    [House Hearing, 119 Congress]
    [From the U.S. Government Publishing Office]

                    FOSTERING AMERICAN INNOVATION: INSIGHTS
                          INTO SBIR AND STTR PROGRAMS

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

                                    HEARING

                                   before the

                          COMMITTEE ON SMALL BUSINESS
                                 UNITED STATES
                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED NINETEENTH CONGRESS

                                 FIRST SESSION
                                   __________

                                  HEARING HELD
                               FEBRUARY 26, 2025
                                   __________

                   [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                Small Business Committee Document Number 119-003
                 Available via the GPO Website: www.govinfo.gov

                                    ------

                      U.S. GOVERNMENT PUBLISHING OFFICE

    58-905                    WASHINGTON : 2026

                       HOUSE COMMITTEE ON SMALL BUSINESS

                        ROGER WILLIAMS, Texas, Chairman
                            PETE STAUBER, Minnesota
                            DAN MEUSER, Pennsylvania
                             BETH VAN DUYNE, Texas
                               JAKE ELLZEY, Texas
                             MARK ALFORD, Missouri
                             NICK LALOTA, New York
                            BRAD FINSTAD, Minnesota
                              TONY WIED, Wisconsin
                          ROB BRESNAHAN, Pennsylvania
                              BRIAN JACK, Georgia
                             TROY DOWNING, Montana
                 KIMBERLYN KING-HINDS, Northern Marina Islands
                             DEREK SCHMIDT, Kansas
                   NYDIA VELAZQUEZ, New York, Ranking Member
                           MORGAN MCGARVEY, Kentucky
                           HILLARY SCHOLTEN, Michigan
                          LAMONICA MCIVER, New Jersey
                            GIL CISNEROS, California
                           KELLY MORRISON, Minnesota
                            GEORGE LATIMER, New York
                             DEREK TRAN, California
                           LATEEFAH SIMON, California
                           JOHNNY OLSZEWSKI, Maryland
                            HERB CONWAY, New Jersey
                        MAGGIE GOODLANDER, New Hampshire

                     Lauren Holmes, Majority Staff Director
                     Melissa Jung, Minority Staff Director

                                C O N T E N T S

                               OPENING STATEMENTS

                                                                       Page
    Hon. Roger Williams..............................................     1
    Hon. Nydia Velazquez.............................................     3

                                   WITNESSES

    Mr. William Marinelli, President and Chief Executive Officer,
      Physical Science Inc., Andover, MA.............................     8
    Ms. ML Mackey, Chief Executive Officer and Co-founder, Beacon
      Interactive Systems, Arlington, VA.............................    10
    Mr. Cyrus Miryekta, Chief Executive Officer, Ravelin, US,
      Fairfax, VA....................................................    12
    Mr. Jere Glover, Executive Director, Small Business Technology
      Council, Annapolis, MD.........................................    13

                                    APPENDIX

    Prepared Statements:
        Mr. William Marinelli, President and Chief Executive Officer,
          Physical Science Inc., Andover, MA.........................    42
        Ms. ML Mackey, Chief Executive Officer and Co-founder, Beacon
          Interactive Systems, Arlington, VA.........................    51
        Mr. Cyrus Miryekta, Chief Executive Officer, Ravelin US,
          Fairfax, VA................................................    56
        Mr. Jere Glover, Executive Director, Small Business
          Technology Council, Annapolis, MD..........................    63
    Questions and Answers for the Record:
        Question from Hon. LaLota to Mr. Miryekta and Response from
          Mr. Miryekta...............................................    81
        Question from Hon. LaLota to Mr. Marinelli and Response from
          Mr. Marinelli..............................................    83
    Additional Material for the Record:
        Waiver Request Letter........................................    84

                         FOSTERING AMERICAN INNOVATION:
                      INSIGHTS INTO SBIR AND STTR PROGRAMS

                                  ----------

                          WEDNESDAY, FEBRUARY 26, 2025

                      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, Hon. Roger Williams
    [chairman of the Committee] presiding.
        Present: Representatives Williams, Stauber, Meuser, Alford,
    LaLota, Finstad, Wied, Jack, Downing, King-Hinds, Velazquez,
    McGarvey, Scholten, Cisneros, Morrison, Latimer, Tran, Simon,
    Olszewski, and Goodlander.
        Also Present: Representatives Moolenaar and Krishnamoorthi.
        Chairman WILLIAMS. Before we begin, I will ask Mr. Stauber
    to open us in prayer.
        Mr. STAUBER. Dear Lord, thanks for this wonderful day that
    you have given us to provide wisdom to each and every one of us
    to live this day in your name. And we also pray for our
    families that are back home. We pray for their safety.
        We pray for our staff and for our colleagues on both sides
    of the aisle. As we work today on behalf of the American
    people, know that the United States of America is a great
    country when we work together.
        In your name we pray, Amen.
        Please join me in the pledge of allegiance.
        I pledge allegiance to the flag of the United States of
    America, and to the Republic for which it stands, one nation,
    under God, indivisible, with liberty and justice for all.
        Chairman WILLIAMS. Good morning, everyone.
        And I now call the Committee on Small Business into order.
        Without objection, the Chair is authorized to declare a
    recess of the Committee at any time.
        And prior to opening statements, I ask unanimous consent to
    enter a letter into the record from the House Select Committee
    on the Chinese Communist Party requesting to waive on today's
    hearing.
        Without objection, so ordered.
        Pursuant to the rules of the House and the rules of the
    Committee, I ask unanimous consent that Members of the House
    Select Committee on the Chinese Communist Party be waived on to
    the Committee for the purpose of making an opening statement
    and asking questions.
        And without objection, that is so ordered.
        I now recognize myself for my opening statement.
        I want to welcome everybody today to the hearing, Fostering
    American Innovation: Insights into SBIR and STTR Programs.
        I want to thank our witnesses today for being here. And
    many of you traveled a long way to get here, and we are
    interested in your perspectives and your experiences, and we
    deeply value your time and your voice.
        Small businesses are the backbone of innovation and
    economic prosperity in America. The ability to take an idea,
    develop it into a product, and bring it to the market drives
    innovation and economic growth, strengthening our nation's
    competitiveness.
        For over four decades, the SBIR and the STTR programs have
    fueled American innovation by providing early stage funding to
    small businesses, allowing them to develop cutting-edge
    technologies that strengthen our economy and support our
    military. From lifesaving medical advances to next-generation
    defense capabilities, these programs have empowered main street
    to turn ideas into reality for the government and the private
    sector.
        The SBIR and the STTR programs channel federal R&D dollars
    in phases to small business, enabling the development of
    innovative ideas that align with the needs of federal agencies.
    These agencies can offer SBIR and STTR awards through two
    avenues. First, through targeted solicitations where the agency
    requests a product that meets specific requirements, or through
    open topics where small businesses propose innovative solutions
    to meet an agency's mission.
        Prominent companies, including Qualcomm, 23andMe, and Bose,
    began as small businesses that leveraged the SBIR program to
    become industry leaders demonstrating the program's power to
    drive innovation and economic growth.
        Our responsibility right here in Washington is to ensure
    that these programs continue to foster groundbreaking
    advancements while remaining free from foreign exploitation. In
    today's hearing, we will examine these programs' challenges and
    addresses and propose unresolved solutions from the last
    reauthorization.
        SBIR and STTR have long supported American ingenuity, yet
    these vital programs still face growing threats. The CCP
    continues to exploit the SBIR and the STTR programs, siphoning
    taxpayer-funded research back to China. This undermines
    American innovators' intellectual property rights and
    jeopardizes our nation's national security.
        The due diligence program established in the last
    reauthorization continues to face limitations in effectively
    preventing CCP infiltration. At the same time, small businesses
    participating in these programs face significant barriers in
    transitioning from research to commercialization, lacking
    access to capital.
        With SBIR and STTR set to expire in September 2025, we have
    a critical opportunity to make changes to ensure these programs
    operate efficiently and support small businesses' growth to
    ultimately accomplish the program's goal of fulfilling R&D
    needs.
        Ensuring these programs are awarded by merit after rigorous
    competition will continue driving the best innovations to the
    top. Innovators thrive in an environment where competition
    reigns supreme, where they are free from limitations or caps on
    their success.
        Working alongside the Trump administration, we will
    continue to prioritize policies that protect our innovators,
    cut bureaucratic red tape, and create an environment where Main
    Street America can survive and thrive.
        With that, I would yield to our distinguished Ranking
    Member, my friend from New York, Ms. Velazquez.
        Ms. VELAZQUEZ. Thank you, Mr. Chairman, for calling this
    hearing to discuss one of our most important priorities of the
    119th Congress: reauthorization to small business innovation
    research and small business technology transfer programs. The
    timing could not be more critical.
        SBIR and STTR are among the federal government's most
    effective engines for driving innovation. These programs
    channel just a small percentage of extramural R&D budgets into
    highly competitive awards that fuel cutting-edge discoveries,
    create new industries, and drive economic growth.
        At just under $5 billion annually, these programs have had
    an outside impact on our economy, helping to launch companies
    like iRobot, Sonny Care, 23andMe, and Qualcomm. They have
    played a role in game-changing advances. From second-generation
    LASIK eye surgery to critical mineral recycling that reduces
    our dependence on foreign sources, to advancement that helps us
    investigate the inner workings of the human brain, to studying
    disorders like Alzheimer's and Parkinson's.
        More recently, an SBIR-backed company, Boom Aerospace,
    whose CEO testified in this room 3 years ago, conducted a test
    flight that broke the sound barrier over the Mojave Desert.
    With the help of SBIR and the private capital it has helped
    attract, our countries' innovators are one step closer to
    bringing supersonic passenger jet travel into reality.
        Yet despite its overwhelming success, these programs are
    among the only core SBA programs that are not permanently
    authorized. If Congress fails to act before its expiration on
    September 30, a lapse in the program will have severe
    implications for American entrepreneurs. Even a short-term
    disruption would deliver a substantial setback for America's
    innovation pipeline.
        Meanwhile, China is aggressively investing in its own R&D
    ecosystem. Just last month, the release of the DeepSeek AI
    model rattled global markets, exposing the complacency of the
    dominant U.S. firms that have grown too comfortable with their
    market power.
        The SBIR program is uniquely positioned to counter this
    stagnation, funding nimble, emerging businesses to challenge
    entrenched tech giants and restore competition to the
    innovation economy.
        In many ways, Mr. Chairman, our task this year should not
    just be about a simple extension of the programs but, rather, a
    bipartisan collaboration to making SBIR and STTR stronger than
    ever before. It is my greatest hope that we can work together
    to grow the programs in several ways.
        First, we must work to make the program permanent, giving
    small innovators operating on the cutting edge of their
    industries more certainty and stability to invest their time,
    money, and staff into competing for SBIR or STTR awards.
        Second, we must expand the programs, allowing for greater
    agency allocation over time and growing the volume of small
    business grants and contracts available. This will bring more
    competition to our economy and our industrial defense base.
        Third, we must work to help participating companies
    overcome the valley of death by expanding commercialization
    services and growing Phase III of the program.
        Finally, we must continue protecting small business firms
    from foreign threats that seek to undermine our national
    security.
        These are just a few of many priorities we can consider.
        Thank you to all the witnesses for appearing before us
    today, and thank you to the Chair and Ranking Member of the
    Select Committee on the Chinese Communist Party for joining us.
    I look forward to your testimony.
        I yield back.
        Chairman WILLIAMS. The gentlelady yields back.
        I now recognize the distinguished Chair of the House Select
    Committee on the Chinese Communist Party, Chairman John
    Moolenaar from the great State of Michigan, for his opening
    remarks.
        Mr. MOOLENAAR. Thank you, Chairman Williams and Ranking
    Member Velazquez, for holding today's hearing on the small
    business innovation research, as well as the small business
    technology transfer programs.
        And I want to thank you for allowing Raja Krishnamoorthi
    and I to waive on to this important meeting.
        The SBIR and STTR programs have long been instrumental in
    fostering American innovation, allowing small businesses to
    development cutting-edge technologies that serve both the
    public and the private sectors. These programs are critical to
    maintaining America's technological edge, particularly in
    industries vital to our national security.
        That being said, as we examine the effectiveness of these
    programs today, we must also acknowledge the serious threats
    they face; most notably, the Chinese Communist Party's
    persistent efforts to exploit these programs for its own
    military and economic gain.
        China has systematically targeted American innovation using
    tactics like talent recruitment programs, state-sponsored
    investments, and university partnerships to siphon off U.S.
    taxpayer-funded research. This is not just a matter of
    intellectual property theft. It is a direct national security
    risk.
        Some U.S. firms that have received SBIR awards have later
    partnered with CCP-linked entities or established Chinese
    subsidiaries, effectively transferring sensitive technology
    into the hands of our foremost adversary.
        The CCP is actively seeking to integrate advanced U.S.
    research into its military modernization efforts, including
    through artificial intelligence, quantum computing, and next-
    generation defense technologies.
        As the September 30 reauthorization deadline approaches, we
    must close the gaps that allow China to take advantage of the
    SBIR and STTR programs. At the same time, we must not lose
    sight of the core mission of SBIR and STTR supporting American
    small businesses. Instead of limiting opportunities for small
    businesses, we should focus on strengthening safeguards against
    foreign exploitation while preserving a merit-based system that
    rewards innovation.
        The United States cannot afford to let China turn our most
    successful small business research and development program into
    a tool for its own strategic advancement. We must take decisive
    action to protect SBIR and STTR from CCP infiltration and
    ensure that taxpayer dollars are used to support American
    innovation, not our adversary's.
        And I am confident that under Chairman Williams and Ranking
    Member Velazquez's leadership, this Committee will be
    successful in doing just that. And the Select Committee on
    China stands ready to support the Small Business Committee's
    important efforts to protect American innovation, strengthen
    our economic security and counterthreats posed by the Chinese
    Communist Party.
        And with that, Mr. Chairman, I yield back. Thank you.
        Chairman WILLIAMS. The gentleman yields back.
        And I now recognize the distinguished Ranking Member of the
    House Select Committee on the Chinese Communist Party, Ranking
    Member Raja Krishnamoorthi--but I know him better as the Raj--
    from the great State of Illinois for his opening remarks.
        Mr. KRISHNAMOORTHI. Well, thank you, Mr. Chairman.
        And by the way, when I first--on my first day of college, I
    introduced myself. I said, Hi, my name is Raja. And the person
    said, What part of Boston are you from, Roger?
        So in any case, wonderful to be with you. Thank you,
    Ranking Member Velazquez, my good friend. And, of course, my
    good friend and colleague and the leader of our Committee,
    Chairman John Moolenaar, thank you for your leadership.
        I want to take this opportunity to speak on the Small
    Business Committee about the SBIR and STTR programs. In full
    disclosure, as a former small business person, my former
    company actually benefited from SBIR programs.
        And I lived in the valley of death frequently. And so it is
    not a pleasant place to be. And SBIR, thanks to the work of
    this Committee and this government, we were allowed to benefit
    from those programs, and we have developed technology for night
    vision, both for space and for military applications, and it is
    helping the warfighter today.
        For decades, these programs have served as the backbone of
    U.S. research and development, empowering small businesses by
    turning new ideas into real technology. They have helped
    advances in defense, energy, and medicine. And in a study from
    1995 to 2018 revealed that these programs have created a
    whopping 1.5 million jobs, averaging over 65,000 jobs annually.
    These investments have led to breakthrough technology, such as
    advanced prosthetics for wounded veterans, revolutionary
    medical imaging systems, and cutting-edge cybersecurity
    solutions.
        I want to say I echo the sentiments of Chairman Moolenaar.
    Our adversaries do know the strengths and weaknesses of our
    innovation ecosystem and, on occasion, they have taken
    advantage of it and targeted some of the beneficiaries of these
    SBIR and STTR programs for intellectual property theft.
        One notable example was a U.S. company that was a former
    SBIR awardee that lost $1 billion in shareholder value and 700
    American jobs after an employee stole wind energy technology
    for a Chinese firm.
        As another anecdote, I should just mention, Chair and
    Ranking Member, when I was running this company in the private
    sector that I mentioned before, we were actually the victims of
    an attempted theft of intellectual property by CCP-controlled
    entities as well. So I know this firsthand. It happens. And so
    we have to do whatever we can to help small businesses ward it
    off, prevent it, empower them to avoid being victims of CCP
    intellectual property theft.
        Congress and the executive branch have taken steps to
    address and mitigate many of these threats. For example, the
    SBIR and STTR Extension Act of 2022 was an important step
    forward, requiring greater disclosure of foreign ties and
    participation in talent recruitment programs. These efforts
    have proven effective in increasing awareness and bolstering
    protections, but we cannot afford to be complacent when it
    comes to competing with the CCP.
        As the SBA Inspector General's 2024 advisory makes clear,
    our current system still relies heavily on self-reporting from
    companies, which can lead to resource constraints for the
    government to verify these reports. We must continue to support
    resources for due diligence so that we can see the results we
    enacted back in 2022.
        Finally, and above all, we must recognize that federal
    funding for research and technology development is not just an
    investment in the present; it is a commitment to our nation's
    future.
        And actually, Chairman Moolenaar and I just met with
    Condoleezza Rice yesterday of Stanford, who heads the Hoover
    Institution, who brought a number of researchers to our office
    to talk to us about the technology competition and the fact
    that the only way that we are going to win this competition is
    for the federal government to invest in basic research and
    development, supplemented by these additional investments in
    SBIR and STTR, which build upon progress, the blue sky
    research, in the private and public sector.
        I just want to say thank you so much, Chairman Roger. And
    thank you, Chairwoman Velazquez and Chair John Moolenaar, for
    your leadership, your partnership, your collaboration. Together
    we are going to win this competition, this strategic
    competition against the CCP.
        Thank you, and I yield back.
        Chairman WILLIAMS. The gentleman yields back. Thank you for
    that.
        And I will now introduce our witnesses.
        Our first witness here with us today is Dr. Bill Marinelli.
    Dr. Marinelli is the president and CEO of Physical Sciences
    Inc., located in Andover, Massachusetts. Dr. Marinelli joined
    Physical Services Inc in 1983, and has been involved as a
    scientist and program manager in a diverse range of technical
    areas.
        In 2006, he was named executive vice president for defense
    systems. In 2018, he became chief operating officer for the
    company and was named to the board of directors in 2021. Dr.
    Marinelli then assumed the title of president and CEO in 2022.
        Dr. Marinelli has made numerous contributions in the fields
    of chemical kinetics, gas service interactions, space physics,
    and advanced diagnostics.
        Dr. Marinelli received his MS and Ph.D. degrees in physical
    chemistry from the University of California at Berkley. He is
    also a graduate of Brown University where he earned a degree in
    chemistry.
        I want to thank you for being with us today, and looking
    forward to your conversation.
        Our next witness here with us today is Ms. ML Mackey. Ms.
    Mackey is the CEO of Beacon Interactive Systems located in
    Waltham, Massachusetts. Ms. Mackey has co-founded Beacon
    Interactive in 1994 and, along with her partner, has grown the
    business into a valued nontraditional defense contractor.
        And throughout her time, Ms. Mackey has won multiple
    awards, such as the WES Leadership Award, the Tibbetts Award,
    Small Business Executive of the Year, Small Business Advocate
    of the Year, and Champion of Small Business Innovation.
        Ms. Mackey serves as the ExCom of NDIA's board and is the
    Chair of the Small Business Division. She is past Chair of NSBA
    and a current member of SBA's innovation advisory committee and
    the National Academy of Sciences, Army S&T Roundtable.
        Ms. Mackey is a graduate of Lehigh University with a
    Bachelor's of Science in Electrical Engineering.
        I want to thank you for being here also today.
        Our next witness here today is Mr. Cyrus Miryekta. Mr.
    Miryekta is the founder and CEO of Ravelin US, located in
    Fairfax, Virginia. Mr. Miryekta founded Ravelin in 2023 to
    serve as a strategic consulting firm for the USG-inclined
    innovators. And prior to Ravelin, he was with the Air Force
    Office of Special Investigations and spearheaded the Department
    of Defense counterintelligence in Silicon Valley.
        He enlisted in the U.S. Army in 2000 and served as an
    airborne fire team leader in Afghanistan and in Iraq, where he
    was decorated for actions under fire and for saving a civilian
    from an IED.
        He serves as board member for the BlackStar Orbital and
    Tigercat Cyber, as well as board advisor for TerraSpace. He
    also has worked as a volunteer to set up medical clinics in
    rural Guatemala where over 1,000 children have been treated a
    week.
        He holds a Master of Arts Degree in Statecraft and National
    Security from the Institute of World Politics. He is also a
    graduate of the National Security Space Institute and
    California State University where he received a bachelor degree
    in political science and government.
        I want to thank you for being with us today, and I am
    looking forward to all of the testimony.
        And I now recognize our Ranking Member from New York, Ms.
    Velazquez, to introduce our last witness appearing before us
    today.
        Ms. VELAZQUEZ. Thank you, Mr. Chairman.
        Our final witness today is Mr. Jere Glover, the Executive
    Director of the Small Business Technology Council, a trade
    association of small, high-tech companies, most of whom are
    involved in the Small Business Innovation Research program. As
    counsel to the House Small Business Committee, he directed and
    organized a set of hearings on small business and innovation
    that laid the groundwork for the program in 1978. Throughout
    the law's existence, he has been one of its most active
    supporters.
        Mr. Glover has a unique blend of public and private sector
    experience. For more than 6 years, he was the federal
    government lead defender of small businesses in the regulatory
    process. In the private sector, he has been the CEO or
    principal of a biotech company and medical technology company
    and a group of medical clinics.
        He obtained his undergraduate and law degrees from the
    University of Memphis and an L.L.M. in Administrative Law and
    Economic Regulation from George Washington University.
        Thank you, Jere. We look forward to your testimony.
        Thank you, Mr. Chairman.
        Chairman WILLIAMS. The gentlelady yields back.
        Before recognizing the witnesses, I would like to remind
    them that oral testimony is restricted to 5 minutes in length.
    If you go over 5 minutes, you will hear the gavel a little bit,
    and you need to bring it to a close. If you see the light turn
    red in front of you, it means your 5 minutes has concluded, and
    you should wrap it up quickly.
        Also, I would like to add, periodically, you will see some
    of us moving in and out. It is no reference on your testimony
    or anything, but some will have other places they have got to
    be real quick and come back. You may see the Ranking Member and
    myself do that, but we will be back. Okay? So that means
    nothing.
        So I now recognize Mr. Marinelli for his 5-minute opening
    remarks.

