[Senate Report 115-454]
[From the U.S. Government Publishing Office]
Calendar No. 352
115th Congress } { Report
SENATE
2d Session } { 115-454
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SUPPORT STARTUP BUSINESSES ACT OF 2018
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December 21, 2018.--Ordered to be printed
_______
Mr. Risch, from the Committee on Small Business and Entrepreneurship,
submitted the following
R E P O R T
[To accompany S. 2419]
[Including cost estimate of the Congressional Budget Office]
The Committee on Small Business and Entrepreneurship, to
which was referred the bill (S. 2419) to amend the Small
Business Act to improve the technical and business assistance
services under the SBIR and STTR programs, having considered
the same, reports favorably thereon with an amendment in the
nature of a substitute and recommends that the bill, as
amended, do pass.
I. INTRODUCTION
The Support Startup Businesses Act of 2018 (S. 2419) was
introduced by Senator Christopher A. Coons, for himself, and
Senator Cory Gardner on February 13, 2018.
This bill as introduced increased the discretionary
technical assistance funding to Small Business Innovation
Research Program and Small Business Technology Transfer (SBIR/
STTR) awardees from $5,000 a year per award to 5% of the award.
It broadened the uses of the funds to include business
assistance, such as services for intellectual property (IP)
protections, market research, and development of regulatory and
manufacturing plans. It expanded the number of vendors an SBIR
agency or a participant could select to provide the technical
or business-related assistance services, and allowed vendors to
be private or public, or a state-funded agency that specializes
in commercializing technology. Finally, it directed the
Administrator of the Small Business Administration (SBA) to
submit a report reviewing the efficacy of the technical and
business assistance.
For the markup of the bill, Senator Coons filed a
substitute amendment that caps the dollar amount used for
commercialization assistance at $50,000 per award for Phase II
awards. The amendment requires that the discretionary technical
assistance funds be taken out of a small business's Phase II
SBIR or STTR award amount instead of being made in addition to
their SBIR and STTR award amount. Finally, the amendment
strengthens the oversight requirements by requiring a survey of
vendors and awardees receiving this assistance and a report to
Congress to determine the efficacy of these technical and
business assistance changes.
The bill, as amended, was approved unanimously by a roll
call vote as part of an eight-bill manager's package.
II. HISTORY (PURPOSE & NEED FOR LEGISLATION)
The SBIR program was authorized by the Small Business
Innovation Development Act of 1982. A sister program, STTR, was
authorized by the Small Business Research and Development
Enhancement Act of 1992. The SBIR program requires federal
agencies with extramural research and development budgets of
$100 million or more to allocate at least 3.2 percent of their
extramural funds for research awards to small businesses.
Awards are competitive and merit-based, given to small
businesses that have proposals or technology that could benefit
the awarding agency: Phase I awards are given to determine the
feasibility of an idea; Phase II awards are for technology that
is particularly promising but needs further development; and
Phase III is for the small business to pursue commercialization
objectives resulting from the Phase I/II R&D activities. The
SBIR program does not fund Phase III. This Phase may involve
follow-on non-SBIR federal R&D funding or production contracts
for products, processes or services for the federal government.
Currently eleven federal agencies participate in the SBIR
program. The STTR program has a similar three phase award
structure but focuses on public-private partnerships in which
small businesses partner with research institutions with the
intention of eventually commercializing their ideas. The STTR
program requires federal agencies with an extramural research
and development budget of $1 billion or more to allocate at
least 0.45 percent of their extramural funds for STTR awards.
Currently five federal agencies participate in the program.
The provisions of this bill were developed to increase
commercialization of SBIR/STTR technologies. While the National
Academy of Sciences has found that 40 to 70 percent of SBIR and
STTR projects reach the market, in many cases, small businesses
carrying out research and development work enter a so-called
``valley of death,'' in which small firms struggle to bridge
the gap between research and the commercialization of an idea
or product.
The Support Startup Businesses Act of 2018 addresses this
issue by allowing for a larger amount of discretionary
technical assistance funds to be used for commercialization,
allowing for more agency-approved commercialization vendors,
and expanding the definition of allowable commercialization
expenses. In the interest of robust congressional oversight,
the bill also directs the SBA to issue a report on the efficacy
of the commercialization and technical assistance changes made
in this bill.
In the 114th Congress, Senator Christopher A. Coons
introduced the Support Startup Businesses Act of 2016 (S.
2751), which contained similar language to this bill. During
Committee consideration of the SBIR and STTR Reauthorization
and Improvement Act of 2016 (S. 2812), which was sponsored by
the Committee's Ranking Member, Senator Jeanne Shaheen, and the
Committee's Chairman, Senator David Vitter, a number of
provisions from S. 2751 were included in S. 2812. The bill was
reported favorably by the Committee by an 18-1 vote, but did
not receive consideration by the full Senate.
In the 115th Congress, similar language was included in the
Support Startup Businesses Act of 2017 (H.R. 2789). While not
considered independently, the text of H.R. 2789 was included as
part of the Small Business Innovation Research and Small
Business Technology Transfer Improvements Act of 2017 (H.R.
2763), which passed the House Small Business Committee on
September 14, 2017 and passed the House of Representatives on
October 11, 2017.
III. HEARINGS & ROUNDTABLES
In the 113th Congress, the Committee held a roundtable on
December 18, 2013 entitled, ``SBIR/STTR: Measuring the
Effectiveness of the Reauthorization Act.'' Most participants
in the roundtable expressed strong support for the
commercialization aspect of the program. The participants also
discussed which agencies could improve commercialization.
