    [House Report 111-190]
    [From the U.S. Government Publishing Office]

    111th Congress                                            Rept. 111-190
                            HOUSE OF REPRESENTATIVES
     1st Session                                                     Part 2

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

          ENHANCING SMALL BUSINESS RESEARCH AND INNOVATION ACT OF 2009

                                    _______

      July 7, 2009.--Committed to the Committee of the Whole House on the
                  State of the Union and ordered to be printed

                                    _______

    Mr. Gordon of Tennessee, from the Committee on Science and Technology,
                            submitted the following

                                  R E P O R T

                                 together with

                            [To accompany H.R. 2965]

          [Including cost estimate of the Congressional Budget Office]

        The Committee on Science and Technology, to whom was
    referred the bill (H.R. 2965) to amend the Small Business Act
    with respect to the Small Business Innovation Research Program
    and the Small Business Technology Transfer Program, and for
    other purposes, having considered the same, report favorably
    thereon with an amendment and recommend that the bill as
    amended do pass.

                                    CONTENTS

                                                                       Page
       I. Bill............................................................2
      II. Purpose of the Bill............................................11
     III. Background and Need for Legislation............................11
      IV. Hearing Summaries..............................................13
       V. Committee Actions..............................................15
      VI. Summary of Major Provisions....................................16
     VII. Section-by-Section Analysis (by Title and Section).............16
    VIII. Committee Views................................................22
      IX. Cost Estimate..................................................23
       X. Congressional Budget Office Cost Estimate......................24
      XI. Compliance with Public Law 104-4...............................27
     XII. Committee Oversight Findings and Recommendations...............27
    XIII. Statement on General Performance Goals and Objectives..........27
     XIV. Constitutional Authority Statement.............................27
      XV. Federal Advisory Committee Statement...........................27
     XVI. Congressional Accountability Act...............................27
    XVII. Statement on Preemption of State, Local, or Tribal Law.........27
    XVIII.Earmark Identification.........................................27

     XIX. Changes in Existing Law Made by the Bill, as Reported..........28
      XX. Committee Recommendations......................................40
     XXI. Proceedings of the Full Committee Markup.......................40

                                    I. Bill

      The amendment is as follows:
      Strike all after the enacting clause and insert the
    following:

    SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

      (a) Short Title.--This Act may be cited as the ``Enhancing Small
    Business Research and Innovation Act of 2009''.
      (b) Table of Contents.--The table of contents for this Act is as
    follows:

    Sec. 1. Short title; table of contents.

       TITLE I--PROGRAM EXTENSION AND VENTURE CAPITAL OPERATING COMPANY
                                  INVOLVEMENT

    Sec. 101. Extension of termination dates.
    Sec. 102. Ensuring that innovative small businesses with substantial
    investment from venture capital operating companies are able to
    participate in the SBIR and STTR programs.

     TITLE II--COMMERCIALIZATION ACTIVITIES AND RESEARCH TOPICS DESERVING
                             SPECIAL CONSIDERATION

    Sec. 201. Focus on commercialization.
    Sec. 202. Inclusion of energy-related research topics and rare disease-
    related research topics as deserving ``special consideration'' as SBIR
    research topics.
    Sec. 203. Nanotechnology-related research topics.
    Sec. 204. Clarifying the definition of ``Phase Three''.
    Sec. 205. Agency research goals.
    Sec. 206. Commercialization programs.

                   TITLE III--RURAL DEVELOPMENT AND OUTREACH

    Sec. 301. Outreach and support activities.
    Sec. 302. Rural preference.
    Sec. 303. Obtaining SBIR applicant's consent to release contact
    information to economic development organizations.
    Sec. 304. Increased partnerships between SBIR awardees and prime
    contractors, venture capital investment companies, and larger
    businesses.

                      TITLE IV--SBIR AND STTR ENHANCEMENT

    Sec. 401. Increased number of research topic solicitations annually and
    shortened period for final decisions on applications.
    Sec. 402. Agencies should fund vital R&D projects with the potential
    for commercialization.
    Sec. 403. Federal agency engagement with SBIR awardees that have been
    awarded multiple Phase One awards but have not been awarded Phase Two
    awards.
    Sec. 404. Funding for administrative, oversight, and contract
    processing costs.
    Sec. 405. Comptroller general audit of how Federal agencies calculate
    extramural research budgets.
    Sec. 406. Agency databases to support program evaluation.
    Sec. 407. Agency databases to support technology utilization.
    Sec. 408. Interagency Policy Committee.
    Sec. 409. National Research Council SBIR Study.
    Sec. 410. Express authority to ``fast-track'' Phase Two awards for
    promising Phase One research.
    Sec. 411. Increased SBIR and STTR award levels.
    Sec. 412. Express authority for an agency to award sequential Phase Two
    awards for SBIR-funded projects.
    Sec. 413. First phase required.

       TITLE I--PROGRAM EXTENSION AND VENTURE CAPITAL OPERATING COMPANY
                                  INVOLVEMENT

    SEC. 101. EXTENSION OF TERMINATION DATES.

      (a) SBIR.--Section 9(m) of the Small Business Act (15 U.S.C. 638(m))
    is amended by striking ``2008'' and inserting ``2011''.
      (b) STTR.--Section 9(n)(1)(A) of the Small Business Act (15 U.S.C.
    638(n)(1)(A)) is amended by striking ``2009'' and inserting ``2011''.

    SEC. 102. ENSURING THAT INNOVATIVE SMALL BUSINESSES WITH SUBSTANTIAL
                        INVESTMENT FROM VENTURE CAPITAL OPERATING COMPANIES
                        ARE ABLE TO PARTICIPATE IN THE SBIR AND STTR
                        PROGRAMS.

      Section 9 of the Small Business Act (15 U.S.C. 638) is amended by
    adding at the end the following:
      ``(aa) Venture Capital Operating Companies.--Effective only for the
    SBIR and STTR programs the following shall apply:
              ``(1) A business concern that has more than 500 employees
            shall not qualify as a small business concern.
              ``(2) In determining whether a small business concern is
            independently owned and operated under section 3(a)(1) or meets
            the small business size standards instituted under section
            3(a)(2), the Administrator shall not consider a business
            concern to be affiliated with a venture capital operating
            company (or with any other business that the venture capital
            operating company has financed) if--
                      ``(A) the venture capital operating company does not
                    own 50 percent or more of the business concern; and
                      ``(B) employees of the venture capital operating
                    company do not constitute a majority of the board of
                    directors of the business concern.
              ``(3) A business concern shall be deemed to be `independently
            owned and operated' if--
                      ``(A) it is owned in majority part by one or more
                    natural persons or venture capital operating companies;
                      ``(B) there is no single venture capital operating
                    company that owns 50 percent or more of the business
                    concern; and
                      ``(C) there is no single venture capital operating
                    company the employees of which constitute a majority of
                    the board of directors of the business concern.
              ``(4) If a venture capital operating company controlled by a
            business with more than 500 employees (in this paragraph
            referred to as a `VCOC under large business control') has an
            ownership interest in a small business concern that is owned in
            majority part by venture capital operating companies, the small
            business concern is eligible to receive an award under the SBIR
            or STTR program only if--
                      ``(A) not more than two VCOCs under large business
                    control have an ownership interest in the small
                    business concern; and
                      ``(B) the VCOCs under large business control do not
                    collectively own more than 20 percent of the small
                    business concern.
              ``(5) The term `venture capital operating company' means a
            business concern--
                      ``(A) that--
                              ``(i) is a Venture Capital Operating Company,
                            as that term is defined in regulations
                            promulgated by the Secretary of Labor; or
                              ``(ii) is an entity that--
                                      ``(I) is registered under the
                                    Investment Company Act of 1940 (15
                                    U.S.C. 80a-51 et seq.); or
                                      ``(II) is an investment company, as
                                    defined in section 3(c)(1) of such Act
                                    (15 U.S.C. 80a-3(c)(1)), which is not
                                    registered under such Act because it is
                                    beneficially owned by less than 100
                                    persons; and
                      ``(B) that is itself organized or incorporated and
                    domiciled in the United States, or is controlled by a
                    business concern that is incorporated and domiciled in
                    the United States.''.

     TITLE II--COMMERCIALIZATION ACTIVITIES AND RESEARCH TOPICS DESERVING
                             SPECIAL CONSIDERATION

    SEC. 201. FOCUS ON COMMERCIALIZATION.

      Section 9(a) of the Small Business Act (15 U.S.C. 638(a)) is amended
    by adding at the end the following: ``It is further the policy of
    Congress that the programs established in this section should focus on
    promoting research and development of projects governed by commercial
    business plans, which have significant potential to produce products or
    services for the marketplace or for acquisition by Federal agencies.''.

    SEC. 202. INCLUSION OF ENERGY-RELATED RESEARCH TOPICS AND RARE DISEASE-
                        RELATED RESEARCH TOPICS AS DESERVING ``SPECIAL
                        CONSIDERATION'' AS SBIR RESEARCH TOPICS.

      Section 9(g)(3) of the Small Business Act (15 U.S.C. 638(g)(3)) is
    amended--
              (1) in the matter preceding subparagraph (A) by inserting
            after ``critical technologies'' the following: ``or pressing
            research priorities'';
              (2) in subparagraph (A) by striking ``or'' at the end; and
              (3) by adding at the end the following:
                      ``(C) the National Academy of Sciences, in the final
                    report issued by the `America's Energy Future:
                    Technology Opportunities, Risks, and Tradeoffs'
                    project, and in subsequent reports issued by the
                    National Academy of Sciences on sustainability, energy,
                    and alternative fuels;
                      ``(D) the National Institutes of Health, in the
                    annual report on the rare diseases research activities
                    of the National Institutes of Health for fiscal year
                    2005, and in subsequent reports issued by the National
                    Institutes of Health on rare diseases research
                    activities; or
                      ``(E) the National Academy of Sciences, in the final
                    report issued by the `Transit Research and Development:
                    Federal Role in the National Program' project and the
                    `Transportation Research, Development and Technology
                    Strategic Plan (2006-2010)' issued by the United States
                    Department of Transportation Research and Innovative
                    Technology Administration, and in subsequent reports
                    issued by the National Academy of Sciences and United
                    States Department of Transportation on transportation
                    and infrastructure;''.

    SEC. 203. NANOTECHNOLOGY-RELATED RESEARCH TOPICS.

      (a) SBIR.--Section 9(g)(3) of the Small Business Act (15 U.S.C.
    638(g)(3)), as amended, is further amended--
              (1) in subparagraph (D) by striking ``or'' at the end;
              (2) in subparagraph (E) by adding ``or'' at the end; and
              (3) by adding at the end the following:
                      ``(F) the national nanotechnology strategic plan
                    required under section 2(c)(4) of the 21st Century
                    Nanotechnology Research and Development Act (15 U.S.C.
                    7501(c)(4)) and in subsequent reports issued by the
                    National Science and Technology Council Committee on
                    Technology, focusing on areas of nanotechnology
                    identified in such plan;''.
      (b) STTR.--Section 9(o)(3) of the Small Business Act (15 U.S.C.
    638(o)(3)) is amended--
              (1) in subparagraph (A) by striking ``or'' at the end;
              (2) in subparagraph (B) by adding ``or'' at the end; and
              (3) by adding at the end the following:
                      ``(C) by the national nanotechnology strategic plan
                    required under section 2(c)(4) of the 21st Century
                    Nanotechnology Research and Development Act (15 U.S.C.
                    7501(c)(4)) and in subsequent reports issued by the
                    National Science and Technology Council Committee on
                    Technology, focusing on areas of nanotechnology
                    identified in such plan;''.

    SEC. 204. CLARIFYING THE DEFINITION OF ``PHASE THREE''.

      Section 9(e) of the Small Business Act (15 U.S.C. 638(e)) is
    amended--
              (1) in paragraph (4)(C) in the matter preceding clause (i) by
            inserting after ``a third phase'' the following: ``, which
            shall consist of work that derives from, extends, or logically
            concludes efforts performed under prior SBIR funding agreements
            (which may be referred to as `Phase III')'';
              (2) in paragraph (8) by striking ``and'' at the end;
              (3) in paragraph (9) by striking the period at the end and
            inserting ``; and''; and
              (4) by adding at the end the following:
              ``(10) the term `commercialization' means the process of
            developing marketable products or services and producing and
            delivering products or services for sale (whether by the
            originating party or by others) to government or commercial
            markets.''.

    SEC. 205. AGENCY RESEARCH GOALS.

      Section 9 of the Small Business Act (15 U.S.C. 638), as amended, is
    further amended by striking subsection (h) and inserting the following:
      ``(h) Agency Research Goals.--
              ``(1) In general.--In addition to the requirements of
            subsection (f), each Federal agency that is required by this
            section to have an SBIR program and that awards annually
            $5,000,000,000 or more in procurement contracts shall,
            effective for fiscal year 2010 and each fiscal year thereafter,
            establish annual goals for commercialization of projects funded
            by SBIR awards.
              ``(2) Specific goals.--The goals required by paragraph (1)
            shall include specific goals for each of the following:
                      ``(A) The percentage of SBIR projects that receive
                    funding for the third phase (as defined in subsection
                    (e)(4)(C)).
                      ``(B) The percentage of SBIR projects that are
                    successfully integrated into a program of record.
                      ``(C) The amount of Federal dollars received by SBIR
                    projects through Federal contracts, not including
                    dollars received through the SBIR program.
              ``(3) Submission to committees.--For each fiscal year for
            which goals are required by paragraph (1), the agency shall
            submit to the Committee on Small Business and the Committee on
            Science and Technology of the House of Representatives and the
            Committee on Small Business and Entrepreneurship of the
            Senate--
                      ``(A) not later than 60 days after the beginning of
                    the fiscal year, the goals; and
                      ``(B) not later than 90 days after the end of the
                    fiscal year, data on the extent to which the goals were
                    met and a description of the methodology used to
                    collect such data.''.

    SEC. 206. COMMERCIALIZATION PROGRAMS.

      Section 9 of the Small Business Act (15 U.S.C. 638) as amended, is
    further amended, by adding at the end the following:
      ``(bb) Commercialization Programs.--
              ``(1) In general.--Each agency required by this section to
            conduct an SBIR program shall establish a commercialization
            program that supports the progress of SBIR awardees to the
            third phase. The commercialization program may include
            activities such as partnership databases, partnership
            conferences, multiple second phases, mentoring between prime
            contractors and SBIR awardees, multiple second phases with
            matching private investment requirements, jumbo awards, SBIR
            helpdesks, and transition assistance programs. The agency shall
            include in its annual report an analysis of the various
            activities considered for inclusion in the commercialization
            program and a statement of the reasons why each activity
            considered was included or not included, as the case may be.
              ``(2) Funding for commercialization programs.--
                      ``(A) In general.--From amounts made available to
                    carry out this paragraph, the Administrator may, on
                    petition by agencies required by this section to
                    conduct an SBIR program, transfer funds to such
                    agencies to support the commercialization programs of
                    such agencies.
                      ``(B) Petitions.--The Administrator shall establish
                    rules for making transfers under subparagraph (A). The
                    initial set of rules shall be promulgated not later
                    than 90 days after the date of the enactment of this
                    paragraph.
                      ``(C) Authorization of appropriations.--There is
                    authorized to be appropriated to the Administrator to
                    carry out this paragraph $27,500,000 for fiscal year
                    2010 and each fiscal year thereafter.
              ``(3) Funding limitation.--For payment of expenses incurred
            to administer the commercialization programs described in
            paragraphs (1) and (2), the head of an agency may use not more
            than an amount equal to 1 percent of the funds set aside for
            the agency's Small Business Innovation Research program. Such
            funds--
                      ``(A) shall not be subject to the limitations on the
                    use of funds in subsection (f)(2); and
                      ``(B) shall not be used for the purpose of funding
                    costs associated with salaries and expenses of
                    employees of the Federal Government.''.

                   TITLE III--RURAL DEVELOPMENT AND OUTREACH

    SEC. 301. OUTREACH AND SUPPORT ACTIVITIES.

      Section 9 of the Small Business Act (15 U.S.C. 638), as amended, is
    further amended by inserting after subsection (r) the following:
      ``(s) Outreach and Support Activities.--
              ``(1) In general.--Subject to the other provisions of this
            subsection, the Administrator shall make grants on a
            competitive basis to organizations, to be used by the
            organizations to do one or both of the following:
                      ``(A) To conduct outreach efforts to increase
                    participation in the programs under this section.
                      ``(B) To provide application support and
                    entrepreneurial and business skills support to
                    prospective participants in the programs under this
                    section.
              ``(2) Authorization of appropriations.--There is authorized
            to be appropriated to the Administrator $10,000,000 to carry
            out paragraph (1) for each of fiscal years 2010 and 2011.
              ``(3) Amount of assistance.--For each of subparagraphs (A)
            and (B) of paragraph (1), the amount of assistance provided to
            an organization under that subparagraph in any fiscal year--
                      ``(A) shall be equal to the total amount of matching
                    funds from non-Federal sources provided by the
                    organization; and
                      ``(B) shall not exceed $250,000.
              ``(4) Direction.--An organization receiving funds under
            paragraph (1) shall, in using those funds, direct its
            activities at one or both of the following:
                      ``(A) Small business concerns located in geographic
                    areas that are underrepresented in the programs under
                    this section.
                      ``(B) Small business concerns owned and controlled by
                    women, small business concerns owned and controlled by
                    service-disabled veterans, and small business concerns
                    owned and controlled by minorities.
              ``(5) Advisory board.--
                      ``(A) Establishment.--Not later than 90 days after
                    the date of the enactment of this subsection, the
                    Administrator shall establish an advisory board for the
                    activities carried out under this subsection.
                      ``(B) Non-applicability of faca.--The Federal
                    Advisory Committee Act (5 U.S.C. App.) shall not apply
                    to the advisory board.
                      ``(C) Members.--The members of the advisory board
                    shall include the following:
                              ``(i) The Administrator (or the
                            Administrator's designee).
                              ``(ii) For each Federal agency required by
                            this section to conduct an SBIR program, the
                            head of the agency (or the designee of the head
                            of the agency).
                              ``(iii) Representatives of small business
                            concerns that are current or former recipients
                            of SBIR awards, or representatives of
                            organizations of such concerns.
                              ``(iv) Representatives of service providers
                            of SBIR outreach and assistance, or
                            representatives of organizations of such
                            service providers.
                      ``(D) Duties.--The advisory board shall have the
                    following duties:
                              ``(i) To develop guidelines for awards under
                            paragraph (1), including guidelines relating to
                            award sizes, proposal requirements, measures
                            for monitoring awardee performance, and
                            measures for determining the overall value of
                            the activities carried out by the awardees.
                              ``(ii) To identify opportunities for
                            coordinated outreach, technical assistance, and
                            commercialization activities among Federal
                            agencies, the recipients of the awards under
                            paragraph (1), and applicants and recipients of
                            SBIR awards, including opportunities such as--
                                      ``(I) podcasting or webcasting for
                                    conferences, training workshops, and
                                    other events;
                                      ``(II) shared online resources to
                                    match prospective applicants with the
                                    network of paragraph (1) recipients;
                                    and
                                      ``(III) venture capital conferences
                                    tied to technologies and sectors that
                                    cross agencies.
                              ``(iii) To review and recommend revisions to
                            activities under paragraph (1).
                              ``(iv) To submit to the Committee on Small
                            Business and Entrepreneurship of the Senate and
                            the Committee on Small Business and the
                            Committee on Science and Technology of the
                            House of Representatives an annual report on
                            the activities carried out under paragraph (1)
                            and the effectiveness and impact of those
                            activities.
              ``(6) Selection criteria.--In awarding grants under this
            subsection, the Administrator shall use selection criteria
            developed by the advisory board established under paragraph
            (5). The criteria shall include--
                      ``(A) criteria designed to give preference to
                    applicants who propose to carry out activities that
                    will reach either an underperforming geographic area or
                    an underrepresented population group (as measured by
                    the number of SBIR applicants);
                      ``(B) criteria designed to give preference to
                    applicants who propose to carry out activities that
                    complement, and are integrated into, the existing
                    public-private innovation support system for the
                    targeted region or population;
                      ``(C) criteria designed to give preference to
                    applicants who propose to measure the effectiveness of
                    the proposed activities; and
                      ``(D) criteria designed to give preference to
                    applicants who include a Small Business Development
                    Center program that is accredited for its technology
                    services.
              ``(7) Peer review.--In awarding grants under this subsection,
            the Administrator shall use a peer review process. Reviewers
            shall include--
                      ``(A) SBIR program managers for agencies required by
                    this section to conduct SBIR programs; and
                      ``(B) private individuals and organizations that are
                    knowledgeable about SBIR, the innovation process,
                    technology commercialization, and State and regional
                    technology-based economic development programs.
              ``(8) Per-state limitations.--
                      ``(A) In general.--To be eligible to receive a grant
                    under this subsection, the applicant must have the
                    written endorsement of the Governor of the State where
                    the targeted regions or populations are located (if the
                    regions or populations are located in more than one
                    State, the applicant must have the written endorsement
                    of the Governor of each such State). Such an
                    endorsement must indicate that the Governor will ensure
                    that the activities to be carried out under the grant
                    will be integrated with the balance of the State's
                    portfolio of investments to help small business
                    concerns commercialize technology.
                      ``(B) Limitation.--Each fiscal year, a Governor may
                    have in effect not more than one written endorsement
                    for a grant under paragraph (1)(A), and not more than
                    one written endorsement for a grant under paragraph
                    (1)(B).
              ``(9) Specific requirements for awards.--In making awards
            under paragraph (1) the Administrator shall ensure that each
            award shall be for a period of 2 fiscal years. The
            Administrator shall establish rules and performance goals for
            the disbursement of funds for the second fiscal year, and funds
            shall not be disbursed to a recipient for such a fiscal year
            until after the advisory board established under this
            subsection has determined that the recipient is in compliance
            with the rules and performance goals.''.

