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S. HRG. 113–469 

SBIR/STTR: MEASURING THE EFFECTIVENESS 

OF THE REAUTHORIZATION ACT 

AND MAXIMIZING RESEARCH DOLLARS 

TO AMERICA’S SMALL BUSINESSES 

ROUNDTABLE 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

AND ENTREPRENEURSHIP 

UNITED STATES SENATE 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

DECEMBER 18, 2013 

Printed for the Committee on Small Business and Entrepreneurship 

( 

Available via the World Wide Web: http://www.fdsys.gov 
(II) 

COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP 

ONE HUNDRED THIRTEENTH CONGRESS 

MARY L. LANDRIEU, Louisiana, Chair 

JAMES E. RISCH, Idaho, Ranking Member 

CARL LEVIN, Michigan 

TOM HARKIN, Iowa 

MARIA CANTWELL, Washington 

MARK L. PRYOR, Arkansas 

BENJAMIN L. CARDIN, Maryland 

JEANNE SHAHEEN, New Hampshire 

KAY R. HAGAN, North Carolina 

HEIDI HEITKAMP, North Dakota 

EDWARD J. MARKEY, Massachusetts 

DAVID VITTER, Louisiana 

MARCO RUBIO, Florida 

RAND PAUL, Kentucky 

TIM SCOTT, South Caarolina 

DEB FISCHER, Nebraska 

MICHAEL B. ENZI, Wyoming 

RON JOHNSON, Wisconsin 

JEFFREY S. CHIESA, New Jersey 

JONATHAN S. HALE, Democratic Staff Director 

SKIFFINGTON HOLDERNESS, Republican Staff Director 
(III) 

C O N T E N T S 

OPENING STATEMENTS

Page 

Landrieu, Hon. Mary L., Chair, and a U.S. Senator from Louisiana .................. 1 

Risch, Hon. James E., a U.S. Senator from Idaho ................................................ 3 

Shaheen, Hon. Jeanne, a U.S. Senator from New Hampshire ............................ 27 

WITNESS TESTIMONY

Savoie, Robert ‘‘Bobby,’’ CEO, Goecent, LLC, Metairie, LA ................................. 3 

Wessner, Charles, Director, Technology Innovation and Entrepreneurship, 

National Academy of Sciences, Washington, DC ............................................... 4 

Glover, Jere, Executive Director, Small Business Technology Council, Washington, DC ............................................................................................................. 4 

Rusco, Frank, Director, Natural Resources and Environment, U.S. Government Accountability Office, Washington, DC .................................................... 5 

Jain, Mahendra K., Senior Vice President, Kentucky Science and Technology 

Corporation, Lexington, KY ................................................................................ 5 

Rinaldi, Chris, SBIR/STTR Program Administrator, Office of Small Business 

Program, U.S. Department of Defense, Washington, DC ................................. 5 

Gudger, Andre, Director, Office of Small Business Program, U.S. Department 

of Defense, Washington, DC ................................................................................ 5 

Oliver, Manny, Director, SBIR/STTR Programs Office, U.S. Department of 

Energy, Washington, DC ..................................................................................... 6 

Portnoy, Matthew, Director, Office of Extramural Programs, National Institutes of Health, Bethesda, MD ........................................................................... 6 

Raghavan, Pravina, Deputy Associate Administrator, Office of Investment 

and Innovation, U.S. Small Business Administration ...................................... 6 

Sobolewski, Lisa, SBIR Program Director, U.S. Department of Homeland 

Security, Washington, DC ................................................................................... 7 

Houston, Jenny, Executive Vice President, Warwick Mills, New Ipswich, NH . 7 

Green, Dave, President and CEO, Physical Sciences, Inc., Andover, MA .......... 8 

ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

Chart titled ‘‘FY2012 SBIR Awards by State’’ ...................................................... 98 

Chart titled ‘‘STTR Increase over 6 Years’’—differential from 0.3% base .......... 100 

Chart titled ‘‘STTR Increase over 6 Years’’—differential from 2.5% base .......... 101 

Department of Health and Human Services 

Information for the record ............................................................................... 116 

Glover, Jere 

Testimony .......................................................................................................... 4 

Biographical sketch .......................................................................................... 47 

Green, Dave 

Testimony .......................................................................................................... 8 

Biographical sketch .......................................................................................... 58 

Outline for SBIR/STTR Roundtable ................................................................ 118 

Letter dated September 12, 2013, to Edsel Brown, Jr. ................................. 120 

Gudger, Andre 

Testimony .......................................................................................................... 5 

Biographical sketch .......................................................................................... 51 

Houston, Jenny 

Testimony .......................................................................................................... 7 

Biographical sketch .......................................................................................... 57 

H.R. 5667 .................................................................................................................. 184
Page

IV 

Jain, Mahendra K. 

Testimony .......................................................................................................... 5 

Biographical sketch .......................................................................................... 49 

Letter dated December 16, 2013, to Chair Landrieu ..................................... 106 

Landrieu, Hon. Mary L. 

Opening statement ........................................................................................... 1 

Responses to post-hearing questions from: 

Robert ‘‘Bobby’’ Savoie .............................................................................. 59 

Jere Glover ................................................................................................. 60 

Frank Rusco ............................................................................................... 62 

Mahendra K. Jain ..................................................................................... 66 

Andre Gudger ............................................................................................ 69 

Manny Oliver ............................................................................................. 75 

Matthew Portnoy ....................................................................................... 81 

Pravina Raghavan ..................................................................................... 86 

Lisa Sobolewski ......................................................................................... 92 

Dave Green ................................................................................................ 96 

Map titled ‘‘Geographic Distribution of SBIR Award Dollars—FY2012’’ ............ 102 

Markey, Hon. Edward J. 

Prepared statement .......................................................................................... 38 

Oliver, Manny 

Testimony .......................................................................................................... 6 

Biographical sketch .......................................................................................... 52 

Letter dated December 16, 2013, to Lena Postanowicz transmitting DOE 

information for the record ............................................................................ 103 

Portnoy, Matthew 

Testimony .......................................................................................................... 6 

Biographical sketch .......................................................................................... 53 

Raghavan, Pravina 

Testimony .......................................................................................................... 6 

Prepared statement .......................................................................................... 54 

Risch, Hon. James E. 

Opening statement ........................................................................................... 3 

Responses to post-hearing questions from Andre Gudger ............................ 97 

Rinaldi, Chris 

Testimony .......................................................................................................... 5 

Biographical sketch .......................................................................................... 50 

Rusco, Frank 

Testimony .......................................................................................................... 5 

Biographical sketch .......................................................................................... 48 

Report titled ‘‘Small Business Research Programs: Summary of GAO 

Reports Since Programs’ Reauthorization’’ ................................................. 109 

Report titled ‘‘Small Business Research Programs: Actions Needed to 

Improve Compliance with Spending and Reporting Requirements’’ ........ 122 

Shaheen, Hon. Jeanne 

Opening statement ........................................................................................... 27 

Sobolewski, Lisa 

Testimony .......................................................................................................... 7 

Prepared statement ..........................................................................................

Savoie, Robert ‘‘Bobby’’ 

Testimony .......................................................................................................... 3 

Biographical sketch .......................................................................................... 45 

Wessner, Charles 

Testimony .......................................................................................................... 4 

Biographical sketch .......................................................................................... 46 
(1) 

SBIR/STTR: MEASURING THE EFFECTIVENESS 

OF THE REAUTHORIZATION ACT 

AND MAXIMIZING RESEARCH DOLLARS 

TO AMERICA’S SMALL BUSINESSES 

WEDNESDAY, DECEMBER 18, 2013 

UNITED STATES SENATE, 

COMMITTEE ON SMALL BUSINESS

AND ENTREPRENEURSHIP, 

Washington, DC. 

The committee met, pursuant to notice, 2:09 p.m., in Room 428– 

A, Russell Senate Office Building, Hon. Mary L. Landrieu (Chair 

of the Committee) presiding. 

Present: Senators Landrieu, Shaheen, and Risch. 

INTRODUCTORY REMARKS OF HON. MARY L. LANDRIEU, 

CHAIR, AND A U.S. SENATOR FROM LOUISIANA 

Chair LANDRIEU. Good afternoon to everyone. Thank you for joining us for this important roundtable on the SBIR and STTR program, one of the important programs coordinated by the Small 

Business Administration that affects all the agencies and departments of the Federal Government. I want to welcome everyone 

here. 

I am going to give an opening statement just briefly, and then 

I am going to ask each of you to introduce yourself and give a oneminute name, title, and why you are excited to be here, what you 

hope to contribute. 

And then, as many of you know who have participated in our 

roundtables, we have a very informal exchange of information that 

is going to help us to understand how this important program is 

working, where it is strong, where it is weak. 

We have just been through a six-year authorization and there 

will be a lot of back and forth. This is not like a regular hearing 

where people read off of a piece of paper and submit it for the 

record. 

There is going to be a lot of back-and-forth questioning, and we 

are going to try to go to about 3:30. If we can exit a little bit early, 

that would be good. If you need to go all the way to 4:00, we are 

authorized to do so. 

But let me again thank you for joining us today to examine the 

comprehensive Small Business Innovation Research and Small 

Business Technology Transfer Reauthorization Act that we passed 

through this Committee and on the House floor two years ago this 
2 

month. It is a good time to look back over the last two years and 

to see how our new authorization is working. 

As many of you know, this program was created back in the 

1980s. I always like to go back to our roots in the beginning with 

Warren Rudman and Congressman LaFalce. Some of you were 

around when it was started, and all of you are familiar with its beginnings. 

The purposes of these programs were as important then as they 

are today. They are, one, to stimulate technological innovation; 

number two, to encourage greater utilization of small businesses to 

meet federal research and development needs which are quite extensive; three, to foster and encourage participation by minority 

and disadvantaged persons in innovation; and four, to increase private sector commercialization of innovations derived from federal 

research and development. 

I think this last point is so important. The Federal Government 

spends billions and billions of dollars on research. How can we take 

that good research and commercialize it appropriately, giving small 

businesses an opportunity to grow and expand and create jobs in 

America. There is no sense in discovering innovations only to have 

them lay on the shelf and not create jobs and not get into the marketplace. 

