think the SBA should be totally pro main street.
How do we create businesses to be successful? And so, what
advice would you give to small business owners right now who
are concerned about the high inflation and the effect it will
have on their businesses?
Mr. WILLIAMS. The one thing that I think helps is that
every year we adjust the amount that they can get in an SBIR
and STTR award based on inflation. So, we are always making
sure that that amount goes up every year. And then----
Mr. WILLIAMS of Texas. It is going up this year, is it not?
Mr. WILLIAMS. It will probably go up this year. Yes, sir.
Mr. WILLIAMS of Texas. Yeah.
Mr. WILLIAMS. And so our goal is really to just get, I
mean, my role is to get more people involved in it and get more
money to them. That is the R&D program funding of the SBIR and
STTR.
Mr. WILLIAMS of Texas. Let me ask you another question from
a tax standpoint. Do you think that lowering taxes benefits
small businesses like those in the SBA or raising taxes would
be good for small business?
Mr. WILLIAMS. So the program I work with is SBIR and the
issue of taxes is not one that is raised to me.
Mr. WILLIAMS of Texas. Okay. All right.
Madam Chairman, I yield my time back.
Chairwoman VELAZQUEZ. The gentleman yields back.
Now we recognize the gentleman from Pennsylvania, Mr.
Evans, for 5 minutes.
Mr. EVANS. Thank you, Madam Chairperson. Thank you for this
hearing. This is very valuable.
Increasing diversity in entrepreneurship in technical
startups is important to me coming from Philadelphia, a city
that has nearly 50 percent Black. And Black and Brown citizens
make up most of the 25 percent of Philadelphians in poverty.
Entrepreneurship is a tool in the economic toolbox to lift
people out of poverty. SBA still has the same level of
diversity in the Small Business Innovative Research and the
Small Business Technology Transfer program as it did 10 years
ago. Does SBA coordinate with historical Black colleges and
minority services to expand awareness of these programs to help
applications? Can you respond?
Mr. WILLIAMS. Yes. Thank you, sir. Great question.
So, we have done a couple things. And again, this is an
area that is a high priority to me. We just actually got some
funding from NSF to award a contract with Howard University
that is on an SBR Inclusion Study to really better understand
the barriers that underserved founders have with getting access
to SBIR and STTR. So that is an ongoing program and we are
going to learn from that and share that information with not
just the agencies but other schools. We have a longstanding
working relationship with MBDA. They were part of our
conference this year. They have been the last couple of years
but when we had this virtual conference, 41 percent of those
registrants were from underserved representatives. And that was
the biggest event that MBDA has had.
I also, about 2 years ago, signed a memorandum of agreement
with MSRDC, so that is the MSI STEM R&D Consortium that is made
up of 60 MSI and HBCU research schools. And we feel that that
is a really good group because, again, trying to get SBIR
awareness to those communities. And so, I think the next big
step really though is to have some funding like there would be
potentially in Growth Accelerators in FAST so we can have
offices at those HBCUs to provide that direct training and
bring more people into the program.
Mr. EVANS. There are nine such institutions in
Pennsylvania, four which are in my home city of Philadelphia.
So, I am interested to hear does SBA work with them?
Mr. WILLIAMS. So we work with all universities. Now, with
SBIR and STTR, in my role we will mainly just work with
technical schools that are developing the types of clients that
we believe would apply. But yes.
Mr. EVANS. I thank the gentleman. I yield back the balance
of my time, Madam Chair.
Chairwoman VELAZQUEZ. The gentleman yields back.
Now we recognize the gentlelady from California, Ranking
Member of the Subcommittee on Innovation, Entrepreneurship, and
Workforce Development, Ms. Young Kim, for 5 minutes.
Ms. YOUNG KIM. Thank you, Chairwoman. And I want to thank
Mr. John Williams for joining us today to discuss the SBIR and
STTR programs.
The SBIR and STTR programs are critical tools for small
businesses to research, develop, and commercialize innovative
technologies and help create good-paying jobs.
China and other nations are taking considerable steps to
bridge the innovation gap with the United States and knock us
down as the world leader in innovation. While we must not
relent our country's position as the leading innovator and
developer of emerging technologies, Congress must ensure that
programs like SBIR and STTR are adhering to their allocation
requirements meeting timeliness guidelines and safeguarding
taxpayers by successfully commercializing technologies and
getting them off the program.
So, Mr. Williams, the Small Business Act requires the SBA
to report annually to Congress on the SBIR and STTR programs.
Unfortunately, SBA compliance with this requirement has been an
ongoing issue. Without the timely reports, it is difficult for
Congress to legislate and improve the programs.
So, in your view, what steps is SBA taking to meet the
reporting requirements as mandated by law?
