[Senate Report 114-417]
[From the U.S. Government Publishing Office]


                                                     Calendar No. 480
                                                     
114th Congress }                                              { Report
                                 SENATE
 2d Session    }                                              { 114-417

======================================================================
 
                 SBIR/STTR REAUTHORIZATION ACT OF 2016

                                _______
                                

               December 20, 2016.--Ordered to be printed

   Filed, under authority of the order of the Senate of December 10 
                  (legislative day, December 9), 2016

                                _______
                                

Mr. Vitter, from the Committee on Small Business and Entrepreneurship, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 2812]

    The Committee on Small Business and Entrepreneurship, to 
which was referred the bill (S. 2812) to amend the Small 
Business Act to reauthorize and improve the Small Business 
Innovation Research Program and the Small Business Technology 
Transfer Program, and for other purposes, having considered the 
same, reports favorably thereon with an amendment and 
recommends that the bill, as amended, do pass.

                            I. Introduction

    The ``SBIR/STTR Reauthorization Act of 2016'' (S. 2812) was 
introduced by the Ranking Member, Senator Jeanne Shaheen, for 
herself and Chairman Vitter, on April 18, 2016. Other 
cosponsors include Senators Kelly Ayotte and Ed Markey.
    The ``SBIR/STTR Reauthorization Act of 2016'' amends the 
Small Business Act to make permanent the SBIR and STTR 
programs. It makes changes to the programs in order to increase 
commercialization, expand the participation of small businesses 
in more regions of the country, increase the participation of 
small businesses owned by women and minorities, reduce 
administrative and reporting burdens on small businesses and 
agencies, accelerate application reviews and disbursements of 
awards, and strengthen oversight and compliance.
    During the markup of the bill on May 11, 2016, the 
Committee adopted five amendments, including an amendment by 
Senator Peters to increase the participation of women and 
minorities and an amendment by Senators Coons and Gardner to 
increase the technical and business assistance to SBIR and STTR 
firms in order to increase the commercialization of SBIR and 
STTR projects. The underlying bill included a pilot program by 
Chairman Vitter designed to increase the participation of small 
businesses from states that are underrepresented in these 
important federal innovation programs by allowing states in a 
region to collaborate on outreach, as well as provide technical 
and business assistance. Specifically, Chairman Vitter's pilot 
would establish a 4-year program in which the SBA provides 
grants to regional, multi-state collaboratives in order to 
address the needs of states in the bottom 50% of the SBIR 
program, and make several changes to the 3% SBIR Administrative 
Funds Pilot Program. It was originally introduced as S. 2136 on 
October 6, 2015 and reported out of the Committee favorably on 
December 3, 2015.
    The Shaheen-Vitter substitute amendment made technical 
changes to the allocation section to clarify that funding for 
the SBIR and STTR programs comes from the research, 
development, test, and evaluation of the Department of 
Defense's budget, added STTR where accidently omitted, added a 
cross-agency Phase II sequential clarification, and expanded 
the Government Accountability Office (GAO) tracking of 
violations against SBIR/STTR firms by an agency or prime 
contractor.
    The bill, as amended, was approved by roll call vote of 18-
1, as part of a manager's package that included five bills: S. 
2812, S. 2831, S. 2838, S. 2846 and S. 2850. Senators Vitter, 
Risch, Rubio, Scott, Fischer, Gardner, Ernst, Ayotte, Enzi, 
Shaheen, Cantwell, Cardin, Heitkamp, Markey, Booker, Coons, 
Hirono and Peters voted for the manager's package. Senator Paul 
voted against the manager's package.

                   II. Purpose & Need For Legislation

    The purpose of the ``SBIR/STTR Reauthorization Act of 
2016'' is to permanently reauthorize, make current and improve 
the Small Business Innovation Research (SBIR) and Small 
Business Technology Transfer (STTR) programs.
    The SBIR and STTR programs need to be reauthorized because 
they are set to sunset on September 30, 2017. The Committee 
agreed it was important to act early, rather than waiting till 
the next Congress, in order to provide certainty and stability 
for the small businesses and government agencies that rely on 
these public-private partnerships. The small business community 
made clear to Congress that they did not want to repeat the 
damage caused during the last reauthorization, when the 
programs expired and limped along for three years, through a 
series of 14 temporary authorizations.
    Despite representing only a sliver of the federal R&D 
budget (roughly $2 billion of $140 billion annually), the 
programs have been a huge success. The Information Technology & 
Innovation Foundation has said that the prominence of SBIR 
firms on the annual list of top 100 innovations is ``a powerful 
indication that the SBIR program has become a key force in the 
innovation economy of the United States.'' The SBIR and STTR 
programs have played a role in the growth of firms that now 
employ thousands of Americans across the country. In addition, 
the technologies developed through the SBIR and STTR programs 
have resulted in a good return on investment for taxpayers: Two 
recent studies found that for every federal dollar awarded to 
SBIR firms through the Air Force and Navy, $12 to $19 was 
returned to the economy.
    The Committee believes that these programs need to be fully 
reauthorized in order to continue 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.
    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.\1\ 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 to increase the diversity 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.
---------------------------------------------------------------------------
    \1\National Research Council, SBIR Challenges and Opportunities, 
Charles Wessner ed. (National Academies Press, 1999), p. 7.
---------------------------------------------------------------------------