So, this is a very important program of the Federal Government, 

and I have taken a particular interest in it. So, as you all know, 

when I took over as chair of this Committee in 2009, the SBIR program had literally exhausted its authorization. It was sputtering. 

It was reauthorized temporarily 14 times until, with all of your 

help, compromise was reached between the House and the Senate, 

and between all the stakeholders, so that we could lay down a 

longer-term six-year authorization—and increase the allocations. 

It is very important, in my view, to have the Federal Government be sensitive that there are some very high-quality small businesses out there inside this Beltway and outside this Beltway that 

are extraordinarily well positioned to bring value to the taxpayer, 

to commercialize new products. This partnership I think is one that 

should be encouraged. 

I want to particularly give special credit to Jere Glover, who is 

here as a strong supporter of this program, Dr. Chuck Wessner, Dr. 

David Green, our program managers and state SBIR directors like 

Dr. Jain, who are also here with us today. 

Now, there were challenges to the reauthorization. I do not want 

to review those now. You all know what they were. But the important take away from today is, is that it seems, in the last two years 

in particular, the overall SBIR program is exceeding its goal by 

over $100 million in 2011 and over $200 million in 2012. 

We also have some information about agencies that are not quite, 

or departments, meeting their goal, but overall the numbers of the 

last two years look particularly encouraging. 

Ranking Member Risch has come. I just want to see if there is 

anything else that I want to add. 

Let me say during today’s discussion, I look forward to hearing 

from many of you about the real-life impact of the changes that we 

made to the SBIR and STTR program, how they are impacting 

your sphere of influence, how many more research and develop-
3 

ment dollars are getting to small firms, and what some of the agencies can do to increase that pipeline to small businesses. 

We need to be perfectly clear, though, that the allocation that we 

have in our law is a minimum, not a maximum. We want people 

to understand that because the Federal Government believes, and 

the members of Congress on both sides of the aisle, that small businesses have a great deal of expertise and value to bring to the Federal Government and it is not just large businesses that make all 

of the discoveries. In fact, the record would show the opposite. 

So, let me turn to Ranking Member Risch for opening remarks 

and then I want to acknowledge additional SBIR program managers who are here to listen, even though they are not on the 

panel—John Williams from the Office of Naval Research, Mary 

Clague from the National Institute of Standards and Technology, 

Alan Rhodes from the National Oceanic and Atmospheric Administration, Natalie Seiling from Defense Logistics Agency, Rachel Sack 

from the Department of Transportation, and Ed Metz from the Department of Education. 

So, they are not on the panel but they are here listening. We 

have many, many other people focusing in through the web and we 

appreciate their participation as well. 

Let me turn it over to my Ranking Member for any opening remarks that he might have. 

OPENING STATEMENT OF HON. JAMES E. RISCH, A U.S. 

SENATOR FROM IDAHO 

Senator RISCH. Thank you, Madam Chairman. 

First of all, I apologize. I cannot stay. I have other commitments 

this afternoon but this is an important hearing for all of you who 

are here to address these issues. 

These goals are not a suggestion. If the board of directors of a 

private entity gives the executing authorities direction as to what 

to do, the board of directors expects that those directions will be 

followed; and so, I kind of view this hearing as what is wrong here, 

how come we are not getting to where we need to be. 

So, for those of you who are not getting to where you are required to be, I will be really interested to hear why and I will be 

interested to hear what the plans are to get there. 

And particularly, I know how things work in the government. 

Promises are wonderful but what I am looking for is some very specific statements and facts as to how everybody intends to get where 

the board of directors has said that you need to be. 

So, thank you very much. 

Chair LANDRIEU. Thank you, Senator. We appreciate your participation. Let us begin with Dr. Bobby Savoie, a very good friend 

and a constituent from Louisiana. 

Thank you, Bobby, for being here and please again one minute. 

I know how you can be. 

[Laughter.] 

No. I am just teasing him. He is very efficient. Just one minute 

and then we will go around the room. 

Mr. SAVOIE. Thank you—— 

Chair LANDRIEU. You have to lean into your mic to pick up any 

volume here. So, if you would just lean into it, that would be great. 
4 

Mr. SAVOIE. Will do. Thank you, Madam Chairman. My name is 

Dr. Bobby Savoie. I am the CEO of a company called Geocent, 

headquartered in New Orleans, Louisiana, with offices in Charleston, South Carolina, Huntsville, the Stennis Space Center, Baton 

Rouge, Tulsa, Dallas, and a few other places. 

We are primarily an IT and engineering company. This is the 

third technology company that I have started and built, all 

headquartered in Louisiana, although usually doing a lot of work 

elsewhere in the country. 

We have done quite a number of SBIRs from Phase I through 

Phase III which I am sure we will have a chance to talk about 

later. 

Chair LANDRIEU. Good. So, your company has actually benefitted 

from an SBIR program. We will come back to that in a minute. 

Dr. Wessner. 

Mr. WESSNER. Thank you, Senator. My name is Chuck Wessner. 

I am the Director of the Technology, Innovation, and Entrepreneurship program, which I founded at the National Academy of 

Sciences, but I wouls emphasize that I am speaking in a personal 

capacity. 

Thanks to the Congress and with the help of our friends in key 

agencies, we have the assignment of assessing the SBIR program. 

The good news is that we have brought some empirical rigor to 

that assessment and the other good news is that what we found, 

after a lengthy assessment led by Dr. Jacques Gansler, the former 

Under Secretary of Defense, is that the program is sound in concept and effective in operation. 

We, of course, have suggestions on how the program can be improved but I think one of the most compelling points is that the 

rest of the world is copying the program for their own use. 

I look forward to the discussion and thank you for the time. 

Chair LANDRIEU. Thank you, Doctor, for your input. 

Mr. Glover. 

Mr. GLOVER. Our members have several concerns. One is the 

capital access. It is still critically hard for small business venture 

capitalists really have withdrawn from an early stage and seed 

fundings. 

Lending is still very tough, very hard. The patent legislation that 

is pending in the House and coming over to the Senate is very antismall business and small businesses are very concerned about that 

for the future of innovation. Things like the Transfer Act, which is 

taking basically 22 percent of the STTR program away from small 

business. 

Again, those are all major concerns. But when we look at the 

SBIR reauthorization where Congress took a great step forward, 

we are going to do a much better job of transitioning SBIR technology into the commercial space and especially at DOD. The law 

was very specific requiring goals, requiring incentives, requiring 

plans, requiring accountability—all of those things would help fill 

some of the gaps that venture capital pulling out of the market has 

created and lending has been challenging. 

Unfortunately, that has been slow in transitioning. It is just not 

happening very quickly and our members are very concerned. They 

think that compliance with the law should be happening much bet-
5 

ter, much faster, and we should see the agencies much more involved in transitioning this technology. 

Chair LANDRIEU. Thank you, Jere, I appreciate it. 

Mr. Rusco. 

Mr. RUSCO. Thank you, Madam Chairman. I am Director of Natural Resources and Environment of the US GAO. As you know, in 

the past number of years we have written a number of reports on 

various aspects the SBIR and STTR programs, and most recently 

we have, responding to mandates in the Reauthorization Act, reported on fraud, waste, and abuse on data protections and also on 

spending requirements and agencies’ adherence to those. 

Chair LANDRIEU. Good. We will look forward to getting some of 

that information today. 

Dr. Jain. 

Mr. JAIN. Thank you, Madam Chair. My name is Mahendra Jain 

and I am Senior Vice President of the Kentucky Science and Technology Corporation. It is a nonprofit, 501(c)(3) organization that 

works with all the faculty and all the small technology businesses 

throughout the State. 

Kentucky has been very fortunate to have had the Kentucky Innovation Act passed in 2000 that created several programs, a couple of which fall into my portfolio—Kentucky Science and Engineering Foundation and Kentucky Commercialization Fund. 

But on top of these is the SBIR/STTR program that I have been 

leading since 2001 in the State. I have been the host of two national conferences. One of these was the National SBIR Conference 

in 2006. That was when NSF used to underwrite the conference 

and then last year in 2012 when I hosted in Kentucky the NIH National SBIR Conference. And I have continued to work with that 

program. 

Chair LANDRIEU. Thank you very much. 

Mr. Rinaldi. 

Mr. RINALDI. Thank you, ma’am. My name is Chris Rinaldi. I am 

the DOD SBIR/STTR program administrator. 

As you may be aware, DOD represents over half of the SBIR program in the Federal Government. We have 13 program managers, 

some of whom you named when you listed the attendees. 

In DOD, although we have 13 program managers, I am responsible for implementation policy for the reauthorization, which we 

have been working vigorously to achieve. 

SBIR is a bright spot and I think that when we see the public 

discussion of how Congress and the Federal Government is not 

working, SBIR is one program that we can point to as working 

well. 

Chair LANDRIEU. Great. You have a big part in that, so we thank 

you. We will come back to what you all are doing because your 

numbers look very, very good. 

Mr. RINALDI. Thank you. 

Chair LANDRIEU. Mr. Gudger. 

Mr. GUDGER. Yes, thank you, Madam Chairwoman, and thank 

you, Ranking Member Risch. I am the Director of Small Business 

and Senior Advisor to the Secretary of Defense on matters of small 

business. 
6 

I would like to thank you for your support. I think Chris was exactly right about the quantum leap in the right direction over the 

past few years that we have taken in infusing some of our more 

innovative programs into programs of record and getting more 

small business involvement. 

We made tremendous strides with several big policy initiatives 

over the past couple of years that aligns with the direction that 

Congress set forth for us. I think that we have seen tremendous 

positive results as a result of you getting feedback from all the 

folks that you named earlier as well as industry. So, thank you for 

that. 

Chair LANDRIEU. Okay. Thank you. 

Mr. Oliver. 

Mr. OLIVER. Thank you, Senator. I am Manny Oliver, the Director of the SBIR and STTR programs at the Department of Energy. 

I joined the department about three years ago and I come from the 

private sector and was looking forward to bringing a new approach 

to the way we run the programs at DOE. I got here before reauthorization and have been caught up in it and made a lot of 

changes to be both responsive to small businesses as well as improve the outcomes for the Department of Energy. 

