[Congressional Record Volume 147, Number 63 (Wednesday, May 9, 2001)]
[Senate]
[Pages S4609-S4612]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY (for himself, Mr. Bond, Mr. Cleland, Ms. Landrieu, 
        Mr. Bennett, Mr. Levin, Mr. Lieberman, Mr. Harkin, Mr. 
        Bingaman, Mr. Enzi, and Ms. Cantwell):
  S. 856. A bill to reauthorize the Small Business Technology Transfer 
Program, and for other purposes; to the Committee on Small Business.
  Mr. KERRY. Mr. President, today I rise to introduce legislation to 
reauthorize the Small Business Administration's Small Business 
Technology Transfer, STTR, Program.
  The STTR program funds cooperative R&D projects between small 
companies and research institutions as an incentive to advance the 
nation's technological progress. For those of us who were here when 
Congress created this program in 1992, we will remember that we were 
looking for ways to move research from the laboratories to market. What 
could we do to keep promising research from stagnating in Federal labs 
and research universities? Our research in this country is world 
renowned, so it wasn't a question of good science and engineering. We, 
without a doubt, have one of the finest university systems in the 
world, and we have outstanding research institutions. What we needed 
was more development, development of innovative technology. We needed a 
system that would take this research and find ways it could be applied 
to everyday life and national priorities. One such company is Sterling 
Semiconductor. Sterling, in conjunction with the University of 
Colorado, has developed silicon carbide wafers for use in 
semiconductors that can withstand extreme temperatures and conditions. 
In addition to defense applications, these wafers can be used for 
everything from traffic lights to automobile dashboards and 
communications equipment.
  With technology transfer, it was not just the issue of the tenured 
professor who risked security if he or she left to try and 
commercialize their research; it was also an issue of creating 
businesses and jobs that maximized the contributions of our scientists 
and engineers once they graduated. There simply weren't enough 
opportunities at universities and labs for these bright individuals to 
do research and development. The answer was to encourage the creation 
of small businesses dedicated to research, its development, and 
ultimately moving that research out of the lab and finding a commercial 
application.
  We knew that the SBA's existing Small Business Innovation Research, 
SBIR, program had proven to be extremely successful over the previous 
ten years, so we established what is now known as the Small Business 
Technology Transfer program. The STTR program complements the SBIR 
program. Whereas the SBIR program funds R&D projects at small 
companies, STTR funds cooperative R&D projects between a small company 
and a research institution, such as a university or Federally funded 
R&D lab. The STTR program fosters development and commercialization of 
ideas that either originate at a research institution or require 
significant research institution involvement, such as expertise or 
facilities, for their successful development.
  This has been a very successful program. One company, Cambridge 
Research Instruments of Woburn, Massachusetts, has been working on an 
STTR project with the Marine Biological Lab in Woods Hole. They have 
developed a liquid crystal-based polarized light microscope for 
structural imaging. While that is a mouthful, I'm told that it helps in 
manufacturing flat screen computer monitors, and even helps improve the 
in vitro fertilization procedure. Together this company and the lab 
expect to have sales in excess of $1 million dollars next year from 
this STTR project.
  As this example illustrates, the STTR program serves an important 
purpose for this country's research and development, our small 
businesses, our economy, and our nation. The program is set to expire 
at midnight on Sunday, September 30th. By the way, we absolutely have 
no intention of letting reauthorization get down to the wire, which was 
the unfortunate fate of the reauthorization of the SBIR program last 
year. I have worked in partnership with Senator Bond to develop this 
legislation, and as part of the process we have consulted with and 
listened to our friends in the House, both on the Small Business 
Committee and the Science Committee. We do not see this legislation as 
contentious, and we have every intention of seeing this bill signed 
into law well before September.
  Shaping this legislation has gone beyond policy makers; we have 
reached out to small companies that conduct