     STATEMENTS OF MR. BILL MARINELLI, PRESIDENT AND CEO, PHYSICAL
       SCIENCES INC.; MS. ML MACKEY, CEO AND CO-FOUNDER, BEACON
     INTERACTIVE SYSTEMS; MR. CYRUS MIRYEKTA, CEO, RAVELIN US; AND
    MR. JERE GLOVER, EXECUTIVE DIRECTOR, SMALL BUSINESS TECHNOLOGY
                                COUNCIL

                    STATEMENT OF MR. BILL MARINELLI

        Mr. MARINELLI. Good morning, Chairman Williams, Ranking
    Member Velazquez, and Members of the House Committee on Small
    Business. It is an honor to testify here today on behalf of
    Physical Sciences Incorporated, a small business headquartered
    in Andover, Massachusetts. I want to thank you for the
    opportunity to talk about our experience with the SBIR program.
        Our company was founded in 1973, with a mission to develop
    technical solutions for national priorities in defense,
    security, energy, environmental, healthcare, and industrial
    markets. The company is 100 percent owned by an employee stock
    ownership trust, has no foreign ownership interest, and takes
    active measures to prevent foreign technology transfer.
        Our company embraces the key intent of the SBIR legislation
    to meet federal research and development needs while
    identifying commercial applications for those highly
    specialized technologies. Four examples include: One, advanced
    Lithium-ion battery technology to support two Navy programs of
    record where their operational requirements exceed commercial
    standards.
        Two, rare earth extraction from coal ash to provide a
    secure domestic supply of these critical elements. We developed
    and patented that technology under SBIR and non-SBIR programs.
    And funding for a $30 million pilot plant has now been awarded
    to Pennsylvania's Winner Water Systems in conjunction with the
    southern company.
        Radiation detection technology to secure our borders
    against trafficking in this threat. The technology we
    manufacture currently provides detection capability to several
    ports of entry along the southern United States, as well as to
    federal, state, and local law enforcement agencies in the U.S.,
    the U.K., and select overseas locations.
        And finally, remote natural gas leak detection technology
    developed for use by the natural gas industry. Over 7,400 of
    those systems have been sold under license to PSI.
        The key point is that component technology funded by SBIR
    awards from multiple agencies and facilitated by significant
    investments by PSI and facilities and select capabilities was
    employed to meet these needs.
        We have reported over $677 million in Phase III academic--
    economic activity to the SBA, about half of which is actual
    commercial sales from licensed technology by our partners. Only
    $5.8 million of those funds are formally listed as Phase III
    awards, illustrating the erroneous and misleading conclusions
    that can be drawn by simplistic studies that purport to capture
    the program's total economic activity.
        Looking at reauthorization, we believe the primary SBIR
    reauthorization challenges is to reduce barriers to entry and
    not restrict program participation. Reauthorization should
    reinforce five basic principles, and I think you have heard
    some of them already today.
        First, merit-based awards. Congress should maintain the
    competitive merit-based fundamentals of the program to ensure
    that the best technology is developed. The GAO review of the
    program showed that there were no SBIR mills and that the
    intent of the program is being met. There should be no
    arbitrary award caps, submission limits, or forced graduation.
        Second, agency discretion. Agencies should have the
    discretion to shape the program and to find merit consistent
    with their missions. Multi-award winners should not be
    penalized for some agencies' lower rate of adoption and
    commercial potential.
        Three, improved communication. Agencies should improve the
    communication of their needs and opportunities across all topic
    types to enable companies to tailor their proposals to meet
    those specific needs, improve their potential for award, and
    support subsequent technology transition.
        Four, application simplification. The largest barrier to
    participation in the program for new entrants is increased
    administrative burden and complexity of proposal submission.
    Per capita, proposal submission rates from underserved regions
    of the country are some of the lowest in the program reflecting
    those barriers.
        And finally, permanent authorization. The GAO identified
    investments and dedicated capabilities as key to receiving DOD
    awards and to being viewed as a reliable supplier by our
    customers.
        Program permanency reduces the concern that those
    investments will be stranded at the next reauthorization
    without limiting the ability of Congress to make further
    adjustments to the program.
        In conclusion, there are many pathways for commercial
    success. The U.S. Government should be open to innovation from
    all small business sources and not limit participation to
    certain pathways. Doing so would undermine the ability to
    secure the very best technology for its priorities.
        Thank you very much.
        Chairman WILLIAMS. The gentleman yields back.
        And, Ms. Mackey, you have 5 minutes.

