[Senate Report 111-37]
[From the U.S. Government Publishing Office]


                                                        Calendar No. 94
111th Congress                                                   Report
                                 SENATE
 1st Session                                                     111-37

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



 
                 SBIR/STTR REAUTHORIZATION ACT OF 2009

                                _______
                                

                  July 2, 2009.--Ordered to be printed

   Filed, under authority of the order of the Senate of June 25, 2009

                                _______
                                

        Ms. Landrieu, from the Committee on Small Business and 
               Entrepreneurship, submitted the following

                              R E P O R T

                         [To accompany S. 1233]

    The Committee on Small Business and Entrepreneurship, to 
which was referred the bill (S. 1233) to reauthorize and 
improve the SBIR and STTR programs, and for other purposes, 
having considered the same, reports favorably thereon with an 
amendment and recommends that the bill, as amended, do pass.

                  I. Purpose and Need for Legislation

    The purpose of the ``SBIR/STTR Reauthorization Act of 
2009'' is to reauthorize, make current, and improve the Small 
Business Innovation Research (SBIR) and Small Business 
Technology Transfer (STTR) programs. The SBIR program needs to 
be reauthorized because it was set to sunset on September 30, 
2008. The program has been extended two times since the 
original sunset date, as part of a temporary reauthorization 
bill for all of the Small Business Administration's programs. 
First, it was extended through March 20, 2009 (S. 3026, P.L. 
110-235, signed into law May 23, 2008), and most recently it 
was extended through July 31, 2009 (H.R. 1541, P.L. 111-10, 
signed into law March 20, 2009). The Committee believes that 
these programs need to be fully reauthorized in order to 
stimulate America's innovation economy, to remedy the continued 
underrepresentation of small businesses in federal research and 
development, and to use small businesses to help government 
agencies meet national needs. Small businesses continue to 
receive only about 4 percent of federal research and 
development dollars despite the fact that small businesses 
employ about one-third of America's scientists and engineers, 
produce more patents than large businesses and universities, 
and are powerful vehicles for the dissemination of scientific 
and technical knowledge.\1\ SBIR and STTR are two of the very 
few federal programs that utilize this largest sector of the 
scientific and technological community.
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    \1\National Science and Engineering Indicators 2003, National 
Science Foundation, Division of Science Resources Statistics. See also, 
Testimony of NSBA member Robert Schmidt before the House Subcommittee 
on Technology and Innovation, Committee on Science and Technology, 
``Reauthorization of the Small Business Innovation Research Programs 
and `Unleashing American Innovation,''' 110th Congress, April 26, 2007.
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    It is important to reauthorize these two worthy and highly 
successful programs for economic and national security reasons. 
Globalization, in particular, has resulted in increased 
competition and a new series of challenges to the economic and 
military preeminence America has enjoyed since World War II. In 
a comprehensive evaluation of the state of American innovation, 
the National Academy of Sciences' report, Rising Above the 
Gathering Storm, underscored the dangers the United States 
faces in science and technology:

          The scientific and technological building blocks 
        critical to our economic leadership are eroding at a 
        time when many other nations are gathering 
        strength...We are worried about the future prosperity 
        of the United States. Although many people assume that 
        the United States will always be a world leader in 
        science and technology, this may not continue to be the 
        case inasmuch as great minds and ideas exist throughout 
        the world. We fear the abruptness with which a lead in 
        science and technology can be lost--and the difficulty 
        of recovering a lead once lost, if indeed it can be 
        regained at all.\2\
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    \2\Committee on Prospering in the Global Economy of the 21st 
Century, Rising Above the Gathering Storm: Energizing and Employing 
America for a Brighter Economic Future, Kate Kelly ed. (National 
Academies Press, 2007), p. 3.

    Government-industry partnerships in innovation and research 
have become increasingly critical to keeping our nation 
competitive internationally and to fulfilling the needs of the 
American people.\3\ Together, SBIR and STTR form one of the 
largest such public-private partnerships in the nation, and 
they are essential to fulfilling the priority research needs of 
the country. Furthermore, these programs utilize the innovative 
capabilities of small businesses to create jobs, to stimulate 
local economies, and to commercialize ideas originally 
developed in our federal science agencies and universities. The 
SBIR and STTR programs also serve as powerful mechanisms to 
involve a diverse group of individuals, geographically and 
demographically, in federal research and development, thereby 
increasing competition, diversifying the government's supply 
base, and reducing costs. For these reasons, the programs need 
and deserve to be reauthorized, strengthened, and improved.
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    \3\National Research Council, SBIR Challenges and Opportunities, 
Charles Wessner ed. (National Academies Press, 1999), p. 7.
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                              II. Summary

    The ``SBIR/STTR Reauthorization Act of 2009'' (S. 1233), 
reauthorizes the Small Business Administration's (SBA) SBIR and 
STTR programs for 14 years each, through 2023. The legislation 
gradually increases, over ten years, the allocation for the 
SBIR program at all participating agencies from 2.5 percent to 
3.5 percent of the agency's extramural research and development 
budget, and, for the STTR program, it gradually increases, over 
six years, the allocation at all participating agencies from 
0.3 percent to 0.6 percent of this same budget. It increases 
the award size guidelines for the SBIR and STTR programs from 
$100,000 to $150,000 for Phase I and from $750,000 to $1 
million for Phase II, with authority for the SBA to make 
adjustments every three years based on inflation, instead of 
every five years, as is currently the law. Also, in order to 
protect against abuses in issuing ``jumbo'' awards, the bill 
restricts agencies from making Phase I and Phase II awards that 
are more than 50 percent larger than the guidelines. Awards 
over the 50 percent cap can still be made, but a Federal agency 
cannot use funds from the SBIR and STTR allocations to provide 
the supplemental funding. To increase geographic participation 
in the SBIR and STTR programs, particularly in rural states, S. 
1233 enhances and reauthorizes through 2014 the Federal and 
State Technology Partnership (FAST) program and the Rural 
Outreach Program (ROP). To help move SBIR and STTR technologies 
across the ``valley of death'' (a phrase used to describe the 
funding gap between Phases II and III or transitioning projects 
to the commercialization stage), the legislation improves and 
makes permanent what is currently known as the 
Commercialization Pilot Program at the Department of Defense 
(DoD) and creates commercialization pilot programs at the other 
SBIR agencies, authorizing all such pilots through 2014. This 
bill includes a compromise on the issue of the participation of 
companies majority-owned and controlled by multiple venture 
capital companies in the SBIR program, allowing the National 
Institutes of Health (NIH) to award up to 18 percent of its 
SBIR dollars to companies majority-owned and controlled by 
multiple venture capital companies and the other SBIR 
qualifying agencies to apply to award up to 8 percent of their 
SBIR dollars to this class of firms.\4\ The affiliation rule 
itself and the 500 employee standard remain unchanged in this 
bill. Last, the legislation seeks to improve oversight by 
giving more autonomy and resources to the Small Business 
Administration's Office of Technology, by building in regular 
assessments by the National Academy of Sciences, and by 
streamlining data collection and reporting requirements to help 
Congress better assess the programs' effectiveness, to guide 
future policy changes, and to address record-keeping problems 
identified by GAO and NAS in their reports on the SBIR program.
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    \4\SBIR and STTR participating agencies: At the time of Committee 
passage of S. 1233, 11 agencies qualified to have SBIR programs and 
five qualified to have STTR programs. The SBIR participating agencies 
are as follows: Department of Defense, Department of Health and Human 
Services, NASA, Department of Energy, National Science Foundation, 
Department of Homeland Security, Department of Agriculture, Department 
of Education, Department of Commerce, Environmental Protection Agency, 
and Department of Transportation. The STTR participating agencies are 
as follows: Department of Defense, Department of Health and Human 
Services, NASA, Department of Energy, and the National Science 
Foundation.
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                      III. History of the Program


          A. SMALL BUSINESS INNOVATION RESEARCH (SBIR) PROGRAM

1982 Establishment of SBIR: ``Small Business Innovation Development Act 
        of 1982'' (P.L. 97-219, S. 881, July 22, 1982)

    The federal SBIR program was created more than 25 years ago 
out of growing concern since the 1960s that, despite the 
increasing prominence of small businesses in innovation, 
federal research and development expenditures had 
disproportionately been awarded to large businesses, colleges, 
universities, and federally funded research and development 
centers. As a result, in 1976, Roland Tibbetts, at the National 
Science Foundation (NSF), took the lead in directing a greater 
and more significant share of its extramural research and 
development funds to small business in a new innovation and 
research program, with a focus on discovering, funding, and 
evaluating the initial, highest-risk, most cutting-edge 
exploratory research that is necessary to achieve significant 
technological innovations and breakthroughs. The purpose was to 
make small but sufficient awards to test as many ideas as 
possible. The program at NSF led policymakers to consider 
taking further steps to unleash the innovative potential of 
small businesses.\5\ On August 9 and 10, 1978, the House and 
Senate Committees on Small Business held a joint hearing on the 
underutilization of small businesses in American innovation. 
There was a clear consensus that small businesses deserved a 
greater share of federal research and development funds, not 
only because of the innovative and development successes of 
small firms, but also because of their achievements in job 
creation and cost efficiency and their powerful contribution to 
the greater science and technology communities. The 1980 White 
House Conference on Small Business echoed these sentiments and 
recommended legislation to expand the NSF concept to other 
agencies.\6\ The end result of the recommendation was the Small 
Business Innovation Development Act of 1982, which first 
authorized the SBIR program (P.L. 97-219, S. 881, July 22, 
1982). The bill was introduced by Senator Warren Rudman (R-NH), 
and had 84 cosponsors, 12 of whom are still serving in the 
Senate.\7\ Senator Snowe, then serving in the House of 
Representatives, was an original co-sponsor of the SBIR 
legislation adopted in 1982. The Act creating SBIR had four 
objectives:
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    \5\Joint Hearings before the U.S. Senate Select Committee on Small 
Business and the U.S. House of Representatives Subcommittee on 
Antitrust, Consumer and Employment and Subcommittee on Energy, 
Environment, Safety and Research of the Committee on Small Business, 
``Underutilization of Small Business in the Nation's Efforts to 
Encourage Industrial Innovation,'' 99th Cong. (1978) (Transcript of the 
two-day proceedings).
    \6\National Research Council, SBIR Challenges and Opportunities, 
1999.
    \7\Senators who cosponsored P.L. 97-219 and still serve in the 
Senate: Max Baucus; Robert C. Byrd; Thad Cochran; Christopher Dodd; 
Chuck Grassley; Orrin G. Hatch; Daniel K. Inouye; Edward M. Kennedy; 
Patrick J. Leahy; Carl Levin; Richard G. Lugar; and Arlen Specter.
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          1. To stimulate technological innovation;
          2. To use small business to meet federal research and 
        development needs;
          3. To foster and encourage participation by minority 
        and disadvantaged persons in technological innovation; 
        and
          4. To increase private sector commercialization of 
        innovation derived from federal research and 
        development.
    The intent of the 1982 Act and the original NSF program was 
not for the SBIR program to be merely a commercialization 
program. Small businesses in SBIR were designed to be vehicles 
for fulfilling the priority research needs of federal agencies 
and the nation at large while stimulating local economies. 
Further, as mentioned earlier, the program was designed to fund 
as many ideas as possible, rather than to take only a few ideas 
from concept to market or insertion into a government product 
or technology. The allocation of funds for SBIR in its first 
year of existence totaled $45 million, or 0.2 percent of the 
extramural research and development budgets of federal agencies 
that had extramural research and development budgets that 
exceeded $100 million. Per P.L. 97-219, the allocation was 
gradually increased over six years, until the final mandated 
allocation for SBIR of 1.25 percent was reached. Modeled after 
the NSF program, the program was structured in three phases. 
Phase I awards were modest and capped at $50,000 and were meant 
to test the feasibility of an idea or product. Phase II awards, 
capped at $500,000, were meant to be used to begin product 
development and prototyping. In Phase III, the graduation stage 
of SBIR, small businesses were to obtain outside funding, 
whether private funding or non-SBIR federal funding, to 
continue development toward a commercial product or products or 
systems to further the mission of an agency.\8\ P.L. 97-219 
authorized the SBIR program for six years, through 1988.
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    \8\National Research Council, SBIR Challenges and Opportunities, 
Charles Wessner ed. (National Academies Press, 1999), pp. 18-21.
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1986 SBIR Extension: ``A bill to provide the Small Business 
        Administration continuing authority to administer a program for 
        small innovative firms'' (P.L. 99-443, H.R. 4260, Oct. 6, 1986)

    SBIR was not set to expire until 1988, six years after its 
establishment, but, due to the program's political support, in 
1986, it was extended for another seven years, through 1993.