                        III. Description of Bill

    The Shaheen-Vitter SBIR/STTR Reauthorization Act of 2016 
permanently reauthorizes and strengthens the important and 
successful Small Business Innovation Research (SBIR) and Small 
Business Technology Transfer (STTR) programs.
    SBIR and STTR harness the creativity and ingenuity of 
America's small businesses to meet the research and development 
(R&D) missions of our federal agencies, such as addressing 
threats to public health and our national security. The 
programs also support the growth of small, high-tech companies 
that create good jobs in local communities across the country 
and keep the United States competitive.
    Under SBIR and STTR, participating federal agencies foster 
government-industry partnerships by making competitive awards 
to small firms with the best scientific proposals in response 
to public research and development needs. By ensuring that 
American entrepreneurs can compete for R&D awards, the programs 
tap into the ingenuity of American small businesses and enhance 
our ability to move technologies from the lab to the 
marketplace.
    S. 2812 makes these programs permanent while also building 
in mechanisms for Congressional oversight and making 
significant improvements by:
           Expanding opportunities for small businesses 
        to commercialize their technologies;
           Increasing gradually the allocation of SBIR 
        and STTR awards in order to make more awards and 
        explore more innovations;
           Clarifying and increasing assistance to 
        small businesses to protect their intellectual 
        property;
           Strengthening state outreach and technical 
        assistance in order to diversify the geographic 
        distribution of awards around the country as well as 
        increasing the participation of women and minorities;
           Enhancing oversight of the Small Business 
        Administration and the 11 participating SBIR agencies 
        to ensure implementation of outstanding provisions from 
        past SBIR/STTR reauthorization bills; and,
           Implementing initiatives to reduce 
        duplicative reporting for small businesses, speed up 
        the review of applications, and simplify program 
        implementation for agencies.

                       IV. Hearings & Roundtables

    On January 28, 2016, the Committee held a hearing entitled, 
``Reauthorization of the SBIR/STTR Programs--The Importance of 
Small Business Innovation to National and Economic Security.'' 
The purpose of the hearing was to examine the SBIR and STTR 
programs and discuss their effectiveness at solving technology 
problems for our country, especially for national security, as 
well as their contributions to our general economy with new 
firms and quality jobs. The witnesses included: Mr. Robert 
Smith, Director, Department of Navy SBIR/STTR Programs, Office 
of Naval Research; Mr. John Williams, Director of Innovation 
and Technology, Office of Investment and Innovation, U.S. Small 
Business Administration; Mr. Robert Kline-Schoder, Ph.D., 
President, Creare, Hanover, N.H.; Mr. Jere W. Glover, Executive 
Director, Small Business Technology Council, Annapolis, MD; and 
Mr. Roy Keller, Director, LA Technology Transfer Office, LSU 
Innovation Park, Louisiana Business & Technology Center, Baton 
Rouge, LA (invited but unable to attend due to weather).
    On August 4, 2016, the Committee held a field hearing in 
Hawaii entitled, ``Expanding Hawaii's STEM Pipeline: Examining 
Opportunities to Grow Small Businesses, Entrepreneurs, and the 
STEM Workforce.'' Witnesses included: Dr. Walter Jones, 
Executive Director, Office of Naval Research, Arlington, VA; 
Dr. Sylvia James, Director, Division of Human Resource 
Development, Directorate for Education and Human Resources, 
National Science Foundation, Arlington, VA; Ms. Jane A. Sawyer, 
Hawaii District Office Director, U.S. Small Business 
Administration; Dr. Lui Hokoana, Chancellor, Maui College, 
Kahului, HI; Ms. Sarah A. Jenkins, Student, Duke University, 
Kaunakakai, HI; Ms. Lily N. Jenkins, Student, Molokai High 
School, Kaunakakai, HI; Ms. Audrey S.C. Cabrera, P.E., Brown 
and Caldwell, Wailuku, Maui, HI; Ms. Leslie Wilkins, Vice 
President, Women in Technology Program Director, Maui Economic 
Development Board, Inc. Kihei, HI.