Chair LANDRIEU. Thanks. 

Mr. Portnoy. 

Mr. PORTNOY. Thank you, Madam Chairwoman. My name is 

Matt Portnoy and I am the Director of the NIH, National Institutes 

of Health, SBIR and STTR program in the Department of Health 

and Human Services. 

So, we have been working amongst ourselves, with our colleagues 

at agencies and with the SBA vigorously over the past two years 

to implement the provisions of the Reauthorization Act, and we 

have made a good deal of progress, and we are happy to continue 

to talk about that. 

Thank you. 

Chair LANDRIEU. Okay. I am not sure in my data, staff, do we 

have the NIH broken out from HHS; and if not, if we could get that 

data that would be good. 

Overall the department is up, you know, over the required allocation. 

Mr. PORTNOY. That is right. NIH is around 98 percent of the 

HHS program and we are meeting and exceeding our set-aside. 

Chair LANDRIEU. Right. Okay. If you would turn your placards 

a little bit toward me so I can recognize you. 

Ms. Raghavan. 

Ms. RAGHAVAN. Thank you, Chair Landrieu and Ranking Member Risch. My name is Pravina Raghavan. I am the Deputy Associate Administrator for the Office of Investment and Innovation at 

the SBA. 

I extend my apologies of our Associate Administrator Javier 

Saade. Unfortunately, he was not able to attend today, but he looks 

forward to working with all of you. 

As you correctly said, the SBIR and STTR programs are ex- tremely important for small businesses in America. Over $38 billion has been provided in funding and it has funded companies like 

QUALCOMM and Symantec but also funded research that would 
7 

not normally be commercialized like GPS which is now an awardwinning and a tremendously competitive industry. 

The reauthorization was extremely critical, and the SBA has 

been supportive of it, and actually has made it one of its top priorities, in fact, including moving me down from New York to sit here 

and help with the transition. 

We have been working diligently with all the agencies. We have 

done a lot but we have a lot more to do, and we look forward to 

working with them in a collaborative manner as they have been in 

getting some of these issues tackled and making sure that we all 

hit and exceed our goals. 

Thank you. 

Chair LANDRIEU. Thank you very much. 

Ms. Sobolewski. 

Ms. SOBOLEWSKI. You got it. Great. 

I certainly appreciate the opportunity to be here. My name is 

Lisa Sobolewski. I am the Director of the SBIR program within the 

Department of Homeland Security. We have two programs within 

DHS. 

One is in my directorate, the Science & Technology Directorate. 

The other one is in the Domestic Nuclear Detection Office, and we 

coordinate very closely with the two. But I am really passionate 

about helping small businesses meet their dreams, and especially 

that dream of getting to Phase III. I think our directorate is pretty 

successful in helping companies get there, including Geocent. 

We utilize the SBIR program within DHS to actually meet the 

needs of the DHS components, the FEMAs, the ICE, the Coast 

Guard, the Secret Service, because we are an operational department and so small business that provide those innovative solutions 

are very important to us. 

So, I work with my colleagues very closely to make sure that we 

implement the program in such a way to get good technology solutions for those components. 

Thank you. 

Chair LANDRIEU. Excellent. Very well said. 

Ms. Houston. 

Ms. HOUSTON. Thank you, Senator. I am Jenny Houston from 

Warwick Mills in New Hampshire. I have been with the company 

for 18 years and we have done several SBIR projects—two Phase 

IIs, one with the Navy and one currently with NSF that we are on 

the brink of commercializing. 

Warwick Mills is a manufacturer and an engineering company of 

high-performance, flexible materials that are used in body armor 

for both military and law enforcement both in the U.S. and internationally. 

We also do recreational and industrial protective garments and 

we do quite a bit of aerospace including the successful crash bags 

that were used for NASA’s missions. 

So, we view the SBIR program as a very important leg up and 

a partnership with the agencies that we are working with. Every 

technological innovation has its roots somewhere, and we feel like 

the advancements that we have made in our SBIR programs have 

been very important in our commercial programs and feel like it is 

a very good program. 
8 

Chair LANDRIEU. Thank you. 

Dr. Green. 

Mr. GREEN. I work for Physical Sciences, a science and engineering company that takes ideas from concept through to demonstration and sales. 

We have performed SBIRs for a great many agencies. As the 

technology matures, we most often partner with either venture or 

large businesses to transition the technology effectively. 

We thank you for your strong leadership in the reauthorization 

of 2009. What I would like to talk to today is the definition of success. What are those metrics? Is it revenue, is it patents, is it jobs, 

is it of a societal benefit? I hope to have time to illustrate a number 

of success stories that we would share with you. 

Chair LANDRIEU. Excellent point. Let us begin. I am just going 

to make a note that one of the key goals of the reauthorization, one 

of my personal goals, was to get a longer reauthorization so that 

we all had a chance to do our best work on behalf of the taxpayer 

and the small businesses that we are trying to work for. 

I would remind you all that if we had gotten the two-year authorization which some people wanted, we would be finished right 

now instead of really just getting started. 

So, I think we were proven correct, those of us who held out for 

a six-year authorization. The wisdom of that. I would have loved 

to have had an eight-year authorization. We tried a 14-year authorization. Could not get that far. But we did get past two years which 

is really, really important to this particular program. 

I am going to continue to push hard for a longer reauthorization 

because this is a long lead time and you have got to get through 

the politics from one administration to the next and try to focus 

like a laser on the technology, what the market is, how the market 

is moving, et cetera, and what opportunities there are. 

So, let me start with you Dr. Wessner. The way this works is, 

I am going to throw out a question. If you want to comment or if 

I do not call on you and you want to comment, just put your plaque 

up like that and I will call on you in as fair an order as I possibly 

can when I recognize that you want to speak. If you want to ask 

a question or respond to someone, put up your plaque as well. 

We are going to go for about an hour, maybe a little bit longer. 

But Dr. Wessner, let me start with you because I think you have 

one of the biggest overviews of this program. What can you tell us 

about in the last two years, based on the tweaks that we did in the 

reauthorization? What are some of the things that you are seeing 

that are really paying off, either in a particular agency or a particular best practice or a particular method that is emerging that 

is promising to you. And then I am going to ask you if there is anything that you see that is concerning to us that we should focus on 

now. 

And again, you have to speak into your mic. 

Mr. WESSNER. Well, thank you, Senator, and let me join Dave 

Green in emphasizing that, while I am speaking in a personal capacity, it is unquestionable that the Nation owes you a great debt 

in having this program reauthorized, and getting it reauthorized 

with a timeframe that provides the necessary stability to let it ac-
9 

tually work. This stability, of course, is one of the attributes of the 

program. 

Thanks to this program, our war fighters in the field are better 

served, as are those suffering from health challenges. Valuable 

products are going into the market that would not otherwise be 

going into the market. 

Also the program is a great way of improving our nation’s procurement. It increases competition both in quality and price and, 

as you know, our procurement system is, to put it mildly, a little 

bit sclerotic. So, having new companies come in with new initiatives is really important and we thank you for that. 

There are a number of things that I think you will hear about. 

One of the problems that you managed to eliminate was the question on venture capital firms where an effective compromise was 

reached. 

But with your permission, I always take these invitations very 

seriously and we have a number of quick points that we would like 

to make. 

Chair LANDRIEU. Go ahead. 

Mr. WESSNER. If I may, I want to demonstrate some figures and 

it is hard to do that. 

Chair LANDRIEU. That would be terrific. If you want to do that. 

I do not know if everybody can see this. 

Mr. WESSNER. It is on both sides. 

Chair LANDRIEU. Okay. 

Mr. WESSNER. It is just a quick couple of points. In a sense, what 

I am really interested in, Senator, is encouraging the Committee to 

take a broader view of innovation and entrepreneurship other than 

SBIR per se. The SBIR program is a key part but it is only one 

part of our innovation system. These are a couple of quick points. 

I am going to cut this presentation back. There is a good news, 

bad news story here. The red is the good news. The other challenge 

is China, but China was not there 10 years ago in any meaningful 

way. And there has been this huge surge in their R&D spending. 

Chair LANDRIEU. Let us make sure we get that onto the audio 

record. Go back and let me just put that into, go back, okay. The 
10 

United States has 28.3 percent of the global share of R&D. China 

has a 14.7 and they were not there 10 years ago. 

Mr. WESSNER. You see Germany and Korea are spending huge 

amounts of money and it is interesting. You have those challenges 

from East Asia but you also have mature economies in Europe 

which are really putting in the money. 

What I want to emphasize is that sometimes you hear a debate 

which is fundamentally silly is whether the public sector or the private sector should do it and it is sort of the importance of mothers 

versus fathers. There is no versus. They are both essential. 

Federal research is a public good particularly basic research 

which provides the foundation for future innovation. Some people 

question whether it is a worthwhile investment. 

And that is, of course, it is a good investment. It drives growth. 

It actually generates directly employment, and the innovations that 

you have the list of there, I mean, one of the funniest things I remember hearing here up in the Senate was a young staffer once 

asked me, why do you think semiconductors are so important. Well, 

what do you think is in this box. [Cell phone] 
11 

But if I could go on, there is some troubling news here and the 

most troubling is that recently there has been a relatively steady 

decline in the U.S. R&D position. You hear a lot of people talk positively about the Reagan years. Well, during those years, the U.S. 

was spending significantly more on public R&D as a proportion of 

GDP. Perhaps we should return to that public level of investment 

in R&D. I do not think the world is that much safer than it was 

then. 

If you go to the next one, this is the most disturbing. If you look 

at this just briefly, Germany under Chancellor Merkel has been 

pushing very hard. They have a goal of 3 percent of GDP for R&D 

and 7 percent for higher education. 

On the other hand, the UK is coasting and not in a good direction. But if you look at Finland, a small country, with major hightech industries, there has been a huge increase. Look at Japan. 

Large country, large increase. Look at China and Korea, shooting 

right up off the map. These are really major. 
12 

I do not like a position where we are flat in terms of our R&D 

expenditures and other countries are moving up their investments 

really fast. That is not a promising situation. 

What is key about this is it is a question of what are we going 

to give our children. In 20 years, if God forbid there is another war, 

what kind of equipment are we going to have. Let me go on there 

very quickly. 