    SEC. 302. RURAL PREFERENCE.

      Section 9 of the Small Business Act (15 U.S.C. 638), as amended, is
    further amended by adding at the end the following:
      ``(cc) Rural Preference.--In making awards under this section,
    Federal agencies shall give priority to applications so as to increase
    the number of SBIR and STTR award recipients from rural areas.''.

    SEC. 303. OBTAINING SBIR APPLICANT'S CONSENT TO RELEASE CONTACT
                        INFORMATION TO ECONOMIC DEVELOPMENT ORGANIZATIONS.

      Section 9 of the Small Business Act (15 U.S.C. 638), as amended, is
    further amended by adding at the end the following:
      ``(dd) Consent To Release Contact Information to Organizations.--
              ``(1) Enabling concern to give consent.--Each Federal agency
            required by this section to conduct an SBIR program shall
            enable a small business concern that is an SBIR applicant to
            indicate to the agency whether the agency has its consent to--
                      ``(A) identify the concern to appropriate local and
                    State-level economic development organizations as an
                    SBIR applicant; and
                      ``(B) release the concern's contact information to
                    such organizations.
              ``(2) Rules.--The Administrator shall establish rules to
            implement this subsection. The rules shall include a
            requirement that the agency include in its SBIR application
            forms a provision through which the applicant can indicate
            consent for purposes of paragraph (1).''.

    SEC. 304. INCREASED PARTNERSHIPS BETWEEN SBIR AWARDEES AND PRIME
                        CONTRACTORS, VENTURE CAPITAL INVESTMENT COMPANIES,
                        AND LARGER BUSINESSES.

      Section 9 of the Small Business Act (15 U.S.C. 638), as amended, is
    further amended by adding at the end the following:
      ``(ee) Increased Partnerships.--
              ``(1) In general.--Each agency required by this section to
            conduct an SBIR program shall establish initiatives by which
            the agency encourages partnerships between SBIR awardees and
            prime contractors, venture capital investment companies,
            business incubators, and larger businesses, for the purpose of
            facilitating the progress of the SBIR awardees to the third
            phase.
              ``(2) Definition.--In this subsection, the term `business
            incubator' means an entity that provides coordinated and
            specialized services to entrepreneurial businesses which meet
            selected criteria during the businesses' startup phases,
            including providing services such as shared office space and
            office services, access to equipment, access to
            telecommunications and technology services, flexible leases,
            specialized management assistance, access to financing,
            mentoring and training services, or other coordinated business
            or technical support services designed to provide business
            development assistance to entrepreneurial businesses during
            these businesses' startup phases.''.

                      TITLE IV--SBIR AND STTR ENHANCEMENT

    SEC. 401. INCREASED NUMBER OF RESEARCH TOPIC SOLICITATIONS ANNUALLY AND
                        SHORTENED PERIOD FOR FINAL DECISIONS ON
                        APPLICATIONS.

      (a) Increased Number of Research Topic Solicitations Annually.--
    Section 9(g)(2) of the Small Business Act (15 U.S.C. 638(g)(2)) is
    amended by inserting before the semicolon at the end the following: ``,
    but not less often than twice per year''.
      (b) Shortened Period for Final Decisions on Applications.--Section
    9(g)(4) of the Small Business Act (15 U.S.C. 638(g)(4)) is amended by
    inserting before the semicolon at the end the following: ``, but a
    final decision on each proposal shall be rendered not later than 90
    days after the date on which the solicitation closes unless the
    Administrator determines, on a case by case basis, that a decision may
    be extended from 90 days to 180 days''.

    SEC. 402. AGENCIES SHOULD FUND VITAL R&D PROJECTS WITH THE POTENTIAL
                        FOR COMMERCIALIZATION.

      Section 9 of the Small Business Act (15 U.S.C. 638), as amended, is
    further amended by adding at the end the following:
      ``(ff) Multiple First Phase SBIR Awards Report.--The Administrator
    shall, on an annual basis, submit to the Committee on Small Business
    and the Committee on Science and Technology of the House of
    Representatives and the Committee on Small Business and
    Entrepreneurship of the Senate a list identifying each small business
    concern that, for the period covered by the preceding 5 fiscal years,
    received 15 or more first phase SBIR awards and no second phase SBIR
    awards.''.

    SEC. 403. FEDERAL AGENCY ENGAGEMENT WITH SBIR AWARDEES THAT HAVE BEEN
                        AWARDED MULTIPLE PHASE ONE AWARDS BUT HAVE NOT BEEN
                        AWARDED PHASE TWO AWARDS.

      Section 9 of the Small Business Act (15 U.S.C. 638), as amended, is
    further amended by adding at the end the following:
      ``(gg) Requirements Relating to Federal Agency Engagement With
    Certain First Phase SBIR Awardees.--Each Federal agency required by
    this section to conduct an SBIR program shall engage with SBIR awardees
    that have been awarded multiple first phase SBIR awards but have not
    been awarded any second phase SBIR awards and shall develop performance
    measures with respect to awardee progression in the SBIR program.''.

    SEC. 404. FUNDING FOR ADMINISTRATIVE, OVERSIGHT, AND CONTRACT
                        PROCESSING COSTS.

      Section 9 of the Small Business Act (15 U.S.C. 638), as amended, is
    further amended by adding at the end the following:
      ``(hh) Assistance for Administrative, Oversight, and Contract
    Processing Costs.--
              ``(1) In general.--From amounts made available to carry out
            this subsection, the Administrator may, on petition by Federal
            agencies required by this section to conduct an SBIR program,
            transfer funds to such agencies to assist with the
            administrative, oversight, and contract processing costs
            relating to such program.
              ``(2) Petitions.--The Administrator shall establish rules for
            making transfers under paragraph (1). The initial set of rules
            shall be promulgated not later than 180 days after the date of
            the enactment of this subsection.
              ``(3) Limit on transfer.--A Federal agency may not receive
            under this subsection in a fiscal year an amount greater than 3
            percent of the SBIR budget of such agency for such fiscal year.
              ``(4) Authorization of appropriations.--There is authorized
            to be appropriated to the Administrator to carry out this
            subsection $27,500,000 for each of fiscal years 2010 and
            2011.''.

    SEC. 405. COMPTROLLER GENERAL AUDIT OF HOW FEDERAL AGENCIES CALCULATE
                        EXTRAMURAL RESEARCH BUDGETS.

      The Comptroller General of the United States shall carry out a
    detailed audit of how Federal agencies calculate extramural research
    budgets for purposes of calculating the size of the agencies' Small
    Business Innovation Research Program and Small Business Technology
    Transfer Program budgets. Not later than 1 year after the date of the
    enactment of this Act, the Comptroller General shall submit to the
    Committee on Small Business and the Committee on Science and Technology
    of the House of Representatives and the Committee on Small Business and
    Entrepreneurship of the Senate a report on the results of the audit.

    SEC. 406. AGENCY DATABASES TO SUPPORT PROGRAM EVALUATION.

      Section 9(k) of the Small Business Act (15 U.S.C. 638(k)) is
    amended--
              (1) in paragraph (2)(A)--
                      (A) by striking ``and'' at the end of clause (ii);
                      (B) by inserting ``and'' at the end of clause (iii);
                    and
                      (C) by adding at the end the following new clause:
                              ``(iv) information on the ownership structure
                            of award recipients, both at the time of
                            receipt of the award and upon completion of the
                            award period;'';
              (2) by amending paragraph (3) to read as follows:
              ``(3) Updating information for database.--
                      ``(A) In general.--A Federal agency shall not make a
                    Phase I or Phase II payment to a small business concern
                    under this section unless the small business concern
                    has provided all information required under this
                    subsection and available at the time with respect to
                    the award under which the payment is made, and with
                    respect to any other award under this section
                    previously received by the small business concern or a
                    predecessor in interest to the small business concern.
                      ``(B) Apportionment.--In complying with this
                    paragraph, a small business concern may apportion sales
                    or additional investment information relating to more
                    than one second phase award among those awards, if it
                    notes the apportionment for each award.
                      ``(C) Annual updates upon termination.--A small
                    business concern receiving an award under this section
                    shall--
                              ``(i) in the case of a second phase award,
                            update information in the databases required
                            under paragraphs (2) and (6) concerning that
                            award at the termination of the award period;
                              ``(ii) in the case of award recipients not
                            described in clause (iii), be requested to
                            voluntarily update such information annually
                            thereafter for a period of 5 years; and
                              ``(iii) in the case of a small business
                            concern applying for a subsequent first phase
                            or second phase award, be required to update
                            such information annually thereafter for a
                            period of 5 years.''; and
              (3) by adding at the end the following new paragraph:
              ``(6) Agency program evaluation databases.--Each Federal
            agency required to establish an SBIR or STTR program under this
            section shall develop and maintain, for the purpose of
            evaluating such programs, a database containing information
            required to be contained in the database under paragraph (2).
            Each such database shall be designed to be accessible to other
            agencies that are required to maintain a database under this
            paragraph. Each such database shall be developed and operated
            in a manner to ensure that each such database is relevant to
            and contributes to the agency's oversight and evaluation of the
            SBIR and STTR programs. Paragraphs (4) and (5) apply to each
            database under this paragraph.''.

    SEC. 407. AGENCY DATABASES TO SUPPORT TECHNOLOGY UTILIZATION.

      Section 9(k) of the Small Business Act (15 U.S.C. 638(k)), as
    amended, is further amended by adding at the end the following new
    paragraph:
              ``(7) Agency databases to support technology utilization.--
            Each Federal agency with an SBIR or STTR program shall create
            and maintain a technology utilization database, which shall be
            available to the public and shall contain data supplied by the
            award recipients specifically to help them attract customers
            for the products and services generated under the SBIR or STTR
            project, and to attract additional investors and business
            partners. Each database created under this paragraph shall
            include information on the other databases created under this
            paragraph by other Federal agencies. Participation in a
            database under this paragraph shall be voluntary, except that
            such participation is required of all award recipients who
            received supplemental payments from SBIR and STTR program funds
            above their initial Phase II award. Each database created under
            this paragraph shall be developed and operated in a manner to
            ensure that each such database is relevant to and contributes
            to the agency's oversight and evaluation of the SBIR and STTR
            programs.''.

    SEC. 408. INTERAGENCY POLICY COMMITTEE.

      (a) Establishment.--The Director of the Office of Science and
    Technology Policy shall establish an Interagency SBIR/STTR Policy
    Committee comprised of one representative from each Federal agency with
    an SBIR program and the Office of Management and Budget.
      (b) Cochairs.--The Director of the Office of Science and Technology
    Policy and the Director of the National Institute of Standards and
    Technology shall jointly chair the Interagency SBIR/STTR Policy
    Committee.
      (c) Duties.--The Interagency SBIR/STTR Policy Committee shall review
    the following issues and make policy recommendations on ways to improve
    program effectiveness and efficiency:
              (1) The public and government databases described in section
            9(k) (1) and (2) of the Small Business Act (15 U.S.C. 638(k)
            (1) and (2)).
              (2) Federal agency flexibility in establishing Phase I and II
            award sizes, and appropriate criteria to exercise such
            flexibility.
              (3) Commercialization assistance best practices in Federal
            agencies with significant potential to be employed by other
            agencies, and the appropriate steps to achieve that leverage,
            as well as proposals for new initiatives to address funding
            gaps business concerns face after Phase II but before
            commercialization.
              (4) Development and incorporation of a standard evaluation
            framework to enable systematic assessment of SBIR and STTR,
            including through improved tracking of awards and outcomes and
            development of performance measures for individual agency
            programs.
      (d) Reports.--The Interagency SBIR/STTR Policy Committee shall
    transmit to the Committee on Science and Technology and the Committee
    on Small Business of the House of Representatives, and to the Committee
    on Small Business and Entrepreneurship of the Senate--
              (1) a report on its review and recommendations under
            subsections (c)(1) and (c)(4) not later than 1 year after the
            date of enactment of this Act;
              (2) a report on its review and recommendations under
            subsection (c)(2) not later than 18 months after the date of
            enactment of this Act; and
              (3) a report on its review and recommendations under
            subsection (c)(3) not later than 2 years after the date of
            enactment of this Act.

    SEC. 409. NATIONAL RESEARCH COUNCIL SBIR STUDY.

      Section 108(d) of the Small Business Reauthorization Act of 2000 (15
    U.S.C. 638 note), enacted into law by reference under section 1(a)(9)
    of the Consolidated Appropriations Act, 2001 (Public Law 106-554), is
    amended--
              (1) by striking ``of the Senate'' and all that follows
            through ``not later than 3'' and inserting ``of the Senate, not
            later than 3''; and
              (2) by striking ``; and'' and all that follows through
            ``update of such report''.

    SEC. 410. EXPRESS AUTHORITY TO ``FAST-TRACK'' PHASE TWO AWARDS FOR
                        PROMISING PHASE ONE RESEARCH.

      Section 9 of the Small Business Act (15 U.S.C. 638), as amended, is
    further amended by adding at the end the following:
      ``(ii) Authority To `Fast-track' Phase Two Awards for Promising Phase
    One Research.--To address the delay between an award for the first
    phase of an SBIR program and the application for and extension of an
    award for the second phase of such program, each Federal agency with an
    SBIR program may develop `fast-track' programs to eliminate such delay
    by issuing second phase SBIR awards as soon as practicable, including
    in appropriate cases simultaneously with the issuance of the first
    phase SBIR award. The Administrator shall encourage the development of
    such `fast-track' programs.''.

    SEC. 411. INCREASED SBIR AND STTR AWARD LEVELS.

      (a) SBIR Award Level and Annual Adjustments.--Section 9(j) of the
    Small Business Act (15 U.S.C. 638(j)) is amended by adding at the end
    the following:
      ``(4) Further Additional Modifications.--Not later than 180 days
    after the date of enactment of this paragraph and notwithstanding
    paragraph (2)(D), the Administrator shall modify the policy directives
    issued pursuant to this subsection to provide for an increase to
    $250,000 in the amount of funds which an agency may award in the first
    phase of an SBIR program, and to $2,000,000 in the second phase of an
    SBIR program, and a mandatory annual adjustment of such amounts to
    reflect economic adjustments and programmatic considerations.''.
      (b) STTR Award Level and Annual Adjustments.--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 ``$100,000'' and ``$750,000'' and inserting
            ``$250,000'' and ``$2,000,000'', respectively; and
              (2) by striking ``greater or lesser amounts'' and inserting
            ``with a mandatory annual adjustment of such amounts to reflect
            economic adjustments and programmatic considerations, and with
            lesser amounts''.
      (c) Limitation on Certain Awards.--Section 9 of the Small Business
    Act (15 U.S.C. 638), as amended, is further amended by adding at the
    end the following:
      ``(jj) Limitation on Phase I and II Awards.--No Federal agency shall
    issue an award under the SBIR program or the STTR program if the size
    of the award exceeds the amounts established under subsections (j)(4)
    and (p)(2)(B)(ix).''.

    SEC. 412. EXPRESS AUTHORITY FOR AN AGENCY TO AWARD SEQUENTIAL PHASE TWO
                        AWARDS FOR SBIR-FUNDED PROJECTS.

      Section 9 of the Small Business Act (15 U.S.C. 638), as amended, is
    further amended by adding at the end the following:
      ``(kk) Requirements Relating to Additional Second Phase SBIR
    Awards.--
              ``(1) In general.--A small business concern that receives a
            second phase SBIR award for a project remains eligible to
            receive additional second phase SBIR awards for such project.
              ``(2) Technical or weapons systems.--Agencies are expressly
            authorized to provide additional second phase SBIR awards for
            testing and evaluation assistance for the insertion of SBIR
            technologies into technical or weapons systems.''.

    SEC. 413. FIRST PHASE REQUIRED.

      Section 9 of the Small Business Act (15 U.S.C. 638), as amended, is
    further amended by adding at the end the following:
      ``(ll) First Phase Required.--Under this section, a Federal agency
    shall provide to a small business concern an award for the second phase
    of an SBIR program with respect to a project only if such agency finds
    that the small business concern has been provided an award for the
    first phase of an SBIR program with respect to such project or has
    completed the determinations described in subsection (e)(4)(A) with
    respect to such project despite not having been provided an award for
    the first phase.''.

                            II. Purpose of the Bill

        The purpose of the bill is to reauthorize the Small
    Business Innovation Research (SBIR) Program and the Small
    Business Technology Transfer (STTR) Program at the Small
    Business Administration (SBA) through 2011. The legislation
    also implements a number of policy changes to better reflect
    the competitive environment facing small high-tech businesses.