1992 SBIR Reauthorization: ``Small Business Research and Development 
        Enhancement Act of 1992'' (P.L. 102-564, S. 2941, Oct. 28, 
        1992)

    The next congressional review of the program came with the 
``Small Business Research and Development Enhancement Act of 
1992,'' which reauthorized SBIR for eight years, through FY 
2000, and made several modifications to the program. Lawmakers 
praised SBIR for its accomplishments in commercialization and 
towards its other goals in innovation and research over its 
first ten years of operation. The SBIR allocation was doubled 
to 2.5 percent, and award sizes were increased for Phase I to 
$100,000 and for Phase II to $750,000. Among the arguments put 
forth to justify the increase to the SBIR allocation were that 
the SBIR program had been ``an effective catalyst for the 
development of technological innovations'' and that small firms 
in SBIR ``[had] provided high quality research and development 
in a cost-effective manner.''

2000 SBIR Reauthorization: ``Small Business Reauthorization Act of 
        2000'' (P.L. 106-554, H.R. 5667, Dec. 21, 2000)

    In 2000, the SBIR program was again reauthorized and 
extended for eight years, through September 30, 2008. The House 
bill incorporated changes to SBIR originally outlined in the 
Senate bill, S. 3236. The final legislation emphasized the need 
for systematic evaluation of the program and mandated a 
comprehensive evaluation by the National Academy of Sciences 
(NAS) of SBIR at federal agencies with an SBIR budget greater 
than $50 million. The law also established the FAST, created to 
increase the participation of small firms across the country in 
the SBIR program.

2008 SBIR Temporary Extension: ``An Act 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, 
        S. 3029, May 23, 2008)

    The SBIR program was extended for eight months through 
March 20, 2009. This was the fifth time that the Committee 
temporarily extended the SBA's programs since 2006 but the 
first time that it was applicable to the SBIR program. More 
specifically, this legislation amended P.L. 109-136, which 
temporarily authorized through February 2, 2007, any program, 
authority, or provision, including any pilot program, 
authorized under the Small Business Act or the Small Business 
Investment Act of 1958 that was scheduled to expire on or after 
September 30, 2006, but before February 2, 2007, by 
substituting March 20, 2009, for the 2007 date. Since the SBIR 
program was set to expire on September 30, 2008, the program 
was temporarily extended under this Act to sunset on March 20, 
2009.
    This temporary extension of the sunset date was important 
because the previous sunset date of September 30, 2008, was 
fast approaching and the likelihood of passing legislation 
through both houses of Congress, reconciling the differences, 
and enacting it into law before September 30, 2008, was low. 
The extension, which covered all of the SBA's programs, gives 
Congress additional time to complete the comprehensive SBIR 
reauthorization process, while preventing the agencies from 
slowing down or shutting down their SBIR programs, as happened 
around the time of the 2000 reauthorization, hurting many small 
businesses and delaying research.

2009 SBIR Temporary Extension: ``An Act 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, 
        H.R. 1541, March 20, 2009)

    The SBIR program was extended for an additional four months 
through July 31, 2009. This legislation, like the eight-month 
extender bill described above, amended P.L. 109-136 and was 
necessary because the 2008 election brought changes in the 
administration with a new president and significant changes in 
the Senate and House of Representatives that delayed 
organization of the bodies and their committees and therefore 
pushed back legislation. Furthermore, the new Administrator of 
the SBA had not yet been confirmed, and it was important to 
wait for her to take over leadership of the SBA and allow the 
new administration time to weigh in on major pieces of 
legislation, including reauthorization of the SBIR and STTR 
programs. As with the last extension, this legislation gave 
Congress additional time to complete the comprehensive SBIR 
reauthorization process, while preventing the agencies from 
slowing down or shutting down their SBIR programs, as happened 
before the 2000 reauthorization, hurting many small businesses 
and delaying research.

          B. SMALL BUSINESS TECHNOLOGY TRANSFER (STTR) PROGRAM

1992 Establishment of STTR: ``Small Business Research and Development 
        Enhancement Act of 1992'' (P.L. 102-564, S. 2941, Oct. 28, 
        1992)

    This legislation not only reauthorized the SBIR program, as 
discussed above, but also created, as a pilot, the Small 
Business Technology Transfer program, with a three-year 
authorization. The goal of this program, which complements the 
SBIR program, was to stimulate partnerships between small 
businesses and non-profit research institutions, such as 
universities and federally funded research laboratories. STTR 
likewise has three phases, corresponding to the three phases in 
SBIR, and the two programs operate in a similar fashion and 
have similar goals. STTR was also designed to convert the 
billions of dollars invested in research and development at our 
nation's universities, federal laboratories, and non-profit 
research institutions into new commercial technologies. P.L. 
102-564 required federal agencies with an extramural research 
and development budget of $1 billion or more to dedicate 0.05 
percent of this budget to the STTR program in 1994, 0.1 percent 
in 1995, and 0.15 percent in 1996.

1996 STTR Extension: ``Omnibus Consolidated Appropriations Act, 1997'' 
        (P.L. 104-208, H.R. 3610, Sept. 30, 1996)

    This legislation extended the STTR pilot program for one 
year and maintained the 1996 allocation level of 0.15 percent 
of the extramural research and development budget of 
participating agencies. This made the new sunset date September 
30, 1997.

1997 STTR Reauthorization: ``Small Business Reauthorization Act of 
        1997'' (P.L. 105-135, S. 1139, Dec. 2, 1997)

    In the 105th Congress, the STTR program was reauthorized 
for four years, through fiscal year 2001. This bill also 
established the Rural Outreach Program, designed to increase 
the participation of small business concerns in areas with low 
participation rates in the SBIR and STTR programs.

2001 STTR Reauthorization: ``The Small Business Technology Transfer 
        Program Reauthorization Act of 2001'' (P.L. 107-50, H.R. 1860, 
        Oct. 15, 2001)

    This bill reauthorized the STTR program for eight years and 
doubled the STTR allocation from 0.15 percent to 0.3 percent of 
the extramural research and development budget of federal 
agencies with an extramural research and development budget of 
$1 billion or more. The STTR program is currently set to sunset 
on September 30, 2009.

           IV. History of Legislation and Votes in Committee

    The ``SBIR/STTR Reauthorization Act of 2009'' (S. 1233) was 
introduced by Senator Mary L. Landrieu, for herself and Senator 
Snowe, on June 10, 2009. As introduced, the bill reauthorizes 
the Small Business Innovation Research and Small Business 
Technology Transfer programs for 14 years each, through 
September 30, 2023. The Committee passed the bill unanimously 
by a roll call vote of 18-0 on June 18, 2009.
    S. 1233 incorporated most of the SBIR and STTR provisions 
adopted by the Committee in the 109th Congress from S. 3778 and 
in the 110th Congress from S. 3362.
    S. 3778, the ``Small Business Reauthorization and 
Improvements Act of 2006,'' was introduced as an original bill 
on August 2, 2006 by Senator Snowe, then chair of the 
Committee, the text of that legislation was reported out of the 
Committee unanimously, by a vote of 18-0, on July 27, 2006. 
According to Senate procedure, original bills reported from a 
Committee may only be introduced by one Senator; however, 
members of the Committee wishing to cosponsor the bill included 
Senators Kerry, Vitter, Lieberman, Landrieu, and Cantwell. S. 
3778 was not passed by the full Senate before the adjournment 
of the 109th Congress. S. 3362, the SBIR/STTR Reauthorization 
Act of 2008, was introduced by Senator Kerry, chair of the 
Committee in the 110th Congress, for himself and Senator Snowe, 
on July 29, 2008, and was cosponsored by Senators Jeff 
Bingaman, Benjamin Cardin, Norm Coleman, Ken Salazar, Carl 
Levin, Thomas Harkin, Sherrod Brown, Mark Pryor, Joseph 
Lieberman, Mary Landrieu, Pete Domenici, and Evan Bayh. Like S. 
3778 of the 109th Congress, S. 3778 was reported out of the 
Committee unanimously, by a vote of 19-0 (on July 30, 2008), 
but it was not passed by the full Senate before the end of the 
relevant Congress, the 110th.
    While the framework for S. 1233, the SBIR/STTR 
Reauthorization Act of 2009, and most of its text was derived 
from S. 3778 and S. 3362, several changes were incorporated to 
address concerns that contributed to preventing the bills from 
passing the full Senate in the 109th and 110th Congresses. For 
example, in the 109th Congress, the Committee voted to double 
the SBIR and STTR allocation percentages, whereas this bill is 
more moderate and increased the allocation by 40 percent from 
2.5 percent to 3.5 percent, phased in gradually at 0.1 percent 
per year over 10 years. Also in the 109th Congress, the 
Committee voted to allow up to 25 percent of SBIR dollars to go 
to firms majority-owned and controlled by multiple venture 
capital firms, and this bill is more moderate, allowing up to 
18 percent of the SBIR dollars at NIH to go for this purpose 
and up to eight percent of the SBIR dollars at the other 
agencies.
    From the 109th Congress, S. 1233 also incorporated an 
amendment from Senator Coleman to create a pilot program to 
encourage innovative small businesses to provide opportunities 
to college students studying science, technology, engineering, 
and math.
    From the 110th Congress, S. 1233 also incorporated 
provisions from S. 2988, Senator Lieberman's ``Accelerating 
Cures Act of 2008,'' S. 3274, Senator Kerry's ``National 
Nanotechnology Initiative Amendments Act of 2008,'' S. 3343, 
Senator Landrieu's ``Rural Small Business Enhancement Act of 
2008,'' and an amendment from Senator Cardin to clarify that 
small businesses with Cooperative Research and Development 
Agreement (CRADA) with federal labs can still participate in 
the SBIR program.
    From this Congress, S. 1233 incorporated in its manager's 
substitute amendment several changes: A provision from Senator 
Snowe to eliminate the exemption for NIH from the allocation 
increase so that they will be treated like the other agencies 
and gradually increase the percent of funding dedicated to 
small business research; a provision from Senator Levin to make 
the commercialization pilot program at DoD permanent; a 
provision from Senator Enzi for agencies to collect data and 
report annually on awards to companies in states that have 
little participation in federal research and development; a 
provision from Senator Shaheen to enhance an amendment from 
Senator Landrieu that was adopted in the 110th Congress that 
makes the matching requirements of the FAST program more 
affordable for rural states and those with low participation in 
the SBIR and STTR programs; and a provision from Senator Cardin 
that clarifies that the cap on ``jumbo'' awards does not 
prevent agencies from making larger awards but that when they 
do go beyond the caps, they cannot use scarce SBIR and STTR 
funds for the excess amounts, it must come from the agencies' 
other R&D funds, which currently are more than 97 percent of 
their R&D budgets.
    The SBIR and STTR programs and the provisions in S. 1233 
were deliberated in a series of hearings and roundtables in the 
109th, 110th, and 111th Congresses.
    On July 12, 2006, the Committee held a hearing entitled 
``Strengthening Participation of Small Businesses in Federal 
Contracting & Innovation Research Programs.'' The purpose was 
to discuss the state of the SBIR program and the challenges and 
opportunities inherent in it in anticipation of legislation to 
reauthorize the program (S. 3778). Witnesses included members 
of the Small Business Technology Counsel, members of the 
Biotechnology Industry Organization, owners of businesses in 
the biotechnology sector that had received significant amounts 
of venture capital and those that had not, persons familiar 
with SBIR initiatives on the state level, and the lead on the 
comprehensive National Academy of Sciences study of the SBIR 
program. The Committee heard testimony both for and against 
allowing companies majority-owned and controlled by multiple 
venture capital firms to participate in the program and covered 
issues ranging from the appropriateness of award sizes to how 
best to increase the diversity of the program, both 
geographically and demographically.
    On August 1, 2007, the Committee held a roundtable, 
``Reauthorization of the Small Business Innovation Research 
Program: National Academies' Findings and Recommendations,'' to 
follow-up on the 2006 hearing and to bring the discussion on 
reauthorization up-to-date by inviting the National Academies 
to present the results of its overall assessment of the SBIR 
program. In addition to NAS, a variety of stakeholders 
participated in the roundtable, including SBIR program managers 
at federal agencies, staff of the Office of Technology at the 
SBA, small business owners, trade association representatives, 
and providers of technical assistance to SBIR award recipients. 
The discussion was wide-ranging and gave participants the 
opportunity to provide feedback on the findings and 
recommendations of the NAS report, providing the Committee with 
further insight into a number of issues relevant to 
reauthorization.
    On October 18, 2007, the Committee held another roundtable, 
``Reauthorization of the Small Business Innovation Research 
Program: How to Address the Valley of Death, the Role of 
Venture Capital, and Data Rights,'' in order to expand upon 
previous discussions of these three critical issues. 
Participants again included program managers at federal 
agencies and staff of the SBA Office of Technology, as well as 
small business owners in a variety of industries. The 
roundtable focused on initiatives in effect at SBIR agencies to 
help small businesses move their innovative technologies across 
the ``valley of death'' from the laboratory to the marketplace, 
the debate over the involvement of companies majority-owned and 
controlled by multiple venture capital firms in the SBIR 
program, and the problems inherent in how SBIR data rights are 
treated by federal agencies and prime contractors.
    On June 4, 2009, the Committee held a roundtable, ``SBIR 
and STTR Reauthorization: Ensuring a Strong Future for Small 
Business in Federal Research and Development.'' The purpose of 
the roundtable was to give participants the opportunity to 
discuss past proposals and offer justifications to either 
retain or change provisions previously adopted by the 
Committee, including length of reauthorization, the size of 
awards, preserving the basic program structures, outreach and 
technical and commercialization assistance initiatives, and 
eligibility for firms majority-owned and controlled by multiple 
venture capital firms. The discussion also included 
presentations by the Government Accountability Office (GAO) and 
the National Academy of Sciences' National Research Council 
(NRC) on studies regarding the participation of firms with 
venture capital in the SBIR and STTR programs. In addition to 
GAO and NRC, participants included small businesses, SBA and 
several program agencies, as well as business and industry 
associations.
    The National Academy of Sciences and the Government 
Accountability Office issued several reports on the program 
since the 2000 reauthorization of SBIR that have guided the 
work of the Committee in drafting S. 1233.
    NRC Studies: In order to better measure the progress of the 
SBIR program toward its objectives, when the SBIR program was 
reauthorized for eight years in 2000 (P.L. 106-554), Congress 
requested a comprehensive external evaluation by the National 
Research Council (NRC) for the National Academy of Sciences of 
SBIR at federal agencies with an SBIR budget greater than $50 
million. The goals of the studies were to determine how SBIR 
has stimulated innovation and used small firms to meet the 
research needs of the nation and to provide overall 
recommendations for the program. The result of the five-year, 
$5 million review by the NRC was a series of reports, issued 
beginning in 2007.
    The Council's comprehensive assessment of SBIR, ``An 
Assessment of the Small Business Innovation Research Program,'' 
was published in July 2007. The core finding of the NAS study 
was that the SBIR program is ``sound in concept and effective 
in practice.'' The report also included the following short 
summary of the SBIR program:

