[Congressional Record Volume 165, Number 7 (Monday, January 14, 2019)]
[House]
[Pages H526-H528]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               ENCOURAGING SMALL BUSINESS INNOVATION ACT

  Ms. VELAZQUEZ. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 206) to amend the small business laws to create certain 
requirements with respect to the SBIR and STTR program, and for other 
purposes.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                                H.R. 206

       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 ``Encouraging Small Business 
     Innovation Act''.

     SEC. 2. INCLUSION OF TESTING AND EVALUATION IN THE DEFINITION 
                   OF RESEARCH AND DEVELOPMENT.

       Section 9(e)(5) of the Small Business Act (15 U.S.C. 
     638(e)(5)) is amended--
       (1) by redesignating subparagraphs (A), (B), and (C) as 
     clauses (i), (ii), and (iii), respectively (and conforming 
     the margins accordingly);
       (2) by striking ``means any activity which is'' and 
     inserting the following: ``means--
       ``(A) any activity which is--''; and
       (3) in clause (iii), as so redesignated, by adding ``and'' 
     after the semicolon at the end; and
       (4) by adding at the end the following new subparagraph:
       ``(B) any testing or evaluation in connection with such an 
     activity;''.

     SEC. 3. INCLUSION OF SMALL BUSINESS INVESTMENT COMPANIES IN 
                   SBIR AND STTR.

       Section 9 of the Small Business Act (15 U.S.C. 638) is 
     amended--
       (1) by striking ``or private equity firm investment'' each 
     place such term appears and inserting ``private equity firm, 
     or SBIC investment'';
       (2) by striking ``or private equity firms'' and inserting 
     ``private equity firms, or SBICs'';
       (3) in subsection (e)--
       (A) in paragraph (12)(B), by striking ``and'' at the end;
       (B) in paragraph (13)(B), by striking the period at the end 
     and inserting ``; and''; and
       (C) by adding at the end the following new paragraph:
       ``(14) the term `SBIC' means a small business investment 
     company as defined in section 103 of the Small Business 
     Investment Act of 1958.''; and
       (4) in the heading for subsection (dd), by striking ``or 
     Private Equity Firms'' and inserting ``Private Equity Firms, 
     or SBICs''.

     SEC. 4. CALCULATION OF LEVERAGE OF SMALL BUSINESS INVESTMENT 
                   COMPANIES THAT INVEST IN SBIR OR STTR 
                   PARTICIPANTS.

       Section 303(b)(2) of the Small Business Investment Act of 
     1958 (15 U.S.C. 683(b)(2)) is amended by adding at the end 
     the following new subparagraph:
       ``(E) Investments in sbir and sttr participants.--
       ``(i) In general.--Subject to clause (ii), in calculating 
     the outstanding leverage of a company for purposes of 
     subparagraph (A), the Administrator shall exclude the amount 
     of any investment made in a SBIR or STTR participant, if such 
     investment is made in the first fiscal year after the date of 
     enactment of this subparagraph or any fiscal year thereafter 
     by a company licensed during the applicable fiscal year.
       ``(ii) Limitations.--

       ``(I) Amount of exclusion.--The amount excluded under 
     clause (i) for a company shall not exceed 33 percent of the 
     private capital of that company.
       ``(II) Maximum investment.--A company shall not make an 
     investment in any one SBIR or STTR participant in an amount 
     equal to more than 20 percent of the private capital of that 
     company.
       ``(III) Other terms.--The exclusion of amounts under clause 
     (i) shall be subject to such terms as the Administrator may 
     impose to ensure that there is no cost (as that term is 
     defined in section 502 of the Federal Credit Reform Act of 
     1990 (2 U.S.C. 661a)) with respect to purchasing or 
     guaranteeing any debenture involved.

       ``(iii) Definitions.--In this subparagraph, the term `SBIR 
     or STTR participant' means a small business concern that 
     receives contracts or grants pursuant to section 9 of the 
     Small Business Act.''.

     SEC. 5. ENCOURAGING PARTICIPATION IN THE MENTOR-PROTEGE 
                   PROGRAM.