Mr. WILLIAMS. Sure. Thank you for the question.
So, what we have really focused on since I have come is
getting the quality of the data up, making sure we are getting
complete data from all the agencies that first collected from
the individual companies, and then get that on the site. And
so, the second an agency submits their information on awards to
SBA, it is posted on our SBIR.gov website. That site allows for
downloads. It has got over 170,000 awards on that site from the
beginning of 1982. We really focused on the last 10 years,
making sure that that data was as accurate as possible. So, our
push was really to make sure the data is there, can be
downloaded and looked at in real time, and also looked at in
trend form and things like that.
For the current 2021 report, the data is due by March 15th
from the agencies so we have not started on that. We are
working on the 2020 report and we have got that in paper form
and that will then start the external review process then
before it gets to Congress. But I would stress that really all
that information is out there and we make sure it is available,
transparent, downloadable, and it is a massive amount of data.
Each award has over 80 records and so there is a lot of
information on that website about what we do.
Ms. YOUNG KIM. Thank you.
You know, I am concerned that the effectiveness of the
programs vary by agency and some agencies are more successful
in others in responding to requests in a timely manner. Do you
believe it might make sense to standardize some of the
paperwork requirements across agencies to improve timeliness?
And do you think SBA has a role to play in helping agencies
standardize proposal review procedures?
Mr. WILLIAMS. So, timeliness is in the legislation and we
then measure the time from a solicitation closing to the
selection to the award and then the gap between Phase I and
Phase II. Different agencies based on FAR and DFAR and some of
the regulations have different timelines that have been
established by Congress. And so, we work with those. And so,
our role is to measure those. Measure the agencies. Measure
what they are doing on every award and then to document that
and provide that information to Congress.
Ms. YOUNG KIM. Thank you.
One more question. Some companies have received upwards of
like 50 Phase I awards in a single year. What can we do
differently to make sure other companies have a fair shot in
receiving the awards? Because it does not seem fair that a few
companies are receiving the bulk of the awards.
Mr. WILLIAMS. The numbers on multi-award winners, which is
over 15 awards that they have ever received, is down 25 percent
in the last 5 years and the percent of first-time applicants is
at 46 percent currently right now. So that is about 2,000
companies every year new to the program year over year. So, I
think it is really up to the agencies then to determine why are
you awarding to the same company. And again, the goal of the
program is to solve the mission needs of that agency and to
pick the best technology solution for that. And so that is what
the agencies do. They understand the transition. All that
information is in the proposal for them to evaluate.
Chairwoman VELAZQUEZ. The gentlelady's time has expired.
Now we recognize the gentleman from New Jersey, Mr. Kim,
for 5 minutes.
Mr. KIM. Thank you. Thank you for taking the time to be
able to come talk with us, Mr. Williams.
I wanted to ask you about something that I came across in
the district. So, I have a joint base, McGuire-Dix-Lakehurst in
my district, and as I have been talking to them about
entrepreneurship and innovation and kind of bringing in the
work of small businesses, they talked about how they did a
pitch day when it came to SBIR/STTR. I know as I dug into it
more, the Air Force has been moved forward on a number of these
types of ditch days in which they have been able to streamline
the process and often even be able to make initial awards on
that same day.
So, I guess I wanted to ask you just what you thought of
that process, how it has been working and whether or not there
is something there that the other departments and agencies
might be able to pick up on, have been intrigued by this model.
Mr. WILLIAMS. Sure. So, Lakehurst is great. When I was at
Navy they did pretty much all our contracting and we went to a
central single source of contracting which I think was one of
the more valuable tools than just about anything that the Navy
did. And I know the Air Force has done some of that because,
again, when you spread contracting out you get different types
of contract shells and things like that. And so,
standardization of those kind of things, centralizing it, at
least at the Navy, created great value and it allowed us to
make awards more quickly.
There are pros and cons to pitch days. There is a lot of
time and effort that goes into some of those things but they
have shown some interesting results on awarding instantaneously
and so I think I am a big proponent of we experiment. We allow
the flexibility that the legislation allows and we measure the
time it takes. And so, when things work well, again, we have
monthly meetings with all the program managers, that we share
that information and we learn from best practices and what we
are seeing the Air Force and others do is tweak some of those
things. So, they take what works and continue. So, anything
that accelerates the time to award is absolutely something we
are supportive of.
Mr. KIM. Yeah. And so, you are saying that you are actively
keeping track of this process.
Mr. WILLIAMS. Yes.
Mr. KIM. And analyzing how it has been working for Air
Force. And what are some of the other departments and agencies?
Which other ones are utilizing this model right now?
Mr. WILLIAMS. The Air Force is the lead in the pitch day
but I know a couple of the other Department of Defense ones are
looking at it. I personally do not think it is a ``one size
fits all'' in this area because some of them are in person. But
yes, that is the main one, is the Air Force.