                    III. Background and Need for Legislation

                                      SBIR

        Congress has demonstrated an ongoing interest in the small
    business sector and has given special consideration to small,
    high tech firms in addressing issues related to economic growth
    and competitiveness. This is for several reasons, including the
    fact that data indicates such companies tend to be highly
    innovative, play a significant role in technological
    advancement, and contribute to a high standard of living in the
    United States. Such was the rationale behind legislation
    creating the SBIR program (P.L. 97-219). Believing that small
    companies were underrepresented in government R&D activities,
    P.L. 97-219 established agency SBIR programs to guarantee this
    sector a portion of the government's research and development
    budget to compensate for what was viewed as a federal
    contracting preference for large corporations.
        Current law requires that every Federal department with an
    extramural R&D budget of $100 million or more establish and
    operate a SBIR program. Generally, a set percentage of that
    agency's extramural research and development budget--currently
    set at 2.5%--is to be used to support mission-related work in
    small companies. To be eligible to compete in the program, a
    company must: (1) be independently owned and operated; (2) not
    be dominant in the field of research proposed; (3) for profit;
    (4) employ 500 or fewer people; (5) be the primary employer of
    the principal investigator; and (6) be at least 51% owned by
    one or more U.S. citizens or lawfully admitted permanent
    resident aliens. Subsidiaries of SBIR-eligible companies are
    also eligible to participate as long as the parent company
    meets all SBIR requirements.
        Agency SBIR efforts involve three phases of activity. In
    the first phase, awards up to $100,000 (for six months) are
    provided to evaluate a concept's scientific or technical merit
    and feasibility. The project must be of interest to, and
    coincide with, the mission of the supporting organization.
    Projects that demonstrate potential after the initial endeavor
    may compete for Phase II awards of up to $750,000 (lasting one
    to two years) to perform the principal R&D. Phase III funding,
    directed at the commercialization of the product or process, is
    expected to be generated in the private sector. Federal
    dollars, but not SBIR funds, may be used if the government
    perceives that the final technology or technique will meet
    public needs. The Small Business Research and Development
    Enhancement Act of 1992 (P.L. 102-564) directed agencies to
    weigh commercial potential as an additional factor in
    evaluating SBIR proposals.
        As of Fiscal Year 2009, 11 departments administer SBIR
    programs, including the Departments of Agriculture, Commerce,
    Defense (DOD), Education, Energy (DOE), Health and Human
    Services (HHS), Homeland Security, and Transportation; the
    Environmental Protection Agency; the National Aeronautics and
    Space Administration (NASA); and the National Science
    Foundation (NSF). Individual departments select R&D interests,
    administer program operations, and control financial support.
    Funding may be disbursed in the form of contracts, grants, or
    cooperative agreements. Separate agency solicitations are
    issued at established times.
        The Small Business Administration has created broad policy
    and guidelines under which individual departments operate SBIR
    programs. The agency monitors and reports to Congress on the
    conduct of the separate departmental activities.

                                      STTR

        A pilot effort to encourage commercialization of university
    and Federal laboratory R&D by small companies was created by
    the Small Business Research and Development Enhancement Act of
    1992 (P.L. 102-564) and reauthorized several times through
    Fiscal Year 2009. The STTR program provides funding for
    research proposals that are developed and executed
    cooperatively between a small firm and a scientist in a
    research organization and fall under the mission requirements
    of the Federal funding agency. Up to $100,000 in Phase I
    financing is available for one year. Phase II awards of up to
    $750,000 may be made for two years. Currently funded by a set-
    aside of 0.3% of the extramural R&D budget of departments that
    spend over $1 billion per year, the DOE, DOD, HHS, NASA, and
    NSF participate in the STTR program.

                                  LEGISLATION

        The SBIR and STTR programs have been extended several times
    and were scheduled to terminate on September 30, 2008. In the
    110th Congress, several bills were introduced to reauthorize
    and alter the initiatives. H.R. 5819, the SBIR/STTR
    Reauthorization Act, passed the House on April 23, 2008, and
    the Senate version (S. 3362) was reported from the Senate
    Committee on Small Business and Entrepreneurship on August 22,
    2008. However, no comprehensive SBIR and STTR reauthorization
    bill was enacted.
        S. 3029, a bill to provide for an additional temporary
    extension of programs under the Small Business Act and the
    Small Business Investment Act of 1958 (P.L. 110-235),
    temporarily extended SBIR activity through March 20, 2009. H.R.
    1541, to provide for an additional temporary extension of
    programs under the Small Business Act and the Small Business
    Investment Act of 1958 (P.L. 111-10), provided another
    extension of the program through July 31, 2009.
        The original statute creating the SBIR program was signed
    into law in 1982. Much has changed in terms of the competitive
    challenges facing American small high-tech entrepreneurs as
    well as the trend of globalization of all aspects of the R&D
    enterprise. Therefore, H.R. 2965 implements a number of
    policies which better reflect the current environment.

                             IV. Hearing Summaries

        The Committee on Science and Technology held four hearings
    on the SBIR and STTR programs over the past three Congresses.
        The Committee held the first hearing in the 109th Congress
    on Tuesday, June 28, 2005. The hearing, entitled Small Business
    Innovation Research: What is the Optimal Role of Venture
    Capital?, focused on the issues associated with awarding SBIR
    grants to small businesses owned, or partly owned, by venture
    capital (VC) firms. The witnesses were: The Honorable Sam
    Graves, Member, U.S. House of Representatives; Ms. Ann Eskesen,
    President of Innovation Technology Institute; Dr. Ron Cohen,
    CEO of Acorda Technologies; Mr. Jonathan Cohen, President and
    CEO of 20/20 Gene Systems; Dr. Carol Nacy, CEO of Sequella
    Inc.; and Dr. Frederic Abramson, President and CEO of
    AlphaGenetics Inc. The witnesses discussed how VC ownership of
    small companies should be treated in the consideration of SBIR
    applications and ways to improve the SBIR program to more
    efficiently promote the development of new technologies and
    help bring them to market. The witnesses were split on whether
    VC-backed companies should be eligible for SBIR funding--half
    of the witnesses were in favor of these companies being
    eligible, arguing that the VC money was used for different
    purposes than the SBIR money, while the remaining witnesses
    supported the existing SBA ruling that makes businesses that
    are majority-owned by venture capitalists ineligible for SBIR
    grants.
        The Committee held a second hearing in the 110th Congress
    on Thursday, April 26, 2007, entitled Small Business Innovation
    Research Reauthorization on the 25th Program Anniversary. This
    hearing focused on the degree to which the current programs
    were meeting their objectives, the adequacy of the award
    levels, strategies to maximize small business participation and
    increase participation by women and minority-owned small
    businesses, the programs' effectiveness in promoting product
    commercialization, covering administrative costs, and the
    appropriate role for VC-backed small businesses. The witnesses
    were: Mr. Bruce J. Held, Director of the Force Development and
    Technology at the RAND Arroyo Center, RAND Corporation; Mr. Jon
    Baron, Executive Director of the Coalition for Evidence-Based
    program Policy at the Council for Excellence in Government; Mr.
    Robert N. Schimdt, Founder and Chairman of Cleveland Medical
    Devices and Orbital Research Inc.; Dr. Gary McGarrity,
    Executive Vice President of Scientific and Clinical Affairs,
    VIRxSYS Corporation; and Mr. Anthony R. Ignagni, President and
    CEO of Synapse Biomedical Inc. The witnesses discussed the
    benefits of the SBIR program, and argued that more flexibility
    in the solicitation and funding process would enhance the
    program. A witness also recommended that the SBIR program
    consider methods to build up entrepreneurial skills. Two of the
    witnesses criticized the SBA ruling barring VC-backed
    businesses from receiving SBIR grants.
        The Committee held a third hearing in the 110th Congress on
    Tuesday, June 26, 2007. The hearing, entitled SBIR and STTR--
    How are the Programs Managed Today?, focused on program trends,
    outreach to encourage new applicants and reach out to a diverse
    pool of applicants, program data and tracking, and the role of
    procurement in enabling commercialization. The witnesses were:
    Mr. Michael J. Caccuitto, SBIR/STTR Program Coordinator at the
    Office of Small Business Programs in DOD; Ms. Jo Anne
    Goodnight, SBIR/STTR Program Coordinator at the Office of
    Extramural Research of the National Institutes of Health (NIH)
    in HHS; Mr. Larry S. James, SBIR and STTR Program Manager and
    Acting Director at the Small Business Research Division in DOE;
    Mr. Doug A. Comstock, Director of the Innovative Partnership
    Program Office at NASA; and Dr. Kesh S. Narayanan, Director of
    the Division of Industrial Innovation and Partnerships in the
    Directorate for Engineering at NSF. The witnesses discussed the
    state of the SBIR and STTR programs in their respective
    departments. Two of the witnesses reported that a balance of
    centralized oversight and decentralized management were key to
    the programs' success. A third witness emphasized the
    importance of program flexibility in fulfilling SBIR and STTR
    goals. A fourth witness cited a recent restructuring of program
    oversight that allowed for a more integrated approach. The
    final witness also reported the programs' overall success, but
    noted that limited funds restricted certain management
    possibilities.
        The Committee held a fourth hearing in the 111th Congress
    on Thursday, April 23, 2009. The hearing, entitled The Role of
    SBIR and STTR Programs in Stimulating Innovation At Small High-
    Tech Businesses, focused on the programs' role in supporting
    innovation at small high-tech firms and how, in turn, this
    promotes the economic welfare of the Nation. The hearing also
    explored the efficiency of the SBIR and STTR programs at
    stimulating innovation at these businesses. The witnesses were:
    Dr. Robert Berdahl, President of the Association of American
    Universities; Mr. Jim Greenwood, President and CEO of the
    Biotechnology Industry Organization; Dr. Sally Rockey, Acting
    Deputy Director for Extramural Research at NIH; and Mr. Jere
    Glover, Attorney and Executive Director for the Small Business
    Technology Council. The witnesses discussed their views on
    updating the rules by which companies qualify for participation
    in the SBIR and STTR programs. Three of the witnesses agreed
    that the programs were generally working well, but argued that
    new legislation was needed to better allow small high-tech
    firms with venture capital backing to participate in SBIR and
    STTR. One of the witnesses emphasized the importance of
    flexibility in the program, while another added that additional
    changes were needed to redefine the process by which the number
    of employees is determined. The final witness disagreed that
    changes were needed to SBIR, but suggested that increased
    funding for the program would be beneficial.

                              V. Committee Actions

                                 111TH CONGRESS

        On June 19, 2009, Representative Jason Altmire, for himself
    and Representatives Wu, Graves, Velazquez, Schock, Nye,
    Halvorson, and Bright, introduced H.R. 2965, the Enhancing
    Small Business Research and Innovation Act of 2009. The bill
    was referred to the Committee on Small Business and the
    Committee on Science and Technology.
        The Committee on Science and Technology met to consider
    H.R. 2965 on June 24, 2009. The Committee considered an
    amendment by Representative Smith of Nebraska to add the Office
    of Management and Budget as a member of the Interagency SBIR/
    STTR Policy Committee. It further added systematic program
    evaluation to the list of issues the Interagency SBIR/STTR
    Policy Committee must review and specified that the committee
    must report on its review and recommendations relating to this
    issue not later than one year after the date of enactment. The
    amendment was agreed to by voice vote. H.R. 2965, as amended,
    was agreed to by voice vote.
        Mr. Gordon moved that the Committee favorably report H.R.
    2965, as amended, to the House with the recommendation that the
    bill do pass. The motion was agreed to by voice vote.

                                 110TH CONGRESS

        On April 15, 2008, Representative Wu, for himself and
    Representatives Baird, Gordon, and Wilson of Ohio, introduced
    H.R. 5789, the Science and Technology Innovation Act of 2008.
    It was referred to the Committee on Small Business and the
    Committee on Science and Technology.
        On April 16, 2008, the Subcommittee on Technology and
    Innovation of the Committee of Science and Technology met to
    consider H.R. 5789. Representative Ehlers offered an amendment
    and Representative Gingrey offered two amendments, none of
    which were adopted. Representative Wilson offered an amendment
    adding nanotechnology-related research to the list of topics to
    receive ``special consideration'' in determining SBIR and STTR
    awards. The amendment was agreed to by voice vote.
    Representative Smith of Nebraska offered an amendment adding a
    section requiring priority be given to SBIR and STTR
    applications from rural areas. The amendment was agreed to by
    voice vote. Mr. Gingrey moved that the Subcommittee favorably
    report H.R. 5789, as amended, to the Full Committee on Science
    and Technology. The motion was agreed to by voice vote.
        On April 16, 2008, Representative Velazquez, for herself
    and Representatives Graves and Sestak, introduced H.R. 5819,
    the SBIR/STTR Reauthorization Act, which incorporated
    provisions from H.R. 5789. H.R. 5819 was referred to the
    Committee on Small Business and the Committee on Science and
    Technology.
        On April 18, 2008, H.R. 5819 was discharged from the
    Committee on Science and Technology. On April 23, 2008, the
    House passed H.R. 5819 by a recorded vote of 368-43.
        On April 24, 2008, H.R. 5819 was received in the Senate and
    referred to the Committee on Small Business and
    Entrepreneurship. No further legislative action was taken on
    H.R. 5819 in the 110th Congress.

                        VI. Summary of Major Provisions

        H.R. 2965 extends the authorization for the SBIR and STTR
    programs through Fiscal Year 2011. It provides that small
    businesses with substantial investment from Venture Capital
    Operating Companies are eligible to participate in the SBIR and
    STTR programs. It adds additional research topics as topics
    deserving special consideration. It requires agencies to
    establish annual goals for commercialization of projects funded
    by SBIR awards and to establish a commercialization program
    that supports the progression of SBIR awardees to the third
    phase. It directs the SBA Administrator to make outreach and
    support grants, and further requires agencies to increase the
    number of award recipients from rural areas.
        H.R. 2965 requires agencies to conduct at least two rounds
    of SBIR research solicitations per year, and render a final
    decision on each proposal within 90 days after the solicitation
    closes. It authorizes funding to assist with the
    administrative, oversight, and contract processing costs
    relating to the SBIR program. It also establishes an
    interagency policy committee to review issues related to the
    SBIR and STTR programs and make policy recommendations. The
    bill further increases the award levels for the SBIR and STTR
    programs for both Phase I and Phase II.

            VII. Section-by-Section Analysis (by Title and Section)

    Sec. 1. Short title; table of contents

        ``Enhancing Small Business Research and Innovation Act of
    2009''

       Title I. Program Extension and Venture Capital Operating Company
                                  Involvement

    Sec. 101. Extension of termination dates

        Amends the Small Business Act to extend through FY2011 the
    SBIR and STTR programs of the SBA.

    Sec. 102. Ensuring that innovative small businesses with substantial
            investment from venture capital operating companies are
            eligible to participate in the SBIR and STTR programs

        Provides that, effective only for the SBIR and STTR
    programs: (1) a business concern that has more than 500
    employees shall not qualify as a small business concern; (2) in
    determining whether a small business concern is independently
    owned and operated, the SBA Administrator shall not consider a
    business concern to be affiliated with a venture capital
    operating company if the venture capital operating company
    (VCOC) does not own 50% or more of the business concern and
    employees of the VCOC do not constitute a majority of the board
    of directors of the business concern; (3) a business concern
    shall be deemed to be independently owned and operated if it is
    owned in majority part by one or more natural persons or VCOCs,
    there is no single VCOC that owns 50% or more of the business
    concern, and there is no single VCOC the employees of which
    constitute a majority of the board of directors of the business
    concern; and (4) if a VCOC controlled by a business with more
    than 500 employees has an ownership interest in a small
    business owned in majority by VCOCs, that small business is
    eligible to receive an SBIR or STTR award only if not more than
    two of such VCOCs have an ownership interest in the small
    business and such VCOCs do not collectively own more than 20%
    of the small business.
        Defines the term ``venture capital operating company''.

     Title II. Commercialization Activities and Research Topics Deserving
                             Special Consideration

    Sec. 201. Focus on commercialization

        Amends section 9 to modify the purpose and policy of the
    SBIR and STTR programs as follows:
        ``It is further the policy of Congress that the purpose of
    the programs established in this section should focus on
    promoting research and the development of projects governed by
    commercial business plans, which have significant potential to
    produce products or services for the marketplace or for
    acquisition by Federal agencies.''

    Sec. 202. Inclusion of energy-related research topics and rare disease-
            related research topics as deserving ``special consideration''
            as SBIR research topics

        Includes energy-related research (as identified by the
    National Academy of Sciences (NAS), in the final report issued
    by the `America's Energy Future: Technology Opportunities,
    Risks, and Tradeoffs' project, and in subsequent reports issued
    by NAS on sustainability, energy, and alternative fuels), rare
    disease-related research (as identified by NIH, in the annual
    report on the rare diseases research activities of NIH for
    fiscal year 2005, and in subsequent reports issued by the NIH
    on rare diseases research activities), and transportation and
    infrastructure research (as identified by the NAS, in the final
    report issued by the `Transit Research and Development: Federal
    Role in the National Program' project and the `Transportation
    Research, Development and Technology Strategic Plan (2006-
    2010)' issued by the United States Department of Transportation
    Research and Innovative Technology Administration, and in
    subsequent reports issued by the NAS and United States
    Department of Transportation on transportation and
    infrastructure) as ``special consideration'' SBIR research
    topics.

    Sec. 203. Nanotechnology-related research topics

        Includes nanotechnology research (as identified by the
    national nanotechnology strategic plan required under section
    2(c)(4) of the 21st Century Nanotechnology Research and
    Development Act and in subsequent reports issued by the
    National Science and Technology Council Committee on
    Technology, focusing on areas of nanotechnology identified in
    such plan) as a ``special consideration'' SBIR and STTR
    research topic.

    Sec. 204. Clarifying the definition of ``Phase Three''

        Clarifies that the ``third phase'' of the SBIR program
    ``shall consist of work that derives, extends, or logically
    concludes efforts performed under prior SBIR funding agreements
    (which may be referred to as `Phase III')''.
        Also provides that the term ``commercialization'' means
    ``the process of developing marketable products or services and
    producing and delivering products or services for sale (whether
    by the originating party or by others) to government or
    commercial markets''.

    Sec. 205. Agency research goals

        Requires agencies with SBIR programs that award annually $5
    billion or more in procurement contracts to establish annual
    goals for commercialization of projects funded by SBIR awards.
    Outlines specific goals required, including: (1) the percentage
    of SBIR projects that receive private sector funds during the
    third phase; (2) the percentage of SBIR projects that are
    integrated into a program of record; and (3) the amount of
    Federal dollars received by SBIR projects through Federal
    contracts, not including dollars received through the SBIR
    program.
        Requires that the goals be reported not later than 60 days
    after the beginning of the fiscal year and the extent to which
    the goals were met and a description of the methodology used to
    collect such data be reported not later than 90 days after the
    end of the fiscal year to the Committee on Small Business and
    the Committee on Science and Technology of the House of
    Representatives and the Committee on Small Business and
    Entrepreneurship of the Senate.

    Sec. 206. Commercialization program

        Requires each agency to establish a commercialization
    program that supports the progression of SBIR awardees to the
    third phase.
        Requires an analysis of the various activities considered
    for inclusion in the commercialization program and a statement
    of the reasons why each activity considered was included or not
    included to be submitted to Congress.
        Authorizes $27.5 million in funding to SBA, to be
    transferred to agencies to support commercialization programs.
    Specifies that agencies may not use more than an amount equal
    to 1% of the funds set aside for the agency's SBIR program to
    administer the commercialization program.

                   Title III. Rural Development and Outreach

    Sec. 301. Outreach and support activities

        Directs the Administrator to make grants on a competitive
    basis to organizations to: (1) conduct outreach efforts to
    increase participation in the programs; and (2) provide
    application support and entrepreneurial and business skills
    support to prospective participants.
        Authorizes $10 million for each of fiscal years 2010 and
    2011 to carry out these outreach and support activities.
        Provides that the amount of assistance provided to an
    organization in any fiscal year shall be equal to the total
    amount of matching funds from non-Federal sources provided by
    the organization and shall not exceed $250,000.
        Requires organizations receiving grants to direct
    activities towards small business concerns located in
    geographic areas that are underrepresented in the programs and/
    or small business concerns owned and controlled by women, by
    service-disabled veterans, and by minorities.
        Requires the Administrator to establish an advisory board
    for outreach and support activities. Members of the advisory
    board shall include the Administrator (or the Administrator's
    designee), the head (or the designee of the head) of each
    Federal agency with an SBIR program, representatives of small
    business concerns that are current or former recipients of SBIR
    awards, and representatives of service providers of SBIR
    outreach and assistance. Assigns the following duties to the
    advisory board: (1) to develop guidelines for outreach awards;
    (2) to identify opportunities for coordinated outreach,
    technical assistance, and commercialization activities among
    Federal agencies, the recipients of the outreach awards, and
    applicants and recipients of SBIR awards; (3) to review and
    recommend revisions to outreach activities; and (4) to submit
    to the Committee on Small Business and Entrepreneurship of the
    Senate and the Committee on Small Business and the Committee on
    Science and Technology of the House of Representatives an
    annual report on outreach activities and the effectiveness and
    impact of those activities.
        Requires the Administrator to use selection criteria
    developed by the advisory board in awarding grants, including
    criteria designed to give preference to applicants who: (1)
    propose to carry out activities that will reach either an
    underperforming geographic area or an underrepresented
    population group; (2) propose to carry out activities that
    complement the existing public-private innovation support
    system for the targeted region or population; (3) propose to
    measure to effectiveness of the proposed activities; and (4)
    include a Small Business Development Center program that is
    accredited for its technology services.
        Specifies that, in awarding grants, the Administrator is to
    use a peer review process.
        States that, to be eligible to receive a grant, the
    applicant must have the written endorsement of the Governor of
    the State where the targeted regions or populations are
    located. Specifies that the endorsement must indicate that the
    Governor will ensure that the activities to be carried out
    under the grant will be integrated with the balance of the
    State's portfolio of investments to help small business
    concerns commercialize technology. Includes a limitation
    stating that, each fiscal year, a Governor may have in effect
    not more than one written endorsement for an outreach grant and
    not more than one written endorsement for a support grant.
        Provides that each award shall be for a period of 2 fiscal
    years.