       Section 9 of the Small Business Act (15 U.S.C. 638) is 
     amended by adding at the end the following:
       ``(tt) Encouraging Participation in the Mentor-Protege 
     Program.--The Administrator shall provide an increase to the 
     past performance rating of any small business concern that 
     has participated in the SBIR or STTR program that serves as a 
     mentor under section 45 to a small business concern that 
     seeks to participate in the SBIR or STTR program.''.

     SEC. 6. ANNUAL MEETING FOR FEDERAL AGENCIES WITH A SBIR OR 
                   STTR PROGRAM.

       (a) In General.--Section 9 of the Small Business Act (15 
     U.S.C. 638), as amended by section 3, is further amended by 
     adding at the end the following new subsection:
       ``(uu) Annual Meeting.--
       ``(1) In general.--The head of each Federal agency required 
     to have a program under this section (or a designee) and the 
     Administrator (or a designee) shall meet annually to discuss 
     methods--
       ``(A) to improve the collection of data under this section;
       ``(B) to improve the reporting of data to the Administrator 
     under this section;
       ``(C) to make the application processes for programs under 
     this section more efficient; and
       ``(D) to increase participation in the programs under this 
     section.
       ``(2) Reporting.--Not later than 60 days after the date on 
     which an annual meeting required under paragraph (1) is held, 
     the Administrator shall submit to the Committee on Small 
     Business and Entrepreneurship of the Senate, and the 
     Committee on Small Business and the Committee on Science, 
     Space, and Technology of the House of Representatives, a 
     report on the findings of such meeting and recommendations on 
     how to implement changes to programs under this section.''.
       (b) Funding for Annual Meeting.--Section 9(mm)(1) of the 
     Small Business Act (15 U.S.C. 638(mm)(1)) is amended--
       (1) in subparagraph (I), by striking the ``and'' at the 
     end;
       (2) in subparagraph (J), by striking the period at the end 
     and inserting ``; and''; and
       (3) by adding at the end the following new subparagraph:
       ``(K) the annual meeting required under subsection (uu).''.

     SEC. 7. INCREASING PARTICIPATION OF UNDERSERVED POPULATIONS 
                   IN THE SBIR AND STTR PROGRAMS.

       (a) In General.--Section 9(mm)(2) of the Small Business Act 
     (15 U.S.C. 638(mm)(2)) is amended to read as follows:
       ``(2) Outreach and technical assistance.--A Federal agency 
     participating in the program under this subsection shall use 
     a portion of the funds authorized for uses under paragraph 
     (1) to carry out the policy directive required under 
     subsection (j)(2)(F) and to increase the participation of 
     States with respect to which a low level of SBIR awards have 
     historically been awarded.''.
       (b) Conforming Amendment.--Section 9(mm)(6) of the Small 
     Business Act (15 U.S.C. 638(mm)(6)) is amended by striking 
     ``paragraph (2)(A) and any use of the waiver authority under 
     paragraph (2)(B)'' and inserting ``paragraph (2)''.
  The SPEAKER pro tempore. Pursuant to the rule, the gentlewoman from 
New York (Ms. Velazquez) and the gentleman from Ohio (Mr. Chabot) each 
will control 20 minutes.
  The Chair recognizes the gentlewoman from New York.


                             General Leave

  Ms. VELAZQUEZ. Mr. Speaker, I ask unanimous consent that all Members 
may have 5 legislative days in which to revise and extend their remarks 
and include extraneous material on the measure under consideration.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentlewoman from New York?
  There was no objection.
  Ms. VELAZQUEZ. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, I rise in support of H.R. 206, the Encouraging Small 
Business Innovation Act of 2019. For almost 40 years, our Nation has 
experienced increased innovation and job creation through the Small 
Business Innovation Research program and the Small Business Technology 
Transfer program.
  As a direct result of these programs, breakthroughs have been made in 
a wide range of sectors, from agriculture,