Mr. KIM. Well, one other aspect of this, and I think this
kind of gets at some of what you were saying about pros and
cons and see how it goes and track it, there have been some
concerns raised though about the diversity of those that are
participating when it comes to pitch days as well as the
reviewers. I think there are some concerns that we are not
necessarily hitting the kind of racial diversity and the
diversity that we want to through these types of efforts right
now.
So, I guess my question to you is, is that kind of
demographic tracking happening in terms of understanding who is
gaining access to this, whether through pitch days or other
types of processes? I just want to make sure that we are
thinking through things in that kind of whole way.
Mr. WILLIAMS. So demographics are measured from the
proposals and awards made and we even are now moving to
breaking down that in SAM to really understand because the
challenges of an African American are different than an Asian
American. And so, yes, those things are tracked. And so, I
think what needs to be understood is there is a low percent of
African American tech companies that exist today. Our woman-
owned companies in tech are 15 percent. We get about 15 percent
of the proposals, make about 15 percent of the awards. So, the
issue is we need to figure out how to get more African
Americans to start a tech company and then that again is
probably boots on the ground, FAST programs, Growth
Accelerators to kind of really figure out what works, and that
is why we are excited about this project we are doing with
Howard to really understand what are those barriers? Why are
they choosing not to start a high tech company and instead
maybe going to work for a big defense contractor or something
else.
Mr. KIM. Okay. Great. Well, thank you for talking to me
about this and we will follow up on some of this.
I will yield back my time.
Mr. WILLIAMS. I appreciate that. Thank you.
Chairwoman VELAZQUEZ. The gentleman yields back.
Now we recognize the gentleman from New York, Mr.
Garbarino, for 5 minutes.
Mr. GARBARINO. Thank you, Madam Chair. Thank you very much
for holding this hearing, and to the Ranking Member.
I have some questions about the SBIR and STTR. Federal
agencies need to, when they invest they have the extramural
research budgets. The SBIR, I believe they use 3.2 percent of
those budgets have to go to small businesses and to the STTR,
.45 percent of those agencies' budgets are extramural research
budgets have to go to small businesses. Where did those numbers
come from, the percentages? Is that said in law? Can we raise
that so more small businesses can participate in these
programs?
Mr. WILLIAMS. Yes, it is in the law and it is up to
Congress to determine those levels.
Mr. GARBARINO. Is there enough demand that we should
increase these levels, the percentages?
Mr. WILLIAMS. When you say is there enough demand are there
enough high-quality proposals?
Mr. GARBARINO. Applications. Could we fulfill more
participation----
Mr. WILLIAMS. So the only data that I have is that the
Academies of Science and others have studied and looked at, and
this exists with other federal funding, too. So, it is not
unique to SBIR. But they do not get to fund all the high-
quality proposals. So that is the case with SBIR but it is also
the case with other programs.
Mr. GARBARINO. So you are saying that they do not get to
fund everything they want to, so increasing that number would
help them with that? Can they spend more than the 3.2 or is it
required that they only spend 3.2 percent to the SBIR?
Mr. WILLIAMS. It is a minimum floor.
Mr. GARBARINO. It is a minimum floor. So, they can spend
more if they want to?
Mr. WILLIAMS. Yes.
Mr. GARBARINO. Okay. Do they spend more?
Mr. WILLIAMS. No.
Mr. GARBARINO. Okay. So, they are doing the bare minimum.
Okay. And that is the same thing for the STTR as well?
Mr. WILLIAMS. And I think actually there are one or two
agencies. I think Homeland in the past has spent more but that
is probably one of the few.
Mr. GARBARINO. Okay. How do you ensure that they do spend
the minimum amount of money? Because I have had some----
Mr. WILLIAMS. We spend a lot of time measuring that. That
is one of the reasons our reports take so long.
Mr. GARBARINO. Okay.
Mr. WILLIAMS. But that is a big part of the measurement is
to determine the total extramural R&D spend that year compared
to then that is the denominator, the numerator of what they
spent and obligated. Yes. And that is part of the reports.
Mr. GARBARINO. So I have had some complaints from some
contractors in my district, military contractors that say that
DoD does not keep up their spending and I do not have any way
to say that they are wrong or they are right so that is my
question to you. So, every year you make sure that your reports
ensure that these agencies are spending the minimum amount that
is required?
Mr. WILLIAMS. No, our reports report what they are spending
as we measure it and we compare it to other things.
Mr. GARBARINO. Have any of these agencies missed the mark,
the amount that they are supposed to?