          ``The program is proving effective in meeting 
        Congressional objectives. It is increasing innovation, 
        encouraging participation by small companies in federal 
        research and development, providing support for small 
        firms owned by minorities and women, and resolving 
        research questions for mission agencies. Should 
        Congress wish to provide additional funds for the 
        program in support of these objectives, with the 
        programmatic changes recommended, those funds could be 
        employed effectively by the nation's SBIR program.''\9\
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    \9\National Research Council, ``An Assessment of the Small Business 
Innovation Research Program,'' 2007.

    The NRC also found that the SBIR program is effectively 
linking universities to public and private markets, increasing 
private sector commercialization of innovations, creating new 
companies, and providing widely distributed support for 
innovation activity. The report included a number of 
recommendations designed to strengthen and improve the program, 
including: a readjustment of the award sizes to $150,000 for 
Phase I and $1 million for Phase II, preservation of the basic 
three-phase structure of the program, regular external and 
internal evaluation, an increased emphasis on pilot programs, 
and more vigorous efforts to reach out to diverse sectors of 
the population, geographically and demographically, in order to 
improve rates of participation in the program across the 
country.
    Agency or topic-specific studies published by NRC in 
accordance with the mandate to evaluate the program originating 
in P.L. 106-554 include:
           An Assessment of the SBIR Program at the 
        National Aeronautics and Space Administration (December 
        2008)
           An Assessment of the SBIR Program at the 
        Department of Energy (June 2008)
           An Assessment of the SBIR Program at the 
        Department of Defense (November 2007)
           An Assessment of the SBIR Program at the 
        National Institutes of Health (November 2007)
           An Assessment of the SBIR Program at the 
        National Science Foundation (July 2007)
           An Assessment of the Small Business 
        Innovation Research Program (July 2007)
           SBIR and Phase III Challenge of 
        Commercialization (February 2007)
           SBIR: Program Diversity and Assessment 
        Challenges (September 2004)
           Capitalizing on Science, Technology, and 
        Innovation: An Assessment of the Small Business 
        Innovation Research Program--Project Methodology 
        (September 2004)
           Revisiting the Department of Defense SBIR 
        Fast Track Initiative (In Review)
    The wealth of information uncovered by this comprehensive 
effort to study the SBIR program informed the Committee's work 
in drafting reauthorization legislation.
    Another NRC report reviewed as part of the Committee's 
reauthorization efforts focused exclusively on the Small 
Business Administration's eligibility rules with regard to the 
participation of firms that are majority-owned and controlled 
by venture capital firms in the National Institutes of Health's 
(NIH) SBIR program. The study, ``Venture Funding and the NIH 
SBIR Program,'' was commissioned in 2006 and paid for by the 
NIH, an agency that had requested in 2005 that SBA allow some 
firms majority-owned and controlled by a single or multiple 
venture capital firms to participate in NIH's SBIR program. The 
premise of the NRC study, unlike the GAO study described below, 
was that the clarification by the Small Business Administration 
in 2002 that ``individual'' means natural persons and not 
entities, such as venture capital firms, was a rule change 
rather than a clarification. As such, the NRC assumed that 
firms majority-owned and controlled by venture capital firms 
were participating in the NIH's SBIR program up until that 
2002. Consequently, the NRC report set out to answer two 
questions: (1) Which NIH SBIR award recipients, looking back 
ten fiscal years from 1992 to 2002, would have been or were 
likely to have been excluded if the SBA's 2002 clarification on 
the definition of ``individual'' and eligibility rules for 
firms majority-owned and controlled by venture capital firms 
have been affected; and (2) the likely impact of the 2002 
clarification if it had been applied during the 1992-2002 
timeframe and probable current impact. Similar to the GAO 
research, the NRC report acknowledged that it is not possible 
to determine directly which firms are venture-funded or 
majority-owned and controlled by their venture investors, 
issued a ``caveat'' on the data and used proxies to decide 
whether a firm was majority-owned and controlled and therefore 
excluded from the SBIR program. Among other findings, the NRC 
concluded that a limited number of businesses majority-owned 
and controlled by venture capital firms appear to have been 
excluded, that businesses with demonstrated potential for 
significant commercialization were disproportionately affected, 
that SBIR firms majority-owned and controlled by venture 
capital firms are less likely to commercialize (55 percent vs. 
38 percent) but are much more likely to generate significant 
sales from their SBIR-funded projects, that restricting firms 
majority-owned and controlled by venture capital firms from 
access to the SBIR awards diminishes the positive impact of the 
nation's investment in research and development. The final 
recommendation was to restore the ``de facto status quo ante 
eligibility requirements for participation in the SBIR program 
or [make] some other adjustment that will permit the limited 
number of [firms majority-owned and controlled by venture 
capital firms] with significant commercial potential to compete 
for SBIR funding.''\10\ This recommendation has been claimed by 
both sides of the argument as supporting their position: 
Proponents of changing the eligibility rules contend this is 
support for allowing such firms to participate, and opponents 
of changing the eligibility rules contend the recommendation 
supports the compromise adopted in Sec. 108 of S. 1233 as 
passed by the Committee.
---------------------------------------------------------------------------
    \10\National Research Council, ``Venture Funding and the NIH SBIR 
Program,'' 2009, pg 65.
---------------------------------------------------------------------------
    GAO Study: Additionally, the GAO conducted a review of the 
SBIR program at the request of Senators Kerry and Kennedy, 
later joined by Senators Snowe and Enzi and Congressman 
Manzullo, that studied the impact of a 2002 SBA Office of 
Hearings and Appeals decision that clarified the definition of 
a small business for the purposes of the SBIR program. The 
purpose of the review was to look at the agencies with the 
largest SBIR budgets to examine the extent to which firms with 
venture capital participated before and after the 
clarification, including those firms majority-owned and 
controlled by multiple venture capital companies. The goal of 
the study was to determine what role venture capital and firms 
majority-owned and controlled by multiple venture capital 
companies should play in the SBIR program, as well as the 
impact that the participation of these firms had on the program 
and the country's innovation.
    The report, entitled ``Small Business Innovation Research: 
Information on Awards Made by NIH and DoD in Fiscal Years 2001 
through 2004,''\11\ was released in April of 2006. It found 
that, over the period of the study, the number of awards and 
dollars to firms with venture capital went up at both the 
National Institutes of Health and the Department of Defense and 
the percentage of SBIR dollars to firms with venture capital 
went up at the National Institutes of Health and held steady at 
the Department of Defense. Due to a lack of publically 
available data on the ownership structure of firms with venture 
capital, it was not possible for GAO to determine which firms 
were majority-owned and controlled by venture capital 
companies; however, it is generally acknowledged that the 
numbers from Fiscal Years (FY) 2001 and 2002 included awards to 
firms with venture capital, both majority-owned and not, and 
that the numbers from FYs 2003 and 2004 did not include 
majority-owned firms. The report also found that, on balance, 
firms with venture capital received larger awards, oftentimes 
well in excess of the established award levels of $100,000 for 
Phase I and $750,000 for Phase II, and that awards were 
concentrated in a limited number of states. These findings 
helped to frame the Committee's deliberations on the matter of 
allowing businesses owned and controlled by multiple venture 
capital companies to be eligible to receive awards in Phases I 
and II of the SBIR program.
---------------------------------------------------------------------------
    \11\GAO-06-565
---------------------------------------------------------------------------