    Sec. 302. Rural preference

        Requires agencies to give priority to SBIR and STTR award
    applications so as to increase the number of award recipients
    from rural areas.

    Sec. 303. Obtaining SBIR applicant's consent to release contact
            information to economic development organizations

        Requires each agency to enable an SBIR applicant to
    indicate whether the agency has its consent to identify the
    applicant to appropriate local and State-level economic
    development organizations as an applicant and release the
    applicant's contact information to such organizations.

    Sec. 304. Increased partnerships between SBIR awardees and prime
            contractors, venture capital investment companies, and larger
            businesses

        Directs each agency to establish initiatives to encourage
    partnerships between SBIR awardees and prime contractors,
    venture capital investment companies, business incubators, and
    larger businesses in order to facilitate the progress of SBIR
    awardees to the third phase.
        Defines ``business incubator''.

                      Title IV. SBIR and STTR Enhancement

    Sec. 401. Increased number of research topic solicitations annually and
            shortened period for final decisions on applications

        Requires the Administrator to establish by regulation a
    process in which each agency conducts at least two rounds of
    SBIR research solicitations per year, and renders a final
    decision on each proposal within 90 days after the solicitation
    closes (with an authorized extension to 180 days on a case-by-
    case basis).

    Sec. 402. Agencies should fund vital R & D projects with the potential
            for commercialization

        Requires the Administrator to submit annually to the
    Committee on Small Business and the Committee on Science and
    Technology of the House of Representatives and the Committee on
    Small Business and Entrepreneurship of the Senate a list of
    small businesses that, during the previous five-year period,
    received 15 or more first phase SBIR awards and no second phase
    SBIR awards.

    Sec. 403. Federal agency engagement with SBIR awardees that have been
            awarded multiple Phase One awards but have not been awarded
            Phase Two awards

        Requires each agency to engage with SBIR awardees that have
    been awarded multiple first phase awards but no second phase
    awards, and to develop performance measures with respect to
    awardee progression in the SBIR program.

    Sec. 404. Funding for administrative, oversight, and contract
            processing costs

        Authorizes $27.5 million for each of fiscal years 2010 and
    2011 to the Administrator, to be transferred to agencies, to
    assist with the administrative, oversight, and contract
    processing costs relating to the SBIR program. States that an
    agency may not receive in a fiscal year an amount greater than
    3 percent of the SBIR budget of such agency for such fiscal
    year under this subsection.

    Sec. 405. Comptroller General audit of how federal agencies calculate
            extramural research budgets

        Requires the Government Accountability Office (GAO) to
    carry out a detailed audit of how Federal agencies calculate
    extramural research budgets for purposes of calculating the
    size of the agencies' SBIR and STTR budgets.
        Requires that GAO submit a report on the results of the
    audit within 1 year of the date of enactment to the Committee
    on Small Business and the Committee on Science and Technology
    of the House of Representatives and the Committee on Small
    Business and Entrepreneurship of the Senate.

    Sec. 406. Agency databases to support program evaluation

        Requires that the government database for SBIR and STTR
    program evaluation include information on the ownership
    structure of award recipients, both at the time of receipt of
    the award and upon completion of the award period.
        Requires: (1) SBIR and STTR small business participants to
    provide updated information for purposes of updating the
    government database for SBIR and STTR program evaluation; and
    (2) participating agencies to develop and maintain such
    databases.

    Sec. 407. Agency databases to support technology utilization

        Requires each agency to create and maintain a technology
    utilization database, available to the public and containing
    data supplied by award recipients, to help them attract
    customers for the products and services generated under the
    SBIR or STTR project, and to attract additional investors or
    business partners. Participation in a database shall be
    voluntary, except that participation is required of all award
    recipients who received supplemental payments from SBIR and
    STTR program funds above their initial Phase II award.

    Sec. 408. Interagency policy committee

        Requires the Director of OSTP to establish an Interagency
    SBIR/STTR Policy Committee comprised of one representative from
    each Federal agency with an SBIR program. Specifies that the
    Director of OSTP and the Director of the National Institute of
    Standards and Technology shall jointly chair the committee.
        Requires the committee to review the following issues and
    make policy recommendations on ways to improve the program
    effectiveness and efficiency: (1) the public and government
    databases; (2) Federal agency flexibility in establishing Phase
    I and Phase II award sizes; and (3) commercialization
    assistance best practices in Federal agencies with significant
    potential to be employed by other agencies, as well as
    proposals for new initiatives to address funding gaps business
    concerns face after Phase II but before commercialization.
        Requires the committee to transmit to the Committee on
    Science and Technology and the Committee on Small Business of
    the House of Representatives and the Committee on Small
    Business and Entrepreneurship of the Senate reports on the
    issues identified above.

    Sec. 409. National Research Council SBIR study

        Amends the Small Business Reauthorization Act of 2000 to
    remove the requirement that the National Research Council
    provide an updated report on the SBIR program.

    Sec. 410. Express authority to ``fast-track'' Phase Two awards for
            promising Phase One research

        Authorizes agencies to develop fast-track programs to
    eliminate funding delays by issuing Phase Two SBIR awards as
    soon as practicable, including simultaneously with the issuance
    of the Phase One award.
        Requires the Administrator to encourage the development of
    such ``fast-track'' programs.

    Sec. 411. Increased SBIR and STTR award levels

        Increases, for both the SBIR and STTR programs, the
    individual small business award levels from: (1) $100,000 to
    $250,000, for participation at a Phase One level; and (2)
    $750,000 to $2 million, for participation at a Phase Two level.
    Provides for an annual readjustment to these levels to reflect
    economic conditions and programmatic considerations.

    Sec. 412. Express authority for an agency to award sequential Phase Two
            awards for SBIR-funded projects

        States that a small business concern that receives a second
    phase SBIR award for a project remains eligible to receive
    additional second phase SBIR awards for such project.
        States that agencies are expressly authorized to provide
    additional second phase SBIR awards for testing and evaluation
    assistance for the insertion of SBIR technologies into
    technical or weapons systems.

    Sec. 413. First phase required

        States that an agency shall provide to a small business
    concern an award for a second phase of an SBIR program with
    respect to a project only if such agency finds that the small
    business concern has been provided an award for the first phase
    of an SBIR program with respect to such project or has
    completed the determinations described in subsection (e)(4)(A)
    with respect to such project despite not having been provided
    an award for the first phase.

                             VIII. Committee Views

        Innovation is crucial to our economic recovery. Innovation
    by small high-tech businesses creates high-wage jobs and
    stimulates economic growth. Congress must implement policies
    that strengthen small high-tech companies that work on the
    cutting edge of scientific and technological innovation. The
    SBIR and STTR programs do just that. Providing more than $2
    billion, the SBIR and STTR programs provide necessary R&D
    funding to small high-tech firms to develop products for the
    marketplace and assist Federal agencies in their missions
        One of the central issues for the reauthorization of these
    two programs is the issue of the participation of majority-
    owned, venture capital-backed high-tech businesses in these
    programs. During the 109th, 110th, and 111th Congresses, the
    Committee held a series of hearings which explored the positive
    and negative effects of allowing majority venture capital-
    backed firms to participate in the SBIR and STTR programs. For
    the most part, the debate was marked by a lack of data
    supporting the views of proponents or opponents of expanding
    participation.
        Therefore, the Committee was pleased that, on May 2, 2009,
    the National Academy of Sciences released a report, entitled
    ``Venture Capital Funding and the NIH SBIR Program''. In
    essence, the report concludes:
         From 1992 to 2002, there is no indication that
    ``venture-controlled'' firms crowded out non-venture-controlled
    firms. ``Venture-controlled'' firms accounted for only 4.1 to
    11.9 percent of NIH's phase II awards.
         The recent exclusion of ``venture-controlled''
    firms seems to disproportionately affect firms with
    demonstrated potential for significant commercialization.
         Restricting access to SBIR funding for companies
    that benefit from VC investments would risk disproportionately
    affecting some of the smallest innovative businesses. To this
    extent, the current exclusion has the potential to diminish the
    positive impact of the nation's investment in research and
    development, especially in the biomedical area.
         Consideration should be given to either restoring
    the de facto status quo ante (i.e., allowing ``venture-
    controlled firms'') eligibility requirements for participation
    in the SBIR program or to making some other adjustment that
    will permit the limited number of majority-venture-funded firms
    with significant commercial potential to compete for SBIR
    funding.
        Congress relies on NAS to provide it with objective,
    unbiased analysis. H.R. 2965 reflects the analysis of the NAS
    report.
        The Committee also notes that it has worked closely with
    its colleagues on the Committee on Small Business in developing
    this legislation. The Committee has worked in the spirit of
    comity, and believes that the SBIR and STTR programs need to be
    updated to better reflect the challenges facing the American
    small high-tech businesses.

                               IX. Cost Estimate

        A cost estimate and comparison prepared by the Director of
    the Congressional Budget Office under section 402 of the
    Congressional Budget Act of 1974 has been timely submitted to
    the Committee on Science and Technology prior to the filing of
    this report and is included in Section X of this report
    pursuant to House Rule XIII, clause 3(c)(3).
        H.R. 2965 does not contain new budget authority, credit
    authority, or changes in revenues or cost expenditures. H.R.
    2965 does authorize additional discretionary spending, as
    described in the Congressional Budget Office report on the
    bill, which is contained in Section X of this report.

                  X. Congressional Budget Office Cost Estimate

                                                          July 7, 2009.
    Hon. Bart Gordon,
    Chairman, Committee on Science and Technology,
    House of Representatives, Washington, DC.
        Dear Mr. Chairman: The Congressional Budget Office has
    prepared the enclosed cost estimate for H.R. 2965, the
    Enhancing Small Business Research and Innovation Act of 2009.
        If you wish further details on this estimate, we will be
    pleased to provide them. The CBO staff contact is Susan Willie.
                Sincerely,
                                                  Douglas W. Elmendorf.
        Enclosure.

    H.R. 2965--Enhancing Small Business Research and Innovation Act of 2009

        Summary: H.R. 2965 would expand and extend the authority
    for programs that require certain federal agencies to set aside
    portions of their research and development budgets for small
    businesses. The bill also would authorize appropriations to
    improve efforts to develop products funded through those
    programs that can be sold commercially. Finally, the bill would
    require participating agencies to develop databases for program
    evaluation and business development purposes.
        Based on information from the Small Business Administration
    (SBA) and other agencies, CBO estimates that implementing H.R.
    2965 would cost $272 million over the 2010-2014 period, subject
    to appropriation of the necessary amounts. Enacting the bill
    would not affect direct spending or revenues.
        H.R. 2965 contains no intergovernmental or private-sector
    mandates as defined in the Unfunded Mandates Reform Act (UMRA)
    and would impose no costs on state, local, or tribal
    governments.
        Estimated cost to the Federal Government: The estimated
    budgetary impact of H.R. 2965 is shown in the following table.
    The costs of this legislation fall within budget functions 050
    (national defense), 250 (general science, space, and
    technology), 270 (energy), 300 (natural resources and
    environment), 350 (agriculture), 370 (commerce and housing
    credit), 400 (transportation), 500 (education, training,
    employment, and social services), 550 (health), and 750
    (administration of justice).

    ----------------------------------------------------------------------------------------------------------------
                                                                     By fiscal year, in millions of dollars--
                                                             -------------------------------------------------------
                                                                2010     2011     2012     2013     2014   2010-2014
    ----------------------------------------------------------------------------------------------------------------
                                      CHANGES IN SPENDING SUBJECT TO APPROPRIATION

    Reauthorize SBIR/STTR Programs:
        Estimated Authorization Level.......................       33       33       17       17       17       117
        Estimated Outlays...................................       25       32       22       18       17       114
    Commercialization:
        Authorization Level.................................       28       28       28       28       28       140
        Estimated Outlays...................................       21       26       29       28       28       132
    Outreach and Support Activities:
        Authorization Level.................................       10       10        0        0        0        20
        Estimated Outlays...................................        2        5        7        5        1        20
    Additional Agency Activities:
        Estimated Authorization Level.......................        6        0        0        0        0         6
        Estimated Outlays...................................        3        3        0        0        0         6
        Total Changes:
            Estimated Authorization Level...................       77       71       45       45       45       283
            Estimated Outlays...............................       51       66       58       51       46       272
    ----------------------------------------------------------------------------------------------------------------
    Note: SBIR = Small Business Innovation Research; STTR = Small Business Technology Transfer.

        Basis of estimate: Under current law, the Small Business
    Innovation Research (SBIR) program requires federal agencies
    with extramural budgets for research and development (R&D) that
    exceed $100 million per year to set aside 2.5 percent of that
    budget for contracts with small businesses. (Extramural budgets
    are made up of expenditures for activities not performed by
    agency employees.) Likewise, the Small Business Technology
    Transfer (STTR) program requires federal agencies with
    extramural budgets for R&D that exceed $1 billion per year to
    set aside 0.3 percent of that budget for cooperative research
    between small businesses and a federal laboratory or nonprofit
    research institution. Eleven agencies currently participate in
    one or both programs, including the Departments of Defense,
    Health and Human Services, Energy, Agriculture, and Homeland
    Security as well as the National Aeronautics and Space
    Administration, the National Science Foundation, and the
    Environmental Protection Agency.
        The cost of those programs to the participating agencies
    consists primarily of personnel and associated overhead
    expenses to solicit applications, prepare reports, and track
    outcomes. The organizational structures of the program offices
    vary. Some agencies have full-time staff members devoted to the
    SBIR and STTR programs, with other staff assisting as part of
    their duties; other agencies, however, have employees working
    part-time on the program.
        For this estimate, CBO assumes that the bill will be
    enacted near the end of fiscal year 2009 and that the necessary
    funds will be appropriated near the start of each year. Based
    on information from SBA and participating agencies, CBO
    estimates that implementing H.R. 2965 would cost $272 million
    over the 2010-2014 period, assuming appropriation of the
    necessary amounts.

    Reauthorization of the SBIR and STTR programs

        The bill would extend both the SBIR and STTR programs
    through 2011. Under current law, the SBIR program is scheduled
    to terminate on July 31, 2009, and the STTR program is
    scheduled to terminate at the end of fiscal year 2009. H.R.
    2965 would authorize the appropriation of $28 million for each
    of fiscal years 2010 and 2011 for costs associated with the
    SBIR program's administration, oversight, and contract
    processing activities. In addition, we estimate that
    participating agencies would require additional appropriations
    of about $5 million in each of years 2010 and 2011 for similar
    costs of the STTR program. CBO expects that participating
    agencies would continue to incur costs of about $17 million per
    year to administer existing contracts with small businesses for
    several years after the programs would expire in 2011.
        Based on information from SBA and participating agencies,
    CBO estimates that reauthorizing the two programs would cost
    $114 million over the 2010-2014 period, assuming appropriation
    of the necessary amounts. About $9 million of that amount would
    be for administrative costs incurred by the agencies to operate
    the STTR program, and $6 million would be for SBA.

    Commercialization program

        H.R. 2965 would authorize the appropriation of $28 million
    annually for a program to support agency efforts to assist
    small businesses that have received SBIR awards to develop
    products or services that could be sold to the government or in
    commercial markets. SBA would oversee this program--each agency
    participating in the SBIR program would be required to request
    funds from SBA to support its commercialization activities.
    Based on information from SBA and participating agencies, CBO
    estimates that implementing this provision would cost $132
    million over the 2010-2014 period, assuming appropriation of
    the authorized amounts.

    Outreach and support activities

        H.R. 2965 would establish a program to conduct research and
    provide technical assistance to increase the number of small
    businesses participating in the SBIR program. The outreach
    activities would be directed to geographic areas that are
    under-represented in the program and to small businesses owned
    by women, veterans, and minorities. The bill would authorize
    the appropriation of $10 million for each of fiscal years 2010
    and 2011 to implement the program. Based on historical spending
    patterns of SBA's other business assistance programs, CBO
    estimates that implementing this provision would cost $20
    million over the 2010-2014 period, assuming appropriation of
    the authorized amounts.

    Additional agency activities

        H.R. 2965 would require each agency that participates in
    the SBIR or STTR program to collect more information from SBIR
    awardees to be included in a database used by the agency for
    program evaluation. The bill also would require agencies to
    develop a new database, available to the public, that would be
    used to help businesses that receive awards or contracts under
    either program to attract customers for the products or
    services developed with those awards. Based on information from
    the participating agencies, CBO estimates that implementing
    those provisions to create and update databases for each
    participating agency would cost about $6 million over the 2010-
    2014 period.
        Intergovernmental and private-sector impact: H.R. 2965
    contains no intergovernmental or private-sector mandates as
    defined in UMRA. The bill would authorize a program to
    encourage states to assist in the development of high-
    technology small businesses. Any costs to state governments of
    providing matching funds to participate in the program would be
    incurred voluntarily.
        Previous CBO estimates: On July 6, 2009, CBO transmitted an
    estimate for H.R. 2965, the Enhancing Small Business Research
    and Innovation Act of 2009, as reported by the House Committee
    on Small Business on June 26, 2009. The two versions of the
    legislation are nearly identical, and the cost estimates are
    the same.
        On June 22, 2009, CBO transmitted an estimate for S. 1233,
    the SBIR/STTR Reauthorization Act of 2009, as reported by the
    Senate Committee on Small Business and Entrepreneurship on June
    18, 2009. The House legislation differs in several ways from
    the Senate version. Specifically, it would: reauthorize the
    SBIR and STTR programs for a shorter period of time; not
    increase the amount of agency R&D budgets that would be set
    aside for those programs; and authorize a commercialization
    program. S. 1233, however, contains an authorization of
    appropriations for a workforce development program that is not
    included in H.R. 2965. CBO estimates that implementing the
    provisions of S. 1233 would cost $229 million over the 2010-
    2014 period.
        Estimate prepared by: Federal Costs: Susan Willie; Impact
    on State, Local, and Tribal Governments: Elizabeth Cove
    Delisle; Impact on the Private Sector: Jacob Kuipers.
        Estimate approved by: Theresa Gullo, Deputy Assistant
    Director for Budget Analysis.

                      XI. Compliance with Public Law 104-4

        H.R. 2965 contains no unfunded mandates.

             XII. Committee Oversight Findings and Recommendations

        The Committee on Science and Technology's oversight
    findings and recommendations are reflected in the body of this
    report.

          XIII. Statement on General Performance Goals and Objectives

        Pursuant to clause 3(c) of House rule XIII, the goals of
    H.R. 2965 are to modernize the SBIR and STTR programs and make
    them more effective.

                    XIV. Constitutional Authority Statement

        Article I, section 8 of the Constitution of the United
    States grants Congress the authority to enact H.R. 2965.

                    XV. Federal Advisory Committee Statement

        H.R. 2965 does not create any new advisory committees
    subject to the Federal Advisory Committee Act.

                     XVI. Congressional Accountability Act

        The Committee finds that H.R. 2965 does not relate to the
    terms and conditions of employment or access to public services
    or accommodations within the meaning of section 102(b)(3) of
    the Congressional Accountability Act (Public Law 104-1).