[[Page S4610]]

the STTR projects and research universities and Federal labs. On my 
part, I sponsored two meetings in Massachusetts on March 16th to 
discuss the STTR program. At my office in Boston, there was a very 
helpful discussion with six of Massachusetts' research universities 
expressing what they like and dislike about the program, and why they 
use it, or don't use it more. The meeting included the licensing 
managers from Boston University, Harvard, MIT, Northeastern University, 
and the University of Massachusetts. They said they need to hear more 
about the STTR program and have more outreach to their scientists and 
engineers so that they understand when and how to apply for the 
program. Based on their suggestions, we've included an outreach mandate 
in our bill. In addition, we're trying to provide SBA with more 
resources in its Office of Technology to be responsive to the concerns 
of STTR institutions and small businesses.
  Later that day, my office was part of a meeting in Newton at 
Innovative Training Systems in which about 20 leaders and 
representatives of small high-tech companies talked about the SBIR and 
STTR programs. They make a tremendous contribution to the economy and 
state of Massachusetts. They said that the Phase II award for STTR 
should be raised form $500,000 to $750,000 to be consistent with the 
SBIR program. Otherwise, since a minimum of 30 percent of the award 
goes to the university partner, it was too little money to really 
develop the research.
  As I said, we listened to them. And we also listened to what the 
program managers of the participating agencies had to say. Agencies 
participate in this program if their extramural R&D budget is greater 
than $1 billion. Consequently, there are five eligible agencies: the 
Department of Defense, the Department of Energy, the National 
Aeronautics and Space Administration, the Department of Health and 
Human Services, and the National Science Foundation. For the STTR 
projects, they set aside .15 percent of their extramural R&D budget. 
The comes to about $65 million per year invested in these 
collaborations between small business and research institutions.
  Combining all the suggestions for improvement, the STTR Program 
Reauthorization Act of 2001 does the following:
  1. It reauthorizes the program for nine years, setting the expiration 
date for September 30th, 2010.
  2. Starting in two years, FY2003, it raises in small increments the 
percentage that Departments and Agencies set aside for STTR R&D. In 
FY2004, the percentage increases from .15 percent to .3 percent. After 
three years, in FY2007, the bill raises the percentage from .3 percent 
to .5 percent;
  3. Starting in two years, FY2003, the legislation raises the Phase II 
grant award amount from $500,000 to $750,000;
  4. It requires the participating agencies to implement an outreach 
program to research institutions in conjunction with any such outreach 
done with the SBIR program;
  5. As last year's legislation did for the SBIR program, this bill 
strengthens the data collection requirements regarding awards and the 
data rights for companies and research institutions that conduct STTR 
projects. The goal is to collect better information about the companies 
doing the projects, as well as the research and development, so that we 
can measure success and track technologies.
  While I believe that these changes reflect common sense and are 
reasonable, I would like to discuss two of the proposed changes.
  First, I would like to talk about reauthorizing the program for nine 
years. The STTR program was a pilot program when it was first enacted 
in 1992. Upon review in 1997, the results of the program were generally 
good and the program was reauthorized that year. A more recent review 
and study of the program shows that the program has become more 
successful as it has had more time to develop. Specifically, the 
commercialization rate of the research is higher than for most research 
and development expenditures. Further, universities and research is 
higher than for most research and development expenditures. Further, 
universities and research institutions have developed excellent working 
relationships with small businesses, and the program has also had good 
geographic diversity, involving small companies and research 
institutions throughout the country. The nine-year reauthorization will 
allow the agencies, small businesses and universities to gradually ramp 
up to the higher percentage in a predictable and orderly manner.
  Second, I would like to talk about the gradual, incremental increases 
in the percentages reserved for STTR contracts and the increase in the 
Phase II awards. When we reached out to the small businesses and the 
research institutions that conduct STTR projects, and the program 
managers of the five agencies that participate in the STTR program, we 
heard two recurring themes: one, raise the amount of the Phase II 
awards; and two, increase the amount of the percentage reserved for 
STTR projects.
  Speaking to the first issue, we heard that the Phase II awards of 
$500,000 generally are not sufficient for the research and development 
projects and should be increased to $750,000, the same as the SBIR 
Phase II awards, to make the awards worth applying for the small 
businesses and research institutions.
  As for the second issue, we were told that the percentage of .15 
reserved for STTR awards needed to be increased in order to better meet 
the needs of the agencies. Last year, that .15 percent of the five 
agencies' extramural research and development budgets amounted to a 
total $65 million dollars available for small businesses and research 
institutions to further develop research and transfer technology from 
the lab to market through the STTR program. Less than a quarter of one 
percent to help strengthen this country's technological progress is not 
extravagant; in fact, it is not adequate support for this important 
segment of the economy.
  Nevertheless, we are very conscientious about the needs of the 
departments and agencies to meet their missions for the nation and have 
proposed gradual increases that take into full consideration the 
realities of implementing the changes for the agencies and departments 
that participate in the program. Consequently, the legislation does not 
increase the percentage for STTR awards until two full years after the 
program has been reauthorized.
  We are also conscientious about the fact that we want more research, 
not less, so we have timed the increase of the Phase II awards to 
coincide with the initial percentage increase reserved for STTR 
projects.
  Overall, we believe this gradual increase will help encourage more 
innovation and greater cooperation between research institutions and 
small businesses. As the program requires, at least 30 percent of these 
additional funds will go to university and research institutions. Not 
only do the universities and research institutions that collaborate 
with small businesses get 30 percent of the STTR award money for each 
contract, they also benefit in that they often receive license fees and 
royalties. We are also conscientious about being fiscally responsible, 
the percentage increases will have no budget implication since it does 
not increase the amount of the money spent. Rather, it ultimately, 
after six years, redirects one half of one percent to this very 
successful program which benefits the economy overall.
  This bill will ensure that this successful program is continued and 
increased. It will also provide Congress with important information and 
data on the program and encourage more outreach to small businesses and 
research institutions.
  I want to encourage my colleagues to learn about this program, to 
find out the benefits to their state's hi-tech small businesses and 
research universities and labs, and to join me in passing this 
legislation in the Senate as soon as possible. To my friend from 
Missouri, Senator Bond, I want to thank you and your staff for working 
with me and my staff to build this country's technological progress. I 
also want to thank all of the cosponsors: Senators Cleland, Landrieu, 
Bennett, Levin, Lieberman, Harkin, bingaman, Enzi, and Cantwell.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