                        IV. Description of Bill


                                TITLE I

    Section 101 of the ``SBIR/STTR Reauthorization Act of 
2009'' reauthorizes the SBIR and STTR programs for 14 years. 
Congress has a history of reauthorizing the SBIR program for 
long periods, including reauthorizations of eight years in 1992 
and 2000. In 2006, the Committee on Small Business and 
Entrepreneurship attempted to make the program permanent as 
part of S. 3778. The SBIR program had existed for 24 years and 
had proven effective, and the Committee agreed that it was time 
to make the program permanent. The small business community 
also argued that the program should be made permanent, not only 
because it had proven effective, but also because it should be 
stable and not in jeopardy of lapsing. They feared a 
reoccurrence of what happened in 2000, when the program was 
last set to expire; the program was not reauthorized by 
September 30th and was not considered to be authorized under 
the series of continuing resolutions.
    However, opponents of making the program permanent argued 
that, without reauthorizations built into the program, Congress 
would not regularly assess the program and make needed changes. 
Therefore, striking a balance between permanency and past 
longer reauthorizations, this bill extends the program for 14 
years. A reauthorization of 14 years factors in the increase in 
the SBIR allocation, which is phased in over ten years, and 
sets the date so that it does not coincide with a presidential 
election year. The bill addresses concerns of oversight by 
building in assessments by the NAS to be published every four 
years.
    Section 102 concerns the SBA's Office of Technology. 
Efforts to strengthen American competitiveness through small 
businesses begin with this office, which administers and 
monitors the implementation of both the SBIR and the STTR 
programs government-wide. As these programs have grown, the 
responsibilities of the Office have increased, such as to 
monitor government-wide compliance with the SBA's SBIR and STTR 
Policy Directives, to carry out the FAST and ROP programs, and 
to carry out the President's Executive Order 13329, Encouraging 
Innovation in Manufacturing. At the same time, the budget and 
staff for this office have decreased. More specifically, since 
FY 1991, the SBIR and STTR programs have more than doubled, 
growing from $500 million to about $2 billion a year, yet the 
budget for the Office of Technology has been cut by more than 
half. According to the SBA's ``Historical Summary, Office of 
Technology,'' in 1991, the Office of Technology had a budget of 
$907,000 and 10 positions. Today, the Office of Technology has 
a budget of $41,000 and four positions.
    The Committee has raised this issue with the Agency on 
numerous occasions over the years, in budget and confirmation 
hearings and in letters, yet the problem has only gotten worse 
with regard to the resources and stature for this office. 
Consequently, there has been inadequate oversight of 
participating agencies' compliance with the 2.5 percent 
allocation requirement, as well as of other compliance 
violations that have put at risk significant SBIR dollars. For 
example, this year, as part of the American Recovery and 
Reinvestment Act of 2009 (P.L. 111-5, signed into law on 
February 17, 2009), referred to as the Recovery Act, the NIH 
requested, unbeknownst to SBA or the Committee, an oblique 
statutory reference that exempted the NIH from the current law 
to allocate 2.8 percent of its extramural research and 
development (R&D) budget to SBIR and STTR projects so that it 
would not have to reserve any of its $8.2 billion in Recovery 
funds for small businesses. The result of this exemption is 
that small, high-tech firms will not be able to compete on a 
level playing field for nearly $230 million in federal R&D 
funds, even though the goals of the Recovery Act to create jobs 
and stimulate the economy were perfectly aligned with the SBIR 
and STTR programs. As a second example, at the Missile Defense 
Agency, at risk was $75 million in FY 2002 and $93 million in 
FY 2003; at the Air Force, in FY 2005, at risk was $175 
million; and, in FY 2007, at risk was $260 million at the Army 
and Air Force. Congress intervened to ensure that the agencies 
awarded the appropriate amount in SBIR awards as opposed to 
transferring money to other accounts. As a third example, the 
SBA's FY 2003 annual reports on the SBIR and STTR programs 
reported two different Department of Defense extramural budgets 
for research and development (the budget in one report 
exceeding the same budget in another report by about $3 
billion), and, despite that significant discrepancy, the SBA 
did not have the resources to adequately review the reports to 
determine which one was correct and wrongly declared that the 
Department of Defense and other agencies complied with the SBIR 
and STTR programs' requirements.
    The Committee urges the Agency to request that the Office 
of Management and Budget (OMB) and the Administration support 
requests which are reasonable for the Office of Technology to 
successfully operate and to carry out its management, data 
collection, and reporting requirements. This is particularly 
important given that this legislation places added emphasis on 
data collection and database maintenance, in order to remedy 
comments included in the NRC and GAO reports that the SBIR and 
STTR programs are insufficiently data-driven. Also, the bill 
requires that the Office of Technology be headed by an 
Assistant Administrator for Technology who will report only to 
the Administrator and that the office be independent from the 
Office of Government Contracting. The SBIR and STTR programs, 
which the Office of Technology is charged with overseeing, 
disburse billions of dollars in awards on an annual basis, and 
the Committee believes that it must have the stature and 
resources to defend the interests of small businesses that 
utilize these cross-agency programs.
    To stimulate America's innovation economy and to remedy the 
continued under-representation of small businesses in federal 
research and development, sections 103 and 104 of the bill 
increase the allocations for both programs, from 2.5 percent to 
3.5 percent for SBIR and from 0.3 percent to 0.6 percent for 
STTR. These increases are to be phased in over the course of 
ten years in the case of SBIR and six years in the case of 
STTR, in order to allow the agencies to adjust to the increase. 
A significant difference between this year's bill and last 
year's bill is that the allocation increase in the SBIR 
allocation will also apply to the Department of Health and 
Human Services, treating it equal to the other SBIR 
participating agencies instead of exempting it. At the 
Departments of Defense and Energy, the additional funds would 
be used, to the greatest extent possible, for the purposes of 
furthering the technology readiness levels of SBIR projects, 
including to conduct testing and evaluation, and not for Phase 
I and Phase II awards. Given the successes of the SBIR and STTR 
programs and the high praise they have garnered from the 
National Research Council, the Committee believes that these 
increases to the allocations are warranted.
    Further, the increases are moderate compared to past 
legislation. A doubling of the allocation was proposed in S. 
2111, the ``Small Business Growth Initiative Act of 2005,'' 
introduced on December 15, 2005, by Senator Evan Bayh, and 
later passed unanimously by the Committee as part of S. 3778, 
the ``Small Business Reauthorization and Improvements Act of 
2006,'' introduced by Senator Snowe in the 109th Congress. 
However, the bill was never considered by the full Senate, in 
part because of holds that this provision and other provisions 
generated, and all subsequent proposed increases in the SBIR 
allocation have been strongly opposed by some, in part based on 
arguments that such increases were not warranted in the absence 
of a systematic and comprehensive performance evaluation to 
determine the success of the program.
    The Committee is not indifferent to these criticisms. 
However, a systematic and comprehensive evaluation of SBIR by 
the National Research Council is now available and its 
conclusions are unequivocally positive for the SBIR program. 
Evidence from this source, highly regarded by the university 
and research community, suggests that the SBIR program both 
contributes to university research and education in science and 
technology and is an important catalyst for bringing basic 
research out of labs and into the marketplace. Small businesses 
employ twice as many scientists and engineers as all American 
universities combined and the SBIR program has the implicit 
goal of utilizing the innovative capacities of this large 
sector of the science and technology community and linking it 
to the resources of academic research institutions.\12\ The 
2007 National Research Council's assessment of SBIR applauds 
the program's contribution towards linking universities and 
small businesses in innovation, as is evident by the following 
facts:
---------------------------------------------------------------------------
    \12\National Science Foundatio, Science and Engineering Indicators 
2006.
---------------------------------------------------------------------------
           More than two-thirds of SBIR companies 
        report that at least one founder was previously an 
        academic;
           About one-third of SBIR company founders 
        were most recently employed as academics before 
        founding the company;
           Over a third of SBIR projects cite direct 
        university involvement with:
                   27 percent of projects having 
                university faculty as contractors on the 
                project;
                   17 percent using universities 
                themselves as subcontractors; and
                   15 percent employing graduate 
                students.
    It is clear that increases in the SBIR allocation will 
invest money in research, contracting, internships, and other 
collaborative activities done with universities, and that the 
contracting and patenting activities with SBIR companies are a 
sizable source of revenue for universities as well. The 
university-industry partnerships that SBIR, and STTR, creates 
are crucial in that they provide an applied research and 
commercialization focus that otherwise likely would not be 
present in university research. More specifically, the 
partnerships are important in exposing faculty and the next 
generation of scientists and engineers to commercial research 
and development. SBIR and STTR businesses provide graduate and 
undergraduate students with hands-on experience and job 
opportunities that universities would be unable to provide 
alone. In addition, the SBIR program supports the transfer of 
knowledge from universities to the commercial marketplace. The 
National Research Council's assessment found that this transfer 
can happen in many different ways; for example, SBIR funding:
           Helps university scientists form companies;
           Enables small firms to use university 
        faculty and to employ graduate students as specialized 
        consultants;
           Permits the use of university laboratory 
        facilities; and
           Encourages other less formal types of 
        collaboration.
    The STTR allocation increase will likewise benefit 
universities and efforts to bring university-based research 
into the commercial marketplace, as a partnership with a 
research institution, such as a university, is a requirement of 
all STTR award recipients.
    Furthermore, the same National Research Council's report 
states that about half of small business respondents in SBIR 
across all agencies had results from their SBIR work published 
in a peer-reviewed scientific publication. In particular, at 
the National Institutes of Health, this percentage was high, 
with 53.5 percent companies publishing a scientific paper and 
two-thirds of those companies having published multiple 
times.\13\ This proves that SBIR projects are of high-quality 
and that the program is a mechanism for the dissemination of 
knowledge across the science and technology community.
---------------------------------------------------------------------------
    \13\National Research Council, ``An Assessment of the Small 
Business Innovation Research Program at the National Institutes of 
Health,'' 2007.
---------------------------------------------------------------------------
    The Committee believes that the SBIR and STTR programs are 
vital to improving research and education in partnership with 
our nation's research institutions and federal agencies, as 
well as to unleashing American innovation and making the United 
States more competitive globally. Yet, the Committee 
understands the importance of basic research conducted by our 
federal agencies and research institutions, and, in light of 
tight federal research and development budgets, the Committee 
proposes a much more modest and measured increase than the 
doubling of STTR that was included in S. 3778 in the 109th 
Congress. Last, the allocation increases at the Department of 
Defense and the Department of Energy are directed to further 
the technology readiness levels of SBIR projects, but are not 
to be used for Phase I and Phase II awards.
    In order to adjust for inflation, acknowledge the growing 
costs of research, and sustain the quality of applications, 
section 105 of the bill proposes an increase in the award size 
guidelines, from $100,000 to $150,000 for Phase I awards and 
from $750,000 to $1 million for Phase II awards. The Committee 
believes that these increases in award size are timely, as the 
last increase in Phase I and Phase II awards was 17 years ago, 
in the 1992 reauthorization for SBIR. The ``Small Business 
Reauthorization and Improvements Act of 2006'' (S. 3778) 
proposed similar increases in award sizes, capping Phase I 
grants at the same $150,000 level but capping Phase II grants 
at $1.25 million. The award sizes in S. 3778 passed the 
Committee along with a doubling of the SBIR allocation. 
However, this bill does not increase the allocation to that 
extent. To increase the size of awards without substantially 
increasing the amount of dollars available necessarily reduces 
the number of awards that can be given and, consequently, the 
number of technologies developed and companies that benefit 
from SBIR. The award levels in this bill are intended to strike 
the appropriate balance between providing awardees with 
sufficient resources while continuing to generate ideas. The 
bill also provides for adjustments to these award levels every 
three years to account for inflation, instead of every five 
years, as is currently the law. Finally, the proposed Phase I 
and Phase II amounts of $150,000 and $1 million are not caps 
but, rather, guidelines. However, the bill does include a cap, 
prohibiting agencies from making awards that are 50 percent 
above the award guidelines with SBIR or STTR funds.
    This cap serves to address the issue of jumbo awards that 
exceed the award guidelines and cut into the number of awards 
that can be given out by the agencies. For example, the 2006 
GAO review of the program found that NIH had made a Phase I 
award of $1.7 million and a Phase II award of $6.5 million. 
Small businesses, particularly those in rural states, have 
complained to the Committee for years that jumbo awards hurt 
them because they reduce the number of grants and awards that 
can be given out. In the case of a Phase I for $1.7 million, 
that eliminates the possibility of 16 awards of $100,000. In 
the case of a Phase II for $6.5 million, that eliminates the 
possibility of almost seven awards of $750,000. To address this 
issue, as mentioned earlier, the bill prohibits federal 
agencies from making an award more than 50 percent higher than 
the guidelines established in this Act, which is a cap of 
$225,000 for Phase I awards and $1.5 million for Phase II 
awards. Per existing requirements, the agencies must also 
continue to report to the SBA when they exceed the guideline 
amounts of $150,000 and $1 million and provide a justification. 
The Committee believes that language is needed to strengthen 
the reporting requirements government-wide to help guide 
Congress in future policy decisions.
    Section 106 of the bill provides for portability of awards 
between different federal agencies and between the two SBIR and 
STTR programs by permitting eligible small business concerns to 
qualify for post-Phase I awards at another agency or through 
the other program. These measures ensure that small innovative 
businesses receive a full opportunity to participate in federal 
research and development and that the nation receives the full 
benefit of small business innovations. Today, research and 
development efforts to meet national priorities are conducted 
across federal agencies; for instance, the Departments of 
Energy and Agriculture work together on renewable energy 
research, and biodefense research is pursued by the Departments 
of Defense, Homeland Security, and Health and Human Services. 
At the same time, research project needs may require changes in 
relationships between the small business and its research 
institution partner. The Committee believes that the additional 
flexibility introduced by this legislation into the SBIR and 
STTR programs is much-needed.
    Section 107 of the bill specifically prohibits agencies 
from using Phase II invitations or any other screening process 
that would inhibit Phase I awardees from applying for a Phase 
II award in a competitive process open to all Phase I awardees. 
The Committee believes that this is an unfair practice which 
not only penalizes those companies that take the largest risk 
with unproven technologies and deprives such companies of the 