                           V. Committee Vote

    In compliance with rule XXVI(7)(b) of the Standing Rules of 
the Senate, the following vote was recorded on May 11, 2016.
    A motion by the Chair to adopt the ``SBIR/STTR 
Reauthorization Act of 2016,'' as amended, as part of a 
manager's package, was reported favorably with a record vote of 
18-1. The following Senators voted in the affirmative: Senators 
Vitter, Risch, Rubio, Scott, Fischer, Gardner, Ernst, Ayotte, 
Enzi, Shaheen, Cantwell, Cardin, Heitkamp, Markey, Booker, 
Coons, Hirono and Peters voted for the manager's package. 
Senator Paul voted against the manager's package. The manager's 
package included five bills: S. 2812, S. 2831, S. 2838, S. 2846 
and S. 2850.
    The amendments to S. 2812 that were included in the 
manager's package as reported favorably include: five 
amendments by Senator Peters to increase the participation of 
women and minorities, and an amendment by Senators Coons and 
Gardner to increase the technical and business assistance to 
SBIR and STTR firms in order to increase the commercialization 
of SBIR and STTR projects.

                           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.

                                                 September 9, 2016.
Hon. David Vitter,
Chairman, Committee on Small Business and Entrepreneurship,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 2812, the SBIR and 
STTR Reauthorization and Improvement Act of 2016.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Stephen 
Rabent.
            Sincerely,
                                                        Keith Hall.
    Enclosure.
    S. 2812 would permanently authorize and expand the Small 
Business Innovation Research (SBIR) and the Small Business 
Technology Transfer (STTR) programs. Those programs help small 
businesses compete for research and development contracts. The 
bill also would authorize federal agencies to use a portion of 
their funding for research and development to cover 
administrative costs of the SBIR and STTR programs. S. 2812 
also would direct the Small Business Association (SBA) to 
develop a pilot program to provide grants to establish regional 
collaboratives to help small businesses increase their 
competitiveness for awards from these programs and would 
authorize a variety of other activities.
    Based on information from the SBA and other affected 
agencies, CBO estimates that implementing S. 2812 would cost 
$166 million over the 2017-2021 period; such spending would be 
subject to appropriation. Pay-as-you-go procedures do not apply 
to this legislation because it would not affect direct spending 
or revenues.
    CBO estimates that enacting S. 2812 would not increase net 
direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2027.
    S. 2812 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA).
    Estimated cost to the Federal Government: The estimated 
budgetary effect of S. 2812 is shown in the following table. 
The costs of this legislation fall primarily within budget 
functions 370 (commerce), 050 (national defense), 250 (general 
science, space, and technology), and 550 (health).

----------------------------------------------------------------------------------------------------------------
                                                               By fiscal year, in millions of dollars--
                                                    ------------------------------------------------------------
                                                       2017      2018      2019      2020      2021    2017-2021
----------------------------------------------------------------------------------------------------------------
                                 INCREASES IN SPENDING SUBJECT TO APPROPRIATION
 
Permanent Authorization and Expansion of the SBIR
 and STTR Programs:
    Estimated Authorization Level..................         0        10        10        10        10         40
    Estimated Outlays..............................         0         8         9        10        10         37
Regional SBIR and STTR State Collaborative
 Initiative Pilot Program:
    Estimated Authorization Level..................        13        16        17        20        21         87
    Estimated Outlays..............................        10        15        16        19        20         80
Federal and State Technology Partnership Program:
    Authorization Level............................        10        10        10        10        10         50
    Estimated Outlays..............................         8         9        10        10        10         47
Additional Agency Activities:
    Estimated Authorization Level..................         1         1         *         *         *          2
    Estimated Outlays..............................         1         1         *         *         *          2
    Total Changes:
        Estimated Authorization Level..............        24        37        37        40        41        179
        Estimated Outlays..........................        19        33        35        39        40        166
----------------------------------------------------------------------------------------------------------------
Notes: SBIR = Small Business Innovation Research; STTR = Small Business Technology Transfer; FAST = Federal and
  State Technology Partnership; * = between zero and less than $500,000.