                       STATEMENT OF MS. ML MACKEY

        Ms. MACKEY. Chairman Williams, Ranking Member Velazquez,
    and distinguished Members of the Committee, thank you for
    inviting me to speak today on the importance of the SBIR/STTR
    programs. My name is ML Mackey. I am the CEO of Beacon
    Interactive Systems, a nontraditional and unconventional
    defense contractor delivering innovative, efficiency-improving
    digital capabilities to our military services.
        I am here today in my capacity as the Chair of the Small
    Business Division of the National Defense Industrial
    Association, NDIA. I also serve on the executive committee of
    NDIA's national board of directors.
        For over 100 years, NDIA has provided a forum for
    government and industry leaders to collaborate and address
    complex defense issues. NDIA and its affiliates represent over
    1,700 defense companies of all sizes and sectors, the majority
    of which are small business.
        NDIA has been a longstanding and vocal supporter of the
    SBIR and STTR programs and regards these programs as some of
    the nation's most effective tools in bringing cost-effective
    and valuable innovations to the DOD.
        We appreciate your leadership in extending the programs
    through September 30, 2025, and we strongly endorse your
    efforts to further extend the programs before the current
    authorization expires.
        The SBIR/STTR programs facilitate and effectively
    streamline the participation of competitive small businesses to
    work on agency-specific research and development needs.
        Speeding innovations and advanced capabilities to our
    warfighters is critical to the DOD's efforts to outpace the
    People's Republic of China and other potential competitors in
    this era of great power competition.
        In my own personal experience as the CEO of Beacon
    Interactive Systems, we found the SBIR program to be a gateway
    by which we could enter the defense marketplace. We have
    delivered multiple programs of record, deployed systems across
    200-plus ships, submarines, and carriers, and multiple shore-
    based locations worldwide. Our digital products transform
    operations at the edge.
        In one example alone, early estimates predict our flight
    line platform will save an hour and a half per maintainer, per
    shift. This tremendous impact on operational capacity was
    critically nurtured with SBIR investment.
        Based on this positive experience and similar experiences
    from my colleagues in NDIA's Small Business Division, we offer
    the following three areas for review to enhance the SBIR/STTR
    programs.
        Our first recommendation. The SBIR/STTR program should be
    permanently authorized. These programs inspire technical
    innovation and inject a vital sense of entrepreneurship into
    the defense enterprise. Establishing them permanently is the
    next logical step. SBIR and STTR are an essential part of
    America's innovative high-tech ecosystem, and even the threat
    of a short-term disruption can severely affect smaller high-
    tech innovators. The temporary nature of the current programs
    also does not signal stability to both the federal agencies who
    administer them and the small businesses seeking to participate
    in these programs.
        Our second recommendation is to provide more support for
    Phase III awards and transition to commercialization. In line
    with the SBIR policy directive--SBIR. I always use the slang.
    In line with the SBIR policy directive, the government is
    required to the greatest extent practicable to award follow-on
    efforts to the SBIR investments already made in the capability.
    This is both an efficient use of federal funding and a
    significant incentive for new entrants to the U.S. defense
    industrial base.
        Attracting and retaining new companies that can rapidly
    deliver innovative technologies and capabilities to the
    warfighter is a critical element to building a modern, diverse,
    and resilient U.S. defense industrial base. The technologies
    these companies deliver can also provide the decisive advantage
    needed to deter or win a fight.
        DOD acquisition program should review prior SBIR/STTR
    projects and assess opportunities to utilize these investments.
    If the federal government already has access to an existing
    technology that is purpose built, meets the competitive
    threshold, and addresses the requirement, it should not expend
    additional funds to procure and then duplicate the same
    technology. Besides saving money, this review would also save
    time, as the DOD can leverage the agile authorities of SBIR
    Phase III contracting to acquire those technologies and deliver
    to the warfighter sooner.
        It would be a disservice I think to my colleagues if I
    inadvertently contributed to the perceived SBIR issue of
    ``vendor lock'' here. So I want to talk about how important it
    is that the SBIR policy directive says ``to the greatest extent
    practicable,'' and if it is not practical, tell us why.
    Document it so that we know--we, as the small businesses--know
    how to improve, and we, as taxpayers, know that you have looked
    for what you already have on the shelf.
        The third recommendation that we have is to increase agency
    oversight of implementation and agency employee accountability.
    In my submitted written testimony, we have fair amount of
    detail on what kind of training we think would help with that.
        But in conclusion today, I want to first applaud this
    Committee for your vigilance in promoting small-business-
    friendly policies. Your work to defend deliberate and efficient
    approaches to include small business high-tech innovators in
    the U.S. defense industrial base is a valuable proposition for
    the government and a direct enabler of innovation and growth.
        I appreciate the opportunity to be here today, and I
    welcome any of your questions.
        Chairman WILLIAMS. The gentlelady yields back.
        I now recognize Mr. Miryekta for his 5-minute opening
    remarks.

                    STATEMENT OF MR. CYRUS MIRYEKTA

        Mr. MIRYEKTA. Chairman Williams, Ranking Member Velazquez,
    distinguished Members of the Committee, thank you for having me
    here today.
        I am here to discuss the Chinese Communist Party's
    exploitation of American innovation with a focus on SBIR
    programs.
        Historically, America has had three offset strategies, and
    an offset strategy is a strategy to defeat a military peer
    should deterrence fail.
        The first offset strategic was nuclear weapons. In 1949,
    the Soviets test their first bomb. We lose that edge almost as
    quickly as we got it.
        The second offset strategy was net warfare, which we
    revealed to the world in Gulf Storm in 1991, where we
    interlinked air, land, sea, and space forces for precision
    strikes. If you read modern Chinese and Russian strategies
    today, you will see it is largely predicated on what they saw
    in 1991. Fast-forward to the present, it is why Russia and
    electronic warfare is so effective in the Ukraine. They spent
    40 years mastering its asymmetrical capability.
        The SBIR program has an outsized impact for the third
    offset strategy, which is the rapid incorporation of innovation
    into the Department of Defense to defeat a peer adversary.
        Innovators in America are largely people in their late 20s,
    early 30s, known for their irreverence and informal apparel,
    and they have become the vanguard of our fight with the CCP.
        I have had the honor of serving my country for 16 years,
    first as a paratrooper in Afghanistan and Fallujah, Iraq. I
    went to university on the Montgomery GI Bill. I infiltrated a
    closed career fair to join the intelligence community. I
    volunteered for an assignment in Central California in 2014
    when I realized DOD had no counterintelligence support to its
    equities in Silicon Valley.
        For nearly a decade, I provided counterintelligence support
    to startups, Fortune 50 companies, FPGA design houses, and
    academic institutions. I set up the counterintelligence
    programs at Defense Innovation Unit, experimental at the time,
    AFWERX and SPACEWERX. For my impact to U.S. national security,
    I have been awarded an unprecedented nine national intelligence
    awards.
        Although, I am not here to talk about my government
    service, this legacy informs the company that I run today,
    which is an advisory firm called Ravelin US. We specialize in
    helping U.S. innovators identify foreign ownership, control,
    and influence issues, and then how to mitigate and/or remove
    them.
        The Chinese Communist Party has also evolved in its tactics
    against the United States. I have witnessed this over the last
    12 years. There is this misconception that cyber exploitation
    vastly outweighs HUMINT exploitation, which couldn't be more
    wrong. HUMINT collections, the exploitation of our people and
    systems, is far more ubiquitous than what we face in the cyber
    realm.
        The CCP will use real relationships curated over a decade.
    I had one last week that was 10 years before they ever deployed
    capital into the innovator's company.
        We will also see the CCP investors and their affiliates
    investing in SBIR recipients who struggle to go from Phase I to
    Phase II.
        There is a grooming process, and it is like slow-boiling
    the target. There is no official signing up to become an asset.
    It is a gradual process that occurs over time.
        We also see American investors who are investing in
    genocide-enabling technologies against the Uyghurs in the
    Xinjiang province. Those same investors will be investing in
    munitions innovators that have received SBIRs on U.S. soil.
        When the Chinese Communist Party wants innovative
    capability, they will often work through proxies. Sometimes
    that means allied countries, usually through U.S. citizens. And
    when they have a capability that they want us to deny
    ourselves, they will loudly deploy Chinese Communist Party-
    affiliated capital knowing that our due diligence systems will
    find it, we will identify it, and we will not use the
    capability as a department. It takes a nuanced eye to identify
    and to remove, but yet, essentially, a poison pill of CCP
    investment in our systems.
        This is not really the worst thing. In fact, if your
    adversary is forced to adjust their tactics and deal with your
    strategy, that means you are having an impact. And right now,
    we are far ahead of them, and we need to intensify our efforts.
        The impact of the SBIR program vastly outweighs the dollar
    amount and it steers the industry. The SBIR/STTR Extension Act
    that went into effect in July of 2023, has changed the American
    innovative landscape.
        Not all of the due diligence teams that are required to do
    the FOCI due diligence are the same. In fact, you have one team
    that is better than all the other teams combined and still way
    out far ahead. But we cannot look at specific teams and say
    whether the program is working or not. It is actually
    quantifiable, and we can figure that out.
        We do have some recommendations for the Committee. I know I
    have a very cumbersome last name, and I would encourage you to
    call me Cyrus.
        The SBIR/STTR program is critical to executing our third
    offset strategy, which is to ensure American hegemony in the
    21st century.
        I look forward to your questions.
        Chairman WILLIAMS. Thank you, Cyrus.
        And now, Mr. Glover, you have your 5-minute opening
    remarks.