Chair LANDRIEU. Let me just ask you though to clarify, and if 

someone has a question to Dr. Wessner because we do want to 

move around and I will give you just a few more minutes. 

But is this data from just government funding or is it a combination of government and private sector funding and university funding in those countries, what you just showed us? 

Mr. WESSNER. What we are showing you is a combination of private R&D expenditure and of public R&D expenditure—— 

Chair LANDRIEU. And public R&D. 

Mr. WESSNER [continuing]. On this last slide which is from the 

OECD, an international organization. 

Chair LANDRIEU. All right. 

Mr. WESSNER. And a key point there is that you need both, and 

often public expenditure in R&D drives private R&D. 

One of the things I wanted to mention just very quickly is that 

there is sometimes a discussion of SBIR versus universities, and I 

would simply argue that that is again a mistake. The universities 

are the sources of many innovations, but the private sector excels 

in bringing those to market. 
13 

One of the things that we have to work harder at is growing the 

SBIR/university link. I have been out recently to some of the leading institutions like Carnegie Mellon University and Case Western 

in Ohio, and it is just discouraging to see how few SBIR applications are coming from these top-notch universities. So, we need to 

have a better outreach there and I would be eager to hear how we 

can do better. 

One of the things I want to emphasize is that we need to pay 

more attention to the manufacturing element in the SBIR program, 

and there are two ways to do that. 

One is, I just want to breakthrough the idea that we can put less 

emphasis on manufacturing and rely on services. 
14 

Well, and the point is that in agriculture we feed ourselves and 

we export to the world but we are not doing that in manufacturing. 

If we could go to the next one please. 

The point is simply that we are losing both in traditional manufacturing, we are also losing in high-tech manufacturing. 

Chair LANDRIEU. This is the side that is up. 

Mr. WESSNER. Yes. Exactly. I used to work in Treasury back here 

when we were not worried about this; and everybody always told 

us, oh, we could lose these. Do you know what low-tech manufacturing it is is that is where no one in my family works. That is the 

usual definition of it. 

But up here is where you start to find that where we are losing 

at is at the very cutting-edge. So, this is alarming. If you are interested in national security—well, if we cannot make things, we cannot defend ourselves. We have to make better things than anyone 

else. 

And if you want jobs, which we all do, then we have to do something about that. 

Chair LANDRIEU. When did that red line start to go down, in 

what year? 

Mr. WESSNER. In 2000. But could I suggest that this is a very 

nonpartisan process. There are a number of long-term trends, and 

this is what I am going to get to next is what the rest of the world 

is doing. 

You know, people ask, how do the Germans do this? Well, because they have programs that are long-term, with a high level 

focus on manufacturing. That is where this Committee has been a 

great strength in focusing on small companies and how to help 

them. They have substantial and sustained funding. 

There is a huge training component. We talk about workforce. 

This is what the rest of the world is doing. They are training at 

the high end, they are training at the middle, and they are training 

at the lower end. 

They offer customized and flexible field services. 
15 

If you look at this overhead, Germany has a balanced trade account with China. Now, German workers make substantially more 

than U.S. manufacturing workers make. They have heavy environmental regulations. 

Their unions have representatives on company boards. It is not 

an unfettered capitalist environment, and yet they have a balanced 

trade account with China. One reason for this is that they have the 

Fraunhofer systems, which has over 60 research institutes and 

22,000 employees and is funded at two and a half billion dollars 

annually. 
16 

These programs are not confined to Germany. Canada, for example, is one-tenth our size in population and in the size of economy. 

Yet, they outspend our Manufacturing Extension Partnership program two to one. 
17 

I would argue that there is a message here. Functionally speaking, we are trying to compete with a good college team against the 

pro-teams; and guess what, that does not work so well. 

So, if you look here at the next slide, we have the problem that 

we are home alone. A company with an awful lot of promise cannot 

get the support it needs out of the industrial commons, and the 

contribution of the industrial commons is something that has been 

identified by Professors Pisano and Shih up at the Harvard Business School. 

So, one other thing I want to really bring to your attention looking forward is how do we find a better way of supporting an industrial commons. And a second point which is a real challenge for 

some of the smaller forum that has been brought to my attention 

by the Department of Defense is the cyber security element. 

When a firm wins an SBIR award, that is a signal to some places 

of the world to hack them immediately and persistently; and our 

firms are entrepreneurial, focused on products and they are not 

spending all of their time in cyber defense. 

So, we need to have an industrial commons where you can have 

a manufacturing institute that provides testing equipment, that 

provides advice that you need and at the same time can provide 

you advice on how to keep your intellectual properties. 

Chair LANDRIEU. Excellent point. 

Does anybody else want to comment? Okay. I see you go ahead, 

Ms. Houston, because this has spurred a lot of thinking in my 

head. I hope it does for yours. 

Go ahead, Mr. Houston. 

Ms. HOUSTON. I just want to say how much I appreciate—— 

Chair LANDRIEU. You have to speak into your mic. You have got 

to lean into it please. 

Ms. HOUSTON. I apologize. 

Chair LANDRIEU. That is okay. 

Ms. HOUSTON. Small businesses have two choices if they want to 

do innovative research. They can do IRDD, internal research and 

development dollars, or they can get a program like the SBIR or 

other programs. 
18 

If you get a Phase I and a Phase II and you have close to a million dollars worth of research dollars that you are doing, to be able 

to fund that as a small company means that you, say you get, you 

put aside 10 percent of your profits. You would have to be making $10 million and spend every nickel 

of your profits to get the same amount of research. That is a very 

tall order for a small business that only makes 10 million to come 

up with all of the money toward research. 

Without these programs, companies will not do the internal research and development dollars. 

Chair LANDRIEU. Dr. Oliver. 

Mr. OLIVER. Thank you. I wanted to comment on the connection 

between SBIR and universities. That is something we have given 

a lot of thought at DOE, since the science agencies pump a lot of 

money into the universities and federal labs. 

Something we started last year was trying to reach out to the 

tech transfer offices at universities and federal labs. We fund the 

basic science but we do not track what happens when it goes over 

to the tech transfer office. 

Now we are working with the tech transfer offices, both at Federal labs and universities, and taking some of those tech transfer 

opportunities and putting them directly in our solicitations to help 

move them out from the universities and labs into the private sector. Last year we started with the DOE national labs. This year we 

have included three research universities, a total of 12 tech transfer opportunities from those universities, in our SBIR solicitations. 

Chair LANDRIEU. Mr. Glover. 

Mr. GLOVER. I just want to totally amplify what Dr. Wessner 

said. One of the great frustrations for me is this reauthorization 

bill did tremendous things to try to encourage and in some cases 

require the agencies to do more commercialization. 

My frustration is two years after that bill was passed, we still 

do not see the results and things are getting worse internationally. 

Exports, high technology exports in the world, 457 billion for 

China, 221 billion for the United States, less than half. Germany, 

186, almost as much as us and a much smaller country. Japan, 

126, exporting high technology. 

Exports are jobs. We are not creating the jobs in America. If we 

do not create the jobs in America, the next generation is going to 

suffer. 

So, when some agencies see my frustration, it is because I had 

great expectations. I had great hopes that we could make a huge 

transition and prove some of these things can really work, and we 

are going to have to do that for the next generation. 

Chair LANDRIEU. Okay. And I am going to ask some of the agencies present here to specifically respond to this about what you 

have done in your agency or what you have not done but what you 

plan to do. 

But, Dr. Jain, let me respond to you and also, when you are answering, could you tell me what other states besides Kentucky have 

a statewide SBIR program; and if not, if you could submit that to 

the Committee within two weeks. 

Mr. JAIN. I can. There are several states that I talked with for 

their input—before I came here including South Dakota, Wisconsin, 
19 

Minnesota, Michigan, Louisiana, and Virginia. And, I also talked 

with a couple of the service providers as well. 

Of course, Kentucky is doing well as you recognized. But Wisconsin, for example, has an innovation center, the Center for Technology Commercialization, that works through the Wisconsin Entrepreneurs Network throughout the State. They are working with 

the University of Wisconsin—WARF—which is very well known for 

holding and commercializing the IP by transferring the technologies. 

And so, if you can transfer the technologies out of the university 

and somehow create new startup businesses, and then you work 

with those companies through programs like SBIR, you can develop 

a good link between the university and small business because the 

faculty is getting involved there. 

In Kentucky, there are two major research universities, the University of Louisville and the University of Kentucky. I have been 

working with those universities for 10 years now. 

Now, they have developed and implemented at least for the last 

five years, a policy called Entrepreneurial Leave. So, a faculty who 

has a technology that can be transferred and commercialized can 

go on entrepreneurial leave for six months, commit 51 percent of 

their time to the company, and manage the SBIR/STTR grant. And, 

during the gap period of Phase I and Phase II, they can come back 

to the university. 

So, it is a leave policy that is working very well at these universities and I think other universities can also learn from their experience and see how their faculty can benefit from such policies, because they are worried about their benefits. They are worried about 

their tenure. If faculty can get credit for what they do and if they 

can get benefits, more and more faculty would look at the SBIR/ 

STTR program. 

Chair LANDRIEU. Interesting, and I really want the staff to make 

a note of that. It is sort of a more flexible approach to kind of a 

partnership with our professors and inventors on our university 

campuses to allow them to do what they want to do which is to 

teach but also so that they can promote a technology that creates 

jobs and benefits. 

And I want to get back to Dr. Green’s question to all of us is how 

do we measure success in this program? Is it the number of jobs 

created? Is it jobs plus wealth? Or is it the general public’s benefit, 

a greater good or a quality of life? But Ms. Lisa, go ahead. Ms. 

Sobolewski. 

Ms. SOBOLEWSKI. So, I wanted to comment, go back to Jere’s 

comment about the commercialization. As many of you know, and 

I am not here to make excuses for sure; but we had what? Over 

40 some provisions of the reauthorization to implement from an 

agency perspective, and many of us had solicitations in the works. 