[[Page S4611]]

                                 S. 856

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Small Business Technology 
     Transfer Program Reauthorization Act of 2001''.

     SEC. 2. EXTENSION OF PROGRAM AND EXPENDITURE AMOUNTS.

       (a) In General.--Section 9(n)(1) of the Small Business Act 
     (15 U.S.C. 638(n)(1)) is amended to read as follows:
       ``(1) Required expenditure amounts.--
       ``(A) In general.--With respect to each fiscal year through 
     fiscal year 2010, each Federal agency that has an extramural 
     budget for research, or research and development, in excess 
     of $1,000,000,000 for that fiscal year, shall expend with 
     small business concerns not less than the percentage of that 
     extramural budget specified in subparagraph (B), specifically 
     in connection with STTR programs that meet the requirements 
     of this section and any policy directives and regulations 
     issued under this section.
       ``(B) Expenditure amounts.--The percentage of the 
     extramural budget required to be expended by an agency in 
     accordance with subparagraph (A) shall be--
       ``(i) 0.15 percent for each fiscal year through fiscal year 
     2003;
       ``(ii) 0.3 percent for each of fiscal years 2004 through 
     2006; and
       ``(iii) 0.5 percent for fiscal year 2007 and each fiscal 
     year thereafter.
       (b) Conforming Amendment.--Section 9 of the Small Business 
     Act (15 U.S.C. 638) is amended in subsections (b)(4) and 
     (e)(6), by striking ``pilot'' each place it appears.

     SEC. 3. INCREASE IN AUTHORIZED PHASE II AWARDS.

