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S. HRG. 114–602 

REAUTHORIZATION OF THE SBIR/STTR PROGRAM: 

THE IMPORTANCE OF SMALL BUSINESS INNOVATION TO NATIONAL AND ECONOMIC SECURITY 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

AND ENTREPRENEURSHIP 

UNITED STATES SENATE 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

JANUARY 28, 2016 

Printed for the Committee on Small Business and Entrepreneurship 

( 

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

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(II) 

COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP 

ONE HUNDRED FOURTEENTH CONGRESS 

DAVID VITTER, Louisiana, Chairman 

JEANNE SHAHEEN, New Hampshire, Ranking Member 

JAMES E. RISCH, Idaho 

MARCO RUBIO, Florida 

RAND PAUL, Kentucky 

TIM SCOTT, South Carolina 

DEB FISCHER, Nebraska 

CORY GARDNER, Colorado 

JONI ERNST, Iowa 

KELLY AYOTTE, New Hampshire 

MICHAEL B. ENZI, Wyoming 

MARIA CANTWELL, Washington 

BENJAMIN L. CARDIN, Maryland 

HEIDI HEITKAMP, North Dakota 

EDWARD J. MARKEY, Massachusetts 

CORY A. BOOKER, New Jersey 

CHRISTOPHER A. COONS, Delaware 

MAZIE K. HIRONO, Hawaii 

GARY C. PETERS, Michigan 

ZAK BAIG, Republican Staff Director 

ROBERT DIZNOFF, Democratic Staff Director 

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C O N T E N T S 

OPENING STATEMENTS

Page 

Vitter, Hon. David, Chairman, and a U.S. Senator from Louisiana ................... 1 

Shaheen, Hon. Jeanne, a U.S. Senator from New Hampshire ............................ 3 

WITNESSES

Panel 1 

Williams, John, Director of Innovation and Technology, Office of Investment 

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

Washington, DC ....................................................................................................... 4 

Smith, Robert, Director, Department of Navy SBIR/STTR Programs Office 

of Naval Research, Arlington, VA ....................................................................... 9 

Panel 2 

Kline-Schoder, Robert, Ph.D., President, Creare LLC, Hanover, NH ................. 35 

Glover, Jere W., Executive Director, Small Business Technology Council, Annapolis, MD ........................................................................................................... 40 

ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

Biotechnology Innovation Organization 

Prepared statement .......................................................................................... 108 

Cantwell, Hon. Maria 

Prepared statement and questions ................................................................. 105 

Glover, Jere W. 

Testimony .......................................................................................................... 40 

Prepared statement .......................................................................................... 42 

Testimony charts .............................................................................................. 102 

Kline-Schoder, Robert 

Testimony .......................................................................................................... 35 

Prepared statement .......................................................................................... 37 

Keller, Roy 

Prepared statement .......................................................................................... 33 

Shaheen, Hon. Jeanne 

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

Smith, Robert 

Testimony .......................................................................................................... 9 

Prepared statement .......................................................................................... 11 

Vitter, Hon. David 

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

Williams, John 

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

Prepared statement .......................................................................................... 6 

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REAUTHORIZATION OF THE SBIR/STTR 

PROGRAM: THE IMPORTANCE OF SMALL 

BUSINESS INNOVATION TO NATIONAL 

AND ECONOMIC SECURITY 

THURSDAY, JANUARY 28, 2016 

UNITED STATES SENATE, 

COMMITTEE ON SMALL BUSINESS

AND ENTREPRENEURSHIP, 

Washington, DC. 

The Committee met, pursuant to notice, at 10:04 a.m., in Room 

428A, Russell Senate Office Building, Hon. David Vitter, Chairman 

of the Committee, presiding. 

Present: Senators Vitter, Fischer, Ernst, Ayotte, Enzi, Shaheen, 

Cardin, Coons, Hirono, and Peters. 

OPENING STATEMENT OF HON. DAVID VITTER, CHAIRMAN, 

AND A U.S. SENATOR FROM LOUISIANA 

Chairman VITTER. Good morning. Let us go ahead and get started. Welcome, everyone, and thanks for joining us for the Senate 

Small Business and Entrepreneurship Committee’s hearing on reauthorizing the Small Business Innovation Research and Small 

Business Technology Transfer Programs. 

We are going to be hearing from, first, a panel of federal officials 

and then a panel of stakeholders, and I want to thank all of our 

witnesses today for being here and for your work. 

While small businesses are more easily able to adapt to market 

changes and drive the innovation sector of the economy, it is often 

very difficult for smaller firms and entrepreneurs to find funding 

for their new ideas, especially in the critical early stages of R&D. 

That is why the very existence of SBIR and STTR Programs is crucial. 

These programs are vital to the success of many small businesses 

and have ultimately helped create thousands of new jobs by fostering innovation and stimulating the economy through public-private partnerships. Likewise, they are crucial to federal agencies as 

those agencies solve some of our biggest science and technology 

challenges, and giving small innovative firms access to already appropriated federal R&D funding is a win-win for entrepreneurs and 

for taxpayers. 

These programs exist to foster innovation and to facilitate publicprivate partnerships so that firms have the funding they need to 

develop new technologies and innovations that help federal agencies meet their R&D needs. The programs not only create jobs, but 

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also lead to a path for commercialization for many participating 

firms, which is a crucial key to their success. 

These programs have been front and center in improving our nation’s capacity to innovate. Over the course of the SBIR Program 

history, from 1982 to 2014, federal agencies have made over 

152,000 SBIR awards to small businesses to develop innovative 

technologies. The total dollar amount awarded out of existing federal R&D budgets through that SBIR mandate is $42 billion. In 

2014 alone, SBIR has given 5,496 Phase I and Phase II awards 

worth $2.2 billion. The SBA is currently reporting an average of 

5,000 awards per year. 

Our discussion this morning will examine the SBIR/STTR Programs and why they are an effective way to meet national needs 

while jump-starting entrepreneurs, growing our economy, and creating jobs. The hearing will focus on the successful increase of innovation and how the incentive to commercialize these technologies 

helps our country’s general economy as well as our national security. 

