good afternoon the subcommittee on technology innovation will now come to order and pursuant to notice the subcommittee on technology and innovation meets the consider the following measure h r fifty seven eighty nine the science and technology innovation act of two thousand and eight we will now proceed with the markup beginning with opening statements and the chair recognizes himself i want to welcome everyone to the sub of h r fifty seven eighty nine the science and technology innovation act of two thousand and eight this bill reauthorizes two programs critical to the competitiveness of the united states the small business innovation and research program or r and the small business technology transfer research program s t t r our committee has been working on this bill for quite some time and i want to thank ranking member phil gingrey and all the members of the committee for continuing our work in crafting legislation which supports innovation in today's economy small business is often where innovation comes from the science and technology committee especially the technology innovation subcommittee intends to promote science and technology research that drives an innovation based economy s v r and s t t are key components of our innovation agenda at more than two point three billion dollars per year s v r an s t t r comprise the largest source of federal support for technological innovation for the private sector these funds help companies with innovative ideas bring their products to market to create both new products and jobs however these programs originated more than twenty years ago and much has changed since then these programs need to be restructured to reflect the current global competitive and vironment and the technology and innovation subcommittee held numerous hearings last year on the f b i r and s t t r programs to analyze their place in an innovation agenda for the twenty first century o t t r are necessary if the us is to is going to capture the economic benefits of our federal investment in nanotechnology research outside groups agreed s v r and s t t r important to commercializing inventions that begin with investments in basic research and end with new jobs new products and new services members of this committee agree on the importance of our high tech entrepreneurial companies in creating new technologies and these are exactly the companies targeted by f b i r s t t r links these small high tech companies with our universities which are a key cradle of new high tech ideas based upon this subcommittee's hearings h r fifty seven ninety eight will do the following it reauthorizes the s v r and s t t r programs through two thousand and ten although this period is short it will put both programs on the same reauthorization cycle in addition the authorization time frame will give congress time to examine how well each program is working to better focus on innovation next for any federal agency which spends more than one hundred million dollars per year in intramural or extra research the set aside increases to three point three point zero percent for f b i are and two zero point six percent for s t t r this emphasizes the importance we place upon s t r and s t t are as part of the innovation agenda third this bill increases phase one awards from one hundred thousand dollars to three hundred thousand dollars and it increases phase two awards from seven hundred fifty thousand dollars to two point two million dollars to better reflect the actual costs of doing high tech research in today's environment number four it increases the flexibility of the s v r program by allowing cross agency awards and allowing applicants to apply directly for phase two funding number five the bill allows venture capital back small businesses to apply for awards and defines eligibility requirements number six the bill expands requirements on agency databases of award recipients and also interoperability and accessibility between agency databases and this will permit improved oversight by the agencies and by congress on how the agencies and how the programs are operating  number seven the bill allows for no more than three percent of program funds to be used for administrative costs currently agencies pay for administration of f b i are taking funds from other agency programs and naturally they must try to administer the program as cheaply as possible this results in little oversight of the program with a focus on simply obligating all of the funds that is not the type of management we want for a over two billion dollars program at our hearing is agreed that following some of that allowing some administrative costs would help improve the quality and oversight of the program and finally the bill establishes an interagency committee co chaired by the director legislation that advances our innovation agenda today we continue our leadership by reauthorizing s v r and s t g r i urge my colleagues to support the legislation and i now recognize dr gingrey to present his this markup has been called today to look at the important issue of reauthorizing both a small business innovation research grant program in the small business technology transfer program s b t t these are both grant programs have been effective in providing government assistance to small businesses to help more people our country achieve the american dream however most i do have to express concerns with the  process the legislative process by which this bill has been conducted i appreciate the majority's willingness to hold hearings on this important matter like we did last summer but i do find it troubling that the final text of the science and technology innovation act of two thousand and eight was only made available to the minority onces markup was scheduled late last week i'm proud to say as i have many times in the past that this committee