In the 114th Congress, the Committee held a hearing on
January 28, 2016 entitled, ``Reauthorization of the SBIR/STTR
Program: The Importance of Small Business Innovation to
National and Economic Security.'' At this hearing, Chairman
Vitter discussed the importance of commercialization of
research and technology for small firms participating in the
SBIR/STTR programs. Senator Coons also expressed his belief
that commercialization was an integral part of the program. Mr.
John Williams, Director of Innovation and Technology, Office of
Investment and Innovation, Small Business Administration,
testified that commercialization was a fundamental goal of the
program and that outside expertise was a helpful option for
firms that were attempting to commercialize their technology.
IV. DESCRIPTION OF BILL
The bill allows for greater flexibility in the use of SBIR/
STTR Phase II award funds by agencies and awardees for
commercialization activities. Currently, the discretionary
technical assistance funding for SBIR and STTR awardees is
limited to $5,000 per year for Phase I awards and $5,000 per
year for Phase II awards. The commercialization assistance used
by awardees is not taken out of their award dollars. In
general, this means $5,000 per Phase I award, and $10,000 per
Phase II award.
This bill as introduced allows for up to five percent, per
year, per Phase I and Phase II award to be used for
commercialization activities. In general, this change would
have yielded $7,500 per Phase I award of $150,000 and $50,000
per Phase II award of $1,500,000. However, based on the most
complete data on SBIR and STTR awards (FY2015), in some cases
the new formula could have been insufficient or excessive.
To address these cases and concerns that program changes
not reduce the number of awards going to small businesses,
Senator Coons offered a substitute amendment that capped the
dollar amount used for commercialization assistance at $50,000
per award for Phase II awards. The amendment also eliminated
the changes to Phase I and required that the discretionary
technical assistance funds be taken out of a small business's
Phase II SBIR or STTR funds instead of being made in addition
to their SBIR and STTR award amount.
In addition to increasing the amount of discretionary
technical assistance for SBIR and STTR agencies and awardees,
the bill expands the uses of the funds to allow for business
assistance, such as obtaining intellectual property protection
for a new invention, market validation and research,
manufacturing plans, and business model development. This bill
also increases the number of agency-approved commercialization
vendors from one to several. It requires the SBA to report on
the use of these funds and requires small businesses to provide
participating agencies with a description of the assistance
provided by the agency-approved vendors. Finally, the bill
requires the SBA to conduct a survey of vendors and awardees
receiving this assistance and report to Congress on the
efficacy of these changes to the SBIR/STTR programs.
V. COMMITTEE VOTE
In compliance with rule XXVI(7)(b) of the Standing Rules of
the Senate, the following vote was recorded on March 14, 2018.
A motion to adopt the Support Startup Businesses Act of
2018, a bill to amend the Small Business Act to improve the
technical and business assistance services under the SBIR and
STTR programs, was approved unanimously by a roll call vote as
part of a manager's package. Senators Risch, Rubio, Paul,
Scott, Ernst, Inhofe, Young, Enzi, Rounds, Kennedy, Cardin,
Cantwell, Shaheen, Heitkamp, Markey, Booker, Coons, Hirono, and
Duckworth voted for the bill.
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:
July 16, 2018.
Hon. James E. Risch,
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. 2419, the Support
Startup Businesses Act of 2018.
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,
Director.
Enclosure.
S. 2419--The Support Startup Businesses Act of 2018
S. 2419 would make several changes to the operations of the
Small Business Innovation Research (SBIR) and Small Business
Technology Transfer (STTR) programs.
Under current law, those programs require certain federal
agencies to set aside a portion of their budgets for extramural
research and development for contracts with small businesses or
for cooperative research between small businesses and federal
laboratories or nonprofit research institutions. The 11
agencies that participate in at least one program may provide
technical assistance awards to small businesses that are in
addition to any awards under the SBIR or STTR programs. S. 2419
would expand the assistance that small businesses can receive,
raise the maximum award and technical assistance amounts, and
direct agencies to include those amounts as part of an SBIR or
STTR award. Because awarding additional amounts for technical
assistance would decrease the amounts available for SBIR or
STTR awards by corresponding amounts and would not affect the
underlying costs of administering those programs, CBO estimates
that implementing those provisions would have no budgetary
effect.
S. 2419 also would direct the Small Business Administration
(SBA) to conduct a survey of vendors and small businesses that
provide and receive technical assistance and to submit a report
to the Congress on the efficacy of that assistance. Using
information from the SBA, CBO estimates that implementing the
bill would cost the agency less than $500,000 over the 2019-
2023 period for the agency to update the program's regulations,
conduct the required survey, and monitor the expanded awards.
Such spending would be subject to the availability of
appropriated funds.
Enacting the bill would not affect direct spending or
revenues; therefore, pay-as-you-go procedures do not apply.
CBO estimates that enacting S. 2419 would not increase net
direct spending or on-budget deficits in any of the four
consecutive 10-year periods beginning in 2029.
S. 2419 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act.
The CBO staff contact for this estimate is Stephen Rabent.
The estimate was reviewed by H. Samuel Papenfuss, 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.
VIII. SECTION-BY-SECTION ANALYSIS
Section 1. Short title
This section provides the short title for the Act, the
``Support Startup Businesses Act of 2018''.
Sec. 2. Improvement to technical and business assistance
This section allows for up to $50,000 per SBIR/STTR Phase
II award to be used for commercialization activities and
business assistance while increasing the number and type of
agency-approved vendors that agencies and awardees may use. The
$50,000 will be counted as part of the recipient's Phase II
award.
This section also allows the Administrator to impose a
limit on the amount of technical and business services one
small business may receive with respect to multiple Phase II
SBIR/STTR awards in one fiscal year. Finally, this section
requires a report on the efficacy of SBIR/STTR business and
technical assistance be submitted to Congress by the SBA before
the end of fiscal year 2019.