          XVII. Statement on Preemption of State, Local, or Tribal Law

        This bill is not intended to preempt any State, local, or
    tribal law.

                         XVIII. Earmark Identification

        H.R. 2965 does not contain any congressional earmarks,
    limited tax benefits, or limited tariff benefits as defined in
    clause 9(d), 9(e), or 9(f) of rule XXI.

           XIX. Changes in Existing Law Made by the Bill, as Reported

      In compliance with clause 3(e) of rule XIII of the Rules of
    the House of Representatives, changes in existing law made by
    the bill, as reported, are shown as follows (existing law
    proposed to be omitted is enclosed in black brackets, new
    matter is printed in italic, existing law in which no change is
    proposed is shown in roman):

    SMALL BUSINESS ACT

               *       *       *       *       *       *       *

      Sec. 9. (a) Research and development are major factors in the
    growth and progress of industry and the national economy. The
    expense of carrying on research and development programs is
    beyond the means of many small-business concerns, and such
    concerns are handicapped in obtaining the benefits of research
    and development programs conducted at Government expense. These
    small-business concerns are thereby placed at a competitive
    disadvantage. This weakens the competitive free enterprise
    system and prevents the orderly development of the national
    economy. Is is the policy of the Congress that assistance be
    given to small-business concerns to enable them to undertake
    and to obtain the benefits of research and development in order
    to maintain and strengthen the competitive free enterprise
    system and the national economy. It is further the policy of
    Congress that the programs established in this section should
    focus on promoting research and development of projects
    governed by commercial business plans, which have significant
    potential to produce products or services for the marketplace
    or for acquisition by Federal agencies.

               *       *       *       *       *       *       *

      (e) For the purpose of this section--
              (1) * * *

               *       *       *       *       *       *       *

              (4) the term ``Small Business Innovation Research
            Program'' or ``SBIR'' means a program under which a
            portion of a Federal agency's research or research and
            development effort is reserved for award to small
            business concerns through a uniform process having--
                      (A) * * *

               *       *       *       *       *       *       *

                      (C) where appropriate, a third phase, which
                    shall consist of work that derives from,
                    extends, or logically concludes efforts
                    performed under prior SBIR funding agreements
                    (which may be referred to as ``Phase III'')--
                              (i)  * * *

               *       *       *       *       *       *       *

              (8) the term ``research institution'' means a
            nonprofit institution, as defined in section 4(5) of
            the Stevenson-Wydler Technology Innovation Act of 1980,
            and includes federally funded research and development
            centers, as identified by the National Scientific
            Foundation in accordance with the governmentwide
            Federal Acquisition Regulation issued in accordance
            with section 35(c)(1) of the Office of Federal
            Procurement Policy Act (or any successor regulation
            thereto); [and]
              (9) the term ``commercial applications'' shall not be
            construed to exclude testing and evaluation of
            products, services, or technologies for use in
            technical or weapons systems, and further, awards for
            testing and evaluation of products, services, or
            technologies for use in technical or weapons systems
            may be made in either the second or the third phase of
            the Small Business Innovation Research Program and of
            the Small Business Technology Transfer Program, as
            defined in this subsection [.]; and
              (10) the term ``commercialization'' means the process
            of developing marketable products or services and
            producing and delivering products or services for sale
            (whether by the originating party or by others) to
            government or commercial markets.

               *       *       *       *       *       *       *

      (g) Each Federal agency required by subsection (f) to
    establish a small business innovation research program shall,
    in accordance with this Act and regulations issued hereunder--
              (1) * * *
              (2) issue small business innovation research
            solicitations in accordance with a schedule determined
            cooperatively with the Small Business Administration,
            but not less often than twice per year;
              (3) unilaterally determine research topics within the
            agency's SBIR solicitations, giving special
            consideration to broad research topics and to topics
            that further 1 or more critical technologies or
            pressing research priorities, as identified by--
                      (A) the National Critical Technologies Panel
                    (or its successor) in the 1991 report required
                    under section 603 of the National Science and
                    Technology Policy, Organization, and Priorities
                    Act of 1976, and in subsequent reports issued
                    under that authority; [or]

               *       *       *       *       *       *       *

                      (C) the National Academy of Sciences, in the
                    final report issued by the ``America's Energy
                    Future: Technology Opportunities, Risks, and
                    Tradeoffs'' project, and in subsequent reports
                    issued by the National Academy of Sciences on
                    sustainability, energy, and alternative fuels;
                      (D) the National Institutes of Health, in the
                    annual report on the rare diseases research
                    activities of the National Institutes of Health
                    for fiscal year 2005, and in subsequent reports
                    issued by the National Institutes of Health on
                    rare diseases research activities;
                      (E) the National Academy of Sciences, in the
                    final report issued by the ``Transit Research
                    and Development: Federal Role in the National
                    Program'' project and the ``Transportation
                    Research, Development and Technology Strategic
                    Plan (2006-2010)'' issued by the United States
                    Department of Transportation Research and
                    Innovative Technology Administration, and in
                    subsequent reports issued by the National
                    Academy of Sciences and United States
                    Department of Transportation on transportation
                    and infrastructure; or
                      (F) the national nanotechnology strategic
                    plan required under section 2(c)(4) of the 21st
                    Century Nanotechnology Research and Development
                    Act (15 U.S.C. 7501(c)(4)) and in subsequent
                    reports issued by the National Science and
                    Technology Council Committee on Technology,
                    focusing on areas of nanotechnology identified
                    in such plan;
              (4) unilaterally receive and evaluate proposals
            resulting from SBIR proposals, but a final decision on
            each proposal shall be rendered not later than 90 days
            after the date on which the solicitation closes unless
            the Administrator determines, on a case by case basis,
            that a decision may be extended from 90 days to 180
            days;

               *       *       *       *       *       *       *

      [(h) In addition to the requirements of subsection (f), each
    Federal agency which has a budget for research or research and
    development in excess of $20,000,000 for any fiscal year
    beginning with fiscal year 1983 or subsequent fiscal year shall
    establish goals specifically for funding agreements for
    research or research and development to small business
    concerns, and no goal established under this subsection shall
    be less than the percentage of the agency's research or
    research and development budget expended under funding
    agreements with small business concerns in the immediately
    preceding fiscal year.]
      (h) Agency Research Goals.--
              (1) In general.--In addition to the requirements of
            subsection (f), each Federal agency that is required by
            this section to have an SBIR program and that awards
            annually $5,000,000,000 or more in procurement
            contracts shall, effective for fiscal year 2010 and
            each fiscal year thereafter, establish annual goals for
            commercialization of projects funded by SBIR awards.
              (2) Specific goals.--The goals required by paragraph
            (1) shall include specific goals for each of the
            following:
                      (A) The percentage of SBIR projects that
                    receive funding for the third phase (as defined
                    in subsection (e)(4)(C)).
                      (B) The percentage of SBIR projects that are
                    successfully integrated into a program of
                    record.
                      (C) The amount of Federal dollars received by
                    SBIR projects through Federal contracts, not
                    including dollars received through the SBIR
                    program.
              (3) Submission to committees.--For each fiscal year
            for which goals are required by paragraph (1), the
            agency shall submit to the Committee on Small Business
            and the Committee on Science and Technology of the
            House of Representatives and the Committee on Small
            Business and Entrepreneurship of the Senate--
                      (A) not later than 60 days after the
                    beginning of the fiscal year, the goals; and
                      (B) not later than 90 days after the end of
                    the fiscal year, data on the extent to which
                    the goals were met and a description of the
                    methodology used to collect such data.

               *       *       *       *       *       *       *

      (j)(1)  * * *

               *       *       *       *       *       *       *

      (4) Further Additional Modifications.--Not later than 180
    days after the date of enactment of this paragraph and
    notwithstanding paragraph (2)(D), the Administrator shall
    modify the policy directives issued pursuant to this subsection
    to provide for an increase to $250,000 in the amount of funds
    which an agency may award in the first phase of an SBIR
    program, and to $2,000,000 in the second phase of an SBIR
    program, and a mandatory annual adjustment of such amounts to
    reflect economic adjustments and programmatic considerations.
      (k) Database.--
              (1) * * *
              (2) Government database.--Not later than 180 days
            after the date of the enactment of the Small Business
            Innovation Research Program Reauthorization Act of
            2000, the Administrator, in consultation with Federal
            agencies required to have an SBIR program pursuant to
            subsection (f)(1) or an STTR program pursuant to
            subsection (n)(1), shall develop and maintain a
            database to be used exclusively for SBIR and STTR
            program evaluation that--
                      (A) contains for each second phase award made
                    by a Federal agency--
                              (i) * * *
                              (ii) information collected in
                            accordance with paragraph (3) on
                            additional investment from any source,
                            other than first phase or second phase
                            SBIR or STTR awards, to further the
                            research and development conducted
                            under the award; [and]
                              (iii) any other information received
                            in connection with the award that the
                            Administrator, in conjunction with the
                            SBIR and STTR program managers of
                            Federal agencies, considers relevant
                            and appropriate; and
                              (iv) information on the ownership
                            structure of award recipients, both at
                            the time of receipt of the award and
                            upon completion of the award period;

               *       *       *       *       *       *       *

              [(3) Updating information for database.--
                      [(A) In general.--A small business concern
                    applying for a second phase award under this
                    section shall be required to update information
                    in the database established under this
                    subsection for any prior second phase award
                    received by that small business concern. In
                    complying with this paragraph, a small business
                    concern may apportion sales or additional
                    investment information relating to more than
                    one second phase award among those awards, if
                    it notes the apportionment for each award.
                      [(B) Annual updates upon termination.--A
                    small business concern receiving a second phase
                    award under this section shall--
                              [(i) update information in the
                            database concerning that award at the
                            termination of the award period; and
                              [(ii) be requested to voluntarily
                            update such information annually
                            thereafter for a period of 5 years.]
              (3) Updating information for database.--
                      (A) In general.--A Federal agency shall not
                    make a Phase I or Phase II payment to a small
                    business concern under this section unless the
                    small business concern has provided all
                    information required under this subsection and
                    available at the time with respect to the award
                    under which the payment is made, and with
                    respect to any other award under this section
                    previously received by the small business
                    concern or a predecessor in interest to the
                    small business concern.
                      (B) Apportionment.--In complying with this
                    paragraph, a small business concern may
                    apportion sales or additional investment
                    information relating to more than one second
                    phase award among those awards, if it notes the
                    apportionment for each award.
                      (C) Annual updates upon termination.--A small
                    business concern receiving an award under this
                    section shall--
                              (i) in the case of a second phase
                            award, update information in the
                            databases required under paragraphs (2)
                            and (6) concerning that award at the
                            termination of the award period;
                              (ii) in the case of award recipients
                            not described in clause (iii), be
                            requested to voluntarily update such
                            information annually thereafter for a
                            period of 5 years; and
                              (iii) in the case of a small business
                            concern applying for a subsequent first
                            phase or second phase award, be
                            required to update such information
                            annually thereafter for a period of 5
                            years.

               *       *       *       *       *       *       *

              (6) Agency program evaluation databases.--Each
            Federal agency required to establish an SBIR or STTR
            program under this section shall develop and maintain,
            for the purpose of evaluating such programs, a database
            containing information required to be contained in the
            database under paragraph (2). Each such database shall
            be designed to be accessible to other agencies that are
            required to maintain a database under this paragraph.
            Each such database shall be developed and operated in a
            manner to ensure that each such database is relevant to
            and contributes to the agency's oversight and
            evaluation of the SBIR and STTR programs. Paragraphs
            (4) and (5) apply to each database under this
            paragraph.
              (7) Agency databases to support technology
            utilization.--Each Federal agency with an SBIR or STTR
            program shall create and maintain a technology
            utilization database, which shall be available to the
            public and shall contain data supplied by the award
            recipients specifically to help them attract customers
            for the products and services generated under the SBIR
            or STTR project, and to attract additional investors
            and business partners. Each database created under this
            paragraph shall include information on the other
            databases created under this paragraph by other Federal
            agencies. Participation in a database under this
            paragraph shall be voluntary, except that such
            participation is required of all award recipients who
            received supplemental payments from SBIR and STTR
            program funds above their initial Phase II award. Each
            database created under this paragraph shall be
            developed and operated in a manner to ensure that each
            such database is relevant to and contributes to the
            agency's oversight and evaluation of the SBIR and STTR
            programs.

               *       *       *       *       *       *       *

      (m) Termination.--The authorization to carry out the Small
    Business Innovation Research Program established under this
    section shall terminate on September 30, [2008] 2011.
      (n) Required Expenditures for STTR by Federal Agencies.--
              (1) Required expenditure amounts.--
                      (A) In general.--With respect to each fiscal
                    year through fiscal year [2009] 2011, 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.

               *       *       *       *       *       *       *

      (o) Federal Agency STTR Authority.--Each Federal agency
    required to establish an STTR program in accordance with
    subsection (n) and regulations issued under this Act, shall--
              (1) * * *

               *       *       *       *       *       *       *

              (3) unilaterally determine research topics within the
            agency's STTR solicitations, giving special
            consideration to broad research topics and to topics
            that further 1 or more critical technologies, as
            identified--
                      (A) by the National Critical Technologies
                    Panel (or its successor) in reports required
                    under section 603 of the National Science and
                    Technology Policy, Organization, and Priorities
                    Act of 1976; [or]
                      (B) by the Secretary of Defense, in
                    accordance with section 2522 of title 10,
                    United States Code; or
                      (C) by the national nanotechnology strategic
                    plan required under section 2(c)(4) of the 21st
                    Century Nanotechnology Research and Development
                    Act (15 U.S.C. 7501(c)(4)) and in subsequent
                    reports issued by the National Science and
                    Technology Council Committee on Technology,
                    focusing on areas of nanotechnology identified
                    in such plan;

               *       *       *       *       *       *       *

      (p) STTR Policy Directive.--
              (1) * * *
              (2) Contents.--The policy directive required by
            paragraph (1) shall provide for--
                      (A) * * *
                      (B) a simplified, standardized funding
                    process that provides for--
                              (i) * * *

               *       *       *       *       *       *       *

                              (ix) 1-year awards for the first
                            phase of an STTR program, generally not
                            to exceed [$100,000] $250,000, and 2-
                            year awards for the second phase of an
                            STTR program, generally not to exceed
                            [$750,000] $2,000,000, [greater or
                            lesser amounts] with a mandatory annual
                            adjustment of such amounts to reflect
                            economic adjustments and programmatic
                            considerations, and with lesser amounts
                            to be awarded at the discretion of the
                            awarding agency, and shorter or longer
                            periods of time to be approved at the
                            discretion of the awarding agency where
                            appropriate for a particular project;

               *       *       *       *       *       *       *

      (s) Outreach and Support Activities.--
              (1) In general.--Subject to the other provisions of
            this subsection, the Administrator shall make grants on
            a competitive basis to organizations, to be used by the
            organizations to do one or both of the following:
                      (A) To conduct outreach efforts to increase
                    participation in the programs under this
                    section.
                      (B) To provide application support and
                    entrepreneurial and business skills support to
                    prospective participants in the programs under
                    this section.
              (2) Authorization of appropriations.--There is
            authorized to be appropriated to the Administrator
            $10,000,000 to carry out paragraph (1) for each of
            fiscal years 2010 and 2011.
              (3) Amount of assistance.--For each of subparagraphs
            (A) and (B) of paragraph (1), the amount of assistance
            provided to an organization under that subparagraph in
            any fiscal year--
                      (A) shall be equal to the total amount of
                    matching funds from non-Federal sources
                    provided by the organization; and
                      (B) shall not exceed $250,000.
              (4) Direction.--An organization receiving funds under
            paragraph (1) shall, in using those funds, direct its
            activities at one or both of the following:
                      (A) Small business concerns located in
                    geographic areas that are underrepresented in
                    the programs under this section.
                      (B) Small business concerns owned and
                    controlled by women, small business concerns
                    owned and controlled by service-disabled
                    veterans, and small business concerns owned and
                    controlled by minorities.
              (5) Advisory board.--
                      (A) Establishment.--Not later than 90 days
                    after the date of the enactment of this
                    subsection, the Administrator shall establish
                    an advisory board for the activities carried
                    out under this subsection.
                      (B) Non-applicability of faca.--The Federal
                    Advisory Committee Act (5 U.S.C. App.) shall
                    not apply to the advisory board.
                      (C) Members.--The members of the advisory
                    board shall include the following:
                              (i) The Administrator (or the
                            Administrator's designee).
                              (ii) For each Federal agency required
                            by this section to conduct an SBIR
                            program, the head of the agency (or the
                            designee of the head of the agency).
                              (iii) Representatives of small
                            business concerns that are current or
                            former recipients of SBIR awards, or
                            representatives of organizations of
                            such concerns.
                              (iv) Representatives of service
                            providers of SBIR outreach and
                            assistance, or representatives of
                            organizations of such service
                            providers.
                      (D) Duties.--The advisory board shall have
                    the following duties:
                              (i) To develop guidelines for awards
                            under paragraph (1), including
                            guidelines relating to award sizes,
                            proposal requirements, measures for
                            monitoring awardee performance, and
                            measures for determining the overall
                            value of the activities carried out by
                            the awardees.
                              (ii) To identify opportunities for
                            coordinated outreach, technical
                            assistance, and commercialization
                            activities among Federal agencies, the
                            recipients of the awards under
                            paragraph (1), and applicants and
                            recipients of SBIR awards, including
                            opportunities such as--
                                      (I) podcasting or webcasting
                                    for conferences, training
                                    workshops, and other events;
                                      (II) shared online resources
                                    to match prospective applicants
                                    with the network of paragraph
                                    (1) recipients; and
                                      (III) venture capital
                                    conferences tied to
                                    technologies and sectors that
                                    cross agencies.
                              (iii) To review and recommend
                            revisions to activities under paragraph
                            (1).
                              (iv) To submit to the Committee on
                            Small Business and Entrepreneurship of
                            the Senate and the Committee on Small
                            Business and the Committee on Science
                            and Technology of the House of
                            Representatives an annual report on the
                            activities carried out under paragraph
                            (1) and the effectiveness and impact of
                            those activities.
              (6) Selection criteria.--In awarding grants under
            this subsection, the Administrator shall use selection
            criteria developed by the advisory board established
            under paragraph (5). The criteria shall include--
                      (A) criteria designed to give preference to
                    applicants who propose to carry out activities
                    that will reach either an underperforming
                    geographic area or an underrepresented
                    population group (as measured by the number of
                    SBIR applicants);
                      (B) criteria designed to give preference to
                    applicants who propose to carry out activities
                    that complement, and are integrated into, the
                    existing public-private innovation support
                    system for the targeted region or population;
                      (C) criteria designed to give preference to
                    applicants who propose to measure the
                    effectiveness of the proposed activities; and
                      (D) criteria designed to give preference to
                    applicants who include a Small Business
                    Development Center program that is accredited
                    for its technology services.
              (7) Peer review.--In awarding grants under this
            subsection, the Administrator shall use a peer review
            process. Reviewers shall include--
                      (A) SBIR program managers for agencies
                    required by this section to conduct SBIR
                    programs; and
                      (B) private individuals and organizations
                    that are knowledgeable about SBIR, the
                    innovation process, technology
                    commercialization, and State and regional
                    technology-based economic development programs.
              (8) Per-state limitations.--
                      (A) In general.--To be eligible to receive a
                    grant under this subsection, the applicant must
                    have the written endorsement of the Governor of
                    the State where the targeted regions or
                    populations are located (if the regions or
                    populations are located in more than one State,
                    the applicant must have the written endorsement
                    of the Governor of each such State). Such an
                    endorsement must indicate that the Governor
                    will ensure that the activities to be carried
                    out under the grant will be integrated with the
                    balance of the State's portfolio of investments
                    to help small business concerns commercialize
                    technology.
                      (B) Limitation.--Each fiscal year, a Governor
                    may have in effect not more than one written
                    endorsement for a grant under paragraph (1)(A),
                    and not more than one written endorsement for a
                    grant under paragraph (1)(B).
              (9) Specific requirements for awards.--In making
            awards under paragraph (1) the Administrator shall
            ensure that each award shall be for a period of 2
            fiscal years. The Administrator shall establish rules
            and performance goals for the disbursement of funds for
            the second fiscal year, and funds shall not be
            disbursed to a recipient for such a fiscal year until
            after the advisory board established under this
            subsection has determined that the recipient is in
            compliance with the rules and performance goals.