So, it took a little bit of time. But what DHS has done and what 

I wanted to go on record to say is what is very important to us is 

the 10 percent civilian commercialization pilot program because 

within DHS especially, we are a medium size agency. My S&T directorate SBIR budget is about $14 million; DNDO is 

roughly 2- to 4,000,000. So, we are not talking billions of dollars 

here. And what myself and my colleague have seen is that we in-
20 

vest in the technology in Phase I and Phase II and then we just 

do not have the funding to take it further with non-SBIR funds to 

take it into operation. So, that 10 percent is really helping us get 

some of these companies over the hump and do some further testing and evaluation. 

And in response to Jere’s question, because of some of the other 

priorities that we were all working on with the implementation, we 

responded to SBA’s request for our civilian commercialization business pilot program in the July time frame of this year. 

So, yes, Jere, it was a year and a half into it but we had all these 

other things that we were implementing at the time. We did receive approval fairly quickly, and we will be implementing that 

starting in 2014, and we already had initial discussions with several of our technical divisions that will provide funding into that 

program to help these companies. 

So, I wanted to let you know that that civilian commercialization 

readiness business pilot program is extremely important for DHS 

especially to be able to use that 10 percent of our SBIR funds for 

such purposes. 

Chair LANDRIEU. Great. Dr. Green, and I am going to ask anybody else who wants to follow up on that comment how this 10 percent is working either at your agency or how you have observed it 

at an agency or department that you are familiar with. 

But, Dr. Green, go ahead. 

Mr. GREEN. First, I wanted to return to the comment that Dr. 

Wessner did about cyber security. 

As part of the reauthorization, there is an increased amount of 

training and education for new businesses; and I think that, in addition to transition philosophy and all, adding a cyber security component to that to help ‘‘three guys in a garage’’ figure out what the 

minimum they ought to do would be a very good course to add for 

that community. 

I wanted to touch again on successes, if I may. Some of them 

where you create licenses to another company is a powerful pathway. We had an NIH-funded SBIR which had to do with obtaining 

better images of your retina. 

We partnered with a large company. In the last six years, they 

sold 12,000 units. There is no way we could have scaled up to that, 

and those units perform tens of millions of eye exams. 

I really do not know how to quantify that as a societal benefit 

or a monetary value but it is something where the technology has 

gotten inserted, and I am very proud of that. 

Under an EPA SBIR, we have developed a natural gas leak detector, partnered with another company. They have sold 2400 

units. As a result of this, there are now 2000 quality jobs in 49 

states surveying the gas lines and in a dozen other countries. 

We won an R&D 100 award. We had a Phase II SBIR but the 

revenue in return is rather modest; nonetheless, our partner is 

benefitting and society is benefitting by having greater safety. 

One more technology that is on the verge of being a success: last 

week I was here in Washington and the EPA gave out its 2013 

Presidential Green Chemistry Awards. 
21 

One of our subsidiaries, Faraday Technology, won that award for 

a technology that will replace toxic hexavalent chrome (chrome six) 

with chrome three. 

There is a long way to go but the EPA and the partners are all 

advocating that we need to make this change to reduce carcinogens 

in our world, and so I am very pleased with that. 

Another path we take is to partner with the venture community 

once the technology has been matured and developed and a certain 

amount of risk removed. 

We have spun out five companies partnering with the venture 

community most often: A kidney stone lithotriper under NIH funding; an environmental emissions monitor that is still in place based 

on NASA and NSF SBIR, that is in use today monitoring combustion products; A telecom technology for dense wavelength division 

multiplexing which had NASA and Air Force SBIR funding. 

Again, often neither we nor the funding agency can see the path 

that will ultimately be the successful commercial incarnation. We 

are currently working in digital cinema, based on an Air Force 

SBIR; and that is a small company currently operating in New 

Hampshire. 

It has received 35 million in venture funding, has 30 employees, 

and is making progress toward reaching the marketplace. 

Chair LANDRIEU. Okay. 

Mr. GREEN. The third path we follow is whether it is such a 

small market that no single-product company could exist. Every 

material that has gone into space has been tested in an atomic oxygen facility that we developed with a NASA SBIR—either at our 

facility or in space facilities around the world in Europe and Japan 

and in this country. 

A company would not exist that could only build those four devices. So, having a company that is able to do that and many other 

things is our goal. 

Chair LANDRIEU. I am going to have to ask you to wrap up. 

Those are very good examples of successes; and if anybody wants 

to comment about basically this technology transferring to a larger 

company that just improves and makes more efficient and grows 

and expands and how do we count those and is that the same as 

launching technology that grows a whole new business out of the 

garage and then may become 10,000. 

But let me get the Director of Small Business for DOD. Go 

ahead, Andre. 

Mr. GUDGER. Thank you. There were some very good points. I 

mean Jere made some very good points and Dr. Wessner made 

some great points as well. 

In 2011 when I took over this job, one of my biggest rocks, I will 

call it, was to modernize our industrial base. I knew the importance of our industrial commons in gaining affordability out of our 

programs and gaining significant capability so that we can not only 

win future or potential conflicts but we can deter them with that 

capability. 

And I looked at our industrial base and saw where we had areas 

of vulnerability and where we could be weak, and I knew that we 

had to make those, make a significant change. 
22 

So, we started this process called the five-star transformational 

process that focused on outreach, commercialization—— 

Chair LANDRIEU. Can you repeat that please? The what process? 

Mr. GUDGER. The five-star transformational process. 

Chair LANDRIEU. Five-star transformational process. 

Mr. GUDGER. And Chris is going to talk a little bit more about 

that later. I give him the hard stuff to do. 

Mr. RINALDI. Thank you, sir. 

Mr. GUDGER. But, you know, the importance of that was figuring 

out how do we perform outreach, how do we increase commercialization, how do we streamline the programs we have, move 

them from the 20th century into the 21st, how do we have reporting and compliance. 

And so, one of the first things we did was address capital. That 

was a very significant thing since the DOD is not necessarily a 

lending institution but we can pay our small businesses faster. And 

that is when you saw the accelerated payments kick in because I 

knew that small businesses, and we knew at DOD that small businesses would do more with more. 

So getting money in their pockets they would make investments 

in technologies, improve their products and hire the right people 

because innovation is not just technology. Sometimes it is people. 

And so we have to make investments in our critical thinking, sequential thinking, personnel so that we can make tremendous improvements. 

Chair LANDRIEU. Good. I am looking forward, Chris, to you filling 

in some of that on some specifics but thank you all. We will get 

back to that in a minute. 

Mr. Portnoy, you wanted to say something. Go ahead. 

Mr. PORTNOY. Yes, thank you, Madam Chairwoman. 

I would like to bring a couple of points together that were 

brought up by both Dr. Green and Mr. Glover about commercialization in general and what we at the NIH have been doing and will 

be doing with newer authorities. 

And so, as Dr. Green said, commercialization is not necessarily 

a linear path. It rarely is, and it takes many forms including direct 

sales from the company that gets the award but frequently and especially in life science space, depending on the technology, it is long 

in time and high in dollar investment to get technology into the 

marketplace. 

There are frequently partnerships, licensing deals, strategic partners, FDA clearance, et cetera. All of this can take a very long time 

to get technology to the market. 

And so, we at the NIH have developed many programs over the 

years to help this commercialization along and will be using newer 

authority provided under the reauthorizations. 

So, we have had what we call a Phase IIB. Many agencies have 

Phase IIBs. Everybody’s is slightly different. Ours is a sequential 

Phase II that we have been doing for nearly 10 years now to provide a second Phase II to companies that are really moving their 

technology by and large towards FDA approval and that really has 

helped companies move further along to get them to the inflection 

point where they can attract the next level of investment, be it venture, angel, or strategic partner. 
23 

We have had under the discretionary technical assistance authority both in the former and the current reauthorization, we have 

had a Phase I and a Phase II program. Our Phase II program, 

called commercialization assistance program, really helps our 

Phase II companies learn about to ‘‘B’’ in SBIR about business. 

Frequently, many of our companies, especially our new companies to the program which are around one third of our companies 

every year are new, they are great scientists and they do great research, but they do not quite understand ‘‘B’’ in how to take their 

research and get it into the commercial marketplace. 

So, we provide lots of guidance, training, and principal advisers 

to help them along the way, and we are going to be continuing that 

program. 

We have expanded it to STTR companies as we are allowed to 

do and increase the amount per company per the reauthorization, 

and we have been excited to do that. 

And then just finally, along with the Department of Homeland 

Security, we applied to SBA over this past summer to institute a 

Civilian Commercial Readiness Pilot Program and received approval, and we are working on that and hope to roll it out either 

later in fiscal year 2014 or early fiscal year 2015 depending on the 

timing. 

Chair LANDRIEU. And this would be a good time to call on the 

SBA because they have got their plaque up, but also I want to, we 

have been trying to help them to maintain some ability within 

their budget to really promote entrepreneurship, development, and 

training based around the country. 

So, I am hoping that you all are making the connections here 

with some of these companies emerging out of what we are talking 

about here, getting them the opportunities for either a mentorship 

through the SCORE program which are at 350 chapters that work 

voluntarily to do exactly that, to help somebody that is wanting to 

start a business, get it up and started or through some of our partnership programs with the likes of Goldman Sachs and American 

Express or with some of our other programs that you all operate 

internally. 

So, go ahead and maybe you could comment about that. 

Ms. RAGHAVAN. Thank you. So, first, I would like to say that the 

Civilian Commercialization Pilot Program, we have four agencies 

actually apply and all have been approved. So, we are looking forward to working with them to ensure that we have more commercialization. 

In fact, it is NIST and NASA which are the other two agencies 

as well; and it is really based on what DOD has done with their 

commercialization so that we can increase more of these businesses, small businesses in particular, to get to the next phase. 

And everyone is right. The next phase is very different for different companies. Some it is, some will become the next Googles of 

the world, you know, three guys in a garage who then go and get 

a billion dollar IPO, and the others will get bought. 

We see quite a lot of that, and one of the things that we are 

working with the SBA in conjunction with all the partner agencies 

is to figure out ways to get people to understand to be in business, 
24 

because it is great to have a wonderful idea, but then how do we 

make you commercialize it. 

And part of it is that we have monthly webinars where the actual program managers themselves come all on and talk. The last 

one was NIH had over 600 people across the country. 