    Basis of estimate: For this estimate, CBO assumes that the 
bill will be enacted near the end of fiscal year 2016, that the 
necessary amounts will be appropriated, and that spending will 
follow historical patterns.
    Under current law, the SBIR program requires federal 
agencies with extramural budgets for research and development 
(R&D) that exceed $100 million per year to set aside 3 percent 
of that budget for contracts with small businesses. (Extramural 
budgets consist of expenditures for activities not performed by 
agency employees.) Likewise, the STTR program requires federal 
agencies with extramural budgets for R&D that exceed $1 billion 
per year to set aside 0.45 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.
    For participating agencies, the cost of those programs 
consists primarily of personnel and associated overhead 
expenses to solicit applications, prepare reports, and track 
outcomes. The organizational structure of the program offices 
varies. 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.

Permanent authorization and expansion of the SBIR and STTR programs

    S. 2812 would permanently authorize the SBIR and STTR 
programs. Under current law, both programs are scheduled to 
terminate at the end of fiscal year 2017. The bill would 
increase the amount of extramural R&D funding that each 
participating agency sets aside for each program, starting in 
fiscal year 2018. The SBA spent approximately $10 million in 
2015 to administer the two programs. On that basis, CBO 
estimates that it would cost the SBA $37 million over the 2018-
2021 period to coordinate with participating agencies and 
administer those programs.
    S. 2812 also would extend, through fiscal year 2021, a 
pilot program that authorizes participating agencies to use up 
to 3 percent of the R&D amounts set aside for the SBIR program 
for administrative costs, rather than paying those costs from 
general operating funds. Under current law, the authority for 
that pilot program is scheduled to expire at the end of fiscal 
year 2017. Because the pilot program would not affect the 
underlying costs of administering the SBIR program, CBO 
estimates that extending the pilot program would have no 
budgetary effect.

Regional SBIR and STTR State Collaborative Initiative Pilot program

    S. 2812 would direct the SBA to establish and operate, 
through fiscal year 2021, a pilot program to provide grants to 
research institutions and small business that collaborate to 
improve small businesses' chances of successfully competing for 
awards under the SBIR and STTR programs. The bill would 
authorize the SBA to use a portion of funds dedicated to those 
programs by each participating agency to cover its costs to 
administer the proposed pilot program.
    Based on information from the SBA and several participating 
agencies about the size of their extramural R&D budgets and 
their respective administrative costs, CBO estimates that 
implementing the pilot program would cost $80 million over the 
2017-2021 period, assuming appropriation of the necessary 
amounts.

Federal and State Technology Partnership Program

    S. 2812 would authorize the appropriation of $10 million 
for each of fiscal years 2017 through 2021 to fund the Federal 
and State Technology (FAST) Partnership Program. Through that 
program, the SBA awards grants to support efforts by colleges 
and universities as well as business development centers to 
provide technical assistance and other support to small 
businesses competing for awards under the SBIR and STTR 
programs. Based on information from the SBA and historical 
trends for spending related to the FAST program, CBO estimates 
that implementing this provision would cost $47 million over 
the 2017-2021 period, assuming appropriation of the authorized 
amounts.

Other provisions

    CBO estimates that implementing a variety of other 
provisions of S. 2812 would involve modest costs. Those 
provisions would:
           Authorize grants to small businesses to 
        support internships for recent graduates from the 
        fields of science, technology, engineering, or math who 
        belong to underrepresented populations;
           Require the SBA to form an interagency 
        committee to recommend ways to improve data collection 
        across federal agencies participating in the SBIR and 
        STTR programs;
           Direct the SBA to make numerous changes to 
        its policy directives for the SBIR and STTR programs; 
        and
           Require the Government Accountability Office 
        to complete certain reports related to the SBIR and 
        STTR programs and federal agencies' compliance with 
        goals for awarding contracts to small businesses.
    Based on information from the SBA and other affected 
agencies, CBO estimates that implementing those provisions 
would cost a total of $2 million over the 2017-2021 period, 
assuming the availability for appropriated funds.
    Pay-as-you-go considerations: None.
    Increase in long term direct spending and deficits: CBO 
estimates that enacting S. 2812 would not increase net direct 
spending or on-budget deficits in any of the four consecutive 
10-year periods beginning in 2027.
    Intergovernmental and private-sector impact: S. 2812 
contains no intergovernmental or private-sector mandates as 
defined in UMRA. Reauthorizing the FAST program would benefit 
states that help develop small businesses focused on 
technology. States also would benefit from a pilot program 
established in the bill that would provide grants to multi-
state collaboratives that address the needs of small 
businesses. Any costs to state governments, including matching 
contributions, would result from complying with conditions of 
assistance.
    Previous CBO estimate: CBO has transmitted estimates for 
two other bills with provisions that are similar to provisions 
of S. 2812.
    On July 15, 2016, CBO transmitted a cost estimate for S. 
2136, the Improving Small Business Innovative Research and 
Technologies Act of 2015, as reported by the Senate Committee 
on Small Business and Entrepreneurship on December 3, 2015. S. 
2812 would reauthorize the FAST program through 2017 and 
establish a one-year Regional SBIR and STTR State Collaborative 
Initiative Pilot Program. Our estimate of spending for those 
programs under S. 2812 is larger because S. 2812 would 
authorize them for a longer period of time.
    On August 31, 2016, CBO transmitted a cost estimate for 
H.R. 4783, the Commercializing on Small Business Innovation Act 
of 2016, as reported by the House Committee on Small Business 
on July 25, 2016. H.R. 4783 would reauthorize the SBIR and STTR 
programs through fiscal year 2022, and our estimates of 
spending for those activities over the 2017-2021 period is the 
same as under S. 2812.
    Estimate prepared by: Federal Costs: Stephen Rabent; Impact 
on State, Local, and Tribal Governments: Rachel Austin; Impact 
on the Private Sector: Logan Smith.
    Estimate approved by: Theresa Gullo, 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