       (a) In General.--Section 9(p)(2)(B)(ix) of the Small 
     Business Act (15 U.S.C. 638(p)(2)(B)(ix)) is amended--
       (1) by striking ``$500,000'' and inserting ``$750,000''; 
     and
       (2) by inserting before the semicolon at the end the 
     following: ``, and shorter or longer periods of time to be 
     approved at the discretion of the awarding agency where 
     appropriate for a particular project''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall be effective beginning in fiscal year 2004.

     SEC. 4. AGENCY OUTREACH.

       Section 9(o) of the Small Business Act (15 U.S.C. 638(o)) 
     is amended--
       (1) in paragraph (12), by striking ``and'' at the end;
       (2) in paragraph (13), by striking the period at the end 
     and inserting a semicolon; and
       (3) by adding at the end the following:
       ``(14) implement an outreach program to research 
     institutions and small business concerns for the purpose of 
     enhancing its STTR program, in conjunction with any such 
     outreach done for purposes of the SBIR program; and''.

     SEC. 5. POLICY DIRECTIVE MODIFICATIONS.

       Section 9(p) of the Small Business Act (15 U.S.C. 638(p)) 
     is amended by adding at the end the following:
       ``(3) Modifications.--Not later than 120 days after the 
     date of enactment of this paragraph, the Administrator shall 
     modify the policy directive issued pursuant to this 
     subsection to clarify that the rights provided for under 
     paragraph (2)(B)(v) apply to all Federal funding awards under 
     this section, including the first phase (as described in 
     subsection (e)(6)(A)), the second phase (as described in 
     subsection (e)(6)(B)), and the third phase (as described in 
     subsection (e)(6)(C)).''.

     SEC. 6. STTR PROGRAM DATA COLLECTION.

       (a) In General.--Section 9(o) of the Small Business Act (15 
     U.S.C. 638(o)), as amended by this Act, is amended by adding 
     at the end the following:
       ``(15) collect, and maintain in a common format in 
     accordance with subsection (v), such information from 
     awardees as is necessary to assess the STTR program, 
     including information necessary to maintain the database 
     described in subsection (k).''.
       (b) Database.--Section 9(k) of the Small Business Act (15 
     U.S.C. 638(k)) is amended--
       (1) in paragraph (1)--
       (A) by inserting ``or STTR'' after ``SBIR'' each place it 
     appears;
       (B) in subparagraph (C), by striking ``and'' at the end;
       (C) in subparagraph (D), by striking the period at the end 
     and inserting ``; and''; and
       (D) by adding at the end the following:
       ``(E) with respect to assistance under the STTR program 
     only--
       ``(i) whether the small business concern or the research 
     institution initiated their collaboration on each assisted 
     STTR project;
       ``(ii) whether the small business concern or the research 
     institution originated any technology relating to the 
     assisted STTR project;
       ``(iii) the length of time it took to negotiate any 
     licensing agreement between the small business concern and 
     the research institution under each assisted STTR project; 
     and
       ``(iv) how the proceeds from commercialization, marketing, 
     or sale of technology resulting from each assisted STTR 
     project were allocated (by percentage) between the small 
     business concern and the research institution.''; and
       (2) in paragraph (2)--
       (A) by inserting ``or an STTR program under subsection 
     (n)(1)'' after ``(f)(1)'';
       (B) in subparagraph (A)(iii), by inserting ``and STTR'' 
     after ``SBIR''; and
       (C) in subparagraph (D), by inserting ``or STTR'' after 
     ``SBIR''.
       (c) Simplified Reporting Requirements.--Section 9(v) of the 
     Small Business Act (15 U.S.C. 638(v)) is amended by inserting 
     ``or STTR'' after ``SBIR'' each place it appears.
       (d) Reports to Congress.--Section 9(b)(7) of the Small 
     Business Act (15 U.S.C. 638(b)(7)) is amended by striking 
     ``and (o)(9)'' and inserting ``, (o)(9), and (o)(15)''.

