[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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