As many of you know, Congress last reauthorized the programs 

in 2011 for a period of six years, so that means the programs are 

currently set to expire September 30, 2017. As Ranking Member 

Shaheen and I can both attest, it was a tumultuous process to complete the last reauthorization. Participating agencies and firms had 

to endure a process that took three years and 14 short-term extensions. 

I am optimistic that, working together with Ranking Member 

Shaheen, we will work to avoid those types of delays that can really cripple innovation and create uncertainty for those small businesses affected. Reauthorizing these programs this year will ensure 

stability and foster an environment of innovative entrepreneurship 

by directing more than $2 billion annually in federal R&D funding 

to the nation’s small firms that are most likely to create jobs and 

commercialize their products. 

SBIR has been a priority of mine this Congress. My bill, S. 2136, 

the Improving Small Business Innovative Research and Technologies Act, is the only SBIR-related bill reported out of any committee so far this Congress. The bill, which received unanimous 

support, establishes the Regional SBIR State Collaborative Initiative Pilot Program and will help low-participation states to work 

together to attract R&D funding for their innovative firms. 

The pilot program provides one-year renewable grants of up to 

$300,000 to a regional collaborative to address the needs of small 

business in order to, one, be more competitive in the proposal and 

selection process for SBIR and STTR Program awards, and two, increase technology transfer and commercialization. 

I am grateful to have the support and guidance of Senator Shaheen and look forward to working with her to ensure that this program is included in the reauthorization bill. 

Now, let us get today’s conversation started. I welcome our expert panelists, who will inform us of their insights into SBIR and 

STTR Programs, how it has made a difference in their work and 

the innovative advances of our nation, and provide us with 

thoughts and opinions on reauthorization. 

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Again, I want to thank everyone for being here today and look 

forward to our discussion. 

With that, I would like to turn it over to our Ranking Member, 

Senator Shaheen. 

OPENING STATEMENT OF HON. JEANNE SHAHEEN, RANKING 

MEMBER, AND A U.S. SENATOR FROM NEW HAMPSHIRE 

Senator SHAHEEN. Well, thank you very much, Mr. Chairman, 

and thank you for calling our first hearing of the year to discuss 

the need to reauthorize both the SBIR Program, the Small Business Innovation Research Program, and the Small Business Technology Transfer Program. 

As you have pointed out, these are programs that have had broad 

bipartisan support, and they have had that support because they 

have been so effective. The programs work by harnessing the creativity and the ingenuity of America’s small businesses to meet the 

research and development missions of our federal agencies, and 

they also support the growth of those small high-tech companies 

that create good jobs in local communities across the country. 

And, as you pointed out, the last time we tried to reauthorize 

these programs, it took three years and 14 short-term extensions, 

so it is very important, I think, that we are starting early. I think 

we ought to make these programs permanent so we do not have to 

go through this process periodically, but that will be part of our 

discussion as we go forward. 

And, you know, we recently—we have been doing military reform 

hearings in the Armed Services Committee in the Senate and we 

had a hearing not too long ago talking about R&D within our military. And, one of the things that people express concern about is 

the declining support for research and development for innovation 

within the military. But, Dr. Jacques Gansler, who testified, pointed out that the only program that we can consistently count on is 

the SBIR program, and he called it a no-brainer that we should 

continue to support this. 

In fact, back in 2011, when we were working on reauthorization, 

Dr. Charles Wessner, who led the National Academies of Science 

study of the SBIR Programs, testified, and I quote, ‘‘The rest of the 

world thinks this is the greatest thing since sliced bread. The rest 

of the world is copying it, putting it on steroids, while we are debating it.’’ 

Well, hopefully, given the bipartisan support, we are not going to 

continue to debate it. We are going to move forward, point out 

again why this is such a good investment at the federal level, and 

get this reauthorized very quickly. 

So, let me, before I conclude, take a minute to welcome one of 

our next panelists, who is Dr. Bob Kline-Schoder from Creare in 

New Hampshire. I want to point out Creare, in particular, because 

back when former Senator Warren Rudman of New Hampshire was 

working on developing this legislation, and maybe that is one reason I feel so supportive of it, they worked with Creare in thinking 

about how to structure it so it would really work. And, obviously, 

there have been a lot of improvements over the years, but I think 

this is—both SBIR and STTR are things that work and we should 

continue to support them. 

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So, thank you very much, Mr. Chairman, for moving forward, 

and I thank all of the witnesses who are here today. 

Chairman VITTER. Thank you, Senator Shaheen. 

Our witnesses at this hearing today have administered, promoted, and participated in the SBIR and STTR Programs. They 

will speak to the successes and challenges of these programs in expanding opportunities for small innovative firms while solving 

some of the most pressing science and technology challenges U.S. 

government agencies are trying to address. 

The witnesses on our first federal panel are Mr. John Williams, 

Director of SBA’s Office of Innovation and Technology. His primary 

responsibility is to serve as Senior Principal for the Federal Policy 

Implementation and Programmatic Oversight of the SBIR and 

STTR Programs across all 11 participating agencies. 

And our second witness is Mr. Robert Smith from the Department of the Navy’s Office of Naval Research. In his current capacity, Mr. Smith manages the Navy’s SBIR and STTR Programs and 

assists small businesses in getting their technology fully developed, 

tested, and inserted into products and services used by the Navy. 

I certainly look forward to hearing from you all. Your full written 

statements will be part of the hearing record, and here, you will 

have five minutes to present your testimony to the committee. 

And, so, Mr. Williams, you may begin. 

STATEMENT OF JOHN WILLIAMS, DIRECTOR OF INNOVATION 

AND TECHNOLOGY, OFFICE OF INVESTMENT AND INNOVATION, U.S. SMALL BUSINESS ADMINISTRATION, WASHINGTON, DC 

Mr. WILLIAMS. Chairman Vitter, Ranking Member Shaheen, and 

distinguished members of the committee, thank you for inviting me 

here today to discuss the SBIR and STTR Programs, affectionately 

known as America’s Seed Fund. 

I would like to begin by formally acknowledging the great work 

of Dr. Arthur Obermayer, famed entrepreneur, activist, technologist, and philanthropist who passed away three weeks ago. Arthur and his wife, Judy, were honored this past summer at our 

SBIR Hall of Fame Awards for their seminal work on helping 

spearhead the creation of the program, working with Senators Kennedy and Rudman. Having the opportunity to work with the entrepreneurial folks like Arthur makes the efficacy and the efficiency 

of these programs all that much more important and personal to 

me. 