We have been doing these webinars due to travel restrictions. It 

is a great way, and people can listen at any time that they want. 

Also, we are trying to kind of marry what is going on in the commercialization process with other resource partners. So, involving 

our SBDCs, our SCORE, Women’s Business Centers, for them to 

understand what an SBIR company is and how can they help them 

get through the business cycle. 

And then on top of that, we are trying to do demo days where 

we actually bring in SBIR recipient and have them mentor with accelerators across the country because it is sometimes a local touch 

that you need. It is not, okay, I am going to listen to a webinar. 

I know how to do a website, and I can figure out how to do a business plan but who is that person who is actually going to accelerate 

my growth in the next six months. 

And so, working with those accelerators who also have funding 

mechanisms which is very important so that these businesses can 

get additional funds. 

Chair LANDRIEU. Well, the SBA has a very important role, coordinating, cheerleading, facilitating, et cetera, in this. I want to 

hear from the Department of Defense. 

But, Jere, your plaque has been up for a while. So, do you want 

to comment? 

Mr. GLOVER. Just quickly. Dr. Green’s examples where all things 

that would, under the DOD commercialization achievement index, 

would be counted as follow-on funding. The law is very clear. Anything that logically flows from or extends SBIR technology counts. 

I have been told informally by SBA that they are going to use that 

broader DOD definition. 

So, I think all of that will be included hopefully. That is what 

we have been told and that is the way the instructions will be reading. 

Pravina is nodding yes so I think some of your concerns have already been alleviated. So, thank you. 

Chair LANDRIEU. I would love to hear from the Department of 

Defense and then we will get back to you, Dr. Wessner. You started 

all of this conversation with your excellent presentation. 

But can Defense talk about some of the successes that you all 

have had, and Chris, we really thank you for your leadership on 

that. 

Mr. RINALDI. Well, let me see if I can put it in the context of the 

reauthorization, which may be helpful. 

I want to begin by saying you were corect in getting the longerterm reauthorization. The longer term was most helpful because it 

gave us time to steer this big ship. The DOD is a huge ship and 

it takes time to change direction. 

Let me walk you through quickly what happened since Congress 

put the reauthorization in place. The reauthorization is quite voluminous and it added many new positive revisions to the program 

but it increased the complexity by an order of magnitude. 
25 

Then on top of that, the SBA put out a large SBA policy directive 

which also put good things in place, but also increased the complexity of the program. 

Fortunately, the basic program is still intact, Phase I, Phase II, 

Phase III, the way we have been doing it for years. But as we go 

through the implementation, we may encounter unintended consequences. 

To responsibly implement this program across the department, 

we separated out tactical imperatives from strategic imperatives, 

which I would like to describe. 

The tactical imperatives are upgrades that we needed to make in 

the department to keep the ball rolling, and they were things such 

as processes, IT systems, and websites. 

We completely rewrote our solicitation so that it complied with 

the legislation and the FAR and the DFAR requirements. We had 

to keep the program going. We were flying the plane and building 

it at the same time. 

Since the reauthorization, we put out a year’s worth of solicitations: five of them, and that amounts to about 700 topics, 11,000 

proposals, and 3,000 awards. So, we successfully kept everything 

moving. 

And DOD SBIR implementation is a high priority notwithstanding sequestration, furloughs, and budget challenges. 

Now, we are talking about strategic imperatives that are in the 

reauthorization legislation. This represented excellent strategic 

foresight, which is why Andre mentioned the five-star program. 

The five pillars are outreach, commercialization, streamlining, 

reporting, and policy compliance; and to really understand how this 

program works, we need to understand the interrelationships between all of them. 

If we do outreach well, we are going to get new people into this 

program, and we are going to get new ideas. DOD currently gets 

roughly 30 percent of new businesses in every single solicitation. 

So, we are creating businesses at the rate of about 30 percent. 

Streamlining. When we talk about getting money out the door to 

small businesses, streamlining is very important. We have to make 

sure that we get awards and money out as quickly as possible. 

Commercialization. I know Jere is big on commercialization. 

Jere’s model is to sell Phase III back to DOD. I believe the broader 

model is: have small businesses work on megatrends that sell to 

the world. That is what I think the broad model is, and the gentleman who spoke earlier, Mr. Green, pointed that out exactly. 

Chair LANDRIEU. But this is an important subject to think about 

why the model is, and maybe there is one best model or maybe 

there are several equal models. 

Let us talk a little bit about that. And I want to come back. I 

do not mean to interrupt you, Chris. 

Mr. RINALDI. Yes, ma’am. 

Chair LANDRIEU. If there are portions of our law that are more 

complicated than they need to be, please let us know. Just submit 

that in writing. I mean, our goal, and I really want to welcome 

Senator Shaheen, who has been an absolutely spectacular partner 

and former governor, and former chief economic development officer of her State. She understands this very well. 
26 

I mean, you do need to have some kind of organizational structure in an industrial commons. I love that term. An industrial commons. There have got to be some rules as to how people operate 

in that commons so that it works well but you want to have as few 

rules and regulations as possible, as much freedom and flexibility 

to reach the goals. So if there is something in our reauthorization 

that you think is unnecessarily complicated, please let us know. 

Dr. Wessner, let me get to you. His presentation was extraordinary. He is going to give it to us. I may have you come speak 

to the whole Senate about this. I think the whole Senate would be 

interested, but go ahead, Doctor. 

Mr. WESSNER. Well, thank you, ma’am. I am always very pleased 

when a Senator is pleased. 

Chair LANDRIEU. Yes, it is good to keep Senators happy because 

when we are not, we get very grumpy. 

[Laughter.] 

Mr. WESSNER. Let me make this one very quick overview observation. I think that one key question that has arisen here is what 

are we doing for the innovation ecosystem around the SBIR award 

winners, how can we improve that industrial commons. 

And there are three things that are worth mentioning. One is we 

just completed a study which is outside the door in the Manufacturing Extension Program and the answer of that evaluation was 

that that program works pretty well but it is 123 million in a 16 

trillion economy; and our competitors, as I illustrated earlier, are 

outspending us vastly. 

Secondly, Senator Brown and Senator Blunt have introduced legislation for a network for manufacturing innovations and that 

would be a way of addressing this. 

You know, in the 1960s we had the missile gap which was more 

or less real. We certainly have a manufacturing support gap that 

we need to address if we are going to compete. 

Thirdly, you mentioned accelerators or several have mentioned 

accelerators and incubators. We would like to do some work. We 

just approved that on our board on Science Technology and Economic Policy, to figure out what works. 

You could put a lot of money in an incubator and not accomplish 

much. So, we need to be very careful about what best practice is. 

But my point is that there is a whole series of things with a network that the Senators have proposed, with strengthening MAP, 

getting a better grasp on best practice to support. 

You raised a very good question. Is there one best practice model 

or equal models? And I would submit that there are many appropriate models. 

The diversity of the agencies is what it is. Just the—very quickly, 

you asked the question of Dr. Green about metrics. You can look 

at publications, patent applications, patent granting and licensing. 

That is one group. 

The second group that you can look at is commercialization. 

About 60 percent in our last study of the SBIR firms actually reach 

the market. 

Now, in some cases that may mean they sold their mother one; 

but in other cases, 3 to 5 percent of those, they are making serious 

money and that is normal. 
27 

You know, our joke that the venture capitalist with all their 

money and all their expertise, they succeed 2 out of 20 times 

whereas our poor colleagues here only succeed one out of 10. So, 

you see the difference. 

Chair LANDRIEU. Yes. 

Mr. WESSNER. The other is that I think it is important to understand that with the commercialization you get the cost-effective 

procurement that you do not get otherwise. 

You get the hard mission solved. I mean, I think, ma’am, I just 

have enormous respect. You know, we would like to throw a small 

car under the planet Mars and could you figure out some way of 

cushioning that. I mean, that is the most amazing task. Yes. And 

successfully being a key point. 

Ms. HOUSTON. A very difficult public display of R&D that did not 

go well. It would have been quite hard on the company of whose 

fault it was that it went splat. 

Mr. WESSNER. The way things usually go it would have been 

hard on the president in many cases. 

Ms. HOUSTON. That is true. 

Mr. WESSNER. The other thing that I think Dr. Portnoy raised 

which is really important to understand is the unexpected outcomes. I mean, the LASIK eye surgery. You had a technology designed to hold spacecraft together and in so naturally that was 

going to end up in LASIK eye surgery. I mean no one had any idea. 

And that is one of the great geniuses of the systems is that you 

put these technologies out there and the private sector picks them 

up and enables them. 

So, let me stop there but I really want to emphasize the importance of the broader ecosystem. We cannot just drive SBIR companies and then have a foreign power come in and hack their stuff 

and take it away. I really like the idea that you suggested of operational—— 

Chair LANDRIEU. Absolutely. We need a security, we need a parameter, we need a perimeter around this. We have to think 

through that and we need this ecosystem which our Committee 

talks a lot about. 

But, let me recognize Senator Shaheen for some comments and 

she may have a question for some of you. 

Senator SHAHEEN. Well, thank you very much, Senator Landrieu, 

and thank you all very much for being here, and I want to recognize Jenny Houston, who is the Executive Vice President at Warwick Mills in New Ipswich, New Hampshire. 

It is very nice and clearly you have already let the panel know 

all of the great things you do at Warwick Mills. I could tell by the 

response from Mr. Wessner so I do not need to say more about 

what you are doing there. 

But let me also recognize Dave Green from PSI as well because 

you have a facility in New Hampshire also, Laser Light Engines. 

So, we are delighted to have both of you here. 

I am sure you all have spoken to the importance of SBIR and 

STTR and innovation. I could hear it just since I came in and the 

remarks that I had a chance to hear you talk about. 

I am especially proud of this program from New Hampshire because Senator Warren Rudman was the author of the legislation 
28 

originally from New Hampshire, and so we have been watching it 

closely, and New Hampshire companies have benefitted greatly 

from the legislation. 

I think that speaks to the innovation that is going on there. And 

one of the things that we have heard, Senator Ayotte, my other 

Senate colleague from New Hampshire and I did a small business 

hearing when we were working on reauthorization for SBIR. 