               *       *       *       *       *       *       *

      (aa) Venture Capital Operating Companies.--Effective only for
    the SBIR and STTR programs the following shall apply:
              (1) A business concern that has more than 500
            employees shall not qualify as a small business
            concern.
              (2) In determining whether a small business concern
            is independently owned and operated under section
            3(a)(1) or meets the small business size standards
            instituted under section 3(a)(2), the Administrator
            shall not consider a business concern to be affiliated
            with a venture capital operating company (or with any
            other business that the venture capital operating
            company has financed) if--
                      (A) the venture capital operating company
                    does not own 50 percent or more of the business
                    concern; and
                      (B) employees of the venture capital
                    operating company do not constitute a majority
                    of the board of directors of the business
                    concern.
              (3) A business concern shall be deemed to be
            ``independently owned and operated'' if--
                      (A) it is owned in majority part by one or
                    more natural persons or venture capital
                    operating companies;
                      (B) there is no single venture capital
                    operating company that owns 50 percent or more
                    of the business concern; and
                      (C) there is no single venture capital
                    operating company the employees of which
                    constitute a majority of the board of directors
                    of the business concern.
              (4) If a venture capital operating company controlled
            by a business with more than 500 employees (in this
            paragraph referred to as a ``VCOC under large business
            control'') has an ownership interest in a small
            business concern that is owned in majority part by
            venture capital operating companies, the small business
            concern is eligible to receive an award under the SBIR
            or STTR program only if--
                      (A) not more than two VCOCs under large
                    business control have an ownership interest in
                    the small business concern; and
                      (B) the VCOCs under large business control do
                    not collectively own more than 20 percent of
                    the small business concern.
              (5) The term ``venture capital operating company''
            means a business concern--
                      (A) that--
                              (i) is a Venture Capital Operating
                            Company, as that term is defined in
                            regulations promulgated by the
                            Secretary of Labor; or
                              (ii) is an entity that--
                                      (I) is registered under the
                                    Investment Company Act of 1940
                                    (15 U.S.C. 80a-51 et seq.); or
                                      (II) is an investment
                                    company, as defined in section
                                    3(c)(1) of such Act (15 U.S.C.
                                    80a-3(c)(1)), which is not
                                    registered under such Act
                                    because it is beneficially
                                    owned by less than 100 persons;
                                    and
                      (B) that is itself organized or incorporated
                    and domiciled in the United States, or is
                    controlled by a business concern that is
                    incorporated and domiciled in the United
                    States.
      (bb) Commercialization Programs.--
              (1) In general.--Each agency required by this section
            to conduct an SBIR program shall establish a
            commercialization program that supports the progress of
            SBIR awardees to the third phase. The commercialization
            program may include activities such as partnership
            databases, partnership conferences, multiple second
            phases, mentoring between prime contractors and SBIR
            awardees, multiple second phases with matching private
            investment requirements, jumbo awards, SBIR helpdesks,
            and transition assistance programs. The agency shall
            include in its annual report an analysis of the various
            activities considered for inclusion in the
            commercialization program and a statement of the
            reasons why each activity considered was included or
            not included, as the case may be.
              (2) Funding for commercialization programs.--
                      (A) In general.--From amounts made available
                    to carry out this paragraph, the Administrator
                    may, on petition by agencies required by this
                    section to conduct an SBIR program, transfer
                    funds to such agencies to support the
                    commercialization programs of such agencies.
                      (B) Petitions.--The Administrator shall
                    establish rules for making transfers under
                    subparagraph (A). The initial set of rules
                    shall be promulgated not later than 90 days
                    after the date of the enactment of this
                    paragraph.
                      (C) Authorization of appropriations.--There
                    is authorized to be appropriated to the
                    Administrator to carry out this paragraph
                    $27,500,000 for fiscal year 2010 and each
                    fiscal year thereafter.
              (3) Funding limitation.--For payment of expenses
            incurred to administer the commercialization programs
            described in paragraphs (1) and (2), the head of an
            agency may use not more than an amount equal to 1
            percent of the funds set aside for the agency's Small
            Business Innovation Research program. Such funds--
                      (A) shall not be subject to the limitations
                    on the use of funds in subsection (f)(2); and
                      (B) shall not be used for the purpose of
                    funding costs associated with salaries and
                    expenses of employees of the Federal
                    Government.
      (cc) Rural Preference.--In making awards under this section,
    Federal agencies shall give priority to applications so as to
    increase the number of SBIR and STTR award recipients from
    rural areas.
      (dd) Consent To Release Contact Information to
    Organizations.--
              (1) Enabling concern to give consent.--Each Federal
            agency required by this section to conduct an SBIR
            program shall enable a small business concern that is
            an SBIR applicant to indicate to the agency whether the
            agency has its consent to--
                      (A) identify the concern to appropriate local
                    and State-level economic development
                    organizations as an SBIR applicant; and
                      (B) release the concern's contact information
                    to such organizations.
              (2) Rules.--The Administrator shall establish rules
            to implement this subsection. The rules shall include a
            requirement that the agency include in its SBIR
            application forms a provision through which the
            applicant can indicate consent for purposes of
            paragraph (1).
      (ee) Increased Partnerships.--
              (1) In general.--Each agency required by this section
            to conduct an SBIR program shall establish initiatives
            by which the agency encourages partnerships between
            SBIR awardees and prime contractors, venture capital
            investment companies, business incubators, and larger
            businesses, for the purpose of facilitating the
            progress of the SBIR awardees to the third phase.
              (2) Definition.--In this subsection, the term
            ``business incubator'' means an entity that provides
            coordinated and specialized services to entrepreneurial
            businesses which meet selected criteria during the
            businesses' startup phases, including providing
            services such as shared office space and office
            services, access to equipment, access to
            telecommunications and technology services, flexible
            leases, specialized management assistance, access to
            financing, mentoring and training services, or other
            coordinated business or technical support services
            designed to provide business development assistance to
            entrepreneurial businesses during these businesses'
            startup phases.
      (ff) Multiple First Phase SBIR Awards Report.--The
    Administrator shall, on an annual basis, submit to the
    Committee on Small Business and the Committee on Science and
    Technology of the House of Representatives and the Committee on
    Small Business and Entrepreneurship of the Senate a list
    identifying each small business concern that, for the period
    covered by the preceding 5 fiscal years, received 15 or more
    first phase SBIR awards and no second phase SBIR awards.
      (gg) Requirements Relating to Federal Agency Engagement With
    Certain First Phase SBIR Awardees.--Each Federal agency
    required by this section to conduct an SBIR program shall
    engage with SBIR awardees that have been awarded multiple first
    phase SBIR awards but have not been awarded any second phase
    SBIR awards and shall develop performance measures with respect
    to awardee progression in the SBIR program.
      (hh) Assistance for Administrative, Oversight, and Contract
    Processing Costs.--
              (1) In general.--From amounts made available to carry
            out this subsection, the Administrator may, on petition
            by Federal agencies required by this section to conduct
            an SBIR program, transfer funds to such agencies to
            assist with the administrative, oversight, and contract
            processing costs relating to such program.
              (2) Petitions.--The Administrator shall establish
            rules for making transfers under paragraph (1). The
            initial set of rules shall be promulgated not later
            than 180 days after the date of the enactment of this
            subsection.
              (3) Limit on transfer.--A Federal agency may not
            receive under this subsection in a fiscal year an
            amount greater than 3 percent of the SBIR budget of
            such agency for such fiscal year.
              (4) Authorization of appropriations.--There is
            authorized to be appropriated to the Administrator to
            carry out this subsection $27,500,000 for each of
            fiscal years 2010 and 2011.
      (ii) Authority To ``Fast-track'' Phase Two Awards for
    Promising Phase One Research.--To address the delay between an
    award for the first phase of an SBIR program and the
    application for and extension of an award for the second phase
    of such program, each Federal agency with an SBIR program may
    develop ``fast-track'' programs to eliminate such delay by
    issuing second phase SBIR awards as soon as practicable,
    including in appropriate cases simultaneously with the issuance
    of the first phase SBIR award. The Administrator shall
    encourage the development of such ``fast-track'' programs.
      (jj) Limitation on Phase I and II Awards.--No Federal agency
    shall issue an award under the SBIR program or the STTR program
    if the size of the award exceeds the amounts established under
    subsections (j)(4) and (p)(2)(B)(ix).
      (kk) Requirements Relating to Additional Second Phase SBIR
    Awards.--
              (1) In general.--A small business concern that
            receives a second phase SBIR award for a project
            remains eligible to receive additional second phase
            SBIR awards for such project.
              (2) Technical or weapons systems.--Agencies are
            expressly authorized to provide additional second phase
            SBIR awards for testing and evaluation assistance for
            the insertion of SBIR technologies into technical or
            weapons systems.
      (ll) First Phase Required.--Under this section, a Federal
    agency shall provide to a small business concern an award for
    the second phase of an SBIR program with respect to a project
    only if such agency finds that the small business concern has
    been provided an award for the first phase of an SBIR program
    with respect to such project or has completed the
    determinations described in subsection (e)(4)(A) with respect
    to such project despite not having been provided an award for
    the first phase.

               *       *       *       *       *       *       *

                                  ----------

         SECTION 108 OF THE SMALL BUSINESS REAUTHORIZATION ACT OF 2000

    SEC. 108. NATIONAL RESEARCH COUNCIL REPORTS.

      (a) * * *

               *       *       *       *       *       *       *

      (d) Report.--The National Research Council shall transmit to
    the heads of agencies entering into an agreement under this
    section and to the Committee on Science and the Committee on
    Small Business of the House of Representatives, and to the
    Committee on Small Business [of the Senate--
              [(1) not later than 3] of the Senate, not later than
            3 years after the date of the enactment of this Act, a
            report including the results of the study conducted
            under subsection (a)(1) and recommendations made under
            subsection (a)(2)[; and
              [(2) not later than 6 years after that date of the
            enactment, an update of such report].

                         XX. Committee Recommendations

        On June 24, 2009, the Committee on Science and Technology
    favorably reported the Enhancing Small Business Research and
    Innovation Act of 2009, by voice vote and recommended its
    enactment.

        XXI. PROCEEDINGS OF THE FULL COMMITTEE MARKUP ON H.R. 2965, THE
          ENHANCING SMALL BUSINESS RESEARCH AND INNOVATION ACT OF 2009

                                  ----------

                            WEDNESDAY, JUNE 24, 2009

                      House of Representatives,
                                          Committee on Science,
                                                        Washington, DC.

        The Committee met, pursuant to call, at 10:00 a.m., in Room
    2318 of the Rayburn House Office Building, Hon. Bart Gordon
    [Chair of the Committee] presiding.
        Chair Gordon. The Committee will come to order.
        Pursuant to notice, the Committee on Science and Technology
    meets to consider the following measures: H.R. 2965, the
    Enhancing Small Business Research and Innovation Act of 2009;
    H.R. 2729, To authorize the designation of National Environment
    Research Parks by the Secretary of Energy and for other
    purposes; and H.R. 1622, To provide for the programs of
    research, development and demonstration on natural gas
    vehicles.
        Today the Committee is going to mark up three good
    bipartisan pieces of legislation. The first bill, H.R. 2965,
    the Enhancing Small Business Research and Innovation Act, is
    one of the most significant bills the Committee will likely
    address in this Congress. The Small Business Innovation
    Research Program (SBIR) is a more than $2.3 billion federal
    investment in small high-tech businesses that assist them in
    developing commercial products and assist agencies in their
    mission related to research agendas. It is the single largest
    federal program supporting the private sector research
    activities.
        Since its beginning more than 25 years ago, we have learned
    about the significant contributions small high-tech startup
    companies can have to our economy and employment growth. AmGen,
    Apple, Microsoft, Genetech, Research-in-Motion all started as
    small high-tech entrepreneurial firms. In the current economic
    environment, we need to do everything possible to support small
    high-tech entrepreneurs in the United States, which is the goal
    of the SBIR program.
        There is no stronger supporter of the SBIR program than
    Representative David Wu. H.R. 2965 is largely the result of
    hard work by Representative Wu. In the 110th and 111th
    Congress, he has held three Subcommittee hearings on the
    program and he has worked closely with the Small Business
    Committee in crafting this legislation. H.R. 2965 is
    substantially the same bill which passed the House last year
    with only 43 no votes. H.R. 2965 was introduced with strong
    bipartisan support.
        Unfortunately, the SBIR program is operating under rules
    more than 25 years old. H.R. 2965 makes major improvements to
    the SBIR program which reflects the current set of challenges
    confronting our small high-tech entrepreneurs. I strongly
    support this legislation and will work with my counterpart on
    the Small Business Committee to bring it to the Floor as
    quickly as possible. This program is set to expire on July 31,
    so time is of the essence.
        Today we will also consider H.R. 2729, a bill introduced by
    Representative Lujan that will formally authorize the seven
    National Environmental Research Parks supported by the
    Department of Energy (DOE). These parks are a truly unique
    national resource. They provide large tracks of undisturbed
    land that enable long-term research in environmental sciences,
    climate change and for the development and testing of methods
    to clean up past pollution. The parks are located on DOE sites
    in states across the country. They have had bipartisan
    cooperation in making this a good bill, and I hope that you
    will all join me in supporting it.
        Finally, the Committee will consider H.R. 1622, a bill
    introduced by Mr. Sullivan of Oklahoma and co-sponsored by my
    friend from Texas, Mr. Hall, as well as Mr. Lujan and Mr.
    Lucas. This bill reauthorizes the Department of Energy's
    research, development and demonstration program in natural gas-
    powered vehicles and related infrastructure. The vehicle fleet
    of the future will include a diverse range of fuels and vehicle
    technologies, and since it is both cleaner than petroleum and
    domestically available, natural gas will likely play an
    important role in a more sustained transportation sector.
        I hope we can continue to improve these bills in a
    bipartisan manner today, and I look forward to moving to the
    Floor for their final passage.
        I now recognize Mr. Hall to present his opening remarks.
        [The prepared statement of Chair Gordon follows:]
                    Prepared Statement of Chair Bart Gordon
        Today the Committee is going to markup three good, bipartisan
    pieces of legislation. The first bill, H.R. 2965, the Enhancing Small
    Business Research and Innovation Act, is one of the most significant
    bills the Committee will likely address in this Congress.
        The Small Business Innovation Research Program (SBIR) is a more
    than 2.3 billion dollar federal investment in small high-tech
    businesses that assists them in developing commercial products and
    assists agencies in their mission-related research agendas.
        It is the single largest federal program supporting private-sector
    research activities.
        Since its beginning more than 25 years ago, we have learned about
    the significant contributions small high-tech start-up companies can
    have to our economic and employment growth--AmGen, Apple, Microsoft,
    Genetech, and Research-in-Motion all started as small high-tech
    entrepreneurial firms. In the current economic environment we need to
    do everything possible to support small high-tech entrepreneurs in the
    United States, which is the goal of the SBIR program.
        There is no stronger supporter of the SBIR program than
    Representative David Wu. H.R. 2965 is largely the result of hard work
    by Representative Wu. In the 110th and 111th Congresses he has held
    three Subcommittee hearings on the program and has worked closely with
    the Small Business Committee in crafting this legislation. H.R. 2965 is
    substantially the same bill which passed the House last year with only
    43 no votes. H.R. 2965 was introduced with strong bipartisan support.
        Unfortunately, the SBIR program is operating under rules more than
    25 years old. H.R. 2965 makes major improvements to the SBIR program
    which reflect the current set of challenges confronting our small high-
    tech entrepreneurs. I strongly support this legislation and will work
    with my counterpart on the Small Business Committee to bring it to the
    Floor as quickly as possible. This program is set to expire on July 31,
    so time is of the essence.
        Today we will also consider H.R. 2729, a bill introduced by Mr.
    Lujan that will formally authorize the seven National Environmental
    Research Parks supported by the Department of Energy. These parks are a
    truly unique national resource.
        They provide large tracts of undisturbed land that enable long-term
    research in environmental sciences, climate change, and for the
    development and testing of methods to clean up past pollution.
        The Parks are located on DOE sites in states across the country,
    including my home State of Tennessee. We've had bipartisan cooperation
    in making this a good bill, and I hope you will all join me in
    supporting it.
        Finally, the Subcommittee will consider H.R. 1622, a bill
    introduced by Mr. Sullivan of Oklahoma and co-sponsored by my friend
    from Texas, Mr. Hall, as well as Mr. Lujan and Mr. Lucas. This bill
    reauthorizes the Department of Energy's research, development, and
    demonstration program in natural gas powered vehicles and related
    infrastructure.
        The vehicle fleet of the future will include a diverse range of
    fuels and vehicle technologies.
        And since it is both cleaner than petroleum and domestically
    available, Natural gas will likely play an important role in a more
    sustainable transportation sector.
        I hope we can continue to improve these bills in a bipartisan
    manner today, and I look forward to moving to the Floor for final
    passage.
        I now recognize Mr. Hall to present his opening remarks.

