[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.




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