operates in a very bipartisan way in most cases are our minority side is certainly given the opportunity to provide its input to the bills before they're marked up at the subcommittee level how about that i don't fortunate partisanship was compromised i think on this bill maybe for the sake of legislative expediency had the minority been consulted much earlier and had we been given about a notice of a markup i believe i truly believe that this that is the intention that this bill will be marked up in the full committee after we get done with the markup today and subcommittee this subcommittee will mark up the legislation the f level and then pending approval there a markup by the full committee i would assume that's what's happened in the small business committee and i just wonder why the the why in a way from regular order in that regard reclaiming my time my understanding although i'm not intimately familiar with their proceedings my understanding is that the small business committee is not having a subcommittee mark they are having a full  to full committee and then to the floor they have been an exclusion to that during the hundred days agenda but i'm working off recollection and i and i just don't know if it's  criticism of you or the chairman of the full committee or of the majority party but i'm disturbed by the process largely because this once again as a case where the science committee is getting floor does not give us an opportunity to really work hard well on this we have had the hearings we've had a couple of hearings over two years on this issue waiting for the other committee of jurisdiction to act jurisdiction when it was originally created obviously and i should be in this committee but it isn't because another committee refused to give it up but we see this over and over and the only way we're going to get the subject before this committee that really belong before this committee is to dig in our heels and say enough we're going to claim full responsibility and full opportunity and this committee as well so as i say this is not a criticism of you or them majority in any sense it's criticism on behalf of the institution perhaps on behalf of this committee that we really have to make it clear we're here to stay we're going to act with force on all issues that come before us and above all i would hope that the majority would insist that when this bill goes to the floor it go have to prove proceeding through the rules committee so we have the opportunity to present amendments there if they have after this charade that we're going through now it goes directly to the floor on a suspension we will not have any opportunity to and i will certainly restrung objections to that an ice to get the leaders of the my nor person i don't get angry often but this is a case where i think we have to fight together we have to fight for the jurisdiction of this committee to make it known that we don't want this or thank you very much  subcommittee and preferably the whole committee that we are holding this markup today so that members can have as much opportunity as possible to consider the bill to propose amendments and the gentleman  certainly has my full support to take this bill to the floor under a rule rather than under suspension of the rules and i do thank you for holding this hearing and appreciate that i thank the surely in the spirit of bipartisanship which is specially prevails on this committee mr chairman we respect you for that a great make up call not only would be to bring this bill to the floor under our rules but also floor i'm afraid that if it is what kind of rule it's under is a little bit above my pay grade and i think that jennifer's comments we do have a set of four votes which have been called and there are two minutes left to vote the committee is reconvened without objection any members who have opening statements may place their statements in the record at this point i ask you ask consent that the bill is considered read and open to it men men at any point and that members proceed with the amendments in the order of the roster without objection so ordered a substantial increase in the set aside in both cases secondly as we all know when the omnibus bill was passed last fall it did major damage to the funding for the science organization to the federal government particularly the national science foundation nast department of energy and several other agencies and it seems to me particularly strange that when we have either reduced or given very small increases for the basic research which this country desperately needs and which is what the competes act was all about which this committee worked on so hard for so long it seemed strange to me when when the funding is low that would we would increase a set aside and do even greater damage to agencies such as a national science foundation etc that's it's just that even aside from whether or not they should have the increase which we can certainly debate this is obviously the wrong time to do it and it will hurt the science agencies of the federal government who have already really struggling department of energy for example is is laying off several hundred people as a result of the cuts they received in the omnibus bill so i strongly support this amendment and i hope we will pass and we can consider changing the set aside at some future date any one seeking time in the chair recognizes them regrettably i oppose this amendment the the increase to three percent would be more than offset percent will not decrease the amount of funds available for for pure research additionally at our hearings there you know there is uniform support for increasing the size of awards at a minimum to adjust s is another good argument for taking this to the floor under rule so we will have an opportunity to offer these amendments their primary because this is