opportunity to take the lessons learned from Phase I into a 
Phase II effort, but also limits competition at Phase II. There 
is no provision in the current statute that specifies that 
there is a separate process between Phase I and Phase II, and 
this bill clarifies that it is Congress' intent that there not 
be anything to limit competition for Phase II awards.
    Section 108 of S. 1233 includes a compromise struck between 
Senators Kerry and Bond during the 110th Congress that would 
allow firms majority-owned and controlled by multiple venture 
capital firms to participate in the SBIR program. The extent to 
which companies that are majority-owned and controlled by 
multiple venture capital companies should be able to 
participate in SBIR has been the foremost issue to 
reauthorizing the SBIR program over the past three Congresses. 
The venture capital issue stems from a 2002 decision by the 
SBA's Office of Hearings and Appeals that clarified that a 
business must have 500 or fewer employees, including 
affiliates, and be 51 percent owned and controlled by 
individuals to be eligible for the SBIR program and that 
venture capital companies are considered entities, not 
individuals, for the purposes of determining ownership. That 
clarification adversely affected some firms that had 
participated in the SBIR program, because they could no longer 
self-certify that they met the definition of a small business 
and, therefore, no longer could participate. Biotechnology 
firms that had participated in the SBIR program at NIH prior to 
the 2002 decision were most affected.
    During the 109th Congress, in July 2006, when the Committee 
marked up S. 3778, a comprehensive SBA reauthorization bill 
that included a title on reauthorization of the SBIR and STTR 
programs, the Committee adopted an amendment put forward from 
Senator Bond that would have allowed all qualifying agencies to 
direct up to 25 percent of their SBIR budgets to companies that 
are majority-owned by multiple venture capital companies. 
Senator Bond introduced the amendment in part because he was 
concerned that the 2002 decision by SBA had become a roadblock 
for many small businesses, especially small biotech and life 
science companies, working to develop life-saving cures, and 
that the decision was leading to a decline in the number of 
applications to the NIH SBIR program. Senator Bond spoke in 
support of the critical early stage research. Though there was 
no vote on the amendment in 2006, Senator Kerry spoke out 
against it, in part because he was concerned that directing up 
to 25 percent of SBIR funds to firms majority-owned and 
controlled by venture capital firms, on top of the almost 22 
percent, in FY 2004, already going to firms with venture 
capital (but that were not majority-owned) at NIH, would steer 
too many of the program's projects away from early-stage, high 
risk research that would not be done but for the government and 
instead towards projects with larger potential market shares 
and a greater potential to deliver better returns for investors 
in a shorter amount of time. Furthermore, the majority-owned 
venture capital provision in S. 3778 was opposed by some 
senators, and this was one of several issues that attracted 
holds and prevented floor consideration. In order to have a 
better chance of getting an SBIR reauthorization bill through 
the Senate in the 110th, and now in the 111th Congress, it was 
necessary to moderate the provision. Senators Snowe, Lieberman, 
and Coleman played a significant role in reaching the 
compromise adopted as part of S. 3362 in the 110th Congress.
    Instead of allowing all agencies to apply to direct up to 
25 percent of their SBIR funds to firms majority-owned and 
controlled by multiple venture capital firms, the agreement 
adopted as part of S. 3362 and included in this bill, S. 1233, 
would allow NIH to apply to the SBA to award up to 18 percent 
of its SBIR dollars to companies majority-owned and controlled 
by multiple venture capital companies. The remaining qualifying 
SBIR agencies would be able to apply to award up to 8 percent 
of their SBIR dollars to this class of firms. It is important 
to note that this is the percentage of dollars that would be 
allowed to be awarded to companies majority-owned and 
controlled by venture capital companies (the companies that are 
currently ineligible). Companies that have some venture capital 
investment but that are still majority-owned and controlled by 
individuals have always been eligible for SBIR dollars and will 
remain eligible to compete for the entirety of the SBIR 
allocation under this legislation.
    The Committee believes that this compromise remains 
reasonable, addressing each side of the venture capital debate 
and paving the way for the Committee to act and the full Senate 
to pass this reauthorization legislation. For the small 
businesses that opposed changing the eligibility rules, this 
bill's compromise preserves more SBIR dollars for companies 
that are not majority-owned and controlled by venture capital 
companies than the 2006 amendment would have. Based on 2006 
data, the most recent data available, it is estimated that this 
compromise would preserve an additional $69 million at NIH and 
$147 million at the other agencies, compared to the one adopted 
in 2006.\14\ It was particularly important to moderate these 
percentages because, unlike S. 3778 from the 109th Congress, 
this legislation (SBIR/STTR Reauthorization Act of 2009) does 
not double the SBIR allocation (although it does increase the 
percentage of the allocation at all agencies), and the 
Committee needed to adjust the percentages to offset concerns 
that allowing these new entities to participate would crowd out 
small businesses. This was of particular concern to those in 
rural states where there is less venture capital investment and 
where GAO found little to no SBIR awards to firms with venture 
capital, further diminishing their participation in SBIR, the 
most important government research and development program 
available to small businesses. Specifically, GAO found that, in 
17 largely rural states, none of the firms that had received 
SBIR awards from NIH had received venture capital investment, 
and, in 21 largely rural states, none of the firms that had 
received SBIR awards from DoD had received venture capital 
investment.\15\ It is also to the benefit of small businesses 
currently participating in the program that this bill maintains 
the affiliation rule, helping to keep current participants on a 
level playing field with the new class of companies that will 
be made eligible.
---------------------------------------------------------------------------
    \14\2006 SBIR Program Data, SBA Office of Technology, provided to 
the Committee on March 10, 2008.
    \15\``Small Business Innovation Research: Information on Awards 
Made by NIH and DoD in Fiscal Years 2001 through 2004,'' GAO 06-565, 
April 2006, p. 20.
---------------------------------------------------------------------------
    The Committee believes that this is also a positive 
compromise for the companies that have been supporting a change 
to the rules, because it provides companies majority-owned and 
controlled by multiple venture capital firms with access to 
more SBIR dollars, proportionately and dollar-wise, than they 
were getting before the SBA clarified in 2002 that such firms 
were not eligible to participate in the program. For example, 
before the clarification, in 2001, GAO found that firms with 
venture capital received 14 percent, or $57 million, of all 
SBIR dollars at NIH, and, in 2002, they received 14 percent, or 
$72 million, of all SBIR NIH dollars.\16\ These dollars were 
shared between firms that were majority-owned and controlled by 
multiple venture capital firms and those that were not. Based 
on 2008 SBIR data, the most recent available, this offer would 
make it possible for NIH to award up to 18 percent, or $104 
million, of its SBIR funds to small businesses owned and 
controlled by multiple venture capital companies. These dollars 
would not be shared with companies that have venture capital 
but are not majority-owned and controlled by venture capital 
companies. If the full 18 percent is utilized, this could be a 
possible increase of 84 percent over the amount of funds firms 
with venture capital were sharing in 2001, and a possible 
increase of 45 percent over what they were sharing in 2002.
---------------------------------------------------------------------------
    \16\GAO 06-565, p. 32.
---------------------------------------------------------------------------
    The same GAO study also looked at DoD, where it found that, 
in 2001, companies with venture capital received 5 percent, or 
$34 million, of all SBIR dollars and, in 2002, they received 7 
percent, or $48 million, of all SBIR dollars.\17\ Again, based 
on the most recent SBIR data available, this offer would make 
it possible for companies owned and controlled by multiple 
venture capital firms to get up to 8 percent, or $91 million, 
of DoD's SBIR dollars all to themselves. If the full 8 percent 
is utilized, this could be a possible increase of 65 percent 
over the amount of funds firms with venture capital were 
sharing in 2001, and a possible increase of 47 percent over the 
amount of funds they were sharing in 2002.
---------------------------------------------------------------------------
    \17\GAO 06-565, p. 32.
---------------------------------------------------------------------------
    As was the case with S. 3778 in the 109th Congress and S. 
3362 in the 110th Congress, the affiliation rule itself and the 
500 employee size standard remain unchanged in this bill, 
meaning that all SBIR and STTR applicants, whether majority-
owned by venture capital companies or not, must still have 500 
or fewer employees, including the employees of their 
affiliates. In the case of companies majority-owned and 
controlled by multiple venture capital companies, this means 
that the employees of venture capital companies that control or 
have the power to control the SBIR applicant, as well as the 
employees of portfolio firms of those venture capital companies 
that the venture capital companies control or have the power to 
control, will be added together and, in aggregate, must be 500 
or fewer.\18\ In testimony before Congress and in Statements of 
Administration Policy, the SBA under President George W. Bush 
stressed the importance of the affiliation rule because it 
allows the SBA to look into who is controlling the firm and the 
amount of resources that they bring to the table. Affiliation, 
as illustrated in the Federal Regulations, is determined by the 
``totality of the circumstances'' and is the current regulatory 
tool to ensure that a small firm is not controlled by a large 
firm. The SBA has also been concerned about the precedent that 
waiving the affiliation rule would set for other SBA programs. 
Furthermore, some small businesses have argued to the Committee 
that it would be unfair to exempt the employees of venture 
capital firms and the employees of their portfolio firms from 
the affiliation rule, allowing them to play by different rules, 
unless an alternative size standard is established, because it 
would create an unfair playing field, particularly in the 
biotech industry, where the majority of firms have fewer than 
50 employees, significantly less than the current cap of 500 
employees.\19\ Other small businesses, especially biotech 
firms, are concerned that SBA has been applying the affiliation 
rule inconsistently, making it difficult to determine 
eligibility and self certify. In addition, those same small 
businesses are concerned about the process by which SBA applies 
affiliation to an SBIR applicant's minority investors' other 
portfolio companies that they argue are unrelated to the SBIR 
applicant or their research, which, therefore, also creates an 
unfair playing field.\20\
---------------------------------------------------------------------------
    \18\13 CFR 121.103.
    \19\Critical Technology Assessment of Biotechnology in U.S. 
Industry (October 2003) U.S. Department of Commerce Technology 
Administration and Bureau of Industry and Security. http://
www.technology.gov/reports/Biotechnology/CD120a--0310.pdf. And 
testimony before Congress from the Biotechnology Industry Organization 
on July 22, 2004; June 17, 2005; June 25, 2005; and July 27, 2005.
    \20\For further discussion of the affiliation issue, see the 
Committee Roundtable, ``Reauthorization of the Small Business 
Innovation Research Program: How to Address the Valley of Death, the 
Role of Venture Capital, and Data Rights,'' Transcript of Proceedings, 
October 18, 2007, p. 50-117.
---------------------------------------------------------------------------
    In addition, in order to address concerns from companies 
with venture capital that it is difficult to determine who 
their affiliates are and, therefore, whether they are, in fact, 
eligible to participate in the SBIR program, this bill includes 
language to assist an SBIR applicant in interpreting the 
affiliation rule when self-certifying. Specifically, the bill 
directs the SBA to post a document on its website that helps 
SBIR applicants determine who is affiliated with them. Language 
is also in the bill that requires the SBA to update the 
relevant website information to keep it current and to respond 
in a timely way to requests from firms to determine if they are 
eligible.
    While the affiliation rule is an administrative issue, and, 
therefore, does not require legislation to make any changes, 
the report also includes data collection requirements on the 
participation of firms with venture capital, both majority and 
non-majority-owned, to help the Committee collect necessary 
information to assess how the SBA's existing affiliation rule 
is affecting the participation of firms and whether 500 
employees, including those of affiliates, is a realistic limit.
    On November 22, 2006, the Court of Appeals for the Federal 
Circuit ruled in favor of the U.S. Air Force dismissing Night 
Vision's breach of contract claim. The Committee believes that 
the Federal Court, in the case of Night Vision v. United 
States, disregarded the special acquisition preference intended 
by the Congress for Phase III awards by effectively placing 
upon the small businesses the burden of proof that a Phase III 
award would be practicable. The Committee believes that any 
questions with regard to the capacity of small business 
concerns to perform as Phase III awardees should be established 
by the relevant agency. Therefore, section 109 of the bill 
codifies and clarifies the existing special acquisition 
preference.
    Section 110 of the bill seeks to improve the collaboration 
of SBIR or STTR firms with federal labs. In 2002, the SBA 
proposed and subsequently implemented a requirement that SBIR/
STTR firms seeking to subcontract with federal laboratories and 
research and development centers obtain a waiver from the SBA 
to enter into such subcontracts. Such subcontracts are 
typically concluded through cooperative research and 
development agreements (CRADAs). As a result, small firms which 
plan to utilize the world-class technical facilities or 
research capabilities of federal labs may be denied a waiver 
even after receiving their SBIR awards. The Committee believes 
that greater cooperation between small businesses and federal 
labs is a worthy goal, though agencies and departments cannot 
demand that a small business work with a federal lab in order 
to win the project. For that reason, the bill permits small 
businesses to subcontract portions of the work on SBIR and STTR 
awards to federal labs and research and development centers 
without having to seek a waiver from the SBA, as the SBA 
currently requires. Small businesses receiving SBIR and STTR 
awards where a portion of the work is subcontracted to federal 
labs and research and development centers shall not perform a 
smaller percentage of work than is required by the SBIR and the 
STTR Policy Directives. At the same time, the Committee 
acknowledges that the SBA waiver process was instituted in 
response to attempts by federal agencies to recapture SBIR 
funds through the CRADA subcontracting process regardless of 
scientific merit. Consequently, federal agencies shall not 
require small businesses to subcontract with federal labs and 
research and development centers as a condition of receiving 
SBIR or STTR awards, and the SBA shall ensure that no such 
requirements whatsoever are imposed. SBIR and STTR awards shall 
be based strictly on merit, and participation of federal labs 
and research and development centers in SBIR and STTR research 
shall be considered only to the extent that it strengthens the 
merits of the proposals.
    A provision authored by Senator Cardin from last year's 
bill was retained in this legislation and clarifies that 
grantees who have entered into Cooperative Research and 
Development Agreements and are housed in NIH or other federal 
facilities can continue to receive CRADA grants and still 
retain or apply to the SBIR program. The practices of various 
national laboratory administrations have resulted in 
interpreting the rules differently. The effect has been to deny 
CRADA recipients the opportunity to keep or apply for SBIR 
funds. This amendment clarifies the language and permits 
contemporaneous participation in both the SBIR and CRADA 
programs.
    To promote effective enforcement of the SBIR and STTR 
Policy Directives, section 111 requires the SBA to notify 
Congress of its appeals or other actions to enforce the Policy 
Directives. Likewise, the Committee expects that the SBA 
Administrator will be promptly informed concerning any case or 
controversy surrounding the SBIR or the STTR program. The 
Committee believes that SBA must always be presented an 
opportunity to defend its programs in legal proceedings.