        Mr. Hall. Mr. Chair, I thank you, and as you say, today we
    are marking up three bills: H.R. 2965, and the other two bills
    authorizing the designation of National Research Parks by the
    Secretary of Energy and for H.R. 1622 that provides a program
    of research, development and demonstration on natural gas
    vehicles.
        As you ably pointed out, H.R. 2965 extends and makes
    important changes to the Small Business Innovation Research
    Program and the Small Business Technology Transfer Program,
    which as their names indicate, fund innovation and technology
    development of America's small businesses. One of the basic
    purposes of my parroting what you are saying is that I speak
    for myself when I say I support this bill and note that both
    the Committee and the Full House passed a bill very similar to
    this version last year, as you ably pointed out; and I am
    pleased that we are again able to advance this bill in a
    bipartisan fashion, working closely with the Majority as well
    as our counterparts on the Small Business Committee. This has
    allowed us to build a strong legislative record on this
    program, which will serve us well, and we aim to complete Floor
    action and conference negotiations before the program expires
    on July 31.
        H.R. 2729 will authorize and make permanent the existing
    seven National Environmental Research Parks across the country.
    The National Environmental Research Parks are outdoor
    laboratories that provide opportunities for environmental
    studies on protected lands that act as buffers around the
    Department of Energy facilities. I commend Mr. Lujan for his
    dedication on the Parks and for authorizing this legislation. I
    will be offering an amendment to the bill that came about as a
    result of consultation with the Parks and with the Majority
    staff to clarify that the Parks and the sites they are located
    on shall continue to be run as they currently are.
        H.R. 1622 reauthorizes the natural gas vehicle R&D program
    that was created in the 1992 Energy Policy Act. This bill was
    introduced by Representative John Sullivan of Oklahoma and I
    co-sponsor it as does Representative Lucas on this committee.
    On a well-to-wheels basis, natural gas vehicles produce 22
    percent less greenhouse gases than comparable diesel vehicles
    and 29 percent less gasoline vehicles. In 2007, natural gas
    vehicles displaced 250 million gallons of petroleum in the
    United States. In the next 17 years, the industry's goal is to
    grow that to 10 billion gallons. Over 60 percent of the
    petroleum used in America is imported. Much of it is from
    countries that are unstable and do not have the best interests
    of the United States in mind. Meanwhile, almost 98 percent of
    the natural gas used in America is produced in North America,
    85 percent in the U.S. and the rest in Canada. Just last
    Thursday the report by the Potential Gas Committee, the
    authority on gas supplies, shows that the United States holds
    far larger reserves than previously thought, 35 percent more
    than the previous report showed in 2006. Natural gas makes
    sense as a transition fuel, and this bill will help us get more
    natural gas vehicles on the road. I will be offering an
    amendment to H.R. 1622 that will simply clear up some wording
    in order to avoid potential jurisdictional issues.
        And since I have just a little bit of time left, I want to
    yield the balance of my time to Congressman Adrian Smith for
    additional comments on H.R. 2965.
        [The prepared statement of Mr. Hall follows:]
               Prepared Statement of Representative Ralph M. Hall
        Thank you Mr. Chairman. Today we're marking up three bills, H.R.
    2965, the Enhancing Small Business Research and Innovation Act of 2009;
    H.R. 2729, To authorize the designation of National Environmental
    Research Parks by the Secretary of Energy, and for other purposes; and
    H.R. 1622, To provide for a program of research, development, and
    demonstration on natural gas vehicles.
        H.R. 2965 extends and makes important changes to the Small Business
    Innovation Research program (SBIR) and the Small Business Technology
    Transfer program (STTR), which, as their names indicate, fund
    innovation and technology development at America's small businesses. I
    support this bill, and note that both the Committee and the Full House
    passed a very similar version last year. I'm pleased that we're again
    able to advance this bill in a bipartisan fashion, working closely with
    the Majority as well as our counterparts on the Small Business
    Committee. This has allowed us to build a strong legislative record on
    this program, which will serve us well as we aim to complete Floor
    action and conference negotiations before the program expires on July
    31st.
        H.R. 2729 will authorize and make permanent the existing seven
    National Environmental Research Parks across the country. The National
    Environmental Research Parks are outdoor laboratories that provide
    opportunities for environmental studies on protected lands that act as
    buffers around Department of Energy (DOE) facilities. I commend Mr.
    Lujan on his dedication to the Parks and for authoring this
    legislation. I will be offering an amendment to the bill that came
    about as a result of consultation with the Parks and with the Majority
    staff to clarify that the Parks and the sites they are located on shall
    continue to be run as they currently are.
        H.R. 1622 reauthorizes the natural gas vehicle RD&D program that
    was created in the 1992 Energy Policy Act. This bill was introduced by
    Rep. John Sullivan of Oklahoma and is co-sponsored by myself and Rep.
    Lucas on this committee. On a well-to-wheels basis, natural gas
    vehicles produce 22 percent less greenhouse gases than comparable
    diesel vehicles and 29 percent less than gasoline vehicles. In 2007,
    natural gas vehicles displaced 250 million gallons of petroleum in the
    U.S. In the next 17 years, the industry's goal is to grow that to 10
    billion gallons. Over 60 percent of the petroleum used in America is
    imported--much of it from countries that are unstable or do not have
    the best interests of the U.S. in mind. Meanwhile, almost 98 percent of
    the natural gas used in America is produced in North America--85
    percent in the U.S. and the rest in Canada.
        Just last Thursday, the report by the Potential Gas Committee, the
    authority on gas supplies, shows the United States holds far larger
    reserves than previously thought--35 percent more that the previous
    report showed in 2006. Natural gas makes sense as a transition fuel,
    and this bill will help us get more natural gas vehicles on the road. I
    will be offering an amendment to H.R. 1622 that will simply clear up
    some wording in order to avoid potential jurisdictional issues.
        With that I yield back the balance of my time.

        Mr. Smith. Thank you. Thank you, Mr. Chair, Mr. Hall. I am
    pleased to support passage of this legislation, the Enhancing
    Small Research and Innovation Act of 2009. With 11
    participating agencies and total funding in excess of $2.2
    billion, the SBIR and STTR programs reauthorizing this
    legislation are a key component of the federal R&D and
    portfolio serving to facilitate increased private sector
    commercialization of promising ideas, helping the government
    advance its R&D goals and meet its technology needs.
        This legislation makes important improvements to this
    program, most notably by providing statutory clarity to what
    have been changing interpretations of the eligibility of
    majority venture capital-backed small businesses. As we know,
    both this committee and the Small Business Committee have
    considered this issue in detail in recent years and I think the
    growing consensus in support of the legislation's proposed
    changes is a strong indication that they are on target,
    maximizing the eligibility of legitimate small businesses while
    minimizing inappropriate eligibility of large businesses.
        I also want to note my strong support for title III of this
    bill which includes amendment language that I included in the
    legislation last year. The language requires the Small Business
    Administration's outreach efforts aimed at increasing
    participation in SBIR and STTR, give priority to rural areas,
    which tend to have low participation in the programs but are
    nonetheless home to entrepreneurial and innovative small
    business owners who would benefit from increased outreach.
        I thank Chair Gordon, Ranking Member Hall and Chair Wu for
    their leadership on this legislation, and I look forward to
    working with them to ensure we expedite completion of this bill
    before these programs expire at the end of July. Thank you. I
    yield back.
        [The prepared statement of Mr. Smith follows:]
               Prepared Statement of Representative Adrian Smith
        Thank you, Mr. Chairman. I'm pleased to support passage of this
    legislation, the Enhancing Small Business Research and Innovation Act
    of 2009.
        With 11 participating agencies and total funding in excess of $2.2
    billion, the SBIR and STTR programs reauthorized in this legislation
    are a key component of the Federal R&D portfolio, serving to facilitate
    increased private sector commercialization of promising ideas helping
    the government advance its R&D goals and meet its technology needs.
        This legislation makes important improvements to this program, most
    notably by providing statutory clarity to what have been changing
    interpretations of the eligibility of majority venture capital-backed
    small businesses. As we know, both this committee and the Small
    Business Committee have considered this issue in detail in recent
    years, and I think the growing consensus in support of the
    legislation's proposed changes is a strong indication that they are on
    target-maximizing the eligibility of legitimate small businesses while
    minimizing the inappropriate eligibility of large businesses.
        I also want to note my strong support for Title III of this bill,
    which includes amendment language that I included in this legislation
    last year. The language requires the Small Business Administration's
    outreach efforts--aimed at increasing participation in SBIR and STTR--
    give priority to rural areas, which tend to have low participation in
    the programs but are nonetheless home to entrepreneurial and innovative
    small business owners who would benefit from increased outreach.
        I thank Chairman Gordon, Ranking Member Hall, and Chairman Wu for
    their leadership on this legislation and I look forward to working with
    them to ensure we expedite completion of this bill before these
    programs expire at the end of July.
        I yield back.

        Chair Gordon. Members may place statements in the record at
    this point.

             Prepared Statement of Representative Harry E. Mitchell

        Thank you, Mr. Chairman.
        Today we will mark up H.R. 2965, the Enhancing Small Business
    Research and Innovation Act of 2009; H.R. 2729, legislation to
    authorize the designation of National Environmental Research Parks by
    the Secretary of Energy; and H.R. 1622, legislation to provide for a
    program of research, development, and demonstration on natural gas
    vehicles.
        H.R. 2965 would strengthen and refine the Small Business Innovation
    Research (SBIR) Program and promote energy-related research, rare
    disease-related research, and transportation and infrastructure
    projects.
        As small businesses continue to develop and grow in Arizona, the
    SBIR Program has become a vital resource.
        In my district, small businesses have been partnering with Arizona
    State University (ASU) to apply to SBIR grants. Together, they are able
    to conduct comprehensive and groundbreaking research, while also
    ensuring that local businesses stay innovative and competitive.
        I look forward to today's markup of this legislation which I
    believe would enhance technological competition and help spur economic
    growth.
        I yield back.

        Chair Gordon. We will now consider H.R. 2965, the Enhanced
    Small Business Research and Innovation Act of 2009. I recognize
    the gentleman from Oregon to describe his bill.
        Mr. Wu. Thank you very much, Mr. Chair. I want to thank you
    for your generous words and later on perhaps properly allocate
    that credit elsewhere.
        In today's economy, small businesses, where a lot of
    innovation happens, and the Science and Technology Committee
    under your leadership, especially the Technology and Innovation
    Subcommittee, which Mr. Smith and I serve on, intends to
    promote the science and technology research that will drive an
    innovation-based economy and create new high-wage, high-value
    jobs which are not going to go away. At more than $2.3 billion
    per year, the Small Business Innovative Research and Small
    Business Technology Transfer programs comprise the largest
    single source of federal support for technological innovation
    in the private sector. Given the current economic climate, we
    need robust SBIR and STTR programs more than ever to create the
    next generation of companies that will provide high-paying jobs
    and grow our economy.
        These programs originated more than 20 years ago, and given
    the changes that we have seen during the past two decades, we
    need to update these programs to reflect the current economic
    realities of our increasingly competitive innovation economy.
    The Technology and Innovation Subcommittee has held numerous
    hearings on SBIR and STTR in the past several years including
    one as recently as this April. Our witnesses shared many
    recommendations about how SBIR and STTR can be strengthened.
        Recently, H.R. 2965, the Enhancing Small Business Research
    and Innovation Act, was introduced. This bill reauthorizes SBIR
    and STTR through 2011. The bill increases the phase I awards
    from $100,000 to $250,000 and phase II awards from $750,000 to
    $2 million to better reflect the actual costs of doing business
    in high-tech research and development today. It also increases
    the flexibility of the SBIR program by allowing cross-agency
    awards and allowing applicants to apply directly for phase II
    funding and permits recompeted repetitive phase II awards.
        H.R. 2965 allows venture capital, majority venture capital-
    backed small business to once again apply for awards and
    specifically defines their eligibility requirements. There has
    been much debate over the proper role of venture capital
    participation. The National Academies' report released recently
    states clearly that venture capital-backed companies are
    important to technology development and do not crowd out other
    small businesses.
        In addition, the bill expands requirements for agency
    databases of award recipients and improves accessibility
    between various agency databases. This will allow for improved
    future improvement of SBIR as we move to reauthorize in 2011 or
    2012 and improved oversight by Congress.
        H.R. 2965 also establishes an interagency committee co-
    chaired by the Director of the White House Office of Science
    and Technology Policy and the Director of the National
    Institutes of Standards and Technology to report to Congress on
    the best practices for commercialization of SBIR- and STTR-
    funded research.
        In closing, this committee has been a leader in passing
    legislation that advances our innovation agenda. Today we
    continue that leadership by reauthorizing SBIR and STTR. I want
    to thank the Chair for his leadership of this committee, for
    Speaker Pelosi in pushing the innovation agenda, and want to
    specifically recognize staff who have worked very, very hard on
    this legislation over multiple Congresses. I am fond of saying
    that you don't have to be a rocket scientist to serve on the
    House Science Committee but you do have to be a rocket
    scientist to be on staff, and they have done a tremendous job.
    I want to specifically recognize Mike Quear, who has hung with
    this project through thick and thin, and also Dennis Worden of
    my office staff for his fine work on this legislation, and I
    want to urge all my colleagues to support this bill and yield
    back the balance of my time.
        [The prepared statement of Mr. Wu follows:]
                      Prepared Statement of Chair David Wu
        Thank you, Mr. Chairman. In today's economy, small business is
    where innovation happens. The Science and Technology Committee,
    especially the Technology and Innovation Subcommittee, intends to
    promote the science and technology research that drives an innovation-
    based economy.
        At more than $2.3 billion per year, the Small Business Innovation
    Research and Small Business Technology Transfer programs comprise the
    largest source of federal support for technological innovation in the
    private sector. Given the current economic climate, we need robust SBIR
    and STTR programs to create the next generation of companies that will
    provide high-paying jobs and grow our economy.
        However, these programs originated more than 20 years ago. Given
    the economic changes we have seen during the past two decades, we need
    to update these programs to reflect the current economic realities of
    our increasingly competitive innovation economy.
        The Technology and Innovation Subcommittee has held several
    hearings on SBIR and STTR in the past several years, including one as
    recent as April 2009. Our witnesses shared many recommendations about
    how SBIR and STTR can be strengthened.
        Recently, H.R. 2965, the Enhancing Small Business Research and
    Innovation Act, was introduced. This bill reauthorizes the SBIR and
    STTR programs through 2011.
        The bill increases the Phase I awards from $100,000 to $250,000 and
    Phase II awards from $750,000 to $2 million to better reflect the
    actual costs of doing high-tech research. It also increases the
    flexibility of the SBIR program by allowing cross-agency awards and
    allowing applicants to apply directly for Phase II funding.
        H.R. 2965 allows venture capital-backed small businesses to once
    again apply for awards and specifically defines their eligibility
    requirements. There has been much debate over the role of venture
    capital participation, but the National Academies recently released a
    report stating that venture capital-backed companies had a minimal role
    in the programs and did not crowd out other small businesses.
        In addition, the bill expands requirements for agency databases of
    award recipients, requiring inter-operability and accessibility between
    various agency databases. This will allow for improved oversight by
    Congress on how agencies actually operate SBIR. H.R. 2965 also
    establishes an Interagency Committee, co-chaired by the Director of the
    White House Office of Science and Technology Policy and the Director of
    the National Institutes of Standards and Technology, to report to
    Congress on the best practices for commercialization of SBIR- and STTR-
    funded research.
        In closing, this committee has been a leader in passing legislation
    that advances our innovation agenda. Today we continue our leadership
    by reauthorizing SBIR and STTR. I urge my colleagues to support this
    bill.

        Chair Gordon. Thank you, Mr. Wu, for a job well done, and
    Mr. Quear, we look forward to riding on your shuttle that I am
    sure you will be making soon.
        I now recognize Mr. Hall.
        Mr. Hall. Mr. Chair, I have listened quietly and had advice
    from the rocket scientists we have on this side of the docket.
    We like this bill and urge those on this side of the docket to
    be supportive, and at this time I might yield to Dr. Ehlers any
    time that I may have.
        Mr. Ehlers. I thank the gentleman for yielding. I just want
    to make a comment on one particular area. I am pleased that the
    bill before us today leaves the set-aside for the SBIR and STTR
    programs unchanged. As you know, this has been a matter of
    contention for several years. And last year, the House
    considered legislation which would have increased the set-aside
    for these programs. However, I offered an amendment on the
    House Floor which was approved and left the set-asides
    unchanged. The reason for this is that if you increase the set-
    asides, you are taking money away from the other agencies and
    they lose some money that has been allocated to them. A much
    better approach is to increase the allocation of the other
    agencies and then that automatically gives a higher percentage
    to the SBIR and STTR programs. And I think that is a far better
    approach.
        I do note, however, that the Senate has written a bill that
    was similar to the House bill last year. In other words, they
    wish to include an increase in the set-aside, which is exactly
    the opposite of what we want, and I certainly hope that the
    House conferees will stand strong on this issue when we have
    the conference with the Senate and continue to take the better
    route, which is to leave the set-asides unchanged but increase
    the funding to the base agencies. That is also in accord with
    the COMPETES Act, which was passed several years ago with a lot
    of hard work from various Members of this committee, and the
    intent there also is to increase the allocation to the base
    agencies and that way everyone benefits. The agencies get more
    research funds, but at the same time SBIR and STTR get more
    because that percentage stays the same, and since the base
    increases, their allocations also increase.
        I ask unanimous consent to submit the rest of my statement
    for the record. I yield back.
        [The prepared statement of Mr. Ehlers follows:]
             Prepared Statement of Representative Vernon J. Ehlers
        I am pleased that the bill before us today leaves the set-aside for
    the SBIR and STTR programs unchanged. Last year, the House considered
    legislation which would have increased the set-aside for these
    programs. However, an amendment I offered to leave the set-asides
    unchanged was voice-voted on the House Floor.
        I believe that the amendment proved to be non-controversial because
    of the overwhelming support for increasing the funding for these
    important programs by increasing the overall research funding at
    agencies. I understand, however, that the Senate version of this
    legislation does include an increase in the set-aside.
        By increasing the set-aside, we would only eat away at the base
    funding for research available to our scientific agencies. I would much
    rather see us fight for overall extramural research funding increases
    which will equivalently benefit the innovation and tech transfer
    activities of these programs, and hope that the House conferees will
    stand strong on this issue in conference with the Senate.
        Two years ago this committee worked very hard to get the COMPETES
    Authorization bill signed into law, which created a doubling path for
    several agencies under our jurisdiction. Finding the money to fund
    these authorizations has not been so easy, but in light of the recent
    stimulus funding and appropriations bills for fiscal year 2010, many
    agencies that make SBIR and STTR grants are receiving funding
    increases.
        In fact, if you look at the health of these programs since their
    creation in 1994, SBIR and STTR have increased by 82 percent and 746
    percent, respectively, in inflationary-adjusted real increases in
    funding. On average, SBIR has received an annual increase of over five
    percent and STTR has received annual increases over 20 percent. This is
    due to a combination of increasing the set-aside in the past, as well
    as the overall extramural agency budgets increasing.
        It is my hope that the House conferees will consider supporting
    SBIR and STTR growth through overall funding increases for our
    innovation agencies instead of considering increasing the set-asides.

        Chair Gordon. Thank you, Dr. Ehlers and Mr. Hall. Does
    anyone else wish to comment on this bill?
        Mr. Peters.
        Mr. Peters. Thank you, Mr. Chair.
        The Small Business Innovation and Research Program and
    Small Business Technology Transfer Program provide critical
    financial support to the research and development initiatives
    of small companies. Small firms, of course, are important
    drivers of advanced technology. Innovations in a variety of
    fields are increasingly generated by small companies who will
    ultimately develop a partnership or have their idea purchased
    by a larger firm. SBIR and STTR are the lifeblood of these
    small companies and it is important that we continue to support
    these programs.
        Michigan companies compete favorably for SBIR awards,
    particularly in the Department of Defense program. Over 400
    Michigan companies have received SBIR awards over the years and
    many new companies have been launched as a result, for example,
    JADI, a company in my district that develops soldier tracking
    technology and navigation systems that can be used where GPS is
    not available. JADI was able to form a partnership and launch a
    new company after a successful Army phase II SBIR award. The
    company now has a partnership with Raytheon to provide this
    innovative technology to our military.
        H.R. 2965 extends the SBIR/STTR program until 2011 and
    makes important improvements to the program. My constituents
    often tell me that venture capital-backed companies should be
    allowed to participate in SBIR and that doing so will help the
    best ideas with the greatest chances of commercialization. I am
    glad to see H.R. 2965 takes this into consideration.
        The legislation also promotes greater commercialization
    efforts and agency initiatives that encourage partnerships
    between SBIR recipients and business incubators. Many small
    companies in my district benefit from such partnerships with
    business incubators, like Automation Alley, and it is important
    to continue to promote these partnerships at the federal level.
        I want to thank Chair Gordon and Ranking Member Hall and
    Chair Wu and Ranking Member Smith of the Technology and
    Innovation Subcommittee for their attention to this program and
    for bringing this important legislation up for consideration
    today and I urge my colleagues to report it favorably to the
    House Floor. Thank you, Mr. Chair.
        [The prepared statement of Mr. Peters follows:]
              Prepared Statement of Representative Gary C. Peters
        Thank you Mr. Chairman.
        The Small Business Innovation and Research Program and Small
    Business Technology Transfer Program provide critical financial support
    to the research and development initiatives of small companies.
        Small firms are important drivers of advanced technology.
    Innovations in a variety of fields are increasingly generated by small
    companies who will ultimately develop a partnership or have their idea
    purchased by a larger firm. SBIR and STTR are the life blood of these
    small companies, and it is important we continue to support these
    programs.
        Michigan companies compete favorably for SBIR awards, particularly
    in the DOD Program. Over 400 Michigan companies have received SBIR
    awards over the years and many new companies have been launched as a
    result. For example, JADI is a company in my district that developed
    soldier and first responder tracking technology and navigation systems
    that can be used where GPS is not available. JADI was able to form a
    partnership and launch a new company after a successful Army SBIR
    awards. The company now has a partnership with Raytheon to provide this
    innovative technology to our military.
        H.R. 2965 extends the SBIR/STTR program until 2011 and makes
    important improvements to the program. My constituents often tell me
    that venture capital-backed companies should be allowed to participate
    in SBIR, and that doing so will help promote the best ideas with the
    greatest chances of commercialization. I am glad to see H.R. 2965 takes
    this into consideration.
        The legislation also promotes greater commercialization efforts and
    agency initiatives that encourage partnerships between SBIR recipients
    and business incubators. Many small companies in my district benefit
    from such partnerships with business incubators, like Automation Alley,
    and it is important to continue to promote these partnerships at the
    federal level.
        I want to thank Chairman Gordon and Ranking Member Hall, and
    Chairman Wu and Ranking Member Smith of the Technology and Innovation
    Subcommittee for their attention to this program and for bringing this
    important legislation up for consideration today. I urge my colleagues
    to report it favorably to the House Floor.
        Thank you.