                      STATEMENT OF MR. JERE GLOVER

        Mr. GLOVER. Thank you, Mr. Chairman, Ranking Member
    Velazquez, Members of the Committee. It is an honor to be here
    today to talk about reauthorization of the SBIR/STTR programs.
        Today, I want to share with you a remarkable congressional
    government story. Forty-seven years ago, this Committee,
    together with the Senate, held joint hearings on small business
    and innovation. The Committee found that small business was, by
    far, the most innovative sector of the U.S. economy, creating
    two-thirds of all major inventions, but that virtually none of
    the federal R&D dollars went to small business.
        It was almost impossible for a small business to get
    government R&D contracts. The contracting officers were much
    more comfortable giving R&D contracts to large businesses. Even
    today, the largest prime contractor at DOD receives 10 times
    more than the entire SBIR program in funding.
        The Small Business Committee asked commonsense questions.
    How can the government get better R&D by asking the most
    innovative and entrepreneurial sector of America to do it? And
    how can this make America stronger? The answer was the SBIR
    program, and Congress enacted it to unleash the ingenuity and
    drive of small business on America's technology challenges.
        Today, the SBIR program is the best government R&D program
    in the world and one of the most significant pieces of
    legislation ever passed.
        What are the results for the taxpayers in SBIR? Thousands
    of new innovative farms and thousands of success stories,
    including technologies used today, such as Bluetooth, cell
    phones, electric cameras, GPS on a chip, thousands of medical
    breakthroughs, drones, all solutions that small business
    created and took to the marketplace.
        Here are some of the highlights. SBIR generates $2.50 for
    every dollar in tax income at State and federal levels from
    every dollar at DOD, and $3,68 for every dollar spent at the
    National Cancer Institute. Return on investment is 22 to 33
    percent for every SBIR dollar, depending on the agency.
        Over 2,000 SBIR firms have been acquired, injecting
    innovations into larger companies. Ninety-nine new drug
    approvals in the last 20 years. Twelve percent of all new drug
    approvals companies had funding from the SBIR program. Sixteen
    percent of the priority drugs had approval. 200--24,000,
    510(k)s or premarketing approvals had SBIR involved. Ten
    percent of all venture capital funds go to SBIR programs. The
    SBA agency website lists hundreds of other SBIR success
    stories.
        The program focused on merit with agencies selecting the
    best solutions to keep quality high and competition tough. Only
    1 in 20 proposals get to Phase II.
        In 2017, GSA began writing contracts for other agencies,
    SBIR contracts. This was a major breakthrough. Five years
    later, GSA actions doubled the SBIR Phase III identified
    contracts from 1.5 billion to 3.5 billion. Their proposed IP3
    program, which is pending, would make a great success story.
        When we look at China today, unfortunately, China leads in
    57 of 64 critical technologies. U.S. is even behind Europe.
    Europe spends 20 percent on its small businesses, twice what
    the U.S. spends.
        Congress can take a number of actions to build on these
    successes. One, require better streamlining and simplification
    of the process, keeping merit-based to ensure the program
    continues to fund the best research, double the SBIR program,
    leveraging small businesses to provide innovations to solve
    federal challenges.
        DOD's Section 809 panel and the past Secretary of Defense
    recommended doubling the allocation. Restore the 174 tax
    deduction. That is critical for not only SBIR companies but all
    small innovative businesses. Reverse the slowdown of contracts
    and grant selections and awards, which may be fatal to many
    small firms. Cash flow kills startups.
        Make the SBIR program permanent, and these actions will
    help America regain its leadership in the world of innovation.
        Thank you.
        Chairman WILLIAMS. Thank you, Mr. Glover.
        We will now move on to the Member questions under the 5-
    minute rule.
        I recognize myself for 5 minutes.
        Dr. Marinelli, the SBIR and STTR programs were created to
    support small business growth by helping federal agencies
    fulfill those needs. My question is, as a small business owner
    myself and yourself, how important is it to ensure that the
    SBIR program remains merit-based, as we talked about?
        Mr. MARINELLI. Mr. Chairman, last September, I had the
    privilege to visit four of the five landing beaches at
    Normandy, sat on a German reinforcement and looked at the Omaha
    Beach. I went to the American cemetery afterwards and happened
    to visit the grave of someone important to my wife's family. It
    was truly a sobering experience.
        Cyrus talked about the second offset. That battle was a
    force on force in Normandy. We were able to kick Iraqi forces
    out of Kuwait in a week because of the second offset.
        It is American technology that is going to give us the
    third offset.
        My father actually fought in the Korean war as an artillery
    officer. We need to not have to fight those kinds of battles
    ever again. We need to get the best technology from the best
    sources, no matter where they are, anywhere in the country, to
    establish and maintain that third offset. Otherwise, we are
    going to wind up fighting these battles in a way that we don't
    want. We want to be able to deter foreign forces from ever
    starting a fight like that, and we want to make sure we can win
    it if it does start.
        So I think it is very important for our nation's security
    to make sure that merit is driving technology into our Armed
    Forces and everywhere else in the U.S. Government.
        Chairman WILLIAMS. Thank you.
        Ms. Mackey, the valley of death has been a challenge for
    small businesses in the SBIR/STTR programs. This is when an
    innovation moves from the R&D stage into production. But small
    businesses lack access to capital--we have talked about that--
    to commercialize their product.
        In your written testimony, you mentioned that the DOD and
    other agencies should buy existing SBIR/STTR technologies,
    particularly during Phase III, transition to commercialization.
    So can you explain how the agencies could more effectively
    integrate SBIR-funded innovations into the procurement process
    and how this might save both time and money in the development
    of new technologies?
        Ms. MACKEY. Thank you for the question. I think we don't
    have to do new legislation. I don't think we need to come up
    with how to do this. We need to make sure that it gets done,
    and we need to insert into the acquisition process the step of
    reviewing what do we have. And to be fair, there is a lot that
    we have.
        So even a good due diligence of what we have available and
    documenting that that has happened. We need to change behavior
    in the acquisition programs so that they look for components
    that they can successfully insert into their larger programs.
        I think this does what you were talking about in terms of
    bringing innovation forward and making things faster. It also
    helps address a lot of the adversarial impact that we have.
        If you have a company that is developing good technology,
    and you have a reasonable path forward, you are less likely to
    take global investment that may have competitive interest.
        Chairman WILLIAMS. Okay. I have got a limited amount of
    time.
        And, Cyrus, as you know, there is a growing concern that
    the CCP is leveraging various mechanisms, such as talent
    recruitment programs, the U.S. patent system, and venture
    capital investments to access sensitive IP developed through
    SBIR-funded research.
        In your experience, how is China specifically acquiring IP
    from the SBIR-funded small business? And what are the primary
    methods you have observed being used to exploit these small
    businesses?
        Mr. MIRYEKTA. Thank you, Mr. Chairman. So when it comes to
    venture capital, we see investment post-receipt of a SBIR. That
    is one of the methods. Another is working through U.S. firms.
    So it would be a U.S. firm without linguistic or cultural ties
    to China. They will mobilize them through money.
        We have seen this also with the Canadians where they will
    use a Canadian to be an investor, but when you look at the
    Canadian's LPs, it all comes from one CCP fund, and then that
    individual is trying to oust the CEO of a company and move that
    technology to China.
        And this is all done--it is bank rolled by the Chinese
    Communist Party. They did it once successfully with a biotech
    company, and now they were trying to do it with an aerospace
    company.
        And so working through allies, working through third
    parties trying to obfuscate their hand because they know that
    we are looking for it. And then also working through U.S.
    citizens, whether they are ethnically Chinese or otherwise.
        I yield my time.
        Chairman WILLIAMS. The gentleman yields his time back.
        And I now recognize the Ranking Member for 5 minutes of
    questions.
        Ms. VELAZQUEZ. Thank you, Mr. Chairman.
        Thank you for your testimony.
        Mr. Glover, one of the most important legislative tasks of
    this committee this year is to reauthorize the SBIR and STTR
    programs. Why is it important to make these programs permanent?
    Very briefly, please.
        Mr. GLOVER. Because every time this stop and start, the
    government starts shutting down, there are delays. Whenever
    there is a delay in awarding a contract, small businesses fail.
    They simply don't have the cash flow to carry them over to the
    next one. So every time this happens, it slows down the
    government, makes the government less efficient. But it also
    gives small businesses--sometimes the valley of death just gets
    so long they can't survive. And so this stop and starting is
    just very bad for the program.
        Ms. VELAZQUEZ. Thank you.
        To the panel, yes or no, do you agree that we should make
    SBIR/STTR permanent?
        Mr. MARINELLI. Yes, ma'am.
        Ms. VELAZQUEZ. Ms. Mackey?
        Ms. MACKEY. Yes, definitely.
        Ms. VELAZQUEZ. Cyrus?
        Mr. MIRYEKTA. Yes, ma'am.
        Mr. GLOVER. Yes.
        Ms. VELAZQUEZ. Thank you.
        Mr. Glover, in your testimony, you focus on the
    overwhelming success of the programs. Yet for many years they
    have only accounted for a sliver of federal R&D funding.
        Is it time for Congress to consider significantly expanding
    agency allocations for the SBIR and STTR programs?
        Mr. GLOVER. It is. When we look at Europe, they are doing
    twice as much as we are, and they are getting ahead of us in
    critical technologies. It is the most effective program going.
    Yes, it is time to make it better and bigger and more
    efficient.
        Ms. VELAZQUEZ. Thank you.
        Ms. Mackey, your company has been successful in
    transitioning early-stage technologies into programs of record
    at the Department of Defense. As we focus on prioritizing
    commercialization, what can we do to improve the process for
    earlier stage awardees?
        Ms. MACKEY. I think for earlier stage awardees we can
    improve the process by, specifically in the Department of
    Defense, exposing them to actual warfighters and getting the
    real feedback into what they are building.
        I also think that we could change the process to add the
    responsibility and the credit for transition to not only the
    small business but the extended government team that also has
    to work with them, and other industry partners.
        Ms. VELAZQUEZ. Thank you.
        Mr. Marinelli, some of the firms in the SBIR programs have
    come under fire for having lower transition rates. Can you
    explain why it may not be beneficial to the DOD to arbitrarily
    use transition rates to measure success?
        Mr. MARINELLI. So, Congresswoman Velazquez, one of the
    things that we tend to work on is insertion of component
    technology into large platforms. It takes a decade to evolve
    and lasts for many years. And that is a very slow process.
        Program managers are accepting a lot of risk to try and
    insert new technology into those programs, and often they are
    budgeted years in the future with very strict requirements. And
    so it is very difficult often to insert that technology. We
    have to work very hard in order to do that, and often it
    doesn't happen. Sometimes programs get canceled in midstream.
    And I think those are the issues. It is just a very hard
    business, basically, to be in.
        Ms. VELAZQUEZ. Thank you.
        Mr. Glover, the SBIR and STTR programs have grown
    significantly over the years, now accounting for nearly $5
    billion in the federal budget. Yet, at the same time, the Small
    Business Administration, whose responsibility it is to
    administrator the program, has not seen a similar increase in
    funds.
        Can you explain why we should find ways to bring the SBA
    more funding for program administration?
        Mr. GLOVER. The SBIR program is now one of the biggest
    programs administered by SBA. When it first started, there were
    17 employees overseeing SBIR. I think there are three now. It
    is in dire need of--it can't do everything and it can't oversee
    and make sure the agencies do much more in Phase IIIs and
    follow on and provide that. So it is critical that we bring it
    in balance.
        You look at some of the other programs at SBA. They are
    much better staffed. For some reason this has always sort of
    been a stepchild.
        Ms. VELAZQUEZ. Thank you.
        Thank you. I yield back.
        Chairman WILLIAMS. The gentlelady yields back.
        I now recognize Mr. Stauber from the great State of
    Minnesota for 5 minutes.
        Mr. STAUBER. Thank you, Chairman Williams and Ranking
    Member Velazquez, for holding this important hearing today.
        And thank you to our witnesses for taking time to share
    your expertise to us.
        You know, the United States Government relies on innovative
    solutions to meet mission critical demands, and small
    businesses play a pivotal role in that process.
        Many small businesses rely on the SBIR and STTR programs to
    bring their ideas from concept to reality, strengthening our
    national security, and creating high-quality jobs.
        We have heard from small businesses that while SBIR funding
    is invaluable, the path from research to commercialization
    remains difficult. Many companies struggle to secure private
    investment or navigate federal procurement processes to bring
    their innovations to market.
        If these small businesses cannot transition successfully,
    we do risk losing key technologies to bureaucratic hurdles or,
    worse, foreign competitors.
        Dr. Marinelli, your company has successfully navigated the
    SBIR program. What improvements would you like to see in the
    SBIR program to ensure continued innovation and successful
    commercialization?
        Mr. MARINELLI. Well, I think the most important thing that
    we can do for all companies involved is to improve
    communication of the federal government's needs to the various
    performers that are performing on the program. It is pretty
    critical there.
        A lot of new entrants don't know what is happening, and if
    they hear from program officers what is needed, they can tailor
    their proposals in order to meet those program officers' needs.
        Mr. STAUBER. How do you get to the needs right now? How are
    you aware of the needs?
        Mr. MARINELLI. So earlier in my career, used to be the
    acquisition organizations and the S&T organizations would have
    briefings for industry. The joint program officer for chem/bio
    defense and DITR would. And they would stand up and tell you,
    here is what we need to acquire. Here is where the S&T focus is
    to do that.
        That was enormously informative to me, and, actually, I
    brought that back to our company. It is one of the reasons we
    have grown. I think we need to see more of that throughout the
    federal government to let people know what is needed by the
    organizations.
        Mr. STAUBER. Right. Thank you.
        One of the most alarming threats to American innovation is
    the growing evidence that China is actively working to exploit
    SBIR-funded research. We have seen reports of Chinese firms
    using venture capital investments, research partnerships and
    talent recruitment programs to siphon technology developed with
    U.S. taxpayer dollars, just as Representative Moolenaar stated.
        If we do not take stronger measures, we risk
    unintentionally fueling China's military and economic ambitions
    at the expense of our own national security.
        Mr. Miryekta, how is China leveraging venture capital
    investments and SBIR-funded companies to gain access to
    sensitive technology? And what steps can Congress do to prevent
    this?
        Mr. MIRYEKTA. By the virtue of being innovators, the way
    that companies are set up, nothing is classified yet. So it is
    very easy if a CCP-affiliated investor puts even a tiny amount
    of capital in, not just as the investor themselves but even as
    one of the limited partners, the fact that they have any
    affiliation or access to the company means that they can start
    collecting on the people in it.