  Mr. BOND. Mr. President, I am pleased to join with Senator John 
Kerry, my colleague and ranking member on the Small Business Committee, 
in sponsoring legislation to reauthorize the Small Business Technology 
Transfer, STTR, Program. This program has proven itself to be highly 
effective. The bill we are introducing today acknowledges the success 
of the STTR Program by expanding it during the length of the 
reauthorization so that its benefits will increase in the coming years.
  The STTR Program was created in 1992 to stimulate technology transfer 
from research institutions to small firms while, at the same time, 
accomplishing the Federal government's research and development goals. 
The program is designed to convert the billions of dollars invested in 
research and development at our nation's universities, federal 
laboratories and nonprofit research institutions into new commercial 
technologies. It does this by joining the ideas and resources of 
research institutions with the commercialization experience of small 
companies.
  Each agency with an extramural research and development budget of 
more than $1 billion participates in the program. Currently, the 
Department of Defense, the National Institutes of Health, the National 
Aeronautics and Space Administration, NASA, the National Science 
Foundation, NSF, and the Department of Energy, DOE, have STTR Programs.
  To receive an award under the STTR Program, a research institution 
and a small firm jointly submit a proposal to conduct research on a 
topic that reflects an agency's mission and research and development 
needs. The proposals are then peer-reviewed and judged on their 
scientific, technical and commercial merit. Similar to the Small 
Business Innovation Research Program, awards are provided in three 
phases. Phase one awards are designed to determine the scientific and 
technical merit and feasibility of a proposed research idea, with 
funding for individual awards limited to $100,000. Phase two awards 
further develop research from phase one and emphasize the idea's 
commercialization potential, with individual awards up to $500,000. 
Phase three awards consist of non-Federal funds for the commercial 
application of the technology, non-STTR Federal funds for the 
commercialization of products or services intended for procurement by 
the Federal government, or non-STTR Federal funds for continued 
research and development of the technology.
  The benefits of fostering collaboration between research institutions 
and small firms are numerous. Small firms have shown themselves to be 
excellent at commercializing research when they are provided the 
opportunity to take advantage of the expertise and resources that 
reside in our nation's universities. A recent Small Business 
Administration Office of Advocacy report reviewed the rate of return 
for research and development by large and small firms both with and 
without university partners. When these firms do not have university 
partners, their rate of return is 14 percent. When a collaboration is 
formed between universities and small firms, however, the rate of 
return jumps to 44 percent. By contrast, the rate of return only 
increases to 30 percent when large firms and universities collaborate.
  Moreover, partnerships between small firms and universities have led 
to world-class high-technology economic development. Numerous studies 
cite the emergence of Silicon Valley and the Route 128 corridor in 
Massachusetts as directly resulting from the partnerships and 
technology transfer that occurred, and are still occurring, among small 
firms, Stanford University and the Massachusetts Institute of 
Technology. The cooperation between industry and these universities has 
strengthened considerably our economic competitiveness in the world. 
The STTR Program seeks to foster this same type of economic development 
in the hundreds of communities around the country that contain 
universities

[[Page S4612]]