    Specifies the short title of the legislation as the ``SBIR/
STTR Reauthorization Act of 2016.''

Sec. 2. Table of contents

    Breaks out the six titles of the bill.

                  TITLE I--REAUTHORIZATION OF PROGRAMS

Sec. 101. Permanency of SBIR and STTR programs

    Makes the SBIR and STTR programs permanent.

    TITLE II--ENHANCED SMALL BUSINESS ACCESS TO FEDERAL INNOVATION 
                              INVESTMENTS

Sec. 201. Allocation increases and transparency in base calculation

    Makes several changes to the required expenditure amounts 
for the SBIR and STTR programs to clarify the law, increase the 
percentages, and provide simplification and transparency for 
the base funding calculation at the Department of Defense 
(DoD).
    Revises the law to require agencies to obligate for 
expenditure a minimum percentage each year instead of to expend 
each year. The Government Accountability Office (GAO) 
recommended this change in order to make clearer Congressional 
intent and expectations for the spending requirement, which 
impacts agencies like DoD that use the money over a two-year 
period and have a hard time demonstrating that they are 
complying with the allocation requirement as interpreted by the 
GAO.
    Increases the amounts that agencies are required to 
allocate to the SBIR and STTR programs, in order to stimulate 
America's innovation economy and to remedy the continued 
underrepresentation of small businesses in federal research and 
development.
     For the SBIR program at all non-Department of 
Defense agencies, the allocation increases incrementally over 
ten years (2018-2028) from 3.2 percent to 6 percent. The 
funding is based on and taken out of each agency's extramural 
research and development budget.
     For the SBIR program at DoD, the allocation 
increases incrementally over the same period of ten years, but 
the funding source has been modified in order to reduce the 
administrative burden on the DoD, improve transparency of how 
DoD calculates the allocation and to increase the Department's 
compliance with the allocation requirement. The baseline 
percentage has been adjusted accordingly. Specifically, the 
DoD's allocation increases from 2.5 percent to 5 percent. The 
funding is based on and taken out of DoD's entire research and 
development budget, not just the extramural portion. DoD staff 
requested and GAO recommended changing the funding source in 
order to streamline the calculation process. Under current 
practice, DoD wastes significant staff time recalculating the 
extramural budget of DoD throughout the year as expenditures 
change. The Committee emphasizes that the new percentage does 
not reduce the dollars to SBIR and STTR firms; it increases 
them.
     For the STTR program at all agencies (non-DoD and 
DoD), the allocation increases incrementally over six years 
(2018-2024 from .45 percent to 1 percent. Similar to the SBIR 
program change, at DoD the funding source for the STTR program 
has been changed and comes out of the entire research and 
development budget, not just the extramural portion, in order 
to reduce the administrative burden on the DoD, improve 
transparency of how DoD calculates the allocation and to 
increase the Department's compliance with the allocation 
requirement. Unlike the SBIR program changes, the bill does not 
adjust the percentages because the amounts are so small.