        And there was an example brought up by the Ranking Member
    of the Committee on the Chinese Communist Party earlier, which
    is American Superconductor Corporation, where exactly that
    happened. All they needed was access to the company personnel.
    Then it goes to a department in the PLA that does target
    packages, finds out who has access, who is the most vulnerable,
    whose vices aren't in check. And then they send PLA 2, which is
    Chinese Communist James Bond. They go in and they flip the
    target and are able to extract what it is that they are looking
    for.
        But by virtue of just having access to the individuals,
    some of the companies we see are targeted through Cold War era
    tactics, break-ins. And we mean like 11 cars are broken into, 7
    laptops are stolen, all for one new energy company. Their
    executive's travel is all marked and prepared for when they
    arrive.
        So it is everything from grooming the target, and it is
    very pleasant, to old-style illegal activity.
        Mr. STAUBER. As President Trump says, they are ripping us
    off, and it is unacceptable. The SBIR/STTR programs are
    critical to ensuring small businesses remain the driving force
    of American innovation.
        However, we must continue strengthening them by reducing
    bureaucratic barriers, enhancing security protections, and
    improving pathways to commercialization. This is about
    maintaining our competitive edge while safeguarding taxpayer
    investments. And I look forward to working with my colleagues
    to ensure these programs continue to serve America's best
    interest.
        Mr. Chair, I yield back.
        Chairman WILLIAMS. The gentleman yields back.
        I now recognize Mr. McGarvey from the great State of
    Kentucky for 5 minutes.
        Mr. MCGARVEY. Thank you very much, Mr. Chairman.
        And this is something that we have seen firsthand in my
    district for a long time. I want to talk a second about part of
    my district in Louisville called Rubbertown. And this really
    came from in--in the war, in World War II, in the 1940s.
        We noticed a severe lack of synthetic rubber available to
    our troops and located massive factories in Louisville,
    Kentucky, where almost all of the synthetic rubber used during
    the war came from a small neighborhood right there on the Ohio
    River. Throughout that war, we saw synthetic rubber, nuclear
    fission, radar, cryptography, so many other technologies that
    were highly classified. And classified advancements like those
    that came out of SBIR and STTR programs today are much more
    difficult to patent due to their sensitive nature.
        And we know exactly what we knew during World War II, that
    we are in a strategic power competition with adversaries
    overseas. In 2021, the U.S. National Security Commission for
    Artificial Intelligence reported to Congress and the President
    that, for the first time since World War II, America's
    technological dominance, the backbone of our economic and
    military power, is under threat.
        Ms. Mackey, you stated that innovation is critical to DOD's
    efforts to outpace China and other near-peer competitors. But
    we also know that contracting at DOD can be especially
    difficult for small businesses. Can Congress improve how the
    SBIR program provides a pathway for small businesses into
    government or provides on-ramps to grow?
        Ms. MACKEY. Yeah. I think I would answer that with two
    statements. The first is absolutely, we can do more to make
    sure that there is a consistency in how we engage with
    component tech insertion of innovation and to the contracting
    process.
        The second piece that I would put out is this whole
    infusion of capital--excuse me--is really important to high-
    tech innovators to small business startups. I love this trusted
    capital initiative we had for a while. I think it is really
    important.
        My oldest is starting a business, and as she is very
    interested in getting VC from American Capital, it is not easy
    to figure out what is what. So I think one of the things we can
    do is help with the contracting, and I think we can also help
    with the Department of Defense articulating who is trusted
    capital and how do you know how to engage with trusted capital.
        Mr. MCGARVEY. And, just on those capital guidelines, what
    would you recommend along that front specifically?
        Ms. MACKEY. I would recommend a lot of the work that the
    SBA and Office of Strategic Capital just finished around how do
    you identify investors that are American-owned and intend to
    stay American-owned, and I think probably Cyrus could give you
    some more specific examples on that.
        But, from an industry perspective as a small business
    owner, that would be so helpful. Even as a mature business
    owner, it would be helpful to me, but as a startup, it would be
    really helpful.
        Mr. MCGARVEY. Because if you are starting up, it is--it is
    difficult to untangle all that yourself and then, of course----
        Ms. MACKEY. I am just saying there is a few things you are
    thinking about, right?
        Mr. MCGARVEY. There is a few things going on. Thank you. I
    appreciate that a lot.
        Mr. Glover, wanted to ask you a question. The current
    administration is targeting budget cuts for agencies like NIH
    and NSF, who host these SBIR programs.
        Would these cuts make it possible to fund the necessary
    security advancements we need to combat the IP theft we are
    talking about today?
        Mr. GLOVER. It will be a significant problem. We have led
    the world in innovation because we spent money on it. But other
    countries are now spending more money proportionally than we
    are. Even France has a program to fund transition technologies.
        We are getting left out. And, if we take a serious step
    back on that, not only will health and safety be a challenge,
    but also our defenses will not be as strong and sufficient.
    Research needs continuity. It needs consistency. And, when you
    make it erratic and uncertain, then you lose a generation of
    people who simply decide that the U.S. is not the place to
    develop their technology.
        We have got lots of people who come to America to develop
    their technology. And you just look around, you find them
    everywhere. And that is--if we lose that leadership role, it
    will be a long term. And cutting things right now and making it
    erratic, just delaying contracts for months, when you don't
    have the cash flow, we are going to lose companies. And those
    companies won't come back----
        Mr. MCGARVEY. No.
        Mr. GLOVER.--or they will turn somewhere else to get the
    money.
        Mr. MCGARVEY. Yeah. And I think when you talk about us
    spending less, that is really important. And I would say also
    investing less. Because there is a return on investment for
    what we are talking about here both in the economic impact it
    has in our country and, of course, on the strategic importance
    that it maintains over our adversaries.
        I am nearly out of time, but I think I do want to point out
    that innovation, that investment in innovation is paramount to
    our success as a nation. And the SBIR and STTR programs are
    core to that American innovation.
        Mr. Chairman, I yield back.
        Chairman WILLIAMS. Gentleman yields back.
        And I now recognize Mr. Alford from the great State of
    Missouri for 5 minutes.
        Mr. ALFORD. Thank you, Mr. Chair.
        Thank you, Ranking Member Velazquez, for holding this
    important hearing today, and thank you all for being here on
    your own time and own dime. I appreciate you coming in.
        Today's hearing is focused on the SBIR and STTR programs,
    two of the most important public-private partnership programs
    Congress authorizes. These programs help small businesses
    access capital, a vital issue that constrains growth.
    Additionally, these programs spur innovations. And American
    ingenuity is why our nation laps the world in new technologies,
    and these programs are a key pillar in supporting small
    businesses that create new products.
        While these programs are important to American innovation,
    the Chinese Communist Party also finds it important for their
    great innovation, stealing the intellectual property of
    Americans. According to a 2021 DOD study on SBIR programs,
    nearly all cases show that Communist China, not the U.S., is
    the ultimate beneficiary of DOD and other U.S. Government
    research investments. With both SBIR and STTR's authorizations
    expiring in September this year, I look forward to working with
    my colleagues to make sure these programs remain pillars of
    innovation.
        I want to start with you, Cyrus. Thanks for being here, and
    thank you for letting us call you Cyrus.
        What safeguards should this Committee consider when
    reauthorizing this? I know you all have said it needs to be a
    permanent reauthorization to make sure that the influence, the
    espionage, and theft of intellectual property from the CCP is
    reduced or, if we could eliminate it, would be great.
        Mr. MIRYEKTA. We have already, just by Air Force and Space
    Force's actions alone, have changed the American innovation
    landscape. They realize that if they have CCP capital even
    affiliated, they will be prohibited from doing work with the
    Department until it is sanitized.
        The other branches of service and every agency that gives
    or awards SBIRs and STTRs should have a FOCI, or Foreign
    Ownership, Control, and Influence, due diligence team that is
    as effective as what the Air Force has. Most agencies haven't
    even started building a team, and there are only really four
    and a half functional teams being generous for who is actually
    doing the vetting.
        Once the innovators realize this is a real hurdle to
    reaching U.S. Government funding, they will act immediately
    before they go to bed that night. Once they realize this is
    reality, they will change on a dime. Innovators know how to
    pivot, and they have to accept it as reality.
        The SBIR STTR Extension Act has done that. NDAA-23 has done
    that. The Committee on the Chinese Communist Party has done
    that. And they have made it real for our innovation industry.
    One of the issues, though, with the due diligence teams is they
    are required, but no resources are provided. That is like
    asking the agency to give me everybody who doesn't have
    something real going on. And so this is a low-priority mission.
        Mr. ALFORD. Well, I am also honored to be on the
    Appropriations Committee. I am not on Defense. But I do know
    that this is important, and this investment, if you are talking
    about resources, to fund these programs, are they going to root
    out this--these things are actually hurting America, hurting
    our innovation, and threatening our national security. So I
    will be having a talk with the Chair of Defense Approps, Mr.
    Calvert, about this and seeing what direction we could head
    right across the hall here.
        I want to talk with you a little bit more, Cyrus, about
    China, its influence in our universities. The University of
    Missouri-Kansas City was just in my office this week. They are
    trying to create a defense corridor. They have a SCIF even
    built on campus. They are working with drone programs, critical
    mineral processing, trying to make the Kansas City area and
    down into my district really a defense corridor.
        How should universities be looking now? Because the Chinese
    students are here. How do they get here in the first place, and
    then what safeguards should we put in place to make sure that
    espionage is not taking place?
        Mr. MIRYEKTA. The Chinese Student Scholar Associations are
    run out of the Chinese consulates all over the United States.
        When Chinese students used to come to America in the '90s
    and early 2000s, they would integrate with the U.S. population.
    They would have boyfriends and girlfriends who are American.
    They would fall in love with America, and they would go home
    with pro-American sentiments.
        Nowadays, Chinese students are kept in these little thought
    ghettos managed by the Chinese Student Scholar Associations.
    They are given weekend activities where they are indoctrinated.
    It is not far from Iran's Basij and how they do grassroots
    indoctrination. And we train them with the latest education,
    and then we send them home no more American than when they
    arrived.
        Mr. ALFORD. And they are members of families that have
    favorable status with the CCP, if not CCP members outright,
    correct?
        Mr. MIRYEKTA. They have to be in good standing to come
    here, sir.
        Mr. ALFORD. Yes. Just a point of clarification, Whiteman
    Air Force Base, home of the B-2 stealth bomber, home of the B-
    21 soon, the Raider, is 10.8 miles from the University of
    Central Missouri. They have a small number, five to six Chinese
    students. They say it is not a threat. But we have to be
    vigilant and aware without damaging the reputation of innocent
    people here to gain education.
        Thank you, and I yield back.
        Chairman WILLIAMS. The gentleman yields back.
        I now recognize Mr. Cisneros from the great State of
    California for 5 minutes.
        Mr. CISNEROS. Thank you, Mr. Chairman.
        And thank you to all the witnesses for being here today.
        I am going to get right to the questions. Mr. Glover,
    Politico reported that 20 percent of the SBA workforce will be
    cut by Mr. Musk and DOGE, and who knows what other cuts as far
    as financial may come along that way as well.
        Does threatening firing and forcing resignations of
    dedicated civil servants at the SBA and cutting their budget--
    or at any agency that administers SBIR or STTR, programs help
    small businesses, and how does it hurt the programs overall?
        Mr. GLOVER. I had the privilege of working with Vice
    President Gore's reinventing government initiative in the
    Clinton administration. They cut 300,000 jobs, but they did it
    very carefully, and they looked at it very meticulously and
    took several years to do it, and they did bring down the--you
    know, the expenditures. They did it carefully and wisely. We
    didn't hear screams or shouts from the employees being unfair.
        Terminating people with virtually no notice, not allowing
    them to plan, run their future is a challenge. We see cuts
    that--without thinking about it. When you cut R&D budgets, you
    are going to end up getting less innovation; you are going to
    end up--the inventors are going to look somewhere else for
    money.
        And, as I have been told, they will look wherever they
    have. They have spent their whole life developing this
    technology. If they can't get the money in the United States,
    they will get it somewhere else.
        So it is a real challenge. It is a real problem. And it
    should be done carefully and precisely.
        Mr. CISNEROS. Along that line as well, there is a company
    and small business that is doing some very innovative stuff
    around solar panels and making them more efficient. But the
    amounts that we are paying here--I believe it is like 50,000,
    phase 1; 250,000, phase 2; and then 750,000 later on--it is
    just over a million dollars. They haven't really sought any of
    this funding to help them along the way because it is just not
    really sufficient enough, and they have had to get outside
    funding in order to help them and to do the innovation that
    they need to.
        So are these programs suited right? Are the amounts that we
    are paying right now, are they sufficient enough? Is there
    things that we need to look at to increase things to help them
    innovate technology and keep out the----
        Mr. GLOVER. First of all, the amounts are 100- to 250,000.
    Some agencies have gone below that, like the Air Force. But
    everybody else is pretty much at 100 to 250. And the follow-on
    funding can go up to $3 million if you do things right and even
    higher than that with SBA-specific approval.
        We look at the balance of the situation of how do we fund--
    do we give more at phase 1s and early on awards and less phase
    2s? And what we have had is the National Academy of Sciences
    looking at this program, and they have looked at it to balance
    that. And they say we have got the balance about right. That
    was 4 years ago. We haven't looked at it recently, but there is
    some flexibility.
        So the agencies can go up or even down if they choose to.
    But, by and large, it is--if we can get phase 3 working right,
    like GSA did, we added $2 billion of phased--just because you
    change the procedure of how you did contracting. They have got
    an even better program on the shelf. We can make that huge
    difference in how that works.
        Mr. CISNEROS. All right. Thank you.
        Ms. Mackey, Congress gave the United States Special
    Operations Command, SOCOM, a special authority in 2021 to do
    business-to-business transactions, and in fiscal year 2023
    their average time to production, decision from the initial
    topic enhancement to the award that follows as in phase 3,
    developed from 5 years to 18 months.
        Now, while SOCOM's approach can't be used for all SBIR
    programs, how can we support agencies in moving innovations
    through this process faster than the current average timeline?
        Ms. MACKEY. That is a great example. I love what SOCOM did
    with that. And I think that, when we look at this, we need to
    understand it is not the small business innovator; it is not