        Chair Gordon. Does anyone else wish to be recognized? If
    not, then I ask unanimous consent that the bill is considered
    as read and open to amendment at any point and that the Members
    proceed with the amendments in order of the roster. Without
    objection, so ordered.
        The first amendment on the roster is an amendment offered
    by the gentleman from Nebraska, Mr. Smith. Are you ready to
    proceed with your amendment?
        Mr. Smith. Yes.
        Chair Gordon. The Clerk will report the amendment.
        The Clerk. Amendment to H.R. 2965, amendment number 163,
    offered by Mr. Smith of Nebraska.
        Chair Gordon. I ask unanimous consent to dispense with the
    reading. Without objection, so ordered.
        I recognize the gentleman for five minutes to explain his
    amendment.
        Mr. Smith. Thank you, Mr. Chair. This is a simple and
    straightforward amendment aimed at improving the stewardship of
    taxpayer dollars under SBIR and STTR. Specifically, it requires
    the interagency policy committee established by the bill to
    consider and report to Congress on whether and how SBIR/STTR
    should institute a process through which the program can be
    systematically evaluated and their outcomes can be tracked. It
    also explicitly states the White House Office of Management and
    Budget, OMB, shall participate in the interagency committee
    conducting the review.
        The absence of such a systematic evaluation process for
    SBIR and STTR was identified by the National Research Council
    in its 2008 assessment of the program. Specifically, the
    council review concluded that ``insufficient data collection,
    analytic capability and reporting requirements together with
    the decentralized nature of the program means there is limited
    ability to make connections between program outcomes and
    program management and practices.''
        This amendment is intended to address the concern and
    ultimately I would hope this process could lead to development
    of individual agency performance measures and more complete
    information upon which to base future policy changes. Thank
    you. I yield back.
        [The prepared statement of Mr. Smith follows:]
               Prepared Statement of Representative Adrian Smith
        Thank you Mr. Chairman. This is a simple and straightforward
    amendment aimed at improving stewardship of taxpayer dollars under the
    SBIR and STTR programs. Specifically, it requires the Interagency
    Policy Committee established by the bill to consider and report to
    Congress on whether and how SBIR/STTR should institute a process
    through which the program can be systematically evaluated and awards
    and their outcomes can be tracked. It also explicitly states the White
    House Office of Management and Budget shall participate in the
    interagency committee conducting this review.
        The absence of such a systematic evaluation process for SBIR and
    STTR was identified by the National Research Council (NRC) in its 2008
    assessment of the program. Specifically the NRC review concluded that
    ``insufficient data collection, analytic capability, and reporting
    requirements, together with the decentralized nature of the program,
    means that there is limited ability to make connections between program
    outcomes and program management and practices.''
        This amendment is intended to address this concern, and ultimately
    I would hope this process could lead to development of individual
    agency performance measures and more complete information upon which to
    base future policy changes.

        Chair Gordon. Thank you, Mr. Smith, for that constructive
    amendment.
        Is there further discussion on the amendment? If no, the
    vote occurs on the amendment. All in favor, say aye. Opposed,
    no. The ayes have it and the amendment is agreed to.
        Are there any other amendments? If no, then the vote is on
    the bill, H.R. 2965, as amended. All those in favor will say
    aye. All those opposed, say no. In the opinion of the Chair,
    the ayes have it. I recognize myself to offer a motion.
        I move the Committee favorably report H.R. 2965, as
    amended, to the House with the recommendation that the bill be
    passed. Furthermore, I move that staff be instructed to prepare
    the Committee legislative report and make necessary technical
    and conforming changes and that the Chair take all necessary
    steps to bring the bill before the House for consideration.
        The question is on the motion to report the bill favorably.
    Those in favor of the motion, say aye. Opposed, no. The ayes
    have it, and the bill is favorably reported.
        Without objection, the motion to reconsider is laid upon
    the table. Members will have two subsequent calendar days in
    which to submit supplemental Minority or additional views on
    this measure.
        Let me again in closing say that just because we didn't
    have a lot of rancor today does not mean that we did not have
    three very good bills. For some that came in a little after the
    opening statements, I want to remind you that our first bill
    was a $2.3 billion authorization for research in small business
    innovation. It is the largest such program in the Federal
    Government. When we are talking about creating new jobs for
    this country, it is going to go a long way, and so I thank you
    for helping. I want to thank the Members for their attendance.
    This concludes our Committee markup.
        [Whereupon, at 11:40 a.m., the Committee was adjourned.]
                                   Appendix:

                                  ----------

            H.R. 2965, Section-by-Section Analysis, Amendment Roster

                         Section-by-Section Analysis of
                    H.R. 2965, The Enhancing Small Business
                      Research and Innovation Act of 2009

    Sec. 1. Short Title; Table of Contents

        ``Enhancing Small Business Research and Innovation Act of 2009"

    Title I.  Program Extension and Venture Capital Operating Company
                        Involvement

    Sec. 101. Extension of Termination Dates

        Amends the Small Business Act to extend through FY 2011 the Small
    Business Innovation Research (SBIR) and Small Business Technology
    Transfer (STTR) programs of the Small Business Administration (SBA).

    Sec. 102. Ensuring that Innovative Small Businesses with Substantial
                        Investment from Venture Capital Operating Companies
                        are Eligible to Participate in the SBIR and STTR
                        Programs

        Provides that, effective only for the SBIR and STTR programs: (1) a
    business concern that has more than 500 employees shall not qualify as
    a small business concern; (2) in determining whether a small business
    concern is independently owned and operated, the SBA Administrator
    shall not consider a business concern to be affiliated with a venture
    capital operating company if the venture capital operating company
    (VCOC) does not own 50 percent or more of the business concern and
    employees of the VCOC do not constitute a majority of the board of
    directors of the business concern; (3) a business concern shall be
    deemed to be independently owned and operated if it is owned in
    majority part by one or more natural persons or VCOCs, there is no
    single VCOC that owns 50 percent or more of the business concern, and
    there is no single VCOC the employees of which constitute a majority of
    the board of directors of the business concern; and (4) if a VCOC
    controlled by a business with more than 500 employees has an ownership
    interest in a small business owned in majority by VCOCs, that small
    business is eligible to receive an SBIR or STTR award only if not more
    than two of such VCOCs have an ownership interest in the small business
    and such VCOCs do not collectively own more than 20 percent of the
    small business.
        Defines the term ``venture capital operating company''.

    Title II.  Commercialization Activities and Research Topics Deserving
                        Special Consideration

    Sec. 201. Focus on Commercialization

        Amends section 9 to modify the purpose and policy of the SBIR and
    STTR programs as follows:

        ``It is further the policy of Congress that the purpose of the
    programs established in this section should focus on promoting research
    and the development of projects governed by commercial business plans,
    which have significant potential to produce products or services for
    the marketplace or for acquisition by federal agencies.''

    Sec. 202. Inclusion of Energy-Related Research Topics and Rare Disease-
                        Related Research Topics as Deserving `Special
                        Consideration' as SBIR Research Topics

        Includes energy-related research (as identified by the National
    Academy of Sciences, in the final report issued by the `America's
    Energy Future: Technology Opportunities, Risks, and Tradeoffs' project,
    and in subsequent reports issued by the National Academy of Sciences on
    sustainability, energy, and alternative fuels), rare disease-related
    research (as identified by the National Institutes of Health, in the
    annual report on the rare diseases research activities of the National
    Institute of Health for fiscal year 2005, and in subsequent reports
    issued by the National Institutes of Health on rare diseases research
    activities), and transportation and infrastructure research (as
    identified by the National Academy of Sciences, in the final report
    issued by the `Transit Research and Development: Federal Role in the
    National Program' project and the `Transportation Research, Development
    and Technology Strategic Plan (2006-2010)' issued by the United States
    Department of Transportation Research and Innovative Technology
    Administration, and in subsequent reports issued by the National
    Academy of Sciences and United States Department of Transportation on
    transportation and infrastructure) as ``special consideration'' SBIR
    research topics.

    Sec. 203. Nanotechnology-Related Research Topics

        Includes nanotechnology research (as identified by the national
    nanotechnology strategic plan required under section 2(c)(4) of the
    21st Century Nanotechnology Research and Development Act and in
    subsequent reports issued by the National Science and Technology
    Council Committee on Technology, focusing on areas of nanotechnology
    identified in such plan) as a ``special consideration'' SBIR and STTR
    research topic.

    Sec. 204. Clarifying the Definition of ``Phase Three''

        Clarifies that the ``third phase'' of the SBIR program ``shall
    consist of work that derives, extends, or logically concludes efforts
    performed under prior SBIR funding agreements (which may be referred to
    as `Phase III').''
        Also provides that the term ``commercialization'' means ``the
    process of developing marketable products or services and producing and
    delivering products or services for sale (whether by the originating
    party or by others) to government or commercial markets.''

    Sec. 205. Agency Research Goals

        Requires agencies with SBIR programs that award annually $5 billion
    or more in procurement contracts to establish annual goals for
    commercialization of projects funded by SBIR awards. Outlines specific
    goals required, including: (1) the percentage of SBIR projects that
    receive private sector funds during the third phase; (2) the percentage
    of SBIR projects that are integrated into a program of record; and (3)
    the amount of federal dollars received by SBIR projects through federal
    contracts, not including dollars received through the SBIR program.
        Requires that the goals be reported not later than 60 days after
    the beginning of the fiscal year and the extent to which the goals were
    met and a description of the methodology used to collect such data be
    reported not later than 90 days after the end of the fiscal year to the
    Committee on Small Business and the Committee on Science and Technology
    of the House of Representatives and the Committee on Small Business and
    Entrepreneurship of the Senate.

    Sec. 206. Commercialization Program

        Requires each agency to establish a commercialization program that
    supports the progression of SBIR awardees to the third phase.
        Requires an analysis of the various activities considered for
    inclusion in the commercialization program and a statement of the
    reasons why each activity considered was included or not included to be
    submitted to Congress.
        Authorizes $27.5 million in funding to SBA, to be transferred to
    agencies to support commercialization programs. Specifies that agencies
    may not use more than an amount equal to one percent of the funds set
    aside for the agency's SBIR program to administer the commercialization
    program.

    Title III. Rural Development and Outreach

    Sec. 301. Outreach and Support Activities

        Directs the Administrator to make grants on a competitive basis to
    organizations to: (1) conduct outreach efforts to increase
    participation in the programs; and (2) provide application support and
    entrepreneurial and business skills support to prospective
    participants.
        Authorizes $10 million for each of fiscal years 2010 and 2011 to
    carry out these outreach and support activities.
        Provides that the amount of assistance provided to an organization
    in any fiscal year shall be equal to the total amount of matching funds
    from non-federal sources provided by the organization and shall not
    exceed $250,000.
        Requires organizations receiving grants to direct activities
    towards small business concerns located in geographic areas that are
    under-represented in the programs and/or small business concerns owned
    and controlled by women, by service-disabled veterans, and by
    minorities.
        Requires the Administrator to establish an advisory board for
    outreach and support activities. Members of the advisory board shall
    include the Administrator (or the Administrator's designee), the head
    (or the designee of the head) of each federal agency with an SBIR
    program, representatives of small business concerns that are current or
    former recipients of SBIR awards, and representatives of service
    providers of SBIR outreach and assistance. Assigns the following duties
    to the advisory board: (1) to develop guidelines for outreach awards;
    (2) to identify opportunities for coordinated outreach, technical
    assistance, and commercialization activities among federal agencies,
    the recipients of the outreach awards, and applicants and recipients of
    SBIR awards; (3) to review and recommend revisions to outreach
    activities; and (4) to submit to the Committee on Small Business and
    Entrepreneurship of the Senate and the Committee on Small Business and
    the Committee on Science and Technology of the House of Representatives
    an annual report on outreach activities and the effectiveness and
    impact of those activities.
        Requires the Administrator to use selection criteria developed by
    the advisory board in awarding grants, including criteria designed to
    give preference to applicants who: (1) propose to carry out activities
    that will reach either an under-performing geographic area or an under-
    represented population group; (2) propose to carry out activities that
    complement the existing public-private innovation support system for
    the targeted region or population; (3) propose to measure to
    effectiveness of the proposed activities; and (4) include a Small
    Business Development Center program that is accredited for its
    technology services.
        Specifies that, in awarding grants, the Administrator is to use a
    peer review process.
        States that, to be eligible to receive a grant, the applicant must
    have the written endorsement of the Governor of the State where the
    targeted regions or populations are located. Specifies that the
    endorsement must indicate that the Governor will ensure that the
    activities to be carried out under the grant will be integrated with
    the balance of the State's portfolio of investments to help small
    business concerns commercialize technology. Includes a limitation
    stating that, each fiscal year, a Governor may have in effect not more
    than one written endorsement for an outreach grant and not more than
    one written endorsement for a support grant.
        Provides that each award shall be for a period of two fiscal years.

    Sec. 302. Rural Preference

        Requires agencies to give priority to SBIR and STTR award
    applications so as to increase the number of award recipients from
    rural areas.

    Sec. 303. Obtaining SBIR Applicant's Consent to Release Contact
                        Information to Economic Development Organizations

        Requires each agency to enable an SBIR applicant to indicate
    whether the agency has its consent to identify the applicant to
    appropriate local and State-level economic development organizations as
    an applicant and release the applicant's contact information to such
    organizations.

    Sec. 304. Increased Partnerships Between SBIR Awardees and Prime
                        Contractors, Venture Capital Investment Companies,
                        and Larger Businesses

        Directs each agency to establish initiatives to encourage
    partnerships between SBIR awardees and prime contractors, venture
    capital investment companies, business incubators, and larger
    businesses in order to facilitate the progress of SBIR awardees to the
    third phase.
        Defines ``business incubator.''

    Title IV. SBIR and STTR Enhancement

    Sec. 401. Increased Number of Research Topic Solicitations Annually and
                        Shortened Period for Final Decisions on
                        Applications

        Requires the Administrator to establish by regulation a process in
    which each agency conducts at least two rounds of SBIR research
    solicitations per year, and renders a final decision on each proposal
    within 90 days after the solicitation closes (with an authorized
    extension to 180 days on a case-by-case basis).

    Sec. 402. Agencies Should Fund Vital R&D Projects with the Potential
                        for Commercialization

        Requires the Administrator to submit annually to the Committee on
    Small Business and the Committee on Science and Technology of the House
    of Representatives and the Committee on Small Business and
    Entrepreneurship of the Senate a list of small businesses that, during
    the previous five-year period, received 15 or more first phase SBIR
    awards and no second phase SBIR awards.

    Sec. 403. Federal Agency Engagement with SBIR Awardees that Have Been
                        Awarded Multiple Phase One Awards But Have Not Been
                        Awarded Phase Two Awards

        Requires each agency to engage with SBIR awardees that have been
    awarded multiple first phase awards but no second phase awards, and to
    develop performance measures with respect to awardee progression in the
    SBIR program.

    Sec. 404. Funding for Administrative, Oversight, and Contract
                        Processing Costs.

        Authorizes $27.5 million for each of fiscal years 2010 and 2011 to
    the Administrator, to be transferred to agencies, to assist with the
    administrative, oversight, and contract processing costs relating to
    the SBIR program. States that an agency may not receive in a fiscal
    year an amount greater than three percent of the SBIR budget of such
    agency for such fiscal year under this subsection.

    Sec. 405. Comptroller General Audit of How Federal Agencies Calculate
                        Extramural Research Budgets

        Requires GAO to carry out a detailed audit of how federal agencies
    calculate extramural research budgets for purposes of calculating the
    size of the agencies' SBIR and STTR budgets.
        Requires that GAO submit a report on the results of the audit
    within one year of the date of enactment to the Committee on Small
    Business and the Committee on Science and Technology of the House of
    Representatives and the Committee on Small Business and
    Entrepreneurship of the Senate.

    Sec. 406. Agency Databases to Support Program Evaluation

        Requires that the government database for SBIR and STTR program
    evaluation include information on the ownership structure of award
    recipients, both at the time of receipt of the award and upon
    completion of the award period.
        Requires: (1) SBIR and STTR small business participants to provide
    updated information for purposes of updating the government database
    for SBIR and STTR program evaluation; and (2) participating agencies to
    develop and maintain such databases.

    Sec. 407. Agency Databases to Support Technology Utilization

        Requires each agency to create and maintain a technology
    utilization database, available to the public and containing data
    supplied by award recipients, to help them attract customers for the
    products and services generated under the SBIR or STTR project, and to
    attract additional investors or business partners. Participation in a
    database shall be voluntary, except that participation is required of
    all award recipients who received supplemental payments from SBIR and
    STTR program funds above their initial Phase II award.

    Sec. 408. Interagency Policy Committee

        Requires the Director of the Office of Science and Technology
    Policy (OSTP) to establish an Interagency SBIR/STTR Policy Committee
    comprised of one representative from each federal agency with an SBIR
    program. Specifies that the Director of OSTP and the Director of the
    National Institute of Standards and Technology shall jointly chair the
    committee.
        Requires the committee to review the following issues and make
    policy recommendations on ways to improve the program effectiveness and
    efficiency: (1) the public and government databases; (2) federal agency
    flexibility in establishing Phase I and Phase II award sizes; and (3)
    commercialization assistance best practices in federal agencies with
    significant potential to be employed by other agencies, as well as
    proposals for new initiatives to address funding gaps business concerns
    face after Phase II but before commercialization.
        Requires the committee to transmit to the Committee on Science and
    Technology and the Committee on Small Business of the House of
    Representatives and the Committee on Small Business and
    Entrepreneurship of the Senate reports on the issues identified above.

    Sec. 409. National Research Council SBIR Study

        Amends the Small Business Reauthorization Act of 2000 to remove the
    requirement that the National Research Council provide an updated
    report on the SBIR program.

    Sec. 410. Express Authority to ``Fast-Track'' Phase Two Awards for
                        Promising Phase One Research

        Authorizes agencies to develop fast-track programs to eliminate
    funding delays by issuing Phase Two SBIR awards as soon as practicable,
    including simultaneously with the issuance of the Phase One award.
        Requires the Administrator to encourage the development of such
    ``fast-track'' programs.

    Sec. 411. Increased SBIR and STTR Award Levels

        Increases, for both the SBIR and STTR programs, the individual
    small business award levels from: (1) $100,000 to $250,000, for
    participation at a Phase One level; and (2) $750,000 to $2 million, for
    participation at a Phase Two level. Provides for an annual readjustment
    to these levels to reflect economic conditions and programmatic
    considerations.

    Sec. 412. Express Authority for an Agency to Award Sequential Phase Two
                        Awards for SBIR-Funded Projects

        States that a small business concern that receives a second phase
    SBIR award for a project remains eligible to receive additional second
    phase SBIR awards for such project.
        States that agencies are expressly authorized to provide additional
    second phase SBIR awards for testing and evaluation assistance for the
    insertion of SBIR technologies into technical or weapons systems.

    Sec. 413. First Phase Required

        States that an agency shall provide to a small business concern an
    award for a second phase of an SBIR program with respect to a project
    only if such agency finds that the small business concern has been
    provided an award for the first phase of an SBIR program with respect
    to such project or has completed the determinations described in
    subsection (e)(4)(A) with respect to such project despite not having
    been provided an award for the first phase.