not going to full committee and so most of the s that his approach here it is my understanding and i am not guaranteeing anything but it's my understanding that there is an interest in bringing this rule this bill to the floor a rule i will communicate again for whatever that's worth to the rules committee that i think it is appropriate i may not support it i probably won't support it because there has been a delicate balance reached in making this with the with a lot of consultation both with the minority as well as with the small business but there can be no question that this is a worthwhile amendment and i will again ask you to be on the rules committee about not any longer so all i can do is ask i appreciate it thank you is there any further discussion of the amendment and if not the verbal occurs on the amendment all clerk will report the roll report the tally mr chairman four members vote in seven members vote no the amendment is not agreed to the second amendment on the roster is an amendment offered by the gentleman from georgia  consent to dispense with the reading without objection so ordered i recognize the ranking member dr gingrey for five minutes to explain his amendment mr chairman thank you this amendment that i am offering to h r fifty seven eighty nine w provide a practical way to maintain the integrity of s p i r n s t t our programs in the current form of the bill milat is for companies to apply directly for a phase to grant and we know those grants have a maximum award now of two point two million dollars they can do this without having received a phase one grant affan this practice to be somewhat problematic because it allows companies to conduct phase one process on private funds before approaching the federal government for s b r r s t t r systems in phase t ostensibly if a company has the ability to use private funds for phase one then it should be able to continue to phase two on private phones i believe that the current language regarding this within h r fifty seven eighty nine only provides incentives to companies that can already afford to cultivate r and d initiatives to come to the federal government when they should not do so this practice has the potential of reducing the opportunity for companies that truly need the assistance to utilize s b i r and s t t r programs the way they are intended i am offering this amendment to specifically address this issue by striking the language it provides for bypassing phase one grants therefore the bill would require that in order for a company to be eligible for phase two grant it would first have to have been a recipient of a phase one  financial assistance from the federal government i urge my colleagues to support this amendment and mr chairman with that i'll yield back the balance for my time i thank the gentleman and again  regrettably i must oppose the management because if a small business has already done the preliminary work under phase one i do not think that the business should be penalized for having spent its own money and then coming to the federal government for a phase two grant and skipping phase one the amounts are dramatically different a phase one grant under the proposed legislation is for three hundred thousand dollars and a company that can afford three hundred thousand dollars in development may not be able to afford the new amount of in phase to two point two million dollars the agencies which testified to this subcommittee stated that it would enhance s p i are in  our programs if a small business could apply directly for face to award him and i must add that this is not a a mandatory program this is an option to the agencies  permit skipping phase one if they choose to do so does anyone else seek recognition on the amendment if not then the vote occurs on the amendment all in favor say aye aye those opposed say no in the opinion of the chair the nos have it and the amendment is not agreed to it is now in order to consider the third amendment on the roster and it is also offered by the gentleman from georgia dr gingrey are you ready to proceed with your amendment mr chairman yes i have an amendment at the desk the clerk will report the amendment number zero one nine amendment to h r fifty seven eighty nine offered by mr gingrey of georgia i actually asked consent to dispense with the reading and without objection so ordered i recognize the general from georgia for five minutes to explain his demand as chairman thank you again i brought forth what i believe is a very common sense and practical amendment to ensure that small business innovation research grants actually go to small business applicants but simply venture capital is important to small business initiatives because it provides needed financial assistance and credibility to the ideas and products that possess the potential to be commercialized however because these grants are intended for small business research and development we must ensure that venture capital does not represent a majority of the financial interests within a asked b i r application the manner in which is bill is currently written only limits a single venture capital firm from owning forty five to forty nine percent of the interest of the company applying for the  this leaves open the possibility that more than one venture capital firms could own in the aggregate a majority of financial interests within the company i mean it is example in the aggregate all owning less than forty nine percent they get own ninety nine percent of the company if you had two or more is an example additionally and well i've just given that that worst case scenario so mr chairman i believe that and it says the recognition of the ability of the small firms to develop and commercialize new technologies couple with the apparently declining rate of innovation and productivity in the united states industr