Mr. WILLIAMS. The answer in the way we report it, the
answer is yes. The challenge with the DOD is they have 2-year
funding. Their funding continues to go up. They typically spend
SBIR. They spend a percent of the SBIR in the second year so we
are trying to get more transparency in understanding the year
of the funding and the year of the obligations which is
challenging but I do believe that all agencies are spending the
minimum amount. It is just not in that year and the way we
measure. And we measure it based on the way the legislation is
written.
Mr. GARBARINO. Okay. So, what happens if they do not spend
the money. You think they are but they might not be. The
numbers say they are supposed to be spending this minimum
amount, what happens if they do not?
Mr. WILLIAMS. So I think they are. I think it is over time
but the legislation does not address that issue. We report it.
Mr. GARBARINO. They are required to spend it but there is
nothing to hold their feet to the fire if they do not?
Mr. WILLIAMS. Well, there is Congress. We report it to
Congress.
Mr. GARBARINO. Oh, Congress. Yeah, there is us. Okay.
A separate question. How many companies or small
businesses, and you might have mentioned this before. I know
somebody was asking about the return on investment from the
dollars invested. How many companies or small businesses make
it all the way to Phase III?
Mr. WILLIAMS. So there is reports, and I would really
reference the National Academies of Sciences reports. So, it is
in the 50 to 65. It depends on the agencies. And again, you do
not want it to be 100 percent. You do not probably want it to
be much more than it is because it is cutting edge R&D that you
do not expect all to transition. But that data is in the
Academy of Sciences reports.
Mr. GARBARINO. I appreciate it. I am running out of time so
I thank you for your answers and I yield back.
Chairwoman VELAZQUEZ. The gentleman yields back.
Now we recognize the gentleman from Maryland, Mr. Mfume,
for 5 minutes.
Mr. MFUME. Madam Chair, thank you very much for the
opportunity to both you and the Ranking Member.
Director Williams, hello.
Mr. WILLIAMS. How are you doing?
Mr. MFUME. I am pretty good. And I appreciate your time
here as something that we do not take for granted but it is
part of our responsibility to do oversight and to follow up,
particularly on programs such as the two we are talking about
today.
I know your authorization runs through September 30th. I
think it is fair to say that this Committee wants to make sure
that reauthorization occurs because of our concern for
innovation, technology, and research. I do want to at some
point follow up on the gentleman from Minnesota's comments
about ROI. Return on investment is important to me. I happen to
Chair a Subcommittee on Contracting and Infrastructure and
perhaps I will take that up in that Committee.
But what I would like to turn my attention to right now is
to go back to the comments offered up by the gentleman from
Pennsylvania regarding diversity, specifically with HBCUs.
Director Williams, in 1982, the gentleman whose picture
hangs on the wall here behind me, Parren Mitchell, was very
instrumental in creating the programs that we are here talking
about today and very insistent at the time of that creation on
diversity. Ten years later, in 1992, I Chaired the Subcommittee
of this Committee on Minority and Women Business Enterprise.
And I reiterated 10 years later the concerns that Congressman
Mitchell had, the founder, that we really needed to see a
reduction in multi-awards, that we wanted to see increase in
access to a number of ways to get organizations and people
applied, and that we wanted to make sure that there was real
diversity with woman-owned, minority-owned businesses. And at
that time the emphasis was specifically in 1992 on Black,
Latino, and woman-owned businesses.
So, it is ironic we are 30 years after I held those
hearings. We are talking about the same two very important
programs. And for me, the irony here is that there is such a
similarity of what the hearing 30 years ago dealt with to where
we are today. So, the fact that we have real concerns about
diversity, the fact that there are still many, many multi-
awards that are taking place. I think you said around 46
percent; is that correct?
Mr. WILLIAMS. No, 46 percent are brand new awardees.
Mr. MFUME. Awardees. Yeah.
Mr. WILLIAMS. I think it is 27 percent have won more than
15 awards.
Mr. MFUME. Yeah. So that is why I can appreciate your 8
years in your position. I have got a longer view on this. A
longer perspective that goes back 30 years and remembering the
10 years before that. We really need to get beyond where we
are. Because if not, I think the next time around for
reauthorization, you and the agency are probably going to face
a real bulwark of resistance by those of us who do not
understand why we cannot find a way to do what we say we are
going to do 40 years ago when it was begun and 30 years ago
when I held hearings on this. There has got to be some sort of
way, particularly with HBCUs and MSIs, not to go to one college
or one university or one consortium but to ask the question,
why are we not doing more here and what are the keys? The key
in many respects is where you are going I think and where you
have to go are schools that have engineering programs, STEM
programs, and R2 colleges and universities that will give you
the people who can, in fact, apply. I think there has to be
increased access to early stage technical assistance to
facilitate greater diversity among the program participants.