Many of you know me from the rigor, success, and discipline I 

brought to the Navy SBIR Program. A little over a year ago, I was 

asked by SBA to provide oversight across the federal agency programs. I accepted that position and now make it my personal mission to ensure that we deliver a quality product to all stakeholders. 

At the ceremony where we honored Arthur, we also had the 

privilege to honor companies like Hydronalix, Flexsys, Orbital 

ATK, and LiftLabs, companies using SBIR dollars to push frontiers 

of technology across multiple spectrums, from national security, to 

material science, to space exploration, and to health care. 

Last week, prominently featured in the New York Times, there 

were two SBIR-funded company CEOs, Nina Tandon of EpiBone 

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and Eben Bayer of Ecovative Design, discussing their coveted invites to the World Economic Forum at Davos, not an easy ticket to 

get. They discussed how their companies’ promising technologies 

could help solve pressing challenges in health care and waste reduction and were invited over to that world event to discuss those 

and find customers. 

The SBIR and STTR Programs stimulate our nation’s economy 

and increase our national security by providing seed money to 

small businesses, funding that is in short supply from other private 

sources. This funding is critical at a critical time, to make the advance from early stage ideas to product and to future follow-on 

funding. 

The Air Force recently published the most comprehensive study 

on commercialization of SBIR funding. I have copies of that for the 

group. This study shows substantial follow-on activities and that 

they take a variety of forms. It is not a direct path from Phase I 

to Phase II to Phase III. There is licensing, there is partnering, a 

variety of ways that the technology moves along, but all of it shows 

a very high percent of the SBIR dollars go into follow-on research 

that gets into products and things like that. 

SBA’s role is to provide programmatic and policy oversight. We 

work closely with the agencies and the external stakeholders to ensure that the intent of Congress is carried out in the operation of 

the programs. 

Last month, many of you and your staffers attended the SBIR Innovation Awareness Day at the Rayburn Building. The turnout was 

fantastic and the companies present were truly cutting-edge. None 

of those companies’ groundbreaking efforts are possible without 

your continued support. 

The SBIR and STTR Programs are not only critical components 

of America’s economic growth, they are also the keys to the next 

generation of science and technology advances. Jobs creation is 

great, but jobs creation plus innovative research leads to national 

competitiveness, and that is what sets this great country apart 

from the rest of the world. 

Since 1982, through the SBIR and STTR Programs, 11 agencies 

have made over 150,000 awards, over $40 billion in funding. 

Thanks to this committee, the SBIR and STTR Program was reauthorized, as mentioned, with a lot of pain, but by December of 

2011. We look forward to your support to reauthorize it again prior 

to the 30 September 2017 end. 

As SBA’s Director of Technology and Innovation, I will continue 

to work closely with you and our sister agencies to make sure that 

the SBIR and STTR Programs are priorities in each agency and 

continue to benefit American small business. 

This Senate at this time can send a message going forward that 

smart, innovative programs can originate from all corners of the 

United States government. I look forward to working with you to 

make these programs permanent. 

Thank you. 

[The prepared statement of Mr. Williams follows:] 

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Chairman VITTER. Thank you, Mr. Williams. 

And now, we will hear from Mr. Smith. 

STATEMENT OF ROBERT L. SMITH, DIRECTOR, DEPARTMENT 

OF THE NAVY SBIR AND STTR PROGRAMS, OFFICE OF 

NAVAL RESEARCH, ARLINGTON, VA 

Mr. SMITH. Mr. Chairman, Senator Shaheen, and members of the 

Small Business and Entrepreneurship Committee, thank you for 

the opportunity to speak to you today about SBIR/STTR, specifically the value the Department of the Navy achieves from the program. 

The Department’s fleet and force value the SBIR/STTR Program 

because through the program, American small businesses throughout this country have proven over and over again their ability to 

quickly provide lean, agile, and innovative solutions to the 

warfighters’ requirements to help ensure our naval warfighters 

have the best technology solutions available to support military 

and humanitarian operations today and help achieve even greater 

mission success tomorrow. 

An adage we believe in the Navy is you cannot have successful 

technology transition into acquisition, commercialization, without a 

successful company. I am proud that we help companies realize 

their success. Let me give you three examples. 

International Mezzo Technologies in Baton Rouge, Louisiana, 

thermal management solutions for our electronic components in 

Navy radars. 

Creare from Hanover, New Hampshire, advanced manufacturing 

technologies and processes. 

And Hydronalix from Sahuarita, Arizona, first created the unmanned air vehicle, Silver Fox, used by the Marines in combat, and 

recently in EMILY, the Emergency Integrated Lifesaving Lanyard 

system being used for humanitarian operations in the Mediterranean. 

Let me talk briefly on metrics that support improving the business of the science such as the solicitation, contracting, funding, 

and execution of management functions. Ensuring we have timely 

and accurate data to support sound decisions is key to the effective 

execution of the program. I do not believe we are producing the reports that you need, and I and the Navy SBIR/STTR Programs 

stand ready to support, for want of a better term, an SBIR data 

summit where we can agree on the required data to be collected 

and development of processes to collect and report the data in the 

most timely and efficient manner. This data summit can help establish a new baseline for metrics that matter. 

For the Navy, an SBIR/STTR metric that does matter is investment of non-SBIR/STTR mission dollars. Beginning with 2010, that 

investment, those Phase III fundings, is unmatched throughout the 

Department of Defense and the federal government. Our Phase I 

awards rebounded in 2014 to 423 awards and continued in 2015 

with 390 awards. Awards made to new firms, despite the intense 

competition for SBIR/STTR awards—some solicitations sometimes 

garner 30 proposals to each topic—we have averaged 22 percent 

awards to first-time winners in every solicitation since 2012, due, 

I believe, to improved outreach. 

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Reducing award delays. In 2015, the Office of Naval Research piloted a program focused on improving contracting processes. I am 

happy to say, using the three percent administrative funds that 

you provided in the 2011 reauthorization, we have been able to reduce Phase II award times from 11.2 months to 4.7 months. 