[[Page H527]]

to energy, and most notably, healthcare. Research conducted by SBIR and 
STTR awardees has helped address our country's most important 
technological and research-based challenges while generating tremendous 
economic growth and employment opportunities.
  These programs encourage small firms, where much of today's cutting-
edge ideas are born, to explore their potential while also providing 
the incentive to profit from its commercialization.
  Yet, as with any program, improvements can be made to further 
strengthen the program and its impact on our economy.
  By incentivizing more experienced SBIR and STTR firms to mentor newer 
companies and rewarding mentors through a past-performance rating 
increase, Congressman Rouda's legislation, H.R. 206, positively 
promotes integrating these program participants into the larger Federal 
marketplace.
  Just as we are concerned with the broader ability of SBIR and STTR 
firms to compete more broadly, it is important to ensure the 
participation of all businesses within the program. Just like with 
geography, when it comes to demographics, it is important that the SBIR 
and STTR are serving all entrepreneurs.
  This measure requires participating agencies to use part of their 
SBIR allocation to conduct outreach to minorities and underrepresented 
States by removing the waiver of this requirement from the statute. 
Doing so, guarantees that a wide range of ideas are provided the 
opportunity to thrive.

                              {time}  1630

  Finally, H.R. 206 requires an annual summit of these agencies to 
share best practices to improve data collection and streamline 
processes across the programs. As a result, I believe this bill is 
crucial to modernizing the program and preserving our Nation's 
competitiveness.
  Mr. Speaker, I urge Members to support this legislation, and I 
reserve the balance of my time.
  Mr. CHABOT. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise in support of H.R. 206, the Encouraging Small 
Business Innovation Act.
  I want to commend Mr. Rouda on his work to improve the Small Business 
Innovation Research program and the Small Business Technology Transfer 
program, or SBIR and STTR as they are more commonly known.
  These critical programs provide exceptionally innovative small firms 
with the kick-start they need to develop the next big thing and turn 
their companies from small businesses into large ones. These 
innovations have saved lives on the battlefield, in the hospital room, 
and made immeasurable advancements in communication technology and 
countless other improvements to technologies we all use on a daily 
basis.
  Among other things, this straightforward bill updates and harmonizes 
the definition of research and development in the Small Business Act, 
providing an avenue for more experienced SBIR companies to mentor newer 
companies, and improves oversight.
  Furthermore, this bill encourages collaboration and sharing of best 
practices among Federal agencies to enhance the efficacy of the SBIR 
and STTR programs. Federal agencies housing these programs would be 
required to meet annually to discuss potential data collection and 
reporting process improvements, ideas to increase small business 
participation, and will be required to update Congress on the outcomes 
and recommendations arising from these meetings.
  Mr. Speaker, I urge my colleagues to support this legislation, and I 
reserve the balance of my time.
  Ms. VELAZQUEZ. Mr. Speaker, I yield 3 minutes to the gentleman from 
California (Mr. Rouda), who is the author of this bill.
  Mr. ROUDA. Mr. Speaker, I rise in support of H.R. 206, the 
Encouraging Small Business Innovation Act.
  The Small Business Innovation Research program, or SBIR, and the 
Small Business Technology Transfer program, or STTR, were established 
to spur innovation and job creation throughout the country. Since their 
inception, these programs have awarded over $40 billion to small 
innovative firms, including $34 million in California's 48th District. 
Together, these programs are some of the Federal Government's largest 
technology development programs.
  For many research companies in my district and around the country, 
these two programs serve as a gateway to the Federal contracting field. 
The continued success of these programs depends on three primary 
factors:
  First, the program must remain highly competitive;
  Second, applicants and awardees must have access to financing of all 
types, including venture capital;
  Third, we must ensure these products make it to the market.
  But the lack of competitiveness and diversity continue to raise 
questions, with the participation of women-owned and minority-owned 
firms in these programs declining.
  According to the Small Business Administration's annual report for 
fiscal year 2013, only 15 percent of total award dollars went to women-
owned small businesses, and only 10 percent to socially or economically 
disadvantaged small and HUBZone-certified small businesses.
  This bill addresses both issues by requiring participating agencies 
to use part of their SBIR allocation to conduct outreach to minorities 
and underrepresented States by removing the waiver of this requirement 
from statute.
  To address the need for outside financing, this bill includes small 
business investment companies in the SBIR and STTR programs as possible 
investors and increases the capital levels that can be invested by 
private investors.
  Finally, H.R. 206 also provides an avenue for more experienced SBIR 
and STTR companies to mentor newer companies. It is clear that the SBIR 
and STTR programs have promoted our shared goal of fostering 
innovation, but we must continue to provide vigilant oversight of these 
programs to ensure their maximum effectiveness.
  Mr. Speaker, I include in the Record a letter of support from the 
Small Business Investor Alliance.