and federal laboratories. And, the STTR Program has proven to be 
immensely successful at growing small firms from these types of 
partnerships.
  The Committee on Small Business has recently received data on the 
commercial success of small firms that received STTR awards between 
1995 and 1997. The results are truly outstanding. Of the 102 projects 
surveyed in that time-frame, 53 percent had either resulted in sales or 
the companies involved in the projects had received follow-on 
developmental funding for the technology. To date, these projects had 
resulted in $132 million from sales and $53 million in additional 
developmental funding. Moreover, the Committee has learned that the 
companies who had received these STTR awards are projecting an 
additional $186 million in sales in 2001 and an estimated additional 
$900 million in sales by 2005. These numbers are even more remarkable 
when one considers that it typically takes between 7 to 10 years to 
successfully commercialize new technologies.
  In addition to proving to be an amazing commercial success, the STTR 
Program has also provided high-quality research to the Federal 
Government. In the most recent published report of the General 
Accounting Office on the STTR Program, Federal agencies rated highly 
the technical quality of the proposals. The DOE, as an example, rated 
the quality of the proposed research in the top ten percent of all 
research funded by the Department.
  A good example of the benefits that the STTR Program provides to 
small firms and universities is the experience of Engineering Software 
Research and Development, Inc. in St. Louis, MO. Engineering Software, 
in partnership with Washington University in St. Louis, received a 
phase two award from the Air Force to develop an innovative method of 
analyzing the stresses placed on composite materials. While this 
technology is currently being used in the aeronautics industry, it has 
many other practical applications.
  The STTR Program permitted Dr. Barna Szabo, who had originated an 
algorithm he developed at Washington University, to transfer the 
technology to Engineering Software, which had the software 
infrastructure to transition the technology from an academic to a 
practical commercial application. According to Dr. Szabo, Engineering 
Software has received to date at an estimated $1.25 million in sales 
and follow-on developmental funding resulting from the technology 
funded by the STTR award and that the STTR Program was of great 
assistance in transferring the technology from the academic environment 
to actual use and application.
  Based on the proven success of the STTR Program to date, this 
legislation increases the funds allocated for the program. This 
increase is phased-in through the length of the reauthorization. When a 
program is working as well as the STTR Program, it would be a mistake 
if Congress did not build on its success.
  This is especially true for Federal investment in small business 
research and development. Despite report after report demonstrating 
that small businesses innovate at a greater rate than large firms, 
small businesses only receive less than four percent of all Federal 
research and development dollars. This number has remained essentially 
unchanged for the past 22 years. Increasing funds for the STTR Program 
sends a strong message that the Federal Government acknowledges the 
contributions that small businesses have made and will continue to make 
to government research and development efforts and to our nation's 
economy.
  I am pleased that my colleague Senator Kerry and I have worked 
together on this bi-partisan legislation. It is a good bill for the 
small business high-technology community and will ensure that our 
Federal research and development needs are well met in the next decade. 
When this bill is debated by the full Senate, I trust that it will 
receive the support of all of our colleagues.
  Ms. CANTWELL. Mr. President, research and development has been a 
fundamental driver of the growth of our economy. It is critical that we 
continue significant investment in R&D and improve commercialization of 
the research undertaken at our non-profit institutions.
  I thank the Small Business Committee ranking member John Kerry and 
Chairman Christopher Bond for taking a leadership role in reauthorizing 
the Small Business Technology Transfer program. The program is a 
companion to the very successful Small Business Innovation Research 
(SBIR) program which funds R&D projects undertaken by small businesses. 
Under the STTR program, the U.S. Departments of Defense, Energy, and 
Health and Human Services, the National Aeronautics and Space 
Administration, and the National Science Foundation must set-aside .15 
percent of their research dollars for award to small high technology 
firms that partner with non-profit research institutions.
  The STTR program is scheduled to expire on September 30, 2001. The 
Kerry-Bond bill, entitled the Small Business Technology Transfer 
Program Reauthorization Act of 2001, extends the program until 2010. In 
addition to extending the STTR program it gradually increases the 
percentage of Federal R&D funding going to the program from .15 percent 
to .5 percent over 9 years. There is also a provision to encourage 
agencies to increase outreach to small business and universities to 
promote the STTR Program.
  Many of our most successful businesses in the changing economy were 
only recently small businesses. Going back only 25 years, one of my 
State's largest employers, Microsoft, was a small business. Even today, 
many of the innovators driving the rapid industrial evolution work in 
small businesses. But the risk and expense of conducting serious R&D 
efforts can be beyond the means of many of these businesses.
  On the other side of the equation, the commercial value of non-profit 
research often remains unrealized because there are not adequate 
opportunities to bring researchers together with those who could best 
make the research into a marketable product.
  This program fills a very important need by bringing together the 
capabilities of our non-profit research institutions with the 
entrepreneurial spirit of our small businesses. The program holds great 
promise as one way to meet the scientific and technological challenges 
of our changing economy. And this program has already been successful 
throughout the United States. In my state alone over the past 5 years, 
52 grants have been awarded for work in biotechnology, medicine, fluid 
mechanics, chemistry, electronics and computer technologies. I am very 
pleased to be able to lend my support to this program and look forward 
to this bill moving rapidly into law.

                          ____________________