And we have heard concerns in the past about the barriers that
women and minorities faced then in 1992 and now today women,
minorities, and those in rural areas just to be able to get
matching funds because of where they are. So, there are real
concerns. I do not have more than 5 minutes to discuss my agony
here if I can use that term, having lived and watched this. I
am not here to condemn you or to blame you but I am condemning
the process and what may have preceded you because this is, as
Yogi Berra once said, deja vu all over again. We have not moved
an inch from where we were.
So, my time has expired. I want to thank the Chair for
allowing me to have the opportunity to chime in. I hope, sir,
that you would take these concerns so that this time next year
when we are talking about reauthorization, some of the answers
then will go far beyond where they are now, particularly in
terms of increased participation and diversity for women,
minority-owned businesses, and others.
Thank you, Madam Chair. I yield back.
Chairwoman VELAZQUEZ. The gentleman yields back.
Now we recognize the gentleman from Minnesota, Mr. Stauber,
for 5 minutes.
Mr. STAUBER. Thank you, Madam Chair, and to the Member who
just spoke. I really appreciate some of the things you brought
up and the perspective that you come at these issues with.
As with every government program, finding success is not
always easy. When I first got to Congress, I assisted a small
business, obtained feedback from the Air Force regarding the
SBIR applicant denial. They were never able to get a straight
answer before my involvement, but I was certainly happy to help
get things cleared up for them.
Mr. Williams, can you speak to requirements, if any, of
providing feedback to SBIR and STTR applicants when their
applications are denied?
Mr. WILLIAMS. I know at Navy we had a process where we
would provide electronic feedback on all of them and then
follow up. So, I will have to get back to you on the specific
rules because the rules really are not associated with SBIR and
STTR. They are associated with how an agency runs a grant and/
or a contract and how they go out. So, they follow the same
rules that they do for any types of proposal situations and
grant situations.
Mr. STAUBER. Will you get those to our office or get it to
Madam Chair for us so she can distribute it?
Mr. WILLIAMS. Sure.
Mr. STAUBER. Thank you very much.
And then we talked about standardization of paperwork
across the agencies which would help increase participation.
And you even alluded to the timeliness. Are there any things
that you can suggest to us on the timeliness or change of the
timeframes from your experience? Because a couple of questions
you had answered, well, it is Congress's role. Can you give us
some ideas on specifically the timing from your expertise that
we should be looking at reference legislation change?
Mr. WILLIAMS. So I think all agencies are committed to
reducing timeliness and it is something we measure; we talk
about a lot. There are restrictions and a lot of them are FAR,
DFAR, policies at those agencies. And so, it is hard for me to
speak on one or two. And I know the GAO has done a study to
look at that and they have kind of looked at some of these
things. So, I would be really glad to work with the offices and
really bring in different, because it has got to be
brainstormed. And it is really the procurement and contracting
organizations, not the SBIR shops that need to get involved
because that is where it happens. Those are the regulations
that control these things. And there is a good reason for some
regulations. And so, we always want to balance doing things too
fast and making sure we are checking everything.
Mr. STAUBER. What other barriers to entry have you
identified in your time as director?
Mr. WILLIAMS. I think a lot of it is, again, I am really
proud that we have got 46 percent of the awardees every year
are new. I am not proud that we do not do that across the
country, especially with some of the underserved. So, I think
we need to do more and it is really a resource-based thing of
getting systems in place where training on SBIR and STTR is
available. Access to wet lands is available. Mentors are
available to help those that are underserved that are not
getting access or understanding of this program so they can
write proposals and win awards. I am a big fan of trying to do
that.
In the post-doc there was a hearing here. One of the post-
doc individuals, an African American, he got access to one of
our Growth Accelerator funds that helped them pivot a little
bit but it while he had some other programs going on and
funding. So post-docs are a great place because they are
getting funded to be there anyway. They are used to eating
Ramen and things like that so that is a good time to get them
to write proposals, win awards, and start new companies.
Mr. STAUBER. You talked about some of the things that
needed to be changed to help the program become successful and
we talked about some of the barriers for some small businesses
that want to come into these programs. Would you say that this
administration's $201 billion in additional regulations in year
1 and the $130 million of new compliance hours are barriers to
entry for startups?
Mr. WILLIAMS. I have not seen any of those affect what we
do. The barriers that startups talk about are barriers that
have been in place for a long time.
Mr. STAUBER. The $201 billion in additional regulations in
one year, is that good or bad for small businesses?
Mr. WILLIAMS. So I have not heard any of my small
businesses that I work with reference any specific, but if
there are certain ones that I should be aware of, I would be
glad to work with you on that and try to figure that out.
Mr. STAUBER. My time is expired. Madam Chair, back to you.
Thank you.
Mr. WILLIAMS. Thank you.