Phase III investment. Three-hundred-and-ninety-four million dollars in non-SBIR/STTR dollars were invested in 145 projects in 

2015. That is an average of $2.7 million per project to mature vitally needed technologies. 

As this committee approaches SBIR/STTR reauthorization, consider four factors that have made the Department’s SBIR/STTR 

Program successful. 

Culture. Our naval research and development enterprise, including universities and national research organizations, consider 

SBIR/STTR part of the solution for quickly delivering affordable innovation to our warfighters. In short, Navy acquisition gets it. 

Our dedicated professionals make continual improvements to 

small business assistance, such as improving partnering opportunities with industry and government through our proven SBIR/STTR 

Transition Program and its annual forum. 

Outreach. Through SBA’s SBIR Road Tours, national or regional 

SBIR conferences, and our own command visits to regions throughout the U.S., we look for new entrepreneurs, especially women, veterans, and the disadvantaged, for our SBIR/STTR pipeline. 

Leadership. I would be remiss if I did not mention the support 

the Navy program receives from Mr. Kenyata Wesley and the OSD 

Office of Small Business Programs. Even more significant is the 

senior leadership support the program receives from Secretary 

Mabus, Secretary Stackley, the Chief of Naval Operations, the 

Chief of Naval Research, and Ms. Emily Harman, Director of Navy 

Small Business Programs, here with me today. These champions 

provide continuous advocacy for the program, including guidance to 

our acquisition community. 

In conclusion, it is my honor to be part of such a productive and 

valued program that directly supports our warfighters while also 

providing solutions to our nation. Performance as mentioned above 

led Secretary Jacques Gansler to tell the Senate Armed Services 

Committee recently that SBIR/STTR should be made a permanent 

program. The Department of the Navy continues to seek improvements in our program, to seek a more diverse vendor base, increase 

small business integration into Navy business, and leverage small 

business advances for Navy requirements. 

I look forward to working with you and your staff regarding the 

importance of SBIR/STTR authorities. 

[The prepared statement of Mr. Smith follows:] 

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Chairman VITTER. Great. Thank you both very much. 

Now, we will start rounds, five-minute rounds of questions, and 

I will kick it off. 

Mr. Williams, let me turn to you. Your role is to provide programmatic and policy oversight on these programs from the SBA. 

Given that, I was disappointed, quite frankly, in your testimony 

that you did not provide the committee with any concrete information about progress or accomplishments in the program since Congress last reauthorized them. And unfortunately, that is consistent 

with your office having failed to issue annual reports on the program, as required by law. The latest data available seems to be 

from fiscal year 2012. When will we see an annual report as required by law? 

Mr. WILLIAMS. So, we are working on the annual report. When 

I came over in December of last year, one of the big issues we had 

was the data that we had was not 100 percent accurate. And, so, 

what we worked on was developing our sbir.gov site to actually put 

real-time data on that site and focus on that. So, actually, if you 

go to that site, you can see data up through 2014 and split it and 

look at it in a variety of different ways. 

What we have been focused on, and as often happens with these 

systems, we—the data source, we have 152,000 awards. Each 

award has 79 records. And we have to merge that from 11 agencies, which all have different database systems. We moved from an 

old system, TechNet, about three years ago, once the reauthorization kicked in, to this newer system that is a more robust data system. We have been having challenges with getting data accuracy, 

and so we have been spending time and effort on that data that 

feeds into our report. 

Our report has been completed. It has been briefed out through 

SBA and it should be released to the agencies over the next couple 

of weeks. Then it will go through OMB review for the agencies, and 

then we hope to get it out within less than three months. 

Chairman VITTER. So, we should see it in less than three 

months? 

Mr. WILLIAMS. Yes. 

Chairman VITTER. Okay. And, the data that will be included in 

it—that is included in it—it is done—will be how current? 

Mr. WILLIAMS. So, that will be the 2013 report. We are going to 

do them annually. What we had done was a 2000—before I got 

there, there was a 2010, 2011, 2012. So, this is going to be the 

2013. Right behind it is going to be the 2014. The 2015, we—we 

wait until March, when each agency has to submit their information to us from the prior year. So, March 15, that information is 

due, and then we work on that data for a while and then try to 

push it out. My goal is to actually try to get these reports out within six months of the time that all the data is submitted to us from 

the agencies. 

Chairman VITTER. And, so, when will we see the 2014 report, 

which has obviously long ended? 

Mr. WILLIAMS. I would like to see that three to four months after 

the 2013. 

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Chairman VITTER. Okay. Has each of the 11 agencies required to 

participate in SBIR met their statutory participation goals in each 

of the past five years? 

Mr. WILLIAMS. So, yes, they have—the challenge with that is in 

the way the budget is measured, in two years, multi-year programs. So, for all the agencies that have one-year funding, where 

they have to spend all the money in one year, they have met—they 

have spent and obligated above the requirement of the, right now, 

three percent requirement. 

The way GAO would like us to start to gather the data is to actually see what they obligated that year. So, Defense has two-year 

funding. They spend their 2013 money over 2013 and 2014. And, 

so, they have been measuring their results based on two years of 

funding, not what happened in a single year. So, as the budget goes 

up, they are always a little bit behind. And, so, measured in the 

way GAO has been measuring it recently, they are not, but actually as what they have set aside, they are meeting their requirements. 

So, we are working with those agencies to define that so the 

rules are clearer, and part of that is the terminology of budgets and 

obligations and things like that that we are trying to clear up. 

Chairman VITTER. Okay. How does SBA seek to improve participation in the two programs in states with a significantly lower 

number of awards per capita? 

Mr. WILLIAMS. So, we have focused on two main efforts. One is 

to improve our website and to do more electronic web-based training, train the trainer—well, a couple ways. The FAST Program 

that we have that has been supported, and you talked about another bill that you have been working to get boots on the ground, 

people within individual states who really understand the program 

to train. 

What we have coupled that with is something we started last 

year called the SBIR Road Tour, where we actually put 15 to 20 

program managers on a bus. We do five days at a time. We go state 

by state and we visit those states. We did 20 states last year. This 

year, we have a plan to do 20—well, we are actually going to do 

17 states and then we are going to do five regional events, including one in New Orleans April 4, 5, and 6. We are going to do another one in the New England area, one in California, and continue 

to try to do that. 