                                TITLE II

    Section 201 of S. 1233 reauthorizes the Federal and State 
Technology Partnership program (FAST) and the Rural Outreach 
Program (ROP) for five years each, through 2014, and increases 
the amount of dollars allocated to the Rural Outreach Program 
from $2 million to $5 million per year. Congress created the 
Federal and State Technology Partnership (FAST) program in 2000 
to strengthen the technological competitiveness of small 
business concerns in all 50 states by providing competitive 
matching grants to states to help support the SBIR and STTR 
programs. These grants are traditionally used to raise 
awareness of SBIR and STTR, assist technology transfers by 
universities to small businesses, provide technical assistance 
to firms participating in the SBIR program, and encourage 
commercialization of technology developed through SBIR funding. 
The FAST program has proven vital to rural states, which have 
traditionally been in the lower tier of states in terms of 
SBIR/STTR awards and total dollars. For this reason, technical 
assistance provided under FAST grants is extremely important to 
rural small businesses and universities. In general, the more 
SBIR applications that are submitted by small businesses in a 
state, the more SBIR awards are made in that state.
    While rural states have utilized the FAST program 
successfully, authority expired at the end of fiscal year 2004. 
The Committee believes that rural areas need additional 
technical assistance to help their small businesses compete in 
the SBIR program and so has reauthorized and enhanced the 
program. Currently, each participating state that receives FAST 
awards is required to match each federal dollar that is 
provided with state funds. The Committee supports this 
approach, as each recipient should match funds considering that 
the federal government is putting up the majority of funds for 
these activities. As the FAST program is currently structured, 
the 18 states receiving the fewest SBIR Phase I awards are 
required to put up 50 cents for each federal dollar. The lower 
tier of states requires additional technical assistance, so 
they should have a greater incentive to apply for these grants. 
Next, the 16 states receiving the greatest number of Phase I 
awards are required to match dollar for dollar each federal 
dollar awarded. States not included in either of these two 
categories, those in the middle tier, are required to match 75 
cents for each federal dollar. There is also a special match 
requirement for low-income areas, which is 50 cents for each 
federal dollar.
    In reviewing this current structure, the Committee 
continues to believe that rural areas and rural small 
businesses could benefit from a reduced match requirement for 
the FAST program. Consequently, S. 1233 includes a provision 
offered by Senator Landrieu in the last Congress, taken from S. 
3343, that creates special match requirements for rural areas 
(50 cents to each Federal dollar) and areas that are both rural 
and in the bottom 18 of states that receive SBIR awards (35 
cents). This provision was modified in the manager's package 
based on an amendment filed by Senator Shaheen. Specifically, 
the matches for the states that rank in the bottom 18 in 
participation will decrease from 50 cents to 35 cents, the 
states that rank in the middle on participation (17 to 34) 
would have their match reduced from 75 cents to 50 cents. The 
rural areas would have the match reduced from 50 cents to 35 
cents, and the enhanced rural areas (rural and bottom 18 
recipients) would have their match reduced from 35 to 15 cents. 
These changes would provide increased technical assistance 
where it is most needed--our rural small business and 
universities. This change does not affect the allocation of 
SBIR program awards but does provide rural areas with a level 
playing field when competing for these awards.
    Section 202 of the bill includes a provision from Senator 
Coleman, proposed as an amendment to S. 3778, in the 109th 
Congress, which establishes a five-year workforce development 
grant pilot program to match up innovative small businesses 
with college students studying science, technology, 
engineering, and math. The proposal would provide SBIR grantees 
with a 10 percent bonus grant, for either Phase I or Phase II 
SBIR grants, with a total maximum award of $10,000 per year for 
small businesses that provide opportunities to these students.
    In order to provide SBIR awardees with a more appropriate 
amount of technical assistance, section 203 of the bill 
increases the amount of discretionary technical assistance that 
may be given by federal agencies from $4,000 per Phase I award 
to $5,000 and from $4,000 per year of a Phase II award to 
$5,000 per year. To make the law consistent, the bill states 
that this technical assistance shall be in addition to the SBIR 
award for both Phases I and II. To address concerns from small 
businesses that the technical assistance provider that they are 
required to use may not provide them with the type of technical 
assistance that would best suit their needs, the bill includes 
a provision allowing award recipients to seek out their own 
technical assistance provider and to receive the same amount as 
do those who use the agency's contracted provider. Finally, the 
bill clarifies that agencies may only pay the contractor for 
those recipients who utilize the services provided by the 
agency's technical assistance provider. Participants at the 
Committee's roundtable on August 1, 2007, had expressed 
concerns that federal agencies were bundling the technical 
assistance contracts and that technical assistance providers 
were being compensated for services that were not used.
    During the 108th Congress, Senator Snowe sponsored and 
Senator Kerry cosponsored S.Amdt. 2531, creating the SBIR 
Commercialization Pilot Program (CPP) at the Department of 
Defense, which incorporated relevant amendments offered by both 
Senators to S. 1042, the FY 2006 Defense Authorization bill. 
The CPP authorized incentives for prime contractors and 
provided assistance to SBIR firms in order to facilitate Phase 
III awards at the prime contract and the subcontract level. 
Examples of appropriate incentives are provided in the May 17, 
2006, guidance letter from Senators Snowe and Kerry and 
Congressman Donald Manzullo (at the time Chairman of the House 
Committee on Small Business) to the Undersecretary of Defense 
Kenneth Krieg and in the White Paper of the Small Business 
Technology Council, Incentives and Technology Transition: 
Improving Commercialization of SBIR Technologies in Major 
Defense Acquisition Program (Robert-Allen Baker, May 2006). The 
Committee believes that CPP is a valuable mechanism to move 
technologies across the ``valley of death,'' and section 204 of 
this bill adopts a change requested by Senator Levin to 
strengthen CPP at the Department of Defense, extend it to the 
STTR program, and make it permanent.
    The bill also includes a provision in section 205 that 
permits civilian SBIR agencies to establish their own 
commercialization pilot programs and authorizes these pilot 
programs through 2014. In response to questions during a 
Committee hearing on July 12, 2006, Dr. Charles Wessner of the 
National Academies testified that efforts to promote greater 
funding of Phase II technologies would be valuable, and the 
Committee has included these pilot programs for that purpose. 
The goal of the commercialization pilot programs is to help 
move existing Phase II technologies across the ``valley of 
death'' and closer to the commercial marketplace. Federal 
agencies would be permitted to use up to 10 percent of their 
SBIR and STTR dollars to make awards under a commercialization 
pilot program, and awards made under these pilot programs would 
be allowed to exceed the cap on award size, up to three times 
the award cap, or $3 million per award. To address concerns 
that these awards would cut into the SBIR allocation and to 
further facilitate the strategic connections that will allow 
for SBIR and STTR technologies to be transitioned into a 
government system or to be commercialized, awards given under 
these pilot programs would need to be matched by private or 
federal non-SBIR, non-STTR dollars, for technologies that will 
be acquired by the government. In the last Congress, the award 
size was capped at two times the Phase II award guideline (max 
of $2 million). However, at the request of Senator Snowe, this 
bill raises the cap to three times a Phase II award (max of $3 
million) and also changes the matching requirement so that it 
only applies to technologies acquired by the government.
    Recognizing that nanotechnology has the potential to 
revolutionize our way of life and to make a significant 
contribution to our economy moving forward, section 206 of the 
bill encourages the submission of applications for support of 
nanotechnology-related projects. This provision was carried 
over from the 110th Congress and came from S. 3274, the 
``National Nanotechnology Initiative Amendments Act of 2008,'' 
sponsored by Senator Kerry and cosponsored by Senator Snowe. 
Nanotechnology involves the understanding and control of matter 
at scales between 1 and 100 nanometers and includes nanoscale 
science, technology, and engineering. In the eight years since 
the creation of the National Nanotechnology Initiative, it has 
become clear that our ability to manipulate, engineer, and 
manufacture nanoparticles provides unlimited potential for 
innovation and growth throughout our economy. For instance, an 
estimated $50 billion in products worldwide incorporated 
nanotechnology in 2006, and that figure has been projected by 
some to reach $2.6 trillion over the next eight years. From 
technologies to improve the capabilities of our military to 
life-changing medical devices, nanotechnology has demonstrated 
its unique ability to break barriers and to expand the realm of 
what is possible. The Committee believes that it is important 
for the federal government to encourage the development of 
nanotechnology-related projects and that the SBIR and STTR 
programs are suitable mechanisms for furthering progress toward 
this goal. This provision sunsets after five years, because the 
Committee believes that emphasis on certain sectors should not 
exist in perpetuity but, rather, should be updated to be 
relevant to current needs and challenges.
    The bill also includes a pilot program, in section 207, 
designed by Senator Lieberman, also carried over from the 110th 
Congress, taken from S. 2988, to improve the operations of the 
SBIR program at NIH. Each year, patients are diagnosed with an 
increasing number of orphan diseases. Many of these diseases 
lack an appropriate treatment. The need for effective and 
affordable treatments, vaccines, or cures for these diseases is 
growing. According to the findings of the National Research 
Council's 2007 report, the SBIR program at NIH could be 
enhanced through the following means: establishment of a 
centralized advisory body that makes recommendations based on 
comprehensive metrics, further development of the program's 
ability to capture this data, enhanced flexibility in terms of 
addressing scientific translation and product development, and 
a reduction of the time between Phase I and Phase II awards.
    Pursuant to these recommendations, this section establishes 
an advisory board at the NAS to improve the utilization of data 
in decision-making. The board will be comprised of the NIH 
Director, the Director of the NIH SBIR program, relevant senior 
NIH managers, and subject matter experts. In addition, to bring 
business development experience to the board, one-half of the 
members will be prior SBIR grantees. The principal purpose of 
the board is to collect the relevant metrics to determine the 
effect of various SBIR program initiatives on 
commercialization. The board will also review a new requirement 
of the SBIR program at NIH. Program managers, when awarding 
grants and contracts, will emphasize applications that from the 
onset, identify putative products and services that may enhance 
the development of cures and therapies.
    Additionally, this section strengthens data-capture to 
ensure that decisions aimed at encouraging the translation of 
basic science to marketed treatments are evidence-based. An 
emphasis is placed on collecting the metrics identified in the 
National Research Council's 2007 review of the SBIR program at 
NIH.
    The NAS recommended further enhancing the flexibility of 
the NIH's SBIR program and this section seeks to provide the 
SBIR program at NIH with that opportunity. Prior to adoption of 
new procedures, it is important to test ideas on a smaller 
scale. This section permits 1 percent of the NIH extramural 
budget for research and development to be utilized to establish 
pilot programs in order to investigate new approaches to 
enhancing the development of novel products for disease 
treatments. The pilot programs may be designed to establish 
inventive new strategies or a program may focus on program 
management initiatives. These may include: adding successful 
SBIR grantees during the review process, hiring experienced 
business development personnel to staff positions to bolster 
the programs subject-matter expertise, separating the 
scientific and commercial review process, and assessing the 
efficacy of awarding larger grants on the overall success of 
product development. The NIH director will be required to 
submit a report to Congress and the NAS advisory board 
reviewing these programs.
    Last, the provisions adopted from Senator Lieberman will 
encourage the director of the SBIR program at NIH to reduce the 
time period between Phase I and Phase II grants to six months, 
to the greatest extent possible. This section will sunset five 
years after enactment.