paragraph be state of small business participation in federal r and d i purpose of the bill is to increase the utilization of small businesses in federal research and development yet receive a small share of the federal are in the budget during debate on the legislation frequent reference references i've been made to the small business share of federal are in chairman again i believe that they hopefully reflects the original intent of the bill and that what we're doing in regard to venture capitalist goes against the spirit of the s b a our program  reading further from that report language it says specifically the legislation is also intended to provide seed capital to small high technology firms at the early high risk stage of initial concept development funds provided on the h r well that was the name of the bill back then they go on just to elaborate on that point so the program is designed to provide assistance to a small business that may have an idea that can be considered i damelin in the rough if you will without necessarily having the financial backing to move its promise an idea toward commercialization and maybe even the interest of venture capitalist at the outset ensure that we continue to help out the true small business entrepreneur best simply limiting the total amount of venture capital investment in the company of a s b i r applicant to forty nine percent of their financial interest with the adoption of this amendment this legislation will not acknowledge the importance of the influence that venture capital can play in small biz research and development while still maintaining the integrity of the  chairman would would yield let me just say although dr gingrey is not quite as pure as doctor ehlers i recognize this is not a frivolous amendment by any means and that it is offered in good spirit  i have some concerns about basing them on a nine hundred eighty two report but i know that this is legitimate let me i'll want to also point out that that that i'm uncomfortable with this procedure i think you know we've never taken this although in previous congresses it had been not uncommon to be what you might say out of regular order we have not done that in this congress i think this is somewhat different in the fact that the minority of deliberations with the small business and much of which was as dr ehlers always recommends maintaining our jurisdiction and trying to get it right and so for that reason we're going to be going to the floor next week there is not time to have a full committee markup but i am once again going to recommend to the energy of the rules committee that both of dr mehmet to be made in time if there are no other speakers i must again regrettably oppose the amendment i must say that from the inception of s p i until the ministry of law judge decision include non real person and cities and that's a distinction that lawyers make as a standard item of statutory interpretation after that in my view erroneous interpretation venture capitalists have not been permitted to own a majority stake in s p r s p i are applicants and this bill in essence partially reverses that decision  and it is a carefully crafted partial reversal of that decision no single venture capitalists may own a majority share of an s p r applicant but a consortium  of venture capitalists may own any particular percentage of an applicant and is it is precisely those applicants which are potentially in a weaker negotiating position which may have had to give  a larger share of their equity in order to get the application that would be hurt by a restriction on s p i f b i our applications by those entities which have had to applications and potentially a decrease in the quality of the applicants frequently the venture capitalists are backing folks who have a better mousetrap and a lot of those folks chairman this is really a difficult issue and something that we've discussed in this quit committee quite a few times and i guess my concern is the same as before that another committee has made this decision and we're simply accepting it  consideration more discussion and try to come up with an approach that really accomplishes accommodates all the power lisa involved and so i'm hesitant to you know i certainly support the moment just because that will help us approach it better and further discussion but i think i recognize there's a possibility we need some change here but why this sudden dramatic change and i would prefer that in a more deliberate manner and try to come up with a solution that really made more sense so i will pose support to the amendment and hope that we can debate this on the floor if the chairman would  noticed very quickly once again the reason that make there should be no misunderstanding that the reason that we're running a little bit late is that the committee staff negotiated hard and tough and wouldn't let it come up because the next week until we got concessions from the other committee in question let me also point out that we've got to go through hopefully this will pass on the floor and hopefully the senate will get up a bill and it will go through conference and that this is a dialogue that will continue and because we want the best you know bill that we can get mr chairman comes from the u s small business administration i'll not read the letter but it's it is a letter from steven preston the administrator u s small business administration in support of the amendment and the letter in support m these for the record in support of the amendment without objection so ordered is there any further discussion of the amendment if not the vote occurs on the amendment all in favor say aye aye those opposed say no in the opinion of the chair the nos ha and get to the floor in time for this series of votes the fourth amendment on the rosters amendment offered by the gentleman from ohio mr