So, we are hitting all the underrepresented states and I have got 

a plan and a program and time frame for where we are going to 

hit a lot of the states that are in those underrepresented, under 

one-third of the awards. 

Chairman VITTER. Okay. Thank you. 

Senator Shaheen. 

Senator SHAHEEN. Thank you, Mr. Chairman. 

I would suggest, Mr. Williams, that you talk to Senator Enzi 

about your budget process issues, because as Chairman of the 

Budget Committee, I am sure he can fix what is happening at 

DOD. 

[Laughter.] 

Just trying to inject a little levity here. 

[Laughter.] 

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What do you think, Mr. Williams, of Mr. Smith’s idea of a data 

summit? 

Mr. WILLIAMS. So, it is a great idea. We have been working with 

the agencies. One of the big challenges we have is we have agencies that are as large as the Navy, which has about a $300 to $400 

million program, and we have agencies that are a $5 million EPA 

program. And, so, what they are able to do and develop and the 

dollars they have to put towards those resources has been a challenge. So, we have data coming in from an Excel format everywhere to very modern formats and databases and stuff. And we, 

then, at SBA, have to manipulate all those and get them into one 

format. 

So, I think a value—and I think this is where the administrative 

funding and things can go towards—is it makes—so, right now, the 

approach has been each of the 11 agencies develop their own systems that then feed into ours. What we need to look at is can we 

develop common systems that everyone can use, and especially at 

those poorer agencies or smaller agencies can leverage off of that 

and use that same system that they do not have the resources to 

develop. So, it is a great idea. 

Senator SHAHEEN. I think it is a great idea, too. 

Mr. Smith also talked about one of the ways in which they have 

used that three percent administrative funds was for a pilot in the 

last reauthorization. Can you talk about how some other agencies 

are using those funds and whether you see those as beneficial for 

us to continue? Also, can you talk about some of the other changes 

that we made in the last reauthorization, such as adjusting caps 

on the size of awards and also the role of venture capital firms in 

SBIR? 

Mr. WILLIAMS. So, I will start with the easy ones. The role of 

venture capital, it has not really seemed to have any impact. The 

GAO did a study, I think it was 24 proposals, seven awards, in that 

range, $7 to $8 million over two years between the two organizations, HHS and ARPA–E that run the program. So, really, we 

never saw a big influx of venture capital companies. So, I see no 

reason to change anything. It does not seem to have a big impact. 

Senator SHAHEEN. Were they able to quantify the funds that 

were put into majority vc firms? 

Mr. WILLIAMS. Yeah. Eight-million dollars was awarded to companies, but that is out of, like, $2 billion. 

Senator SHAHEEN. Okay. 

Mr. WILLIAMS. So, it is a very small percent of the funding that 

HHS and ARPA had funded. So, they are allowed to play. They are 

allowed to participate. But, they just are not playing because they 

probably have other resources and funding. 

Senator SHAHEEN. So, is there any downside to continuing that 

provision in the—— 

Mr. WILLIAMS. I do not—— 

Senator SHAHEEN [continuing]. New reauthorization? 

Mr. WILLIAMS. I do not see a downside, because I do not think 

it had a—it did not have a negative impact. It allowed those that 

wanted to to participate, and they won programs and it was a 

small amount. I would be concerned if it was a higher percentage. 

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17 

Caps, I think there has been a challenge with caps in that there 

are programs, especially at the larger agencies—HHS is a perfect 

example—where it just takes more dollars, and DOD is a great example, and I had a lot of experience there. RIF tried to address 

that. That is the Rapid Innovation Fund, that would allow additional dollars to kind of do the test and evaluation work. What has 

now happened, where when I was at Navy, I was allowed to put 

additional SBIR dollars above the cap limits if I could get matching 

dollars from a program of record. I can no longer do that. 

So, I think there is interest in maybe—is there a program that 

you could address the 6.4, what we call the 6.4 to 6.7, the test and 

evaluation, dollars and put almost a separate program that would 

be a follow-on to SBIR that would allow, instead of separate new 

research projects, but really take the research projects you developed and provide the test and evaluation or the dollars that basically reduce the risk, prove them out so a program of record can 

actually accept them. 

And, that has always been a problem. As you know, with the Defense, by the time we have a need and the time we get money is 

usually three to five years. A lot of times, we need money then. So, 

you kind of need a fund that says, wow, these are my five really 

important projects. If they each had $6 million, that could actually 

go on the JSF, or that could go solve this problem right away. 

Senator SHAHEEN. So, can I ask you to comment on that, too, Mr. 

Smith. What would you like to see with respect to those caps? Is 

there—— 

Mr. SMITH. We find on the Phase IIs, flexibility is always helpful. 

Two cases. One is the amount of money. It is expensive to do research, and to get over that ‘‘valley of death,’’ I either need SBIR 

dollars to give them another three to six months of development, 

or I need to have someone else with a checkbook on the other side. 

Their other checkbooks are two years away unless they change the 

plan they approved two years previously. So, there is a challenge 

there when it comes to taking it to the second phase. 

RIF, we found exceedingly important to the Navy. We find 70 

percent of our RIF awardees have a lineage from the SBIR community. So, it is part of that. They have developed that relationship 

with the Navy. They understand the Navy requirements. They are 

ready to answer those Navy demand signals. So, absolutely. 

Senator SHAHEEN. Okay. Thank you. Thank you, Mr. Chairman. 

Chairman VITTER. Okay. Thank you very much. 

Next, we will go to Senator Enzi. 

Senator ENZI. Thank you, Mr. Chairman and Ranking Member 

Shaheen, for holding this hearing. I want to congratulate both of 

you. As the Chairman of the Budget Committee, I know that I am 

just appalled at how many reauthorizations have not been done, 

but we are still spending money on them. You are taking a forward 

look, getting ready to have this reauthorized in a timely manner 

so that the program can continue without either violating the budget and knowing where the funding is going to come from. 