One of the concerns that we heard was around the accounting 

and regulatory compliance and you may have already addressed 

this in your discussions but what we heard was concern that the 

different federal agencies have different standards and was there 

a way to make all of those standards compliant in a way that 

would reduce the unnecessary paperwork and overhead. 

I do not know if anybody has had an experience with that and 

you want to speak to that but that is my question. Is there a way 

for us to be able to reduce the paperwork to make the programs 

easier for small businesses who, as you know, often do not have a 

lot of people who do compliance but we want the people that they 

have working on innovation as opposed to working on paperwork, 

and so what can we do to streamline the programs in a way that 

make them work better for small business? 

Chair LANDRIEU. Anybody. Jere. 

Mr. GLOVER. Well, Senators Landrieu and Shaheen, I want to 

commend you folks for drawing attention to a concern. Your staff 

and armed services staff met with DCAA. That agency in particular was having trouble being consistent with itself. 

Things small businesses had done two or three years ago that 

were perfectly acceptable now are not, and so your staff had a 

meeting with them. SBTC has had five meetings with them now, 

SBDC has, and I am pleased to report that DCAA is recognizing 

that they should not be applying the same standard to a small 

business that they do to Boeing. 

They should not be doing the same kind of auditing, the same 

kind of concerns on small business that they do with big companies. DCAA has 1,000 new auditors to train. This is a success 

story. 

Senators, you focused the attention on them. SBTC has met with 

the head of DCAA five times, explaining the problems. They are 

working with us. Hopefully, we are going to see some real positive 

results coming out of that. 

So, thank you Senators Landrieu and Shaheen for drawing the 

attention. Thank you for having your staffs and Armed Services 

staff meet with DCAA. I am pleased to say at this stage we have 

had five meetings and they are very promising. 

Chair LANDRIEU. Okay. Senator, another question? 

Senator SHAHEEN. No. 

Chair LANDRIEU. Do you want to comment? 

Ms. RAGHAVAN. I was just actually going to say that simplification is a very important part and all of us have been looking at it— 

at reauthorization. 

And one of the things from doing the Interagency Policy Committee reports and working together is that we have decided to 

have working groups start off in the new year to look at some of 

the other aspects, and one of them is looking at simplification and 
29 

how do we actually get to more companies and make it easier for 

them and is it using technology that we already have such as using 

things that make it just easier to read a solicitation or just having 

at one place and really looking at that and all the agencies have 

been great on coming on board and working on these groups to 

make sure that we do make it easier for small businesses to participate and actually become successful. 

Chair LANDRIEU. Okay. We have about 10 or 15 minutes left. We 

are going to end our meeting a little bit shorter than 4:00. But let 

me call your attention to the graph which you can see are in Mardi 

Gras colors. We are in great anticipation of Mardi Gras celebrations soon in Louisiana and other places, other lucky places. 

You all can see that the green states are the states that receive 

the most number of awards. That would be Washington State, California on the West Coast, New York, Massachusetts, Virginia, 

North Carolina on the East Coast, Texas, South. 

Then, of course, the yellow are the middle 16 states, and then 

the bottom 18 are in the purple which would be unfortunately Louisiana, Mississippi, South Carolina, West Virginia, four of our poorest states in the union, and then up towards the north central part 

of our country. 

I want to ask each of you representing a department or agency 

here. What are you doing to meet the new goals of our reauthorization which were to reach out more aggressively to some of these 

states? And whoever wants to start with what you have done or 

what you are planning to do would be very helpful. 

Go ahead, Manny. 

Mr. OLIVER. Yes, I think that there are a couple of things we 

have done and one thing that we are planning to do with regard 

to outreach. In terms of what we have done, I think Pravina mentioned webinars before. Starting in 2012, we implemented webinarbased outreach; and over the last two years, we have reached almost 3,000 potential applicants through that program. This is 

much greater than the number of people we meet through National 

SBIR Conferences. 

Applicants from every state in addition to D.C. and Puerto Rico 

have attended those webinars. So, we are getting to those underrepresented states. For how DOE defines underrepresented states, 

about 30 percent of the webinar participants have come from those 

states. So, webinars are a much more cost-effective way to do outreach, and we align them with our solicitations. 

When you go out and do outreach, if you do not have a topic 

ready for somebody to apply to, it just goes to the back of the mind 

and then they forget about it. So, we time our webinars to occur 

when we release topics. We get our program managers in front of 

applicants to tell them what they are looking for in terms of technology and try to make it a much more personal process even 

though it is still a webinar. We have found that to be very successful. 

For particular states, we have also reached out to the SBDCs, 

the Small Business Development Centers, and also other organizations. For DOE, a lot of the clean tech organizations exist in some 

of these states and we have gone out to those states to do personal 

visits and talk to those communities. Now, we have not visited all 
30 

the underrepresented states but we are working our way through 

the list. 

Finally, what we are planning to do for this year with the administrative funds is to implement a Phase Zero assistance program 

similar to that in Kentucky. That program is focused on applicants 

from Kentucky but we would like to include all of the underrepresented groups. These include the minority-owned businesses, 

woman-owned small businesses, and especially first-time applicants 

to government R&D. 

Chair LANDRIEU. All right. That is at the Department of Energy. 

Are there any other departments that want to speak up about what 

they are doing or planning to do? 

Go ahead, Mr. Portnoy. 

Mr. PORTNOY. Thank you. So, at the NIH, we have been doing 

many of the similar things; and in fact, I would say also we are 

and will be coordinating with SBA on both webinars and on more 

or less an outreach plan across all agencies. 

But we have also been working with our IDeA program, the Institutional Development Award program which represents within 

NIH the 23 states plus D.C. and Puerto Rico which are underrepresented in NIH funding and coordinating with that program to 

present at their regional meetings in the purple states across the 

country. 

In addition, we held our large annual conference this past year 

a few months ago in Sioux Falls, South Dakota, a purposeful attempt to hit both geographically regions of the country we do not 

get to and also to a place where we do not have a lot of awards. 

The conference was one week after the shutdown so we lost 

attendees but we did manage to get all of us out there and we did 

have over 370 plus attendees. Of course, quite a number from 

South Dakota, over 100, and other various places. 

Chair LANDRIEU. That is a very good strategy too, holding your 

conferences in the purple states to just give them more exposure. 

That is a good idea. 

Mr. PORTNOY. Thank you. 

Chair LANDRIEU. Homeland Security. 

Ms. SOBOLEWSKI. Sure. Thank you, Senator. 

Along with Manny from DOE and Matt, we are doing very similar things with webinars. We reach out to several women-owned 

small business organizations and try to leverage some of that and 

some of the socially and economically disadvantaged. 

We go out and speak or do webinars or webcasts to any organization that reaches out to us including states. 

What is more puzzling to us in some of those purple states because I firmly believe you can send me to, I will not pick one but 

any one that does not typically do Homeland Security-type of technologies and we would not get one proposal. 

But what is puzzling to us are states like Ohio or Florida or 

Idaho that we know have technologies that are as strong as in 

some of these other agencies, and for some reason they are submitting proposals to us but they are not being successful. 

And so, we are trying to scratch our heads and figure out how 

can we communicate our needs better so that they have higher success rates along that way too. 
31 

So, we reach out to underrepresented groups and in states as 

well but also those states that we think should be having more success with DHS but for whatever the reason are not. 

Chair LANDRIEU. Okay. Dr. Jain. 

Mr. JAIN. Madam, as I was indicating earlier, 2006 was the last 

year when federal agencies really were underwriting the National 

SBIR Conference. NSF used to underwrite the national conference. 

After that year, holding the National SBIR Conference fell upon 

states. States do not have resources to hold these conferences. They 

require a big commitment: financial and personal. Very few states 

can make these commitments. Certainly not those states that are 

in purple and even in yellow on the map. They do not really have 

enough manpower or resources. 

Yes, agencies have been doing their own conferences. For example, Kentucky hosted the annual NIH conference in 2012 but I 

know did not get any financial support from NIH. It is hard to 

come up with a program that can be supported financially. 

You make commitments for hotels, you make commitments for 

speakers and for other things. For the last two years or beginning 

this year (2013), the national SBIR conference is being held here 

in Washington, D.C., thanks to the leadership of John Williams, 

who has been named the SBIR person of the year. He has taken 

the lead to coordinate the national SBIR conference also in 2014. 

But for a small business person to come to D.C. for four days, 

is nearly impossible. There are a lot of travel costs for him or for 

her. 

I think we need to bring back the conferences in the fall and the 

spring. These can be held at different geographical locations, and 

I think you will see a lot more businesses will come. 

Outreach has taken a hit. Yes, the SBIR funding level has gone 

up. The SBIR/STTR program reauthorization is now there but I 

think that outreach has been overlooked. That part has to be taken 

up by all the agencies. 

I agree that webinars are good and have a place, but they are 

not the alternative for in person contact at national conferences. I 

know what happens in Kentucky and how we have been successful. 

We meet with people one on one, hold their hands, and tell them 

their ideas can work. 

If there is a high risk, Federal agencies will take that risk for 

you but you need to develop your proposal. We teach them how to 

do this. We bring them on board. 

They do not listen to me anymore because I repeat things like 

a broken record. But they will listen to the federal agencies because they know that they control the purse. That is where the 

money is coming from. 

Yes, we got support from the governor and the legislators in Kentucky. We have a Kentucky Matching Funds Program that is supporting our businesses but first they have to win the federal SBIR/ 

STTR program before they can apply for that. That is number one. 

So, federal agency ownership is missing here for the national conference. 

The second one is the SWIFT tours that we used to have at one 

time. There was a bus tour that program managers used to take 

to go to specific geographical locations. A couple of program admin-
32 

istrators will board on the bus and they would be in one city today, 

another the next morning. The tours brought managers together 

but at the same time they used to cover the area that otherwise 

would not be covered through the National SBIR Conferences. By 

holding national conferences in a city with good airline connections 

and with big hotels you miss other geographical areas. 

Chair LANDRIEU. Those are excellent points because we really 

have to make this a national program, all 50 states, all communities, urban, suburban, rural, minority, and women; and that is a 

big focus on the leadership of this Committee. 

Mr. JAIN. One more minor point if I can add it here. 