Chairwoman VELAZQUEZ. The gentlelady from California, Ms.
Chu, is recognized for 5 minutes.
Ms. CHU. Mr. Williams, I am fortunate to represent
California's most prolific research institution, the California
Institute of Technology, Caltech. Caltech has partnered on more
STTR grants than any other research institution in California.
I believe that is a major reason why my district in Pasadena,
California, in particular, has become such a hub for
technology-focused startups and small businesses. This includes
companies like iRobot which you mentioned in your testimony.
In your experience working with these programs, how do
surrounding communities benefit from proximity to qualified
research institutions that participate in SBIR and STTR? What
are the second order investment, employment, and innovation
impacts supported by SBIR and STTR?
Mr. WILLIAMS. I do not have specific numbers on that. I
believe that SBIR and STTR can really accelerate economic
development in areas that are underserved because if you get
that, those are high-growth companies that rapidly grow and
then they can support another layer of small businesses that
are providing supplies and support and things like that. So, I
certainly think it is a great way to get economic growth by
investing in that and the university systems. And there are
many universities that should be playing a bigger role in the
program and we are starting to see that.
Ms. CHU. Thank you.
And Mr. Williams, I would like to follow up on your
reference in the testimony that you provided on efforts to
increase participation by woman-owned small businesses and SBIR
and STTR. A study conducted by the National Women's Business
Council found that across the 11 agencies that participate in
these agencies, only 14 percent of Phase I awards were made to
woman-owned businesses. And while some agencies, such as the
Department of Education are awarding nearly 40 percent of their
grants to woman-owned small businesses, agencies that focus on
STEM fields, such as the Department of Energy, still only award
10 percent of their grants to woman-owned small businesses.
Although this is an improvement over the dismal 3.5 percent
they were awarding to woman-owned small businesses in 2011, it
is still not enough.
Can you talk about the direct work that you are doing at
SBA to encourage more woman-owned small businesses to
participate in these programs? And in particular, I want to
know, how are you measuring success in increasing women's
participation? Is it just that the number of awards granted or
are you also measuring the number of woman-owned small
businesses that apply to the program? Are you increasing the
number of women who serve on peer review panels?
Mr. WILLIAMS. So the study I am very familiar with because
we performed that study for the National Women's Business
Council. And the data that it also showed was that woman-owned
STEM companies was pretty close, was in that 15 percent range
of the amount proposing and the amount winning. It did vary.
So, as you mentioned, certain agencies, and a lot of that
seemed to be tied back to the pipeline, in STEM areas, in
physics and things like that were lower in women than they were
in education and they were in other areas. And so, we saw a lot
of correlation with that.
Now, that said, I certainly think what I would like to see
more of is finding grad students, women while they are in
college and figuring out what the barriers are for them to
start a small business and take the risk. And so, we have seen
some success. Oklahoma FAST has done a great job of having
cohorts of just women first-time applicants and been very
successful at getting them to win and thus starting the process
of forming new minority, new woman-owned companies, and that is
where we really need to put more time and effort. And yes, we
do measure all those things though that you mentioned.
Ms. CHU. But how about increasing the number of women who
serve on peer review panels? Or do you even track that?
Mr. WILLIAMS. So we have not measured that. It would not be
easy to measure. But what we have seen though and we do measure
is do we see a bias? So, do we see the percent of proposals
being much different than the percent of awards? And we have
not seen that.
Ms. CHU. And also, on peer review panels for participants
of color, do you track that?
Mr. WILLIAMS. So again, everything data we get has to be
kind of a requirement. We are not required, nor do we ask for
that data from the individual agencies. I think some of the
agencies have looked at that on their own but no, that is not a
required data element to submit to us.
Chairwoman VELAZQUEZ. The gentlelady's time has expired.
Now we recognize the gentlelady from Texas, Ms. Van Duyne,
for 5 minutes.
Ms. VAN DUYNE. Thank you very much, Chairwoman Velazquez,
and Ranking Member Luetkemeyer.
Mr. Williams, thank you very much for coming and testifying
in front of our Committee today.
One of the main issues of SBIR and STTR programs are their
slow timelines. A GAO report last October stated that just 9 of
29 agencies were consistently on time on making their awards
within the required 6 months which some argue is too long of a
timeline already. So how is the SBA working to streamline the
bureaucratic barriers to expedite these award timelines?
Mr. WILLIAMS. There are a couple of things SBA does. We
measure and we document that information and really, the focus
on that measurement has been more of a concentration after
Senator Carden added some legislation into the DoD bill. So, we
certainly measure all those types of things and we report back
on that. We meet monthly with all the program offices, I mean,
with all the agencies' leads and we talk about what is working
well and what is not working well, sharing best practices. Are
there certain red tape issues that could be removed by us? Or
is it certain policy things, FAR and DFAR regulations that they
would need to work more together with us to remove?