I have been really pleased with the successes of the SBIR and 

STTR and how they work together. We have had some good successes in Wyoming. I do an Inventor’s Conference once a year in 

Wyoming, where we invite people in that have an idea, or are hopDeShaun on LAP51NQ082 with DISTILLER

18 

ing they can learn how to have an idea. We even go through the 

patent process. But, we go through the SBIR process so that they 

can take a look, if they need to build prototypes or do something 

like that. 

And then the opposite time of the year, we have a Procurement 

Conference, and that is where we encourage the federal agencies 

to come to Wyoming and see what products we have. And, I have 

been pleased at the number of agencies that come out to do that 

and we wind up with several million dollars’ worth of contracts 

each year because we have some great products that are at a low 

price. 

One of the first ones that I ran into a few years ago, in fact, 9/ 

11, we had a little problem with some chemical things around the 

Capitol, and we bought a nice huge truck and any time there was 

some kind of a chemical spill, whether it was powdered sugar or 

whatever, around the Capitol, this big van would pull up and guys 

in space suits would jump out and they would run in, they would 

get some samples, and they would take it back to the van and analyze it and figure out what to do. 

Because of SBIR, we had an innovative group in Wyoming that 

came up with a thing that looked like a speed gun hooked to a little hand-held computer. And they just point that at the substance, 

pull the trigger, and ten seconds later, they would know what it 

was and what to do about it. Unfortunately, that has not developed 

into mass marketing yet across the world, but I think it should. 

But, it is just one example of a number of things where a little bit 

of encouragement helps. Big companies can get some special credits 

for their research and development, but small companies do not 

have that. So, I appreciate what you are doing. 

My question would be if you could tell me a little bit more about 

what outreach efforts you have planned for the future to get more 

businesses into the SBIR and STTR Programs. What have you 

found to be successful outreach programs? 

Mr. WILLIAMS. Sure. So, we will be going to Wyoming on June 

27. Hopefully, we will get your support there, I am sure. 

So, we tried this Road Tour event and it actually worked really 

well. We had about 100 individuals at each location we went to. We 

learned a lot from the first go-around. It has two focuses, basically. 

One is underrepresented states, so we look at the states that are 

getting the lower one-third of the awards. And, so, we go to each 

one of those. 

So, this year, what we are trying to do is then also place an emphasis on women and minority. It is challenging—it is obviously 

easier to go to a location where you know there is underrepresented in the community you are addressing. To bring in the 

women and minority has been harder, but we have developed relationships with the Society of Women Engineers and the Minority 

Business Development Agency and things like that to try to get 

them to help us do the outreach so when we go to events. 

What we have expanded to, so, from our 17 individual state Road 

Tour events, where we will go there for each a day, we are going 

to add two-day events that there will be five of that we will also 

do in different regions. 

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19 

So, as much as possible, my goal is we have set up a program 

where we will be within 250 miles of every state in the country. 

We have been to Hawaii earlier this year. So, we are trying to get 

out there and just put boots on the ground to bring program managers there. That is really important. 

But, what is also important is once we leave, do you have people 

in that state who understand what SBIR is, who can do the training, who can walk them through grants.gov and figure out, how do 

I put in an application, all those things. So, what we are also trying to invest in with the administrative dollars, that NSF has provided some to us, is train the trainer tools, so instead of them each 

individually developing training, we develop it for them and then 

we train them on what SBIR is. When there are changes at DOE 

or DOD and other places, we provide that information so they are 

aware of what is current. 

So, we are trying to kind of hit it in multiple ways, but it is having people there. It is bringing the program managers. And it is 

having the material available so that they can train. 

Senator ENZI. Thank you. Excellent explanation and my time has 

expired. 

Thank you, Mr. Chairman. 

Chairman VITTER. Okay. Thank you. 

Senator Hirono. 

Senator HIRONO. Thank you, Mr. Chairman. 

I am a very strong supporter of the SBIR and the STTR Programs, and, in fact, I had introduced legislation to provide more 

funds and permanence for these programs when I was a member 

of the House. So, I know that both of you would like this program 

to be made permanent so that we are not facing a reauthorization 

gap with regard to these programs. 

And, I am sure that if we do make these programs permanent, 

that there is some language that we should consider to make sure 

that there is enough flexibility within the permanent program, and 

I would appreciate that kind of—you know, the areas where you 

would like to see that kind of flexible language as we go forward, 

because the impression I have is that both the Chair and the Ranking Member very much support—if not all of us—very much support these two programs. So, could you give some thought and provide some guidance as to what kind of flexibility. 

So, Mr. Williams, I am glad that you came to Hawaii. Was that 

because Hawaii is considered one of the underrepresented places? 

Mr. WILLIAMS. It is actually—they put on an event every two 

years, and they have been for probably 25 years. And, so, every two 

years, the program managers will go out to Hawaii. 

Senator HIRONO. Great. So, it is not because we are—— 

Mr. WILLIAMS. You are not an underrepresented. 

Senator HIRONO. Yes. 

Mr. WILLIAMS. You actually do reasonably well. 

Senator HIRONO. Good. We could always do better. And, I do not 

know if you have the data as to whether or not we are doing well 

in Hawaii with regard to minority-owned and women-owned businesses. 

Mr. WILLIAMS. I can provide that data to you. I do not have it 

with me. 

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20 

Senator HIRONO. That would be great. 

So, one thing that is important is that the small businesses in 

the various states are aware of these two programs, and then the 

other thing is that, you know, one of you mentioned—I think it was 

Mr. Smith—the ‘‘valley of death.’’ That is when, I take it, that 

when our companies are in Phase III, where they have to go on and 

get their own funding to keep going, that is where things begin to 

happen that do not allow them to go forward. 

So, I think you mentioned—both of you might have mentioned 

that there could be some way that some of the funds that you have 

could go into Phase III support. Did you mention that, Mr. Smith? 

Mr. SMITH. Senator, what we do at day one, essentially, with our 

SBIR companies, is start thinking about where is your Phase III 

money, because there are multiple places where you may or may 

not find those funds. But, you have got to start working that issue 

at day one. And, it can be difficult, aligning the technology development with the POM process. In DOD, it is exceedingly difficult because it is locked down. But, we start those conversations. We start 

those linkages. We put the right folks together early on so there 

is not that gap, okay. 