                               TITLE III

    In order to address continued concerns that the SBIR and 
STTR programs are insufficiently data-driven and to provide 
Congress with a better base of information to use when 
considering future policy changes to the programs, the bill 
includes many oversight and evaluation provisions, encompassing 
sections 301 through 309. The data collection and reporting 
requirements focus, in particular, on the effect of the change 
made in the bill to allow firms majority-owned and controlled 
by multiple venture capital companies to participate in the 
SBIR program, on the involvement of women, minorities, and 
people from rural areas in the programs, and on collaboration 
between small businesses participating in the programs and 
universities. To ensure that this information is collected, 
synthesized, and used to improve the progress toward the 
programs' goals, the bill requires the agencies to maintain 
databases and requires the SBA to coordinate the databases so 
that the information is centralized and easily accessible. 
Section 307 of the bill extends the NRC's review of the SBIR 
program and requires NRC to make recommendations on the program 
every four years.
    In order to address concerns that federal agencies are 
inaccurately calculating their extramural research and 
development budgets, from which the SBIR and STTR allocations 
are determined, section 306 of the bill directs the GAO to 
conduct periodic fiscal and management audits of the program to 
verify that agencies are meeting the allocation requirements of 
the SBIR and STTR programs. The Committee also directs the GAO 
to make a recommendation as to whether or not it would be more 
effective for the SBIR and STTR allocations to be determined 
based on the entirety of federal agencies' research and 
development budgets, internal and external.
    The federal government spends more than $50 billion a year 
in research and development contracts and billions more on 
contracts for goods and services which utilize innovative 
technologies. As a result, federal procurement spending can act 
as a strong force in stimulating small business innovation. 
Public authorities and officials in the European Union, the 
United Kingdom, Sweden, and other countries have proposed a 
three percent pro-innovation set-aside for their small and 
medium enterprises (SMEs). To retain global competitive 
leadership, the Committee believes that the United States 
should consider adopting its own pro-innovation technology 
insertion goal for Phase III SBIR and STTR awards in all 
federal contracts for research, development, testing, and 
evaluation. This bill does not set such a goal, since there is 
currently no data from which to determine what a reasonable 
goal would be, but section 308 does establish reporting 
requirements on federal agencies that issue Phase III contracts 
in order to collect information to establish a baseline.
    Section 309 of the bill addresses concerns that relevant 
SBIR and STTR intellectual property protections are not being 
properly enforced. To attract small businesses for 
participation in federal research and development, the SBIR and 
the STTR programs guarantee data rights protections to small 
business innovators. Unfortunately, the scope of these 
protections has been misconstrued by the U.S. Court of Federal 
Claims in the case of Night Vision v. United States. The Court 
mistakenly relied on the Federal Acquisition Regulation to 
exclude prototypes from statutory data rights protections, even 
though the Small Business Act clearly and unambiguously 
provides that prototypes are within the scope of research and 
development activities which are part of SBIR and STTR. 
However, because the Committee is concerned that there is a 
lack of information on the extent of these violations that 
would serve to justify policy changes, this bill requires the 
GAO to conduct a study of the programs to determine if federal 
agencies are adhering to the data rights protections of SBIR 
awardees and if any clarification of law or policy directives 
is necessary.

                                TITLE IV

    Finally, section 401 of the bill requires the SBA to amend 
the SBIR and STTR Policy Directives to conform to the 
directives of the bill and to publish the policy directives, as 
amended, in the Federal Register.

                           V. Committee Vote

    In compliance with rule XXVI(7)(b) of the Standing Rules of 
the Senate, the following vote was recorded on June 18, 2009.
    A motion by the Chair to adopt the ``SBIR/STTR 
Reauthorization Act of 2009,'' as amended by the Manager's 
Amendment, to reauthorize the SBIR and STTR programs and to 
report the bill favorably with an amendment in the nature of a 
substitute reflecting the text as amended by the Manager's 
Amendment, was approved by a unanimous 18-0 recorded vote with 
the following Senators voting in the affirmative: Landrieu, 
Kerry, Levin, Harkin, Lieberman, Cantwell, Bayh, Pryor, Cardin, 
Shaheen, Hagan, Snowe, Bond, Vitter, Thune, Enzi, Isakson and 
Wicker.

                           VI. Cost Estimate

    In compliance with rule XXVI(11)(a)(1) of the Standing 
Rules of the Senate, the Committee estimates the cost of the 
legislation will be equal to the amounts discussed in the 
following letter from the Congressional Budget Office.

                                                     June 22, 2009.
Hon. Mary L. Landrieu,
Chairman, Committee on Small Business and Entrepreneurship,
U.S. Senate, Washington, DC.
    Dear Madam Chair: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1233, the SBIR/STTR 
Reauthorization 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.

S. 1233--SBIR/STTR Reauthorization Act of 2009

    Summary: S. 1233 would extend and expand 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 for efforts to increase the 
number of small businesses participating in those programs. The 
bill would require participating agencies to collect and report 
more information about program participants that would be used 
both to evaluate the program and for business development. The 
bill would authorize the Government Accountability Office (GAO) 
and the National Academy of Sciences (NAS) to prepare studies 
concerning the operation and effectiveness of the programs.
    Based on information from the Small Business Administration 
(SBA) and other participating agencies, CBO estimates that 
implementing S. 1233 would cost $229 million over the 2010-2014 
period, subject to appropriation of the necessary amounts. 
Enacting the bill would not affect direct spending or revenues.
    S. 1233 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 S. 1233 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        34        34        35        36        172
    Estimated Outlays..............................        25        32        35        35        36        163
Increase in R&D Budget Set-asides:
    Estimated Authorization Level..................         0         2         3         5         6         16
    Estimated Outlays..............................         0         2         3         5         6         16
FAST Program Reauthorization:
    Authorization Level............................        10        10        10        10        10         50
    Estimated Outlays..............................         2         5         9        10        10         36
SBIR-STEM Workforce Development Program:
    Authorization Level............................         0         1         1         1         1          4
    Estimated Outlays..............................         0         0         1         1         1          3
National Academy of Sciences Study:
    Estimated Authorization Level..................         4         0         0         0         0          4
    Estimated Outlays..............................         1         1         1         1         0          4
Additional Agency Activities:
    Estimated Authorization Level..................         7         0         0         0         0          7
    Estimated Outlays..............................         3         4         0         0         0          7
    Total Changes:
        Estimated Authorization level..............        54        47        48        51        53        253
        Estimated Outlays..........................        31        44        49        52        53       229
----------------------------------------------------------------------------------------------------------------
Note.--SBIR = Small Business Innovation Research; STTR = Small Business Technology Transfer; FAST = Federal and
  State Technology Partnership; STEM = Science, Technology, Engineering, and Math.

    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 S. 1233 would cost $229 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 2023. 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. Based on 
information from SBA and participating agencies, CBO estimates 
that administering the two programs will cost about $25 million 
in 2010 (about $2 million of that amount will be for SBA). CBO 
estimates that reauthorizing both programs would cost $163 
million over the 2010-2014 period, assuming appropriation of 
the necessary amounts.

Increase in the R&D budget set-asides for small businesses

    S. 1233 also would increase the amount of each 
participating agency's R&D budget set aside for the programs 
starting in fiscal year 2011. For SBIR, the set-aside would 
increase by 0.1 percent each year over the 2011-2020 period, 
ending at 3.5 percent of each participating agency's R&D 
budget. For STTR, the set-aside would increase by 0.1 percent 
every two years through 2015, ending at 0.6 percent of each 
participating agency's R&D budget. Based on information from 
SBA and the agencies, CBO expects that the expansion would lead 
to an increase in the number of applications received by both 
programs by more than a third over the 2010-2014 period. 
Assuming appropriation of the necessary amounts, CBO estimates 
that processing the additional applications would cost $16 
million over the 2010-2014 period.

FAST program reauthorization

    S. 1233 would reauthorize the Federal and State Technology 
(FAST) Partnership program to improve the competitiveness of 
small businesses in technological fields. A portion of the 
funds made available under the program also would be available 
to conduct outreach and provide technical assistance to 
increase the number of small businesses participating in the 
SBIR program. The bill would authorize $10 million for each of 
fiscal years 2010 through 2014 to implement the program. Based 
on historical spending patterns of SBA's other business 
assistance programs, CBO estimates that implementing this 
provision would cost $36 million over the 2010-2014 period, 
assuming appropriation of the necessary amounts.

SBIR-STEM Workforce Development Program

    The bill would establish a program to encourage small 
businesses that participate in the SBIR program to provide 
internships to college students who are pursuing studies in the 
fields of science, technology, engineering, and math. 
Participating businesses would be eligible for a bonus grant 
equal to 10 percent of their SBIR award, up to a maximum of 
$10,000 per year. S. 1233 would authorize the appropriation of 
$1 million per year for fiscal years 2011 through 2015 for this 
program. CBO estimates that implementing this provision would 
cost $3 million over the 2010-2014 period, assuming 
appropriation of the necessary amounts.

National Academy of Sciences Study

    The bill would direct certain agencies participating in the 
SBIR program to enter into an agreement with the NAS for the 
National Research Council to study the degree to which the SBIR 
program has stimulated innovation and used small businesses to 
meet federal R&D needs. Based on results from the study, NAS 
also would develop recommendations for improving the SBIR 
program. Based on information from NAS, CBO estimates that 
conducting a study as required by S. 1233 would cost $4 million 
over the 2010-2014 period.

Additional agency activities

    S. 1233 would require each agency participating in the SBIR 
or STTR program to expand the amount of information collected 
and maintained about applicants and businesses that receive 
awards under the programs. This information would serve as a 
source for two databases, one public and one governmental, 
maintained by SBA to evaluate the two programs. Based on 
information from the agencies, CBO estimates that collecting 
and maintaining additional data in each participating agency 
would cost about $6 million over the 2010-2014 period to expand 
the systems already in place.
    The bill also would require GAO to conduct two studies: one 
to determine whether the agencies participating in the SBIR and 
STTR programs are complying with the programs' requirements to 
allocate a specific portion of their R&D budgets, the other to 
assess whether agencies participating in the SBIR program are 
sufficiently protecting the intellectual property rights of the 
small businesses that receive awards under the program. CBO 
estimates that conducting such studies would cost about $1 
million, subject to the availability of appropriated funds.
    Intergovernmental and private-sector impact: S. 1233 
contains no intergovernmental or private-sector mandates as 
defined in UMRA. The bill would reauthorize the FAST program, a 
matching-grant program to encourage states to assist in the 
development of high-technology small businesses. Any costs to 
state governments to provide matching funds would be incurred 
voluntarily.
    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

                  VII. Evaluation of Regulatory Impact

    In compliance with rule XXVI(11)(b) of the Standing Rules 
of the Senate, it is the opinion of the Committee that no 
significant additional regulatory impact will be incurred in 
carrying out the provisions of this legislation. There will be 
no additional impact on the personal privacy of companies or 
individuals who utilize the services provided.

                   VIII. Section-by-Section Analysis


Sec. 1. Short title

    This section specifies the short title of the legislation 
as the ``SBIR/STTR Reauthorization Act of 2009.''

Sec. 2. Table of contents

    This section provides the table of contents for the 
legislation.

Sec. 3. Definitions

    This section re-states applicable definitions from the 
Small Business Act.

         TITLE I--REAUTHORIZATION OF THE SBIR AND STTR PROGRAMS

Sec. 101. Extension of termination dates

    This section extends the SBIR and STTR programs for 14 
years, making the new sunset dates for both programs September 
30, 2023.