But at this point, our main focus is sharing best
practices, putting a light on the issue because we certainly
would love to see up from proposal to award and gaps between
awards go down as much as possible.
Ms. VAN DUYNE. I really appreciate you bringing up the red
tape issue because I have heard that from a number of our small
businesses that we have been having roundtable discussions.
So how can Congress eliminate some of the red tape, some of
the paperwork for these small businesses that are trying to
participate in these programs? Do you have anything specific? I
appreciate you trying to put a light on it but what
specifically can Congress do to eliminate some of these
paperwork hassles?
Mr. WILLIAMS. I am comfortable answering that. It is a lot
of certain regulation, FAR, DFAR that are again structured for
overall contracting and grants processing to make sure that the
federal government spends money in a way that is efficient and
effective and gets the best for the taxpayer. So, there is
always a balance between those things.
Ms. VAN DUYNE. Do you believe it might make sense to
standardize some of the paperwork requirements across agencies?
Could that help speed up the process?
Mr. WILLIAMS. I think we have standardized what we can and
what right now, there is pushback. Well, it is not pushback.
They are working in own environment that says this is how a
proposal needs to come in to us. This is the tool. Grants.gov
was a big tool. NSF had a system. So, they have certain systems
that everything comes through. SBIR is just one of their
systems.
Ms. VAN DUYNE. So when you say ``they,'' ``they are working
in their own, in their own system'' who are you talking about?
Mr. WILLIAMS. Yeah, the agencies.
Ms. VAN DUYNE. Okay.
Mr. WILLIAMS. Each agency has rules on how they accept
proposals.
Ms. VAN DUYNE. And I understand that the agencies have
different rules. But as Congress, we can actually help to set
up some of these standardized templates; right? I mean, like
having a standardized contract template, for example, that all
agencies could use that might aid the agencies and have each of
their own. I know when I worked at HUD, we had problems when we
were responding to some of these disasters because HUD had a
different requirement than FEMA had a different requirement and
so on and so forth and it was burdensome for the user.
Mr. WILLIAMS. Yes. So, I do not disagree that
standardizing, simplifying our valuable. I think a lot of it
also goes on that the workforce at those facilities to be able
to put the time and effort on those contracts also is a
challenge. So, more staffing in the grants and contracts shops
to get these things out.
Ms. VAN DUYNE. So that would help them if it was one. Staff
was not having to work on individual as well?
Mr. WILLIAMS. So it could help. I mean, I know I worked to
do standardization at the Navy and the more we streamlined and
combined contracting into single shops it helped us accelerate.
Ms. VAN DUYNE. I appreciate that.
What metrics does the SBA use to measure the overall
success of these programs? And besides overall amounts of
funding and success stories, how do you know the program is
achieving its intended goal of promoting commercialization?
Mr. WILLIAMS. Of commercialization success. Okay, because
we measure a lot of different things. But commercialization, so
companies are required to submit Phase III information, non-
SBIR funded information on any Phase II award they had when
they are applying to the program. We ask them to update that
for 5 years. We also though go out and look at all the awards
that have been made. Is there other information we can gather
on them? There is no legal requirement for us to gather Phase
III information so a lot of it is success story but there are
certainly better tools out there today. But certain tools out
there that financial industry uses to be able to gather
information. But commercialization success is not the same
across the board so I am concerned with just measuring the
follow-on investment as opposed to this was a product that went
into a military system or into the NASA row that we sold two
of. It was not ``commercialization'' but it was very, very
valuable research that was done.
Ms. VAN DUYNE. And I am sorry; my time is up. I yield back.
Thank you.
Mr. WILLIAMS. That was my fault.
Chairwoman VELAZQUEZ. The gentlelady's time has expired.
I just would like to share with the gentlelady regarding
the federal Acquisition Regulations that she made reference
to--they do not fall under the jurisdiction of the Small
Business Committee.
Mr. WILLIAMS. Correct. Thank you.
Now we recognize the gentlelady from New York, Ms. Tenney,
for 5 minutes.
Ms. TENNEY. Thank you, Chairwoman Velazquez, and Ranking
Member Luetkemeyer, for holding this important hearing today.
And thank you to the witness for your time and your insight.
I am honored to currently represent New York's 22nd
Congressional District which stretches from the shores of Lake
Ontario all the way to Pennsylvania border. This region has a
strong innovation heritage for centuries as a pioneer of the
Industrial Revolution in the United States, as well as the
birthplace of IBM--many find that hard to believe--in
Binghamton, New York. And current headquarters for Rome Lab,
the Air Force Research Directorate. The area around Rome Lab
especially hosts a vibrant ecosystem of upstart companies
solving a wide range of issues from cybersecurity to artificial
intelligence to the future of drones and their potential to
improve our lives and national security. Many of these
companies have benefitted from the Small Business Innovation
Research and Small Business Technology programs and the
financial assistance they provide to small businesses to
develop and commercialize innovative technologies.