Chair LANDRIEU. Yes, go ahead, one more and then we are going 

to get Dr. Wessner. 

Mr. JAIN. The FAST program that we were fortunate to get but 

it is just a $2 million program covering only 20 states. As you are 

showing there, there are many more states that need help, particularly for businesses in rural areas, the women-owned businesses, 

and other targeted businesses. 

Every state needs money. My state may contribute some money 

if we get federal money. We need to increase the FAST funding 

level to cover more states, not just 20. This program is for every 

state. 

Thank you, ma’am. 

Chair LANDRIEU. Thank you. 

Dr. Wessner. 

Mr. WESSNER. Thank you, Madam Chairman. 

I would just like to elaborate quickly. It is not only a geographical challenge but we have a volume coming out from our 

meeting last February on minorities and women outreach. 

And we have a growing cohort of women engineers, particularly 

in the biomedical space, and we do not seem to be able to capitalize 

on that. I mean a part of the problem seems to be you may be familiar with that joke about, particularly these days, about the old 

guy who keeps praying every night to win the lottery; and finally 

there is a flash of light and a request for a little help, buy a ticket. 

Women, if they are going to win the awards, have to apply; and 

that seems to be where one of the problems is. So, we need to have 

a targeted outreach both in geographically disadvantaged areas. 

But even in some of the leading schools, we are simply not getting 

the applicants we need. I think with modest sums, we could address that. 

Lastly, could I just invite both of you Senators and your staff and 

my colleagues here, on February 5 we are organizing a meeting at 

the National Academies on the SBIR/STTR and the commercialization of university research where we want to highlight the crucial 

role this program plays in moving research from the university and 

into the market. 

Chair LANDRIEU. Thank you. 

Mr. WESSNER. We would be deeply flattered if either of you could 

join us. 

Chair LANDRIEU. Thank you. I would love to. I will mark it on 

my calendar now. So will Senator Shaheen, and we will see if we 

can be there. We will try to get other members of our Committee. 
33 

I think this is a really important subject for the whole country, 

not just this program but the ramifications of research and development and commercialization for the future economy of our Nation and in keeping us competitive with the rest of the world. 

Now, Mr. Rusco, you have not said anything. 

Dr. Savoie, you have not added anything. I do not want to close 

this meeting without giving you a chance. Did you want to add 

anything from your perspective on any of the things that we have 

mentioned? 

Mr. RUSCO. Thank you. As you know, GAO is performing oversight of this program and we are nibbling on the edges of it because the program essentially is achieving many of its goals. We 

have reported on that over the years. 

There are some areas that we think could be improved, and I 

would like to just name a couple right now. There is some confusion in some agencies as to how to calculate the required spending, 

and only three of 11 agencies over a six-year period from 2006 

through 2011 actually achieved the full spending of their requirements. 

Some of the reasons we got when we asked the agencies this was 

that they were saying, well, we average it over two years. Well, 

that is not what the law says. It is a yearly thing. 

Others say, well, you know, as a program manager I am told to 

spend this amount and they think of it as what they are told to 

spend, a maximum, not as a minimum. 

It is a cultural issue. I can see their point. If you are a program manager and you are told to spend $3 million or $30 million, you 

are not going to go back to your boss and say I spent $35 million, 

give me a raise. 

So, there are some issues there that are not at the program level, 

that are at the agency level and they need to be addressed. 

Secondly, and I think this maybe ties in to the outreach and as 

well as measuring the effects of the program and the benefits of the 

program. 

SBIR.com needs some work. There are still many, many areas 

where you have data that are inconsistently input or missing data 

about awards or types of recipients and/or commercialization. 

These things have been problems for the program for many, 

many years and I think it would help to have a better database 

that would allow people to act on that. 

Chair LANDRIEU. Who is responsible for that? Which agency? Is 

that Small Business? 

Ms. RAGHAVAN. [Indicating.] 

[Laughter.] 

Chair LANDRIEU. There she goes. All right. But thank you and 

we will get your full report. 

Bobby Savoie. Dr. Savoie. 

Mr. SAVOIE. Well, I did not say much because most of the conversation was focused on Phase I or even Phase II SBIRs. I would 

like to focus more on Phase III. 

We did receive a Phase I SBIR from the Department of Homeland Security to develop an open source common operating picture 

because post-Katrina many of the agencies were not able to speak 

to one another or exchange information. 
34 

So, we developed a geospatial information system that allowed 

information on a geospatial level to be exchanged between agencies. 

As you mentioned, the Department of Homeland Security is not 

in a position to really fund a lot of Phase III grants. However, we 

were able to obtain a Phase III SBIR grant from the Navy to tie 

in their METOC, meteorological and oceanographic data, which we 

developed for the Navy and tied that into our Opencop program 

and then were able to provide that information to not just the Navy 

but multiple other entities. 

That is now led—we also, I should say, used that same program 

to tie together a number of very different geospatial entities, or 

asset lists would be the best way to describe it, during the BP oil 

spill. 

The reason I bring all of that up is that has now led to a joint 

venture that we are working with a small company to tie in weather data with a geospatial system to look at the impact of, say, a 

hurricane, the damage from flood versus wind. It is now a requirement to determine that to a certain degree of certainty which is not 

possible without some additional information. 

So, we are currently working on that, and I bring that up because I am very familiar with the Fraunhofer system in Germany. 

We do not have any such thing here unfortunately. 

However, I have found that the Phase III SBIRs do provide small 

businesses with the ability to take technology to the next level and 

possibly even approximate some of what Fraunhofer system does in 

Germany. It does not get us anywhere near as good as the 

Fraunhofer system is but it is a good start. 

The issue here is that numerous people in the different agencies 

do not really know what a Phase III SBIR is all about. So when 

we go forth and talk to different program managers and they love 

the technology and they love the way we can pull data together, 

but they do not realize that they can use the Phase III SBIR to 

issue a contract for that work. They may have the money and the 

need but then we get stuck. 

Again, I am not trying to propose that as a replacement for a 

Fraunhofer-type system but it is something that would be very 

helpful to larger small businesses that know what the ‘‘B’’ stands 

for and know how to take something to market but would need 

that little extra push. It is also something that could be of great 

value to other agencies where we are sharing information that we 

developed for the Department of Homeland Security with the Department of Defense, in this case the Navy, and the Army is very 

interested in the same thing for its helicopter program. 

Eighty percent of the crashes in Afghanistan are due to nonenemy fire. They are due to lack of power via the changes in 

weather, and that is something that the system we have would address. 

So, my only, and again I did not bring that up because we were 

primarily focused on Phase I and Phase II, but if we focus more 

on Phase III, I think we can generate more of a commercial output. 

Chair LANDRIEU. Thanks. And Senator Shaheen wants to follow 

up on that, and this may be our last word. 
35 

Senator SHAHEEN. Well, thank you. Mr. Gudger, this is actually 

a question for DOD and it has to do with the Phase III awards because Section 5122 of the Defense Authorization Act in 2012 requires the Secretary of Defense to establish goals and incentives for 

DOD and its large prime contractors to increase the number of 

Phase III SBIR awards to small businesses. 

It is my understanding that DOD to date has not put in place 

the incentives and goals that are required by that legislation. Do 

you know if that is the case and what is being done to address 

that? 

Mr. GUDGER. First, that is a great question but that is not the 

case. In 2012, the Secretary of Defense added in his defense planning guidance specific language that goes out. This is a classified 

document but it goes out to the Chairman of the Joint Chiefs, the 

directors of field agencies and activities and the military departments. 

It specifically called out the development of our goals and incentives for SBIR and STTR, and we further implemented that 

here—— 

Senator SHAHEEN. For Phase III? 

Mr. GUDGER. For all phases but Phase III in particular. 

And we further implemented that guidance with our DOD 5002, 

just released here recently, where we were very specific not only 

to develop goals and incentives for industry but we also are working with our PEOs, our program executive offices, where program 

managers sit that oversee these Phase IIIs. It is very deliberate, 

very clear language and it is going well. 

Senator SHAHEEN. Good. Well, I am very pleased to hear that because, as you know, that could make a difference for thousands of 

small businesses across the country. 

Mr. GUDGER. It is a quantum leap in the right direction. 

Senator SHAHEEN. Good. That is great. 

Chair LANDRIEU. Okay. I just am going to conclude with, just to 

stay on this Phase III, because in our legislation there was a requirement for all of the agencies to provide some accountability on 

this subject. 

I sent a letter in March regarding the commercialization section 

of the law to get an update from all of you on how you have established your Phase III goals, are the acquisition agencies complying 

with the SBIR/STTR preference and sole source, you know, requirements. 

So, we will get some more information about that. I am going to 

get a brief with the members of the Committee that want to from 

our GAO specifics about weaknesses in the program that we have 

to strengthen, and we will follow up very specifically on all of the 

very good suggestions that you all made today on making sure that 

we are really squeezing every benefit we can out of this federal program but recognizing that universities—and let me just say this before we close—are funded primarily by the states. 

You know, the United States government does not have a line 

item for universities. There are line items in every state budget for 

the University of New Hampshire, the University LSU, the university here, and we are seeing some very tough budget cuts coming 

down from the states to the universities. 
36 

I want to say we have seen it unfortunately more than I would 

like to in the State of Louisiana, which is really affecting the bottom line here because the Federal Government is a partner. State 

governments have to be a partner, and then local, you know, economic development, Chamber of Commerce, local incubators, accelerators that are sometimes and very often at the local or county 

level, not just at the state level, are a big part of creating this ecosystem. 

While we may not be as organized as Germany is right now on 

this and we may not even want to organize ourselves the way they 

do, it is important that we recognize the trend lines that are worrisome, Dr. Wessner in this regard for the future economic growth 

of this country. 

Our Committee has a certain role to play. We are, of course, not 

the only Committee but I think we have a particularly important 

role to play in this space. 

So, I really thank Senator Shaheen. She has just been a terrific 

partner and many of the other members have expressed a great interest in this program. 

So, keep them briefed as you all go about your business and we 

will follow up with you all sometime in the months ahead to see 

where we are headed. 

All right. Thank you all so much and the meeting is adjourned. 

[Whereupon, at 3:42 p.m., the Committee was adjourned.] 
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Æ