    the high-tech company that is slowing things down. It is the
    processes that we have in place.
        I think a first step would be to approximate some of what
    we did with SOCOM as a pilot program within the other SBIR
    programs. But it is not just within the SBIR program. And this
    is the point that I think is important for us to think with. It
    is within that R&D world that funds it, but it is also within
    the acquisition world that acquires that does the follow-on
    testing.
        So I think if we were to encourage pilots of two groups
    working together more effectively, the way SOCOM has the
    ability to bundle that together, you have an ability to get
    something over the valley of death because there is someone to
    receive it on the other side and also to sort of build that
    bridge for you as you come over.
        Mr. CISNEROS. All right. I yield back. Thank you.
        Chairman WILLIAMS. Gentleman yields back.
        I now recognize Mr. Meuser from the great State of
    Pennsylvania for 5 minutes.
        Mr. MEUSER. Thank you very much, Mr. Chairman.
        And thank you to our witnesses. This is a very informative
    and important hearing. Appreciate it very much, you being here.
        So, Dr. Marinelli, you discussed your company's development
    of technology to extract rare earth minerals, critical
    components for satellites, data centers, and other
    technologies, super important from coal ash piles--love that.
    We got a little bit of coal ash up in my--my district, to say
    the least. We are working on it in this same manner.
        So the SBIR program has assisted you in developing this
    technology, and maybe you can expand on why you believe a--how
    it has helped you.
        Mr. MARINELLI. So this started out as a little idea
    experiment. We started as a kind of beaker-scale laboratory-
    type experiment to see if we could extract rare earths from
    coal ash. It turns out that technology is based on the same
    process that you use to extract uranium and plutonium, was
    developed during the Second World War. We adapted it to this
    purpose.
        We received SBIR funding then to bring it to a larger scale
    and to work through some of the details of it and finally went
    to DOE and DOD's IBAS program, where we were able to get
    funding to build a pilot plant actually at Winner Water systems
    in Sharon, Pennsylvania.
        Mr. MEUSER. In Sharon. Okay. Great.
        Mr. MARINELLI. Yeah, in Sharon.
        Mr. MEUSER. Did they find you, or did you find them?
        Mr. MARINELLI. We went out and found them, but--and we
    worked very closely with both DOD and DOE in that process.
        Mr. MEUSER. The first time is easiest, right, because once
    you are in, once you have contact, it is far easier; getting
    through is the most difficult part?
        Mr. MARINELLI. Certainly. But you have got to also show
    success.
        Mr. MEUSER. Just like with anything.
        Mr. MARINELLI. Yes. And then it turns out that Appalachian
    coal is actually rich in rare earths, is one of the things that
    we learned. And, working with Senator Shelby before he retired,
    we were able to get an appropriation to build the next scale
    plant down in Alabama.
        Mr. MEUSER. Okay. Good. Well, contact me. We have got
    Schuylkill County, and we got the best anthracite, and we have
    got all these rare earths within our ash, so--within our coal
    banks.
        Mr. MARINELLI. We are certainly willing to move forward----
        Mr. MEUSER.--those that we are working on excavating.
    Thanks.
        Mr. MARINELLI. Sure.
        Mr. MEUSER. Mr. Miryekta, first off, thank you for your
    service, sir. Appreciate you very much.
        So, from your experience, your methods, your discussions on
    China, very serious, collecting sensitive IP from SBIR-funded
    small businesses. Now, this sounds like it is rampant. It
    sounds like it is targeted; sounds like they are targeting SBIR
    potential businesses or the SBIR fund.
        Now, it is $100 million, right? That is a lot of money, but
    that is not enough to create a whole espionage ring. Is their
    main point not just accessing the money but also accessing the
    mothership, if you will, that is doing the contracting?
        Mr. MIRYEKTA. So, to my knowledge, no. To my knowledge,
    they are very focused on the innovators. It is not the amount
    of money. Everybody is seeking SBIR-funded companies, U.S.
    investors, Chinese investors.
        The receipt of a SBIR tells the investor that there is a
    differentiator, whatever it is. It doesn't matter if they like
    the program or not, but this is a company that somebody in the
    government vetted. They believe it will be effective. So it
    attracts both good and bad investment. But that is for the
    technology itself. And we will see a lot of early-stage funding
    where a CCP investor will try to get in at the pre-seed stage,
    disseminate their cash across the board so they can find or
    keep an eye on most of the industry. And then you see what
    rises up, and that is what they will focus on.
        Mr. MEUSER. Okay. We had Reauthorization 2023. Maybe you
    could talk about some of the improvements.
        Did you like what was done, particularly from a foreign
    adversary security standpoint or just from an access
    standpoint, as well as it being better known by those who may
    benefit by this program?
        Mr. MIRYEKTA. This was a watershed event, sir, and thank
    you for asking about it.
        It legitimized the mission for keeping CCP investment out
    of our equities. It became real once it was codified. And,
    because we had two laws or another law and an executive order
    on top of it, in--and it takes about 2 years for the industry
    to accept it. But, as of February of 2024, they weren't certain
    if this was a real requirement--the denials became more
    publicized over the summer.
        By December of 2024, they accepted it as reality and our
    innovators are trying to get in front of it and make sure that
    they self-sanitize.
        Mr. MEUSER. Thank you very much. I yield back, Mr.
    Chairman. Thank you all.
        Chairman WILLIAMS. The gentleman yields back.
        I now recognize Mr. Tran from the great State of California
    for 5 minutes.
        Mr. TRAN. Thank you, Mr. Chairman.
        Thank you, Ranking Member.
        Thank you and welcome to D.C. to our witnesses.
        Mr. Glover, in your testimony, you rightly pointed out that
    America's basic science is a primary national strength, but
    converting that science to American innovation and jobs faces
    increasing international competition. Unfortunately, small
    businesses in SBIR/STTR programs face the threat of the Chinese
    Communist Party stealing their intellectual property and
    claiming these technology--technological innovations for
    themselves.
        What role does SBIR/STTR program play in the American
    innovation ecosystem, and how does the SBIR/STTR program
    protect American innovation from issues like foreign ownership
    and patent theft?
        Mr. GLOVER. Well, we started off when the founders created
    the SBIR program, we wanted to avoid having foreign countries
    benefit from this. So we put requirements in the law that said
    it has to be a U.S. company; it has to be owned by U.S.
    citizens 51 percent; and the work has to be done in America.
        Well, we thought we did enough. Well, we did for probably
    30 years. But the last few years, obviously, the Chinese have
    outsmarted us and gone beyond that. So it is--it is a
    challenge.
        But, again, you have got to be careful not to simply say
    ``no'' when anything comes up with, and I think as Cyrus
    talked--you need to be able to fix the problems. And we found
    some of the agencies do not tell the company what the problem
    is, nor do they give it a chance to fix it.
        The Department of Defense in their Under Secretary's memo
    made it very clear that you have to tell them what the problem
    is and give them a chance to fix it. And, unless you give them
    a chance to fix it, you are just shutting people down, and they
    can never learn; they can never get better.
        So small business develops the technology. Study after
    study shows it--shows how great the SBIR program is at
    developing it. We have got to make sure that we do stop the
    foreign use of it. It is not as common, but the problem is it
    is in critical areas.
        So like 99.9 percent of all SBIRs are just fine. But that
    one-tenth of 1 percent may be giving away whole generations of
    new technology--critical next generation of something
    significant. So it is a real challenge.
        Mr. TRAN. Thank you for sharing that.
        Ms. Mackey, DOD accounts for roughly half of the SBIR
    funding across the federal government, but concerns have been
    raised that the application process is daunting for many new
    businesses working to break into the space.
        In your experience, is DOD doing anything to make this
    process easier for first-time applicants?
        Ms. MACKEY. I have seen a tremendous uptick in outreach
    efforts for first-time applicants. I will tell you, when we
    wrote our first proposal 20 years ago, it was a lot easier to
    write that first proposal. It was a lot easier to get started
    than it is now.
        I think we really need to focus on, have we overregulated
    that very first piece? All these issues notwithstanding, we
    need--we need to make a funnel that can attract new entrants
    into it.
        So I am seeing better outreach, and I think there is plenty
    of work we could still do.
        Mr. TRAN. Thank you.
        Mr. Glover, back to you real quick. The due diligence
    program to assess foreign risks has been successful in
    identifying risks already, but it can add another layer to an
    already complicated application process.
        I am a big proponent of streamlining the SBIR and STTR
    programs while still protecting our research from foreign
    threats, such as CCP, so entrepreneurs can focus on building
    new technologies and creating good-paying jobs.
        What changes can we make to enhance its effectiveness
    without creating an overly burdensome process for small
    businesses, particularly new applicants?
        Mr. GLOVER. As someone who still remembers the Paperwork
    Reduction Act, which was a big deal years ago and sort of been
    ignored in recent history, it is a real challenge, and the
    first thing, I think, would be--is quick and easy. Make model
    contracts and force every agency to say, ``When you get an
    award, here is your contract.'' There is no reason they can't
    do that right now. So that would simplify phase 1. It would
    take months out of the cycle. Same thing for phase 2; same
    thing for phase 3.
        They do it with grants, but they don't do it with
    contracts. GSA proved that, if you give a simple contract, you
    do it--they cut years out of the contracting process for phase
    3s. And they got a program to do even more that hopefully gets
    finalized very soon.
        But you come up with some basic ideas, but task the
    agencies to say, tell us why--there is a provision in the law
    that says report and standardization, simplification. DOD just
    ignored it. Put some teeth in that and make them do it, but
    force the agencies to come up with the solutions.
        I can give you simple standard contracts with the award;
    that one saves time, energy, and effort. The proposal issue,
    that is a challenge because you have to somehow tell people
    what you want.
        Mr. TRAN. Thank you, Mr. Glover. I truly appreciate it.
        I yield back, Chairman.
        Chairman WILLIAMS. Gentleman yields back.
        I now recognize Mr. Downing from the great State of Montana
    for 5 minutes.
        Mr. DOWNING. Thank you, Mr. Chairman, and thank you all for
    your testimony today.
        First of all, I am deeply concerned by China's ongoing
    efforts to exploit the SBIR and the STTR programs to steal
    valuable U.S. intellectual property, and we need to protect
    these programs from subversion from our foreign adversaries.
        I am going to start out, Mr. Miryekta, thank you for being
    here today. China weaponizes talent recruitment programs like
    the Thousand Talents Plan to gain access to deeply sensitive
    information from American companies and research institutions.
        First, can you give us an idea in your estimation of how
    effective these talent recruitment programs have been and
    really how far they have advanced China's technological
    capacity compared to ours?
        Mr. MIRYEKTA. Yeah. I have seen--thank you for your
    question, Congressman.
        I have seen an individual that fled the PRC for having an
    active role during the Tiananmen Square Massacre on June 4,
    1989. Fast forward 30 years, the United Front Work Department
    has won him over, and now, despite the success he found in
    America, he is helping the Chinese Communist Party from the
    United States. They are highly effective at recruiting expats
    on U.S. soil and in Europe.
        Mr. DOWNING. So what types of technologies has China's
    talent programs and IP theft efforts specifically targeted?
        Mr. MIRYEKTA. It is literally the same as the Air Force/
    Space Force requirements. It is--you know, new space
    capabilities, new energy capabilities, AI, autonomy, everything
    that we have as a priority is essentially seems to be mirrored
    by their priorities.
        Mr. DOWNING. Do you believe that SBIR and STTR currently
    have the protocols in place needed for mitigating the impact of
    China's talent recruitment strategy?
        Mr. MIRYEKTA. Only Department of the Air Force. They are
    the only ones capable.
        Mr. DOWNING. Thank you. Thank you for those answers.
        I also want to discuss with you the impact of China's
    rapidly developing AI capabilities and the threat that it poses
    on our research security. We have, obviously, seen some pretty
    interesting things recently.
        To what degree have China's advancements in AI development
    bolstered their ability to subvert U.S. research programs,
    including SBIR?
        Mr. MIRYEKTA. When it comes to the Chinese, they spend
    billions on perception management, and they are constantly
    overselling their capability. However, oftentimes,
    international actors become sympathetic to what the Chinese are
    broadcasting. That doesn't mean that their AI is on par or that
    it is actually legitimate with the story that they have given
    us.
        Mr. DOWNING. Well, thank you very much.
        Clearly, we need to do more to protect the integrity of our
    federally funded research programs. And, as the Small Business
    Committee develops the reauthorization of SBIR and STTR, I look
    forward to making research security a top priority for this
    legislation.
        And so I thank you, and I yield back.
        Chairman WILLIAMS. The gentleman yields back.
        I now recognize Ms. Scholten from the great State of
    Michigan for 5 minutes.
        Ms. SCHOLTEN. Thank you, Mr. Chairman. And thank you--
    excuse me--as I fend off the last bit of this winter cold.
    Thank you so much for our witnesses for joining us here today
    for this incredibly important conversation.
        The SBIR program has been truly instrumental in supporting
    small businesses that drive technological innovation. I wanted
    to read just a little bit about the economic impact here
    because that is essentially what we are talking about, right?
        How--what is the value of the dollars that we are investing
    in this critical program? Economic analysis of the program has
    routinely demonstrated its outsized importance in generating
    innovations and economic growth. Between 1996 and 2020, 99 new
    drug approvals, 12 percent of all new drugs approved, were
    developed by SBIR/STTR firms.
        Another study found the SBIR phase 2 awards show return on
    investments between $22 and $33 for every dollar invested. It
    is incredible.
        A study from the National Cancer Institute found that, for
    every dollar invested, it resulted in $11 in commercial sales.
    Throughout its lifetime, 829 SBI firms have gone public, and
    2,120 have been acquired.
        Finally, 10 percent of all venture capital investments go
    to SBIR firms. I like those numbers.
        Mr. Glover, the SBIR program is a game changer and critical
    for our economy. How can we ensure that this program continues
    to support cutting-edge research and development, especially in
    areas that are critical for U.S. competitiveness, such as
    health and national security?
        Mr. GLOVER. One, I think we simply need to reauthorize it,
    make it permanent, put the consistency into the program. Two, I
    think we need to have the program simplified and streamlined,
    and I think the government--GSA proved it can be done. So make
    the other agencies do it, something you can require in
    legislation and monitor and make sure that happens.
        And I think, quite frankly, the program needs to be a lot
    larger. Something this efficient is still at the 3 percent,
    hasn't been increased since 2011. You know, you should reward
    something that works, and we haven't in, what, 13 years, 14
    years.
        Ms. SCHOLTEN. And I don't see us going in that direction
    right now. In fact, we have recently heard--staff recently
    heard from an SBIR recipient, who was unable to access funding
    during the federal funding freeze enacted by Donald Trump and
    Elon Musk several weeks ago. Luckily, due to a court order,
    court intervention--right?--the administration wanted to stop