Sec. 202. Regular oversight of award amounts

    Builds in regular Congressional review of the dollar amount 
of award levels. The purpose is to ensure that the dollar 
amounts allowed for the various phases are sufficient for the 
expected research and development while maintaining a balance 
between the size of award and the number of awards. The 
guidelines for size of awards reside in the SBIR and STTR 
policy directives, not in the Small Business Act.
    Accordingly, this section directs the Small Business 
Administration (SBA) to modify the policy directives in two 
ways: (1) eliminate the Administration's authority to 
automatically increase the award levels each year for 
inflation, and (2) clarify that Congress intends to review the 
dollar value of awards every three years.
    Includes a Sense of Congress that every three years the 
Congress should evaluate whether to adjust the dollar amount of 
the award levels.
    Clarifies that a sequential Phase II award is subject to 
the same requirements for regular Phase I and Phase II awards, 
which safeguard against awards that significantly exceed the 
guidelines. Specifically, size of awards cannot be increased by 
more than 50 percent of the award size guidelines. It is 
important to note that returning the award adjustment authority 
to Congress has the added value of building in regular 
oversight of the SBIR and STTR programs in general.

               TITLE III--COMMERCIALIZATION IMPROVEMENTS

Sec. 301. Permanency of the Commercialization Pilot program for 
        civilian agencies

    Makes the voluntary Commercialization Pilot program 
permanent. It also makes it faster and easier for more agencies 
to implement the program and therefore available to more small 
businesses. To make the program easier to use, this section 
eliminates a part of the pilot program that required agencies 
that wanted to opt into the program to go through an 
application process. Interested agencies were required to 
submit an application to SBA justifying the use of 10 percent 
of SBIR funds for maturation instead of for Phase I and Phase 
II projects.
    The Commercialization Readiness Pilot Program for civilian 
agencies was established in 2011 in order to address ongoing 
concerns about the valley of death, which is the time between 
the end of a Phase II award and commercialization. Some small 
businesses with promising SBIR and STTR technologies needed 
more support to advance their development, especially in those 
fields with high manufacturing or regulatory costs. The program 
allows all non-DoD agencies to use up to 10 percent of their 
SBIR funding to make post Phase II awards of up to three times 
the regular size (up to $3 million).
    At the time Congress was contemplating creation of the 
program, there was concern that these very large awards would 
use already scarce funding for Phase I and Phase II awards, 
which would disproportionately adversely impact small 
businesses in low-participation states. To provide some safe 
guards, the program was structured so that agencies would need 
to proactively opt in through an application process. SBA could 
only approve an agency's application if the agency had a 
compelling reason to make the additional investments, thereby 
shifting money from earlier stage research and development in 
Phases I and II. Small businesses and small-business advocates 
have urged Congress during this reauthorization to find more 
ways to increase commercialization of SBIR and STTR 
technologies. Making the program permanent will help increase 
commercialization because it allows for an award after Phase II 
of up to $3 million.

Sec. 302. Enforcement of national small business goal for Federal 
        research and development

    Modifies a provision enacted 34 years ago that requires 
federal agencies with research and research and development 
budgets of more than $20 million to establish a goal for 
federal research and research and development with small 
businesses, not lower than what they currently do. The agencies 
have never established the goal and this provision enforces the 
statute by requiring the agencies to put in place a goal of not 
less than 10 percent by fiscal year 2018.

Sec. 303. Tracking Rapid Innovation Fund awards in annual congressional 
        report

    Modifies the requirements of the annual SBIR/STTR report 
from SBA to Congress to include data on commercialization 
through DoD's Rapid Innovation Fund (RIF) program. The 
information will help track the number and dollar of Rapid 
Innovation Fund awards that go to SBIR and STTR firms each 
year, as well as small businesses in general. It will also 
include a projection of awards that could be made if Congress 
were to provide a more stable funding source for the RIF 
program and thereby increase the commercialization of such 
technologies. The RIF program is set to expire in 2023. The 
SBIR/STTR Reauthorization Act of 2016 anticipates passage of a 
separate, complementary bill that would make the RIF program 
permanent and create a steady and larger funding stream to 
further develop SBIR and STTR technologies and technologies of 
non-traditional contractors.

Sec. 304. Intellectual property protection for technology development

    Clarifies, at the urging of SBIR/STTR firms, that costs for 
seeking intellectual property protections for SBIR/STTR 
technologies are allowable as indirect cost expenses. This 
provision is in order to address concerns that contracting and 
auditing agents across the agencies had been inconsistently 
allowing or denying cost coverage, creating severe 
administrative burdens for SBIR and STTR firms undergoing 
routine audits from the government.
    Specific patent costs that may be expensed as indirect 
costs include, but are not limited to:
           Costs of preparing invention disclosures, 
        reports and related documents
           Costs for searching current patents to 
        determine potentially conflicting rights
           U.S. Patent and Trademark Office fees
           Advising on patent laws, regulations, 
        clauses and employee agreements
    Limits patent cost coverage to technologies specifically 
developed through SBIR and STTR program phases. Phase I is 
limited to an amount of not more than $5,000. Phase II is 
limited to not more than $15,000. Phase III, which does not use 
SBIR or STTR dollars, has no limitations.