One of the ways that gap has been filled is with the Rapid Innovation Program the Congress authorizes every year. 

Senator HIRONO. Yes. 

Mr. SMITH. That has been exceedingly helpful. In fact, the Navy 

has got a very good transition rate on those SBIR technologies 

making it into the program of record, because that up to $3 million 

makes the difference. 

Senator HIRONO. Is the Rapid Innovation Fund, is that a program available to all of the 11 entities that participate? 

Mr. SMITH. No. No, it is not, and it is also done once a year. Definitely with the agencies that continue to purchase—there are certain agencies, like NIH—well, no, I take it back. I think all agencies, there is a value of almost funding a stage past Phase II. You 

have proven it out. You have demonstrated it. But, then, really to 

commercialize it. 

So, we have definitely taken the administrative funds, and one 

of the challenges with the administrative funds is it was a pilot. 

So, it was a three-year pilot of a six-year program, and so a lot of 

agencies were really concerned with actually even using it, and we 

have really only spent about 25 percent of the funds that were 

available. They had to come to us at SBA first to get approval for 

it, and then they had to implement it. They were concerned about 

hiring people and doing things that would really impact commercialization, because if the program stopped in three years, in the 

government, it is hard to get rid of people and things like that. 

So, I think one of the things in flexibility is to make that program permanent so we could use it, cap the amount, but the—and 

then, so, like, the Air Force hired six individuals that, like at the 

Navy, they were more forward thinking in aligning with acquisition, but they did the same thing in the Air Force. They hired people that would help in commercialization. And HHS has done the 

same. They have hired some of their people to work with the physicians to figure out, okay, now the technology needs to go. Who are 

your markets? Same with NSF. They have all developed programs. 

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21 

So, I think everyone could use, whether it is funding or more assistance with people that have expertise on how you find those 

other markets—it may not be providing money, but just the experience is what most of the firms do not have. 

Senator HIRONO. I think that continuity is very important, because if you have already made the investment in these companies 

in Phase I and Phase II—— 

Mr. SMITH. Correct. 

Senator HIRONO [continuing]. I hate for them to get into Phase 

III and not be able to find the funding that they—to commercialize—— 

Mr. SMITH. Correct. 

Senator HIRONO [continuing]. What they have come up with. 

So, my time is up. Thank you. 

Chairman VITTER. Thank you. 

And, Senator Fischer. 

Senator FISCHER. Thank you, Mr. Chairman, and thank you, 

Ranking Member, for holding the hearing today. I appreciate you 

being in the leadership and moving this forward. It is very important. 

Thank you for the panel for being here, as well. 

Mr. Williams, you mentioned to Senator Enzi that you were 

going to be headed to Wyoming. I know that Nebraska is underrepresented—— 

Mr. WILLIAMS. June 28. 

[Laughter.] 

Senator FISCHER. Can you tell me where? Can you tell me where 

in Nebraska on June 28 you will be? 

Mr. WILLIAMS. Actually, you know, I do not have it in front of 

me, but we have picked a city—— 

Senator FISCHER. Let us know. 

Mr. WILLIAMS. Is it Omaha? Yes, Omaha. 

Senator FISCHER. Great. 

Mr. WILLIAMS. Yes, and we are working with people on the 

ground to make sure they have got—— 

Senator FISCHER. Okay. Thank you. I have more questions. Do 

not worry. 

Mr. WILLIAMS. Yes. 

[Laughter.] 

Senator FISCHER. One of the aspects of the SBIR and the STTR 

Programs that I particularly like is the competition that it spurs 

between these small firms. I think that is important when they are 

applying for these awards. 

So, my question for both of you would be, do you see any aspects 

of that application and approval process that could be streamlined 

so that maybe we could see an increase in the number of firms that 

are applying? 

Mr. WILLIAMS. So, the answer is yes, but it is a real challenge, 

and it is one that—— 

Senator FISCHER. And you are going to tell us how on June 28. 

Mr. WILLIAMS. Yes. That will be great. The one challenge is with 

contract authority—so, I work at SBA and you are talking about 

something that is handled by a contracts authority or a grants shop 

in each, and they have to follow rules that are FAR, DFAR rules, 

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22 

and there are not special rules if you are an SBIR company. They 

cannot, you know, set aside. And, actually, in the last reauthorization, there was a fraud, waste, and abuse element to it, so it actually added more paperwork required by Congress to be put on the 

small businesses to address—to be proactive in fraud, waste, and 

abuse. 

I would love to tell you we have moved in a better direction, but 

if anything, we have actually moved in a more conservative direction to protect taxpayer dollars, to make sure that it is being spent 

in a wise way, which hurts small companies that have never had 

experience working with the government. 

So, what we have tried to do, because—so, I think one of my recommendations to the committee is to actually bring in the folks 

that manage the contracting shops, the grants shops, to ask them 

what can they do to streamline. Are there ways that they can treat 

small businesses differently than large businesses? There have 

been some rules put in place about accepting outside audits as opposed to having the government audits come in, which usually take 

six months and a long time. So, there have been things in there, 

but I have not seen them put to practice and I think maybe asking 

them. 

But, what we have tried to then do is to say, look, I cannot solve 

that problem, but what I can do is, again, better training. So, I can 

walk a company through grants.gov. I can tell them how to get 

their EIN numbers and DUNS Numbers and what they need to do 

to write a proposal. We could help them evaluate that proposal and 

say, this is where it really should go. 

So, we focused on that side, which we can impact, and again, I 

am going to plug the three percent administrative funding, but 

those are the tools that we use to do those things, because this is 

one of the unique programs where all the money that comes from 

the Hill has to go and get contracted on the small businesses. The 

government is not allowed to use any of it to manage the program. 

And it is probably the worst program to do that with, because it 

is a program we are purposely trying to get small businesses that 

have never done work with the government to understand the government system. 

And, so, we really need to provide more man hours and bodies 

to help those companies get through these issues, that we have 

FAR and DFAR that are not going to change, but we can provide 

the assistance. So, having that ability to provide those resources is 

helping us streamline, but—it is making it easier, but we are not 

really addressing the streamlining issues. 