    it, but we needed the judicial branch to step in--NSF reopened
    their funding portal.
        Can you explain how this type of uncertainty impacts SBIR
    recipients?
        Mr. GLOVER. The one--the thing small business needs most is
    cash, and they need money, and they go out of business when
    they don't have it. And they don't have--they often mortgage
    their house to make their technology work. So, when you shut
    off the spigot, you basically say, ``This technology will
    die,'' or it will get funded by somebody else. And we all
    know--have heard today how much China is out there looking for
    it. And that is only--outside of the SBIR program, it was
    rampant. This is by no means the only place the Chinese are
    looking.
        So it is critical, and it is painful to let somebody spend
    their whole life developing technology, get it to a level, and
    then they win. And then say, ``Oops, sorry, we are not doing it
    today, and we don't know when we are doing it.''
        Ms. SCHOLTEN. Doesn't seem like the chainsaw approach is
    working as intended in this particular context. National
    security depends on us being a little bit more precise here.
        One more thing, Mr. Glover. The tax cuts passed in Trump's
    first term actually increased taxes on research and
    development, making companies amortize their research
    expenditures over 5 years rather than all at once.
        Do you have any thoughts on how that has impacted SBIR
    firms who usually have no other form of income?
        Mr. GLOVER. It either has bankrupt them or put an end to a
    bankrupt in effect state, where they may not file bankruptcy,
    but they don't have any money to pay anything and don't have
    money to continue. When you are faced with getting a million
    dollar grant and you got to pay taxes on a million dollars, but
    you only--used to be, you know, it was 20 percent. Now it is
    100 percent.
        We are having a conference with a bunch of people on
    tomorrow afternoon with companies all over the country. It has
    been a horrible situation.
        I was told when it got passed, ``Oh, don't worry; it is so
    important; there is no way it won't get extended.'' Well, guess
    what? Washington is Washington. Hasn't been extended.
        Ms. SCHOLTEN. Thank you. Thank you so much, sir. I really
    appreciate it. As a champion of fiscal responsibility, these
    programs are critical.
        I yield back.
        Chairman WILLIAMS. The lady yields back.
        I now recognize Mr. Finstad from the great State of
    Minnesota for 5 minutes.
        Mr. FINSTAD. Thank you, Chairman Williams, and thank you
    for holding this important hearing today, and thank you to our
    witnesses for being here with us.
        The district I have the honor to represent in southern
    Minnesota is home to several innovative companies that provide
    cutting-edge products for the Department of Defense. I also
    serve on the House Armed Services Committee and am happy to be
    serving here on the Small Business Committee as well.
        I have had the pleasure and the opportunity of touring many
    of these businesses in my district and seen the incredible work
    that they have done and that they are doing with the funding
    they receive from the SBIR and the STTR programs. So I am
    looking forward to the opportunity to work with my colleagues
    here on this Committee and our expert witnesses to improve
    these important programs that help drive innovation and
    economic development across our nation and my district.
        So, Dr. Marinelli, as somebody who has had great success
    utilizing the SBIR program with the Department of Defense,
    maybe just a simple question--and you have touched on it a
    little bit, but just maybe kind of cut through the chase here.
        So what challenges do SBIR applicants face in the process,
    and what changes can we make to expand access for this program
    for entrepreneurs and small businesses across the country?
        Mr. MARINELLI. So, typically, in the SBIR program, you are
    looking at the companies trying to do technology push often in
    concert with the S&T program managers and the federal
    government. And you have got on the other side acquisition
    pull, people working off requirements.
        And I think probably the most important thing to do is to
    get them working in closer concert, so there is a technology
    handoff there. You have really got to derisk the technology to
    the point where someone who has got, you know, a billion dollar
    technology platform is willing to accept the risk of bringing
    that new technology in. That takes money, and it takes time.
        So I think trying to make that match earlier in the program
    will help both the acquisition programs and make the companies
    themselves be more successful and perhaps attract that
    investment.
        Mr. FINSTAD. Well, as we work as a Committee on the Armed
    Services to really strengthen our defense industrial base, it
    is now more important than ever that we make this process
    easier and more of an A to B than an A to B to C to D and throw
    in a couple pipe wrenches in the process and a stable full of
    lawyers. So I appreciate your--your advice there.
        Mr. MARINELLI. Thank you.
        Mr. FINSTAD. Ms. Mackey, as past Chair of the National
    Small Business Association, how difficult--again, maybe kind of
    cutting to the chase.
        How difficult is it for small business owners to understand
    the government's hoops and pipe wrenches and all of it that
    they have to go through in contracting and the SBIR--with the
    SBIR opportunities? How can we make it easier for these
    businesses to pursue these opportunities?
        Ms. MACKEY. Boy, I can't emphasize enough what it was like
    the first time when we won an SBIR and someone came in to
    explain how the federal government works. You know, I am an
    electrical engineering. My partner is a Harvard Business School
    grad. We have some gray matter that--and we were just like,
    ``What is this system? How does it work?'' And every time you
    think you learn more, there is something more to learn.
        So here is what I will tell you from our experience that I
    think would be helpful to others: When we were able to get
    technology through, it was because of an extended team. I mean,
    the small business has to be good. The technology has to be
    good. But you have to have government counterparts that are, as
    Bill pointed out, willing to take the risk.
        We, as an ecosystem, need to celebrate those government
    counterparts that are willing to take the risk. And it is the
    acquisition folks, and it is the test folks. We also had
    industry partners who are willing to help us understand, sort
    of mentor us; not in a formal mentor/protege relationship, but
    in a--so I think what we need to do is celebrate the extended
    team, and I think we need to offer them the benefit of the work
    that they do to help make that move forward.
        I would be happy to think of specific examples, but that is
    in general what I think would be good.
        Mr. FINSTAD. No. I appreciate that. Your lived experience
    through this process is very helpful to hear your story, but
    also I want to continue this dialogue as we look at how we can
    improve the process and really--you know, again, I come from
    a--the Armed Services Committee approach of, how do we
    strengthen the defense industrial base, and how do we get some
    of these small and mid-sized companies scattered throughout
    rural America to have a seat at the table and speak the same
    language that government speaks, and how do we make that
    easier, not harder.
        So thank you for your time and for being here. Mr.
    Chairman, thank you. And I yield back.
        Chairman WILLIAMS. The gentleman yields back.
        I now recognize Mr. Olszewski from the great State of
    Maryland for 5 minutes.
        Mr. OLSZEWSKI. Thank you, Mr. Chairman.
        Thank you to all of our witnesses today for your time and
    your testimony.
        I think that--just want to reemphasize my colleague,
    Representative Scholten, and her point of ROI and why these
    programs are so important. So I look forward to working with
    Chairman Williams, Ranking Member Velazquez, and all my
    colleagues here to prioritize, especially what you all, I
    think, have pointed out is providing that certainty, making the
    program permanent or at least more permanent in particular in
    addition to some other changes. So thank you all for your
    recommendations today.
        You know, we know these have real-life impacts. I am aware
    of at least two businesses in my district that are direct
    recipients of this program and SBIR, one of which is a woman-
    owned business in Baltimore County. And so I am interested in
    also the long-term success, not only of the program but also
    the diversification of those who are participating in the
    program.
        Maybe, perhaps Mr. Marinelli, could you speak to us a
    little bit about enhancing the geographic and demographic
    diversity of the program? What can we do to bring in new
    applicants? What is the most effective way in your mind to meet
    that goal?
        Mr. MARINELLI. So, if you go back and look at the--there
    was a 2014 National Academy study of the Department of Defense
    SBIR program, and it showed that some of the underserved States
    in the program have some of the lowest per capita submission
    rates of proposals in the country. And I think probably the
    most important thing to do in terms of diversifying
    participation is to get them introduced into the program, make
    it easier for them to get in.
        In some cases, we have seen some of the States that have
    programs that helped bring the program to small companies are
    doing much better. Most of the new companies tend to form
    around universities, and I think focusing on universities,
    regardless of where they are, is important in terms of kind of
    bringing them out and telling them, ``Here is a way for you to
    get funding.''
        Under the STTR program, we have sent, I believe, around $23
    million in funds to universities all over the country
    associated with that. And I think that is another way to
    introduce them to the program is to show them the benefits of
    that funding, and it also helps get the technology out, as well
    as start to create that workforce that you get on the defense
    side. So I think all of those would be important things to do.
        Mr. OLSZEWSKI. That is great. I appreciate that. Anyone
    else want to--Ms. Mackey?
        Ms. MACKEY. So, when we started in the space, we didn't
    know anything about defense or federal. And I had the bonus of
    being in Boston, you know, companies like PSI that I could
    engage with and start to learn this piece.
        What struck me as I worked through this ecosystem and a lot
    with the National Small Business Association and with NDI's
    small business division, small businesses help each other.
    Like, there is this tremendous collegial outreach that I
    watched a lot of--what people refer to as the coastal companies
    helping other small businesses. And I think if we formalize
    that, that would be tremendous.
        I also think it is important that we help people that
    haven't submitted to understand that they are valuable and that
    their experience would be valuable. You don't recognize
    yourself as valuable or that you could even access this
    program.
        Mr. OLSZEWSKI. That is great.
        I will yield back with that, Mr. Chairman. Thank you.
        Chairman WILLIAMS. Gentleman yields his time back.
        I now recognize Ms. Goodlander from the great State of New
    Hampshire for 5 minutes.
        Ms. GOODLANDER. Thank you, Mr. Chairman. And, really, thank
    you to our witnesses for being here today.
        Dr. Marinelli, I wanted to begin with you. I am very--
    especially happy you are here. You know, New Hampshire is home
    to PSI facility, and I wanted to give you the opportunity to
    talk a little bit more about the important work that you are
    doing in my home State.
        Mr. MARINELLI. So we have what we call the molecules to
    motors program. We started out with SBIR-funded technology to
    create new propellants and new explosive materials and new
    components for that. There is only so much you can do in a
    laboratory. There are certain safety concerns associated with
    that, and we needed to find a place where we could scale up, so
    to speak.
        We actually identified a location in New Hampshire. I am
    not going to talk about where it is because of the kind of
    things that we do there. But we have grown that now to a 13-
    acre campus where we can both mix large quantities of new
    propellants that will extend both the range and lethality of
    U.S. weapons system. We are about to invest $3 million in that
    facility in order to create all of those special capabilities
    associated with that.
        In conjunction with that, we are going to invest about $6
    million in our Massachusetts facility to start to create some
    of the nonexplosive components that we then bring to New
    Hampshire. So it is very much a collaborative effort. But it is
    also an extremely specialized capability.
        We even have some large companies in the area that are
    coming to us saying, ``Can we use your facility,'' because it
    is so hard to get into some of the government facilities to do
    that.
        So I think it is important. It is an example of a
    specialized capability that only the government can fund, and
    we are happy to be bringing that to the area.
        Ms. GOODLANDER. Well, thank you for that. You know, the
    University of New Hampshire is home to the FOSTER program where
    the FOcused SBIR/STTR Teaching Entrepreneurship and Results
    Program, you know, which has the basic mission of helping to
    guide small businesses through the SBIR and STTR processes.
        I would like to just ask our witnesses to speak a little
    bit more about how these types of university-based programs
    have been force multipliers and really helped the SBIR and STTR
    programs. Maybe starting with you, Mr. Glover.
        Mr. GLOVER. The vast programs and regional outreach
    programs primarily with universities and small business
    development centers in many of the States, they have done an
    excellent job. But it is a challenge because, quite frankly,
    they don't have the culture in there. And you will often find
    that SBIR is the only real opportunity for a company in certain
    areas--certain rural areas have not States that are not on the
    coast, and it is a real challenge.
        And we have seen them be successful and really do a great
    job. But getting people to write proposals is a critical issue
    because you can't win if you don't submit a proposal. And the
    studies show that there is a direct relationship with the
    number of proposals submitted by a State and the number of
    awards they win.
        Ms. MACKEY. So I work a lot with the University of
    Massachusetts at Lowell and their outreach similar to the UNH
    outreach. And what I find really valuable there for SBIR
    companies is not only the FOSTER type of programs to teach you
    how to write a proposal, but the depth of research and the
    infrastructure that you can access to do different research
    pieces.
        The other thing that I really like about what the U-Mass
    system, what they are doing with their advanced research
    centers, they are partnering with the industry. So it is not
    just how do you get started, how do you do the research, but if
    I were to use a golf analogy--my husband would be so happy I am
    doing this--it is the swing through. Right? It is where do
    you--well, I guess I can't take that golf analogy any further.
    I tried. But it is the swing through, right?
        And so I think it is universities. And to Jere's point,
    partnering also with industry for that business model kind of
    understanding.
        Ms. GOODLANDER. Dr. Marinelli, did you want to add
    anything?
        Mr. MARINELLI. I mean, I think one of the key things that
    we see is a lot of our new technology that we bring into our
    company actually starts with the universities. More often than
    not, the way we bring technology out of the universities is to
    actually hire the students, and then kind of the professors
    come along for the ride. So I think it is very critical.
        Some of our UUV programs, we actually do with the
    University of New Hampshire off the pier there. We are working
    with one of the chemistry professors at UNH on our energetics
    programs. Universities are critical here, and we need to
    maintain their strength throughout this activity. They are
    critical to the future workforce of the country.
        Ms. GOODLANDER. Well, I appreciate that, and I am going to
    be fighting really hard for the critical funding and the
    certainty that we need for our small businesses and for our
    universities.
        You mentioned the Paperwork Reduction Act. I just want to
    invite all of our witnesses today, any ideas you have about how
    to simplify and streamline these processes, including the use
    for SBIR of other transitional authority, really welcome all of
    your ideas because this is going to be critical to these
    programs, really, continuing to leverage the taxpayer dollars
    that they do in extraordinary ways. So thank you.
        I yield back, Mr. Chairman.
        Chairman WILLIAMS. The gentlelady yields back.
        I now recognize Ms. Simon from the great State of
    California for her 5 minutes.
        Ms. SIMON. Chair Williams, I love it when you say the great