Even with these successes, however, we cannot ignore the
need to improve on this program. Currently in the SBIR program,
a mere 95 firms account for more than 20 percent of all award
funding. Surprising, however, these companies provide some of
the worst returns on investments of any beneficiaries in the
program. In addition, among Air Force SBIT and STTR Phase II
contracts, researchers found that there was an inverse
relationship between federal dollars awarded and commercial
success.
And finally, there is a need to increase the return on
these public investments to American technological and industry
prosperity. This includes prioritizing companies that are
working to expand production domestically in the United States
and are developing new products and technologies that shore up
and secure our domestic supply chains. We also need to focus on
companies that have the highest potential at commercializing
their technology and providing the taxpayers with the best
return on investment. These programs were not created to be a
competition of which companies can create the best white paper.
It is essential we return them to their original purpose of
ensuring the federal government and the American people have
access to world class domestic innovation.
So, Mr. Williams, with that being said, are you aware of
this small group of companies who dominate the SBIR/STTR
programs taking up 20 percent of the funding awarded every
year? And what are your thoughts on an annual cap potentially?
Mr. WILLIAMS. So we report all that to Congress and that is
part of our report. We list out any company that is awarded
more than 15. We break out the percentages and stuff. So yes,
that is part of my job in being aware of it.
My experience at the Navy would argue against caps because
we are looking to have the best technology available to address
a need. And the reason that my program office is going to put
it on a weapon system is because they know it is the best
technology. The companies that we funded at the Navy actually
were the best, even with the large primes. We were funded the
best of the best and I think that is a really important
feature. So, the role of the program is to address the mission
of that agency. It is not an economic development program or a
VC program to kind of advance it but some agencies that is
their role. So, I think it is not a ``one size fits all'' when
it would come to a cap and that would be my concern.
Ms. TENNEY. How would you improve the caps? Obviously,
caps, there might be a great program and a cap would prevent us
from having a great program. I think I understand maybe that is
what your mission would be, but how would you get around that
and make sure that we really are focusing on the mission,
getting back to the mission and making sure that we are
focusing on, for example, the domestic side of it and then the
ability to commercialize these innovations that are coming out?
We have amazing innovation around our Air Force research lab. I
mean, just the companies that are coming up with tremendous
technology in cyber and drone technology. How would you do that
in a way that we can sort of prioritize where this money goes?
I only have a minute left.
Mr. WILLIAMS. So, yeah, I think that is what the agencies
do. So, the agencies are evaluated on commercialization
potential. Is it going to insert into whether it is a weapon
system or the National Science Foundation, the private sector.
So, it is a major part of the proposal and it is a major part
of the evaluation factor to look at the potential to
commercialize.
Ms. TENNEY. So quickly, and so commercializing and
maintaining sort of an onshore critical supply chain, do you
think that is something we can do? Can we restrict some of the
foreign investment and limit say China and other companies from
getting access that have received some of this funding? And is
there a way that we can do that, to prioritize and really bring
the commercialization and our supply chain back here,
especially in a de-industrialized region of upstate New York
where my district is?
Mr. WILLIAMS. Sure. I would probably argue that small
businesses are more likely to do things in the U.S. and keep
things in the U.S. and they are going to help. So SBIR is
helping to advance the supply chain in the U.S. because it is
investing in technologies that will be built here.
Ms. TENNEY. Great. Thank you so much. I am out of time. I
yield it back. Thank you.
Mr. WILLIAMS. Thank you.
Chairwoman VELAZQUEZ. Mr. Williams, you have to have a U.S.
company to get money.
Mr. WILLIAMS. Yes. U.S. owned and operated. Absolutely.
Chairwoman VELAZQUEZ. Okay. Thank you.
Well, thank you, Mr. Williams, for being here today and for
sharing your expertise in this area. Today's hearing has
provided many concrete examples of the way SBIR/STTR help small
businesses and our country as a whole. It has also shed light
on the importance of reauthorizing these programs. As these
companies pursue groundbreaking research that will benefit our
society, they need assurance that the federal government will
support them in their efforts. We can provide that by passing
legislation to make these programs permanent and codifying the
central tenets of the program.
Without objection, Members have 5 legislative days to
submit statements and supporting materials for the record.
If there is no further business to come before the
Committee, without objection, we are adjourned. Thank you.
[Whereupon, at 11:42 a.m., the committee was adjourned.]
A P P E N D I X
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