Sec. 305. Annual GAO audit of compliance with commercialization goals

    Replaces annual self-reporting from the agencies to 
Congress with an annual audit of the agencies by GAO. GAO will 
track implementation of outstanding key commercialization 
goals, such as:
           National Small Business Goal enacted in 
        1982--Agency by agency goal for research and 
        development projects with small businesses
           Phase III Insertion Goals for Subcontracting 
        enacted in 2011--Authorized the DoD to create 
        incentives for contracting officers to transition small 
        business technologies for contracts of $100 million or 
        more by:
                    Establishing goals for the transition of 
                Phase III technologies in subcontracting plans
                    Requiring a prime contractor on such 
                contracts to report the number and dollar 
                contracts with small businesses for their Phase 
                III SBIR or STTR projects
           Phase II Insertion Goals and Incentives 
        enacted in 2011--Required the DoD to set a goal to 
        increase the number of Phase II SBIR and STTR contracts 
        that transition into programs of record or fielded 
        systems.
    Requires GAO to document how the agencies have complied 
with each of those requirements when they are implemented. 
Finally, as part of the report, GAO must provide a list, by 
agency, of small businesses that believe their technology was 
stolen by the government or a prime contractor, or that the 
Phase III preference was not exercised even though the contract 
was for work that derived from, extended, or completed efforts 
made under prior SBIR or STTR projects.

Sec. 306. Clarifying Phase III preferences

    Clarifies that the Phase III preference for SBIR and STTR 
technologies includes awards through the Rapid Innovation Fund 
program. The Phase III preference says that agencies shall, to 
the greatest extent practicable, issue Phase III awards to 
technology related to technology, including sole source awards, 
to the SBIR or STTR recipients that developed the technology.

Sec. 307. Improvements to technical and business assistance

    Modernizes the dollar amounts allowed for providing 
technical and business assistance to SBIR and STTR firms in 
order to help them succeed in commercializing their 
technologies. The amounts are increased from $5,000 to $6,500 
per Phase I award and $10,000 to $15,000 per Phase II award.
    Reduces administrative burdens on the agencies that offer 
business and technical assistance by eliminating the current 
requirement that micro-manages the disbursement of funds by 
year instead of by award.
    Clarifies that the assistance is for not only technical 
assistance but also for business assistance and expands the 
examples of uses of the types of assistance to firms. 
Additional business assistance examples include assistance for 
selling their products, market research and intellectual 
property protections.
    Includes an amendment from Senators Coons and Gardner that 
builds on the bill's business and commercialization assistance. 
It increases from $15,000 to $35,000 the maximum amount of 
business assistance funds for SBIR/STTR Phase II awardees, 
expands the list of allowable expenses to include market 
research and development of regulatory and manufacturing plans, 
clarifies and enhances language allowing awardees the ability 
to select local vendor or vendors of their choice to provide 
technical and business-related assistance services, and 
authorizes a change within existing program resources so there 
will be no additional cost to government.

             TITLE IV--PROGRAM DIVERSIFICATION INITIATIVES

Sec. 401. Regional SBIR State Collaborative Initiative Pilot program

    Establishes a pilot program in which the SBA provides 
grants to regional, multi-state collaboratives in order to 
address the needs of small business concerns in the bottom 50% 
of the SBIR program. Grants to each state would be up to 
$300,000 for one year, and may be renewed for one extra year. 
The goal is to help small businesses in these states become 
more competitive in the proposal and selection process for 
awards under the SBIR and STTR program.
           This section also extends the 3% SBIR 
        Administration Funds Pilot program from September 30, 
        2017, to September 30, 2021. It requires SBIR agencies 
        that opt into the 3% Pilot to transfer 15% of that 
        funding to the SBA for three purposes (about $8.8 
        million):
                    To implement the Regional State 
                Collaborative Initiative Pilot Program
                    To carry out the SBIR Federal and State 
                Technology Partnership Program (FAST)
                    To support the SBA's office that adds the 
                SBIR program and the STTR program in order to 
                deploy outreach initiatives in a coordinated 
                and streamlined way.
    Extends the authorization of the FAST program for four 
years, through September 30, 2021, to make it uniform with the 
authorizations of the related programs--the 3% Administrative 
Funds Pilot and the new Collaborative Pilot.