Senator FISCHER. Do you think you would have suggestions for 

us on maybe what different regulations are needed for smaller companies—— 

Mr. WILLIAMS. I can come back with some of that kind of thing. 

Senator FISCHER. We get to the old quandary there of one-sizefits-all again—— 

Mr. WILLIAMS. Correct. 

Senator FISCHER [continuing]. And it seems like government does 

that quite a bit. Yes, we want to protect taxpayer dollars, but we 

want to make sure that the dollars are spent wisely, as well, and 

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23 

when you look at the costs involved to companies when perhaps it 

is not needed, I would really be interested in—— 

Mr. WILLIAMS. Absolutely. No, I would be glad to provide that. 

And in SBTC, who is talking later, has groups that represent those 

small businesses that have ideas. But, I, certainly from my perspective, have ideas that I would be glad to forward. 

Senator FISCHER. Thank you. 

And, Mr. Smith, did you have anything to add on that? 

Mr. SMITH. One of the things we are working with our three percent in focus is it is not normally—necessarily the SBIR community 

that I have got challenges with. It is working with the other restrictions other folks have to live with. My contracts officers have 

to follow the FAR, but there are ways to have proportionality, okay. 

There is a difference between a $1.2 million SBIR award and a $12 

million SBIR, or a $120 million, so—— 

Senator FISCHER. So, you could look at the award amount as well 

as looking at size of companies? 

Mr. SMITH. Yes, ma’am. 

Senator FISCHER. Would that be a practical way you could handle it, too? 

Mr. SMITH. Those are two of the variables we can look at to work 

those. And, one of the things is we are working best practices within our contracts community. Same thing. They require training. 

SBIR contacts are usually a small percentage of their workload. 

But, we found when you put a dedicated team to doing SBIR contracts, it flows much, much smoother. 

Senator FISCHER. Thank you very much. Thank you, Mr. Chair. 

Chairman VITTER. Thank you. 

Senator Ayotte. 

Senator AYOTTE. I want to thank the Chair and the Ranking 

Member for having this important hearing, and I fully support a 

permanent reauthorization of SBIR and STTR. I know as Senator 

Shaheen has probably mentioned, these programs have a great 

New Hampshire tradition when Senator Rudman really was the 

founder of this because he was concerned about innovation and getting small businesses engaged in new ideas that could come to the 

fore in research and development and giving those opportunities to 

have the government have the benefit of that. 

You know, Mr. Smith, as I look at the other committee that some 

of us serve on on this panel, or the Armed Services Committee, and 

I serve as the Chair of the Readiness Subcommittee, we have had 

numerous hearings on acquisition reform. And having seen the matrix for what it actually takes to get through to get a defense contract, as a small business, especially as we are trying to really engage on these particular programs, SBIR and STTR, I think it 

would be daunting for anyone. 

And, so, we are trying to undertake that in the Armed Services 

Committee to really make it a better, more efficient process, because I think we have proven that layers do not necessarily mean 

more accountability for taxpayers. They can just mean more paperwork as opposed to really focusing on accountability. 

So, I would also add that any recommendations that you have in 

particular in your shop that you think would be helpful, many of 

us serve on both committees and we could take those up not only 

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24 

in the Small Business Committee, but also in the Armed Services 

Committee. We are very focused on acquisition reform. And, this is 

an area where we want to get things quickly, obviously, because 

this is opportunities to drive innovation in our security space. 

So, if you can get back to us on that, that would be tremendously 

helpful. 

Mr. SMITH. Yes, ma’am. We will work with you. 

Senator AYOTTE. Appreciate it. 

I also wanted to follow up. Mr. Williams, in the 2014 Interagency 

Policy Committee’s report to Congress on commercialization, it 

noted that SBA planned to start leveraging and expanding partnerships with high-growth stakeholders like incubators, accelerators, 

and clusters, trade associations, universities, by taking a lead in a 

train the trainers model. So, can you give me an update on how 

that initiative is going, how effective it has been. 

Recently, I visited an incubator, for example, in New Hampshire, 

and we have seen a lot of exciting growth in these incubators and 

I think it is a great way for us to partner on making sure that 

those who are engaged in the incubators also know about the availability of SBIR and STTR. 

Mr. WILLIAMS. So, we are making progress in that area. One of 

the other things under my responsibility is the accelerator program 

within SBA, and so that has been two years. We have gotten a million dollars this year, but we had 2.5, 4.5 in the last two years, and 

a million this year. 

What we do with that is—and it is really small seed dollars that 

we are just adding to existing accelerators. But, the network of accelerators is well over a thousand across the U.S. and one of our 

goals is to—so, we provide a prize contest where we award $50,000 

to what was 100, or 88 accelerators last year. 

Part of that, then, is to make them aware—so, now they are a 

partner with SBA and we have these other programs that we want 

to make sure they are aware of, SBICs, which is a loan program 

for businesses that are also under the OII portfolio, and then the 

SBIR and STTR Programs. So, we have been spending a lot of resources developing our sbir.gov, and then that tool, developing the 

train the trainer materials, and so I have a contract. So, we have 

put out more materials already. 

We have our FAST awardees which we have been funding at 

about $2 million a year, which is 20 individual state awards at 

$100,000 each, where the state provides a match, and those folks, 

we have monthly calls with, then we try to share best practices and 

what materials are out there. So, at first, we have not had as much 

resources to develop the materials until just recently where we got 

some of the three percent from—I mean, HHS, NSF gave us some 

dollars so we could build out the train the trainer stuff. 

But, what we have been doing in the short term was to get individuals to share across states so that they would have that material, and accelerators and incubators are a really good sweet spot 

that, you know, SBA has kind of been focused on our SBDCs, but 

these are two other sources that really have a great potential, especially in the SBIR world. 

Senator AYOTTE. Great. 

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Just a quick follow-up. Also, as you are creating an interagency 

unified outreach plan, are you engaging groups like SCORE and 

the VSOs as we think about some of the, obviously, the veteranrelated groups, as well, that are focused on employment? 

Mr. WILLIAMS. Yes, and they all work on the same floor as I 

do—— 

Senator AYOTTE. Great. 

Mr. WILLIAMS [continuing]. So we work closely with them. 

Senator AYOTTE. Excellent. Thank you. 

Chairman VITTER. Great