                             Small Business Investor Alliance,

                                                 January 14, 2019.
     Hon. Harley Rouda,
     House of Representatives,
     Washington, DC.
       Dear Representative Rouda: Since 1958, the Small Business 
     Investor Alliance (SBIA) has been the voice of Small Business 
     Investment Companies (SBICs). We write in support of H.R. 
     206, the Encouraging Small Business Innovation Act, which is 
     being considered by the House of Representatives today. The 
     bill is a simple, modest improvement to the Small Business 
     Investment Act of 1958 that would encourage more investment 
     in job-creating American small businesses.
       SBICs are highly-regulated private funds that invest 
     exclusively in domestic small businesses, with at least 25% 
     of their investments in even smaller enterprises. The nearly 
     $28 billion SBIC debenture program is a market-driven 
     platform that serves an important public purpose of 
     facilitating private investment in domestic small businesses. 
     After raising private capital and successfully navigating a 
     rigorous licensing process, a licensed SBIC is permitted to 
     access a line of credit (leverage) to increase the amount of 
     capital to be invested in domestic small businesses. 
     Generally, the ratio of leverage to private capital is a 
     little less than 2:1, with some strategies utilizing an even 
     lower leverage ratio. With the private capital in a first-
     loss position, a modest leverage ratio, and the benefits of 
     the portfolio effect, the program operates by law at zero 
     subsidy, further exhibiting effective protection for the 
     American taxpayer. As a testament to the underlying structure 
     of the SBIC program, it is one of the few government programs 
     that was able to continue to operate at zero subsidy through 
     the Great Recession.
       H.R. 206 seeks to encourage more investment in Small 
     Business Innovation Research (SBIR) and Small Business 
     Technology Transfer (STTR) companies. The stated mission of 
     the SBIR and STTR programs is to ``support scientific 
     excellence and technological innovation through the 
     investment of Federal research funds in critical American 
     priorities to build a strong national economy.'' Both 
     programs seek to increase private sector commercialization of 
     innovations arising out of federal research and development. 
     H.R. 206 would include SBICs in SBIR and STTR and would allow 
     SBICs to exclude a percentage of their SBIR and STTR 
     investments from their leverage calculation, with the goal of 
     spurring more investment in technology and innovation.
       H.R 206 would make thoughtful improvements to the SBIC 
     program and thereby help domestic small businesses. SBIA 
     thanks you for your leadership on this legislation and for 
     your commitment to expanding economic opportunity in America. 
     We look forward to working with you during the 116th Congress

[[Page H528]]

     to continue strengthening the SBIC program.
           Sincerely,
                                                     Brett Palmer,
                      President, Small Business Investor Alliance.