Sec. 402. Federal and State Technology Partnership program

    Brings the Federal and State Technology Partnership (FAST) 
program into sync with the Regional SBIR State Collaborative 
Initiative Pilot Program by reauthorizing the FAST program 
through September 30, 2021. Updating the sunset not only puts 
the FAST program on the same schedule as the Regional SBIR 
State Collaborative Pilot, but it also adds another provision 
in law that requires Congress to regularly review the SBIR and 
STTR programs. The FAST program was created in 2000 to 
strengthen the technological competitiveness of small 
businesses in all 50 states by providing competitive matching 
grants to states to help them support the SBIR and STTR 
programs. The goal was to address concerns that awards were 
concentrated in only a few states, and the Committee was 
looking for a way to increase participation without imposing 
quotas, which would have undermined making awards based on the 
merits of the proposals. The program is mostly used by the 
state technology transfer directors, with the strongest 
interest from rural states which have traditionally been in the 
lower tier of states in terms of SBIR/STTR awards and total 
dollars.

                 TITLE V--OVERSIGHT AND SIMPLIFICATION

Sec. 501. Data modernization summit

    Uses the Interagency Policy Committee, made up of the SBA, 
the SBIR/STTR program managers and agency IT experts, to 
resolve within one year a way to reduce and make more uniform 
the paperwork and data collection from SBIR and STTR firms. 
This responds to concerns heard by the Committee that small 
businesses face unnecessary burdens when providing agencies and 
the SBA with information, especially for the commercialization 
index.

Sec. 502. Implementation of outstanding reauthorization provisions

    Addresses concerns that agencies have not implemented key 
outstanding provisions of the 2011 Reauthorization Act, and 
that SBA has a backlog of annual reports to Congress. If the 
agencies and SBA do not implement those provisions or clear out 
the report backlog, they will not be able to use their 3% 
administration dollars. This holds harmless the portion of the 
3% administrative funds that go to the SBA to run the Regional 
SBIR State Collaborative Initiative Pilot Program and the FAST 
program.

Sec. 503. Strengthening of the requirement to shorten the application 
        review and decision time

    Clarifies a requirement from the 2011 reauthorization act 
that required most agencies to reduce their application review 
and decision time to 90 days. There was an exemption for the 
HHS and NSF that allowed them up to one year for a decision. 
USDA has requested the same exemption. This section instead 
gives USDA more time but not one year. Going forward, the goal 
would be for USDA and NSF to get their review time to six 
months, and the HHS to ten months from one year.

Sec. 504. Continued GAO oversight of allocation compliance and accuracy 
        in funding base calculations

    Directs GAO, through fiscal year 2019, to continue its 
annual audit of the agencies' compliance with the allocation 
amounts. Adds a date to determine whether the change in the 
base funding for the Department of Defense improves 
transparency for figuring out if the agency is complying with 
the allocation requirements, reduces the burden of calculating 
the allocations, and whether the change improves DoD's 
compliance with the allocation requirements.

            TITLE VI--PARTICIPATION BY WOMEN AND MINORITIES

Sec. 601. SBA coordination on increasing outreach for women and 
        minority-owned businesses

    Amendment by Senator Peters that makes it an explicit duty 
for SBA to increase outreach and awards to women and minority-
owned businesses, in coordination with agencies.

Sec. 602. Federal agency outreach requirements for women and minority-
        owned businesses

    Amendment by Senator Peters that makes SBIR outreach 
requirements consistent with STTR outreach requirements by 
including women and minority-owned businesses.

Sec. 603. STTR policy directive modification

    Amendment by Senator Peters that makes the STTR policy 
directives consistent with the SBIR policy directives regarding 
outreach to women and minorities.

Sec. 604. Interagency SBIR/STTR policy committee

    Amendment by Senator Peters that builds on the SBIR/STTR 
Interagency Policy Committee's requirements to review outreach 
efforts to women and minorities with a requirement to meet at 
least twice a year.

Sec. 605. Diversity and STEM workforce development pilot program

    Amendment by Senator Peters that establishes a STEM 
Workforce Development Pilot Program for women and minorities to 
intern at SBIR and STTR firms.

                      TITLE VII--TECHNICAL CHANGES

Sec. 701. Uniform reference to the Department of Health and Human 
        Service

    Makes universal the reference to NIH as HHS.

Sec. 702. Flexibility for Phase II award

    Clarifies a provision from the 2011 reauthorization that 
eliminated all invitations to Phase II awards. This now 
provides flexibility so that agencies can invite firms to Phase 
II but cannot exclude firms from competing.

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