    State because I will remind you again, it really is. It is a
    lot warmer than D.C., sir, in my 8 weeks.
        I want to thank you all for coming today, and I just really
    had a great time reading the materials and your testimony prior
    to this hearing. I, like I believe everyone on this Committee,
    wants the United States to be first in innovation. There is no
    doubt about that.
        Some of you may have heard, because I keep talking about
    the amazing CRISPR lab at the University of California. I
    visited last week and saw all these amazing students, met our
    Nobel prize-winning professor and physician scientist at that
    lab. They have proven--they have cured sickle cell anemia in
    one woman who will no longer have to spend nights away from her
    children, spending tens of thousands of dollars, every
    emergency room visit.
        They are light speed ahead on finding treatments for ALS
    and really working with dementia patients to make their quality
    of life better. This amazing lab with these brilliant young
    students, really new lab technology; it was sparkling.
        And I think about Exelixis and Science Corp., Alameda
    County is an innovation hub where some of the most, I will say,
    brilliant folks in the world who, yes, are from the United
    States, and some folks who have come across the world to study
    in our beautiful facilities to change the lives of folks. I
    know this to be true.
        I have told my story, and I will tell it every single day
    as a widow of a great man who died of cancer who was in a
    clinical trial. Our lives will forever be changed because we
    got a little bit of extra time because of great scientists who
    dedicated their lives to both the public sector and the private
    sector.
        I have a question, and it might be a comment. I am super
    concerned that, in this moment, maybe even right now, there are
    folks who are being fired from the SBA. There are folks who are
    being fired from DOE and our Department of Health.
        How the hell are we going to facilitate more opportunity
    for innovators and researchers and folks who will literally
    change the world, be it in 10 years--they have an idea right
    now. And, if it is difficult in this moment to access small
    business innovation research grants and resources and small
    business technology transfer resources, if it is difficult now
    before the slashing and burning of staff in these critical
    departments who serve our innovators and small businesses--we
    are talking about continuing resources for these folks. Well,
    guess what? If nobody answers the phone or no one is answering
    the inquiry on the website, our folks are going to be left--
    they are going to be left dry.
        And, as a result--as a result of what is happening
    throughout the administration, we know if you talk to physician
    scientists, if you talk to innovators, if you talk to that
    young 26-year-old who is working at Genentech working on a data
    model that I couldn't even fathom how complicated it was seeing
    it on a screen, who is this close to that thing, what is going
    to happen? Children are going to die.
        There is actually a family walking around the halls right
    now, there is a young child who has a very rare disease, very
    rare disease. I am hoping to meet them today. The baby is about
    3 years old. Waiting for that next thing.
        No one is answering the phone. No one is reading the
    applications. I cannot trust an AI algorithm to read an
    application that literally has the propensity and the
    opportunity to save a generation. We got to do better.
        I guess, you know, sir, I love all of your bios, so
    inspired by your work; thank you for your service. I can just
    pick and choose. Maybe, Mr. Glover, and thank you so much for
    coming.
        What is going to be--what are the adverse effects of having
    low staffing as, again, we are trying to push and we are
    talking about re-establishing resources for our innovators, our
    scientists, for our pharmaceutical geniuses who are changing
    the way that, for instance, the elderly live out their last
    years and months. If these folks can't get in touch with folks
    or there is decreased infrastructure, what happens?
        Mr. GLOVER. I don't know. And, you know, we hope things
    always get better. We are optimistic, and we hope things get
    better, but I don't have an answer for you.
        Ms. SIMON. Yeah. Well, I appreciate all of you here and the
    work that you are doing.
        And I yield back. Thank you so much for being here, and I
    look forward to working with you all as we move forward and try
    to figure this thing out for our people. Thank you.
        I yield back.
        Chairman WILLIAMS. The gentlelady yields back.
        I now recognize Mr. Jack from the great State of Georgia
    for 5 minutes.
        Mr. JACK. Well, thank you, Mr. Chairman, and thank you to
    each witness for being here today.
        Innovation has long been the driving force behind America's
    global leadership, whether in technology, medicine, or defense.
    Yet, in an era of rapidly advancing technologies and increasing
    global competition, we must continue to foster an environment
    where American businesses, particularly small businesses,
    across each and every one of our congressional districts can
    thrive.
        Thanks to the Chairman. I serve as the Chairman of the
    Subcommittee on Innovation, Entrepreneurship, and Workforce,
    and I look forward to working with each and every one of you
    going forward to help strengthen the environment in which our
    small businesses can thrive.
        But I would like to first start with Dr. Marinelli, if I
    could. I know you have had an opportunity a few times here
    today to talk about a few suggestions. But, specifically, the
    administrative complexity of applying to SBIR and STTR programs
    favors those, in my opinion, with strong networks or prior
    participants.
        In your testimony, you highlighted some great opportunities
    for the programs to increase participation, and if you could
    just take a moment yet again to reiterate your suggestions and
    reducing the barriers to competing for these programs.
        Mr. MARINELLI. So I think, as ML spoke, you know, I--my
    career started with the program 40 years ago, and it was a much
    simpler process then. The solicitations were simpler. The
    proposal formats were fairly common. Today--I don't handle
    these directly anymore, but it is bewildering to look at the
    different types of solicitations, the different formats you
    need to respond to.
        We get messaging all the time about changes in the
    solicitations that make it difficult for our staff to
    understand. And we are a very experienced firm. It makes it
    difficult for us to understand sometimes how to respond to some
    of these solicitations. I can't imagine what it is like right
    now for a small company coming in.
        We have unbelievable IT requirements on ourselves these
    days. We get a lot of attention to that. I can't imagine a
    small firm being able to do many of the certifications anymore
    that would be required to continue on in the program very long.
        So I think there does need to be some recognition that
    there are people who aren't like us, who don't have that
    experience, and kind of a toned-down version of the application
    process that would enable them to put their ideas forward. I
    think that is probably very important.
        Mr. JACK. Wonderful. Thank you.
        And, to Cyrus, because, as you noted, we are not going to
    pronounce your last name, after the initial application, my
    understanding is that small businesses need more support in
    transitioning through the multiple phases of the application
    process. And a common trend we are seeing of China's success in
    stealing American technology comes from closing the funding gap
    and directly supporting the scale-up through small business
    investment.
        Given the challenges of private sector investment and long-
    term technology development within the U.S., how can SBIR be
    modified to help small businesses, small manufacturers better
    overcome the capital crunch between phase 2 and 3?
        Mr. MIRYEKTA. If there is an increase in the dollar amount,
    I know a lot of innovators will not even bother applying for
    SBIRs because they believe the dollar amount is too low. I
    think, if it was moved up probably to 2 million, you would get
    a lot more buy-in.
        And some of the innovators believe that, ``Okay, we will
    succeed commercially before we ever come back to the government
    and try to sell a service contract,'' because the SBIR process
    is too cumbersome for them to apply.
        Mr. JACK. Wonderful. I appreciate that.
        I am just going to close, Mr. Chairman, by noting something
    that I think does impact small business writ large. But we talk
    about the regulatory environment, and some of these regulations
    that have been foisted upon small businesses in previous
    administrations have had a deleterious impact to their ability
    to succeed.
        And, tomorrow, our House is going to vote on a
    Congressional Review Act resolution led by my good friend Gary
    Palmer and myself. And it is to repeal a regulation and rule
    that would affect a company in my congressional district. It is
    about tankless water heaters. I know my colleagues are tired of
    me saying it.
        But, just to share it with--and I will ask a closing
    question. There was a regulation and a rule imposed on the
    noncondensing tankless water heater industry, which just so
    happens to be completely manufactured in my congressional
    district, that we are seeking to repeal tomorrow in our
    legislative body.
        So, if I can close out with you, ML, it is not germane to
    the testimony today, but when it comes to the regulatory
    environment, could you just offer 30 seconds about what we, as
    a Small Business Committee, can do to help improve the
    regulatory environment in which small businesses operate today?
        Ms. MACKEY. I think I have a quick, short answer for you. I
    would recommend that you speak to the National Small Business
    Association. They have a committee that focuses on regulatory
    burden on environmental and would be directly related to this.
        And I say that because I think the best way you can come up
    with making this easier is ask the small businesses, and NSBA
    can give you that voice. I think you need to ask across the
    board, but I would start with them.
        Mr. JACK. Well, I applaud the Chairman for consistently
    providing us an opportunity to engage with small businesses and
    hear directly from you all. I appreciate that recommendation.
        And I thank each and every one of you for taking the time
    to come up today to share with us some ideas to better improve
    the environment in which you all thrive.
        Thank you.
        Chairman WILLIAMS. The gentleman yields back.
        I now recognize Dr. Kelly Morrison from the great State of
    Minnesota for 5 minutes.
        Ms. MORRISON. Thank you, Mr. Chair. Thank you for holding
    this hearing.
        And thank you so much to our witnesses for being here
    today. Sorry I am all the way now down on the other end.
        It is great to see so much bipartisan consensus about the
    important role that SBIR and STTR programs play in supporting
    American innovation.
        Thanks for taking the time to testify.
        Mr. Glover, in your testimony, you mentioned that one of
    the strengths of the SBIR and STTR programs is in its
    investment and innovation across the country, providing funds
    to small businesses in all 50 States.
        My own home State of Minnesota has received nearly 3,000
    awards since the program began in 1982, ranging from
    investments in unmanned ground robotic systems for DOD
    surveillance and recognizance to robotic greenhouse gas
    monitoring to measure the impacts of climate smart farming
    practices, to reducing energy usage, and wearable devices
    through sleep science, informed algorithms, demonstrating, I
    think, that great ideas and scientific breakthroughs can come
    from anywhere.
        Mr. Glover, could you elaborate on why it is important for
    the SBA to promote innovation across the country? How can we
    enhance the geographic and demographic diversity of program
    participants? And how would increasing that diversity of
    applicants impact the competitiveness of the SBIR and STTR
    programs?
        Mr. GLOVER. SBA has been reaching out to try to do that,
    and they have bus tours where they go to underserved States and
    try to get--work with the universities, work with those that do
    outreach.
        I think that, you know, more needs to be done, and we have
    to be careful because, if we allow venture capital to be the
    selection criteria, although it is illegal, what we find is
    awards--and some of the jumbo awards especially--just going to
    a very few States.
        So we have got to make sure that we don't let venture
    capital be the deciding factor of who wins an award. If they
    have, you know, matching money, that was always prohibited
    because matching money meant the States in the middle of the
    country didn't have anybody to match with. So we have got to be
    careful about that and how that selection criteria goes.
        We looked at the super jumbo awards, and we found out that,
    out of $13 billion of venture capital, some 7 billion before
    the awards, 6 billion after, 11 billion of that went to one
    State: California.
        So we have got to be careful because, obviously, selecting
    those companies indirectly meant that it went to primarily one
    State, and that was just not a good idea. So we have got to
    make sure that we look at that.
        We don't want to choose based on anything but merit. Not
    geographic because we don't want to get the second best
    technology for our warfighters or for healthcare, but we do
    need to be sensitive to that issue.
        And thank you for the question.
        Ms. MORRISON. Thank you for that answer.
        In the Army, and DOD in general, female casualties have a
    significantly lower survival rate than male casualties.
    Architecture Technology, Inc., is an engineering company
    headquartered in my district that provides solutions to complex
    system problems.
        Last year, it was granted an SBIR award to address the
    gender survivability gap by developing augmented reality that
    provides gender-specific medical training to soldiers.
        Ms. Mackey, I appreciate your testimony on how SBIR and
    STTR programs have enabled small businesses to work in
    coordination with the federal government to provide ingenuity
    and advancements in the defense sector.
        Could you speak to the SBIR and STTR programs' ability to
    address specific challenges or address issues for overlooked
    populations, such as women in the military?
        Ms. MACKEY. So I think I would answer that in two ways. The
    first is, some years ago, the Navy asked me to help them do
    some outreach to underserved communities, women and ethnic. And
    they said, so, ``We, being a woman CEO, how would we have found
    you?'' And I go, ``Well, not the ways you are looking.''
        And mostly because I wouldn't have recognized myself where
    our skill set is applicable to the DOD. So I am sort of over
    generalizing to make a point.
        So I helped them figure out how to do outreach outside of
    the beltway and to different organizations, but you have to
    give examples of how you are meaningful.
        The second point I would make is I think it is really
    interesting on the geographic diversity to be thoughtful to how
    much ingenuity we have in the center of the country.
        I work a lot in sustainment capabilities with the
    Department of Defense. So figuring out how to make equipment
    continue to run, to have longer remaining useful life, to--I
    just feel like there is a lot of good ideas that might be on
    our farms that those folks wouldn't think of themselves as
    technologists.
        It might be interesting to consider how do we put the
    experienced companies that know how to write SBIR proposals
    together with some of the subject-matter expertise to address
    maybe there is a program or some thoughtfulness we can do that
    really helps share and network that kind of collaboration.
        Ms. MORRISON. I love that answer. Thank you.
        How do you think permanently authorizing the SBIR and STTR
    programs help ensure that small businesses can continue to
    bring cost-effective and valuable innovation to the Department
    of Defense?
        Chairman WILLIAMS. The gentlelady's time is up.
        Ms. MORRISON. Thank you, Mr. Chair.
        Chairman WILLIAMS. Thank you.
        She yields back.
        I would like to thank all the witnesses today for being
    here, for your testimony, and for appearing and sharing
    yourself with us.
        Without objection, Members have 5 legislative days to
    submit additional materials and written questions from the
    witnesses to the Chair, which will be forwarded to the witness.
        Now, I will say I hope you see there is some bipartisanship
    in this town and in this building, and we are working on a lot
    of things together in this Committee.
        So I ask the witnesses to please respond promptly.
        And, if there is no further business, without objection,
    the Committee is adjourned.
        [Whereupon, at 12:05 p.m., the Committee was adjourned.]

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