  Mr. ROUDA. Mr. Speaker, in closing, I want to thank Chairwoman 
Velazquez for her support and leadership of innovative small business. 
I also want to thank Representative Espaillat for his work on this 
issue in the last Congress, and I urge Members to support this 
legislation.
  Mr. CHABOT. Mr. Speaker, I yield myself the balance of my time to 
close.
  Mr. Speaker, the SBIR and STTR programs are often the first place 
small innovative companies come to do business with the Federal 
Government. They are widely popular here on Capitol Hill, in the 
administration, and in the industrial base as well. They provide that 
initial kick-start of funding for ideas that could change the world, 
literally, for the better.
  Mr. Speaker, the reforms contained in H.R. 206 make it easier for 
those ideas to become a reality. Therefore, I urge my colleagues to 
support this bipartisan legislation, and I yield back the balance of my 
time.
  Ms. VELAZQUEZ. Mr. Speaker, I yield myself the balance of my time to 
close.
  Mr. Speaker, I want to thank the gentleman from California (Mr. 
Rouda) for introducing today's bill to increase the assistance to SBIR 
and STTR firms.
  Since their inception, over $40 billion in awards have been made, 
proving their success as a funding source for small innovative firms.
  As we have done before, we must ensure the longevity of the program 
by guaranteeing it reflects modern R&D practices. It must also optimize 
participation through mentorship incentives and Phase 3 awards, in 
addition to including small business investment companies in the SBIR 
and STTR programs to stimulate investment.
  This bill achieves this goal and guarantees the program meets the 
needs of our next generation of SBIR and STTR firms. H.R. 206 makes 
certain that the program remains a catalyst for not just innovation, 
but also the economic empowerment and job creation that is associated 
with these scientific advances.
  Mr. Speaker, I urge Members to support this bill, and I yield back 
the balance of my time.
  Mr. ESPAILLAT. Mr. Speaker, I want to thank the new Chair of the 
House Small Business Committee Congresswoman Nydia Velazquez for her 
leadership on this issue and for working with me during the 115th 
Congress when the Encouraging Small Business Innovation Act first 
passed in the House. I also want to congratulate Congressman Rouda on 
his success in moving this issue forward in the 116th Congress and 
thank him for his commitment to spur innovation and address the issue 
of underrepresentation of minorities in the small business community.
  The Encouraging Small Business Innovation Act is thoughtful and 
constructive legislation. Even in this modern day, we have heard from 
many minority and women-owned small businesses that they continue to 
face institutional challenges to growing their businesses. A 2013 
report commissioned by the Small Business Administration found that 
women-owned small businesses do not have equal access to capital from 
the private sector as compared to their male peers. Furthermore, the 
Small Business Administration's own Office of Advocacy has said that, 
``There are fewer minority-owned businesses representing high-patenting 
industries than in all industries.''
  Through the Small Business Innovation Research (SBIR) and Small 
Business Technology Transfer (STTR) programs, the Small Business 
Administration works with partners in eleven federal agencies ranging 
from the Department of Agriculture to NASA to support small businesses, 
especially those that are owned by members of identified disadvantaged 
communities. While these programs have made some headway in encouraging 
innovation and entrepreneurship among women and many minority 
communities, this vital investment can only be used for research and 
development. There is no consideration given for testing and 
evaluation, an extremely resource-heavy task for small businesses. What 
good is a product or a method when you don't know if it works 
effectively or efficiently? The Small Business Innovation Act addresses 
this problem by including ``testing'' and ``evaluation'' among the 
activities for which SBIR and STTR applicants can seek funding. This 
will empower more underrepresented entrepreneurs to develop new 
products, expand upon new ideas, and gain respected external 
validators.
  The Small Business Innovation Act also includes a number of other 
provisions that I believe will significantly help expand 
entrepreneurship in underserved communities. For example, the bill 
incentivizes mentorship with previous SBIR- and STTR-recipient 
companies that have found success in the programs to impart their 
knowledge and share their experience. It also welcomes investment by 
Small Business Investment Companies into SBIR and STTR projects, which 
will increase the investment of capital from more diverse streams of 
funding. The bill also prioritizes data collection and reporting, 
ensuring that evaluation of the program leads to increased efficiency 
and additional participation. Finally, and most importantly, the bill 
makes explicit commitments to increasing the participation of 
underserved populations in the small business community.
  So again, I thank my colleague, Mr. Rouda, and Chairwoman Velazquez 
for taking up this important cause and I congratulate them both on a 
job well done.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentlewoman from New York (Ms. Velazquez) that the House suspend the 
rules and pass the bill, H.R. 206.
  The question was taken; and (two-thirds being in the affirmative) the 
rules were suspended and the bill was passed.
  A motion to reconsider was laid on the table.

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