wilson mr wilson you ready to proceed with your amendment the clerk will report the amendment amendment to h r fifty seven eighty nine offered by mr wilson of ohio i ask unanimous consent dispense with the reading without objection so ordered i recognize the gentleman from ohio for five minutes to explain his  as a strong supporter of small business innovation research and small business technical transfer programs which serve as a lifeline for many small business an innovative businesses my mehmet today would designate  nanotechnology related research as a critical technology in the s p r excuse me n s t t r programs this would allow companies to to receive special consideration as they apply for federal grants for their work in nanotechnology today nanotechnology has an impact on all sectors of our economy and the work of nanotechnology can be found in electronics like our cell phones and blackberries in our cosmetics cars and medical products with nanotechnology playing such a fundamental role in our economy it's a it's critical that the u s investment in this industry continue to grow in my district at ohio university such research is being done daily i recently heard from some nano scientists that if the research were included in this way it would help their projects to go from the lab and to migrate to the market the inclusion of nanotechnology research is a critical technology will help ensure the federal agencies continue to assist and even increase their support for nanotechnology companies in both s v r and s t p our programs i encourage all my colleagues to support my amendment and reauthorize a small business innovation research program thank you mr chairman i thank the and it education initiatives but i have some concerns about this particular amendment as i read the amendment the s b our program includes nanotechnology topics in its list of other priorities alongside those from the department of defense on the national critical technologies panel for the s t t our program nanotechnology endeavors would be signal as a category of projects that could receive funding there bappa to change really narrowing the scope of the program so i'm concerned that the language for these two programs and especially the s t t are would carve out a specific benefit but nanotechnology at the expense of all the worthy endeavors is important it's very important to point out that under the current law nano initiatives are not excluded from grant consideration they compete for funding with other research and development projects and there's nothing in the underlying bill to detract from that reality nanotechnology research should be considered for grant funding but it should not i don't think be given special consideration above them point topics just this morning the full committee held a hearing and suspicion of reauthorizing national nanotechnology initiative it's my understanding the bill being drafted will incorporate s b i r n s t r r s t t r programs and certainly i look forward to working with my friend mr wilson the gentleman to ensure that nanotechnology programs are advanced across m at number five the fifth amendment on the rosters amendment offered by the general from the rosco mr smith mr smith are you ready to proceed with your amendment yes the clerk will report the amendment amendment to h r fifty seven eighty nine offered by mr adrian smith of priority to applications so as to increase the number of f b i or an s g t r award recipients from rural areas firms located in a relatively small number of states have been successful in obtaining the awards through the program according to a six government accountability study about seventy percent of the awards and dollars awarded went to firms in only ten states i mean i also say that the rural outreach program contained in these programs sunset it expired and  a committee to continue to work together on the brain drain or just option thank you i thank the gentleman i commend him for his amendment and support outreach is there any further discussion of the amendment ranking member thank you mr chairman i want to support the efforts of mister businesses in rural areas typically have a hard time getting capital even when they have a very good concept because of the limited numbers of lending institutions or venture capital firms so this amendment does not require that agencies pick one business over another it simply requires them to consider the rural businesses and how they are represented in the overall agency's wards increas number of rural businesses receiving grants i think it is a good amendment chairman urge my colleagues to support i thank the gentleman are there any further comments on the amendment if not the vote occurs on the amendment all in favor say  no and the pain the chair the ayes have it and the i's have the event memon is agreed to are there any other amendments hearing now and the vote is on the bill h r fifty seven eighty nine the science and technology innovation act of two thousand and eight as amendment mr chairman i move that the subcommittee favorably report h r fifty seven eighty nine as amended to the full committee furthermore i move that staff be instructed to prepare the subcommittee legislative report and make i suppose saying no the ayes have it in the bill is favorably reported without objection the motion to reconsider is laid upon the table i want to take this moment to thank staff on both sides for their very hard work on this bill bill bain who was a detail e to this committee it's hard on this bill the gentleman sitting next to me my career has worked tirelessly on this bill and for my personal and i will commit to urging that the rules committee take this up as a full bill under some form of rule and i want to thank the members for their attendance this concludes our subcommittee markup thank you all very much