Sec. 102. Status of the SBA Office of Technology

    This section requires the SBA to maintain an Office of 
Technology headed by an Assistant Administrator who will report 
directly to the Administrator. It also requires that the Office 
of Technology be independent from the Office of Government 
Contracting and that it be sufficiently staffed and funded to 
oversee the SBIR and STTR programs and to comply with statutory 
data collection, evaluation, and reporting requirements.

Sec. 103. SBIR allocation increase

    This section increases the SBIR allocation from 2.5 percent 
to 3.5 percent by increasing it 0.1 percent each year from 
fiscal year 2010 through 2019. The provision also requires the 
Department of Defense and the Department of Energy to direct 
these additional funds to further the technology readiness 
levels of SBIR projects, including conducting testing and 
evaluation, and not to be used for Phase I and Phase II awards. 
The section applies to all SBIR and STTR participating 
agencies.

Sec. 104. STTR cap increase

    This section increases the STTR allocation from 0.3 percent 
to 0.6 percent by increasing it by 0.1 percent every two years 
from fiscal year 2011 through 2015.

Sec. 105. SBIR and STTR award levels

    This section increases the size of SBIR and STTR awards 
from $100,000 to $150,000 for Phase I and from $750,000 to $1 
million for Phase II and requires the SBA to make triennial 
adjustments of the award sizes for inflation. The provision 
prohibits any agency from issuing an SBIR or STTR award if the 
size of the award exceeds the award guidelines established in 
this section by more than 50 percent. However, it does clarify 
that nothing shall prevent a Federal agency from supplementing 
an award under the SBIR or STTR programs with Federal funds 
that are outside of the SBIR and STTR allocations. Finally, the 
provision requires federal agencies to maintain information on 
awards exceeding the award guidelines, including the award 
amount, a justification for exceeding the guidelines, the 
identity and location of the recipient, and whether or not the 
recipient firm has received venture capital investment and, if 
so, whether or not it is majority-owned and controlled by 
multiple venture capital companies.

Sec. 106. Agency and program collaboration

    The section allows SBIR and STTR applicants to receive 
awards for subsequent SBIR or STTR phases at another agency and 
also allows small business concerns which received SBIR or STTR 
awards to receive awards for subsequent phases in either the 
STTR or SBIR program, respectively.

Sec. 107. Elimination of Phase II invitations

    This section requires that federal agencies conduct their 
solicitation of Phase II SBIR and STTR proposals without any 
invitation, pre-screening, pre-selection, or down-selection 
process between the first and second phase.

Sec. 108. Majority-venture investments in SBIR firms

    This section allows the Department of Health and Human 
Services to apply for the authority to permit firms majority-
owned and controlled by multiple venture capital companies to 
compete for up to 18 percent of the agency's SBIR funds. All 
other qualifying federal agencies with an SBIR program may 
apply for the authority to permit firms majority-owned and 
controlled by multiple venture capital companies to compete for 
up to eight percent of the agency's SBIR funds. The provision 
also requires the Administrator of the SBA to post and maintain 
a website providing a clear explanation of the SBIR program 
affiliation standards.

Sec. 109. SBIR and STTR special acquisition preference

    This section codifies the language from the SBIR and STTR 
Policy Directives confirming the intent of Congress to 
establish a special acquisition preference for SBIR and STTR 
Phase III awards. The provision clarifies that preference for 
contracts concerning research developed with SBIR or STTR funds 
should go to the developers and holders of SBIR and STTR 
technologies to the greatest extent practicable.

Sec. 110. Collaborating with Federal laboratories and research and 
        development centers

    This section reduces the burden on cooperation between 
SBIR/STTR firms and federal laboratories by ensuring that such 
subcontracting is generally permitted without the requirement 
for a waiver. The provision also ensures that subcontracting to 
federal laboratories is not required of SBIR or STTR awardees. 
Finally, it clarifies that firms that have entered into a 
cooperative agreement with a federal laboratory are eligible to 
receive SBIR/STTR awards.

Sec. 111. Notice requirement

    This section ensures that the SBA is notified any time the 
SBIR or STTR policy directives are challenged in court. It also 
requires the SBA to report to Congress on actions taken to 
enforce the SBIR and STTR policy directives.

          TITLE II--OUTREACH AND COMMERCIALIZATION INITIATIVES

Sec. 201. Rural and state outreach

    This provision reauthorizes the FAST program and the ROP 
through 2014, and increases the authorization for the ROP from 
$2 million to $5 million. It creates a matching requirement 
category for FAST recipients in rural areas of 35 cents for 
each federal dollar. The provision further creates an 
``enhanced'' match requirement of 15 cents for a FAST recipient 
in a rural area which is also located in one of the 18 states 
receiving the fewest SBIR Phase I awards. Finally, the matching 
requirements for states receiving an average moderate amount of 
awards is reduced from 75 cents to 50 cents, and the match for 
states in the bottom 18 of recipients is reduced from 50 cents 
to 35 cents.

Sec. 202. SBIR-STEM Workforce Development Grant Pilot Program

    This section establishes a five-year workforce development 
grant pilot program to match up innovative small businesses 
with college students studying science, technology, 
engineering, and math. The proposal would provide SBIR grantees 
with a 10 percent bonus grant, for either Phase I or Phase II 
SBIR grants, with a total maximum award of $10,000 per year for 
small businesses that provide opportunities to these students.

Sec. 203. Technical assistance for awardees

    This section increases the amount of discretionary 
technical assistance that SBIR and STTR agencies can contract 
out to provide to awardees from $4,000 to $5,000 for Phase I 
awards and from $4,000 to $5,000 per year for Phase II awards. 
The provision also states that this amount shall be in addition 
to the amount of the recipient's award. It also requires 
agencies to provide SBIR and STTR award winners who wish to 
procure their own technical assistance with the allowable 
amount. Finally, the provision prohibits the agencies from 
using these funds to pay its contractor for technical 
assistance for a given SBIR or STTR award unless the contractor 
provides the technical assistance to that awardee.

Sec. 204. Commercialization program: Department of Defense

    This section makes the Commercialization Pilot Program 
(CPP) at the Department of Defense permanent for both the SBIR 
and STTR programs. The provision authorizes the Secretary of 
Defense to establish goals for transitioning Phase I and Phase 
II technologies in subcontracting plans for contracts of $100 
million or more. The provision also requires the Secretary of 
Defense to set a goal to increase the number of Phase II 
contracts that lead to technology transition into programs of 
record or fielded systems and to use incentives to encourage 
agency program managers and prime contractors to meet that 
goal. Finally, the provision includes reporting requirements on 
the status of projects funded through CPP.

Sec. 205. Commercialization pilot programs for civilian agencies

    This section authorizes agencies other than the Department 
of Defense to create Innovation Development Transition Pilot 
Programs to support advanced development of small business 
technologies which are facing high manufacturing or regulatory 
costs. The provision authorizes these agencies to grant post 
Phase II awards up to three times the regular size (up to $3 
million), reflecting current practices at NIH. As a condition 
of awards, matching private or federal non-SBIR funds are 
required if the technology will be acquired by the U.S. 
government.

Sec. 206. Nanotechnology Initiative

    This section requires each agency with an SBIR or STTR 
program to encourage the submission of applications for support 
of nanotechnology related projects. The section sunsets in 
2014.

Sec. 207. Accelerating cures

    This section establishes an advisory board at the National 
Academy of Sciences consisting of the Directors of the NIH and 
its SBIR program, senior agency managers at the NIH, industry 
experts, and small business representatives to provide regular 
assessments of program management and effectiveness. Industry 
experts will be selected by the National Academy of Sciences in 
consultation with the Associate Administrator for Technology at 
the SBA and the Director of the Office of Science and 
Technology Policy at the White House. Half of the board shall 
be SBIR awardees and the total number of members, in addition 
to the Directors of the NIH and its SBIR program, shall not 
exceed ten. This section also encourages the creation of a 
pilot program, not to exceed 1 percent of extramural research 
and development dollars at NIH, to support innovation in 
program management and to enhance the development of cures and 
treatments. It also encourages NIH to reduce the time period 
between Phase I and Phase II to no more than six months to the 
greatest extent practicable. Finally, the section requires the 
NIH director to submit an annual report to Congress and the 
aforementioned NAS advisory board on the activities of the SBIR 
program at the NIH. Five years after enactment this section 
will sunset.

                  TITLE III--OVERSIGHT AND EVALUATION

Sec. 301. Streamlining annual evaluation requirements

    This section requires the Administration to report to 
Congress at least annually the number of proposals received 
from firms with venture capital investment, including those 
owned and controlled by multiple venture capital firms. It also 
requires the Administration to report on efforts to increase 
outreach to firms owned and controlled by women and socially or 
economically disadvantaged individual, the implementation and 
compliance with the allocation of funds for firms majority-
owned and controlled by multiple venture capital companies, and 
appeals of Phase III awards and notices of noncompliance with 
the SBIR and the STTR Policy Directives. Finally, the section 
requires the Administration to coordinate the implementation of 
electronic databases at the participating agencies.

Sec. 302. Data collection from agencies for SBIR

    This section requires agencies with an SBIR program to 
collect data on whether or not an applicant or awardee has 
venture capital, if it is majority-owned and controlled by 
multiple venture capital firms, the amount of venture capital 
it has received at the time of award, if it has foreign 
investors and who they are, if it is owned by a woman, if it is 
owned by a socially or economically disadvantaged individual, 
if it received assistance from the FAST program or the ROP, if 
it has a university affiliation, and if the award winner is 
from a state receiving less federal research funds for small 
businesses than a majority of other states. The provision also 
requires agencies to justify awards given that exceed the 
statuary guidelines.

Sec. 303. Data collection from agencies for STTR

    This section requires agencies with an STTR program to 
collect data on whether or not an applicant or awardee has 
venture capital, if it is majority-owned and controlled by 
multiple venture capital firms, the amount of venture capital 
it has received at the time of award, if it has foreign 
investors and who they are, if it is owned by a woman, if it is 
owned by a socially or economically disadvantaged individual, 
if it received assistance from the FAST program or the ROP, if 
it has a university affiliation, and if the award winner is 
from a state receiving less federal research funds for small 
businesses than a majority of other states. The provision also 
requires agencies to justify awards given that exceed the 
statutory guidelines.

Sec. 304. Public database

    This section requires that the public database maintained 
by the Administrator include information on whether or not a 
firm receiving an award has venture capital, is majority-owned 
and controlled by multiple venture capital companies, is owned 
by a woman, is owned by a socially or economically 
disadvantaged individual, has received assistance from the FAST 
program or the ROP, or has a university affiliation.

Sec. 305. Government database

    This section requires that the government database 
maintained by the Administrator in coordination with the 
agencies for the purposes of evaluation of the SBIR and STTR 
programs include information on the ownership structure and 
affiliations of awardee firms that have venture capital and 
that are majority-owned and controlled by multiple venture 
capital companies.

Sec. 306. Accuracy in funding base calculations

    This section requires the GAO to conduct an audit of the 
SBIR and STTR programs to determine whether federal agencies 
are complying with the allocation requirements. The provision 
also requires that the GAO assess whether or not it would be a 
more effective to base participation on a percentage of an 
agency's research and development budget rather than the 
extramural research and development budget and to report such 
information to Congress.

Sec. 307. Continued evaluation by the National Academy of Sciences

    This section authorizes the National Academy of Sciences to 
continue its evaluation of the SBIR program through the end of 
fiscal year 2021 and requires that updates of the studies be 
provided to Congress every four years from the date of 
enactment.

Sec. 308. Technology insertion reporting requirements

    This section requires the Administration to include in its 
annual report to Congress information on Phase III awards 
issued by SBIR and STTR agencies, including the dollar amount 
of these awards, their recipients, and the name of component or 
agency issuing them.

Sec. 309. Intellectual property protections

    This section requires the GAO to conduct a study of the 
SBIR and STTR programs to assess whether the agencies are 
adhering to the data rights protections for SBIR and STTR 
awardees and their technologies, as well as whether the current 
laws and policy directives are sufficient to protect the rights 
of the awardees. The report is due to Congress 18 months after 
the enactment of the Act.

                      TITLE IV--POLICY DIRECTIVES

Sec. 401. Conforming amendments to the SBIR and the STTR Policy 
        Directives

    This section requires conforming amendments to the SBA SBIR 
and STTR Policy Directives within 180 days to implement the 
provisions of this Act. It also requires that the 
Administration publish the SBIR and STTR Policy Directives in 
the Code of Federal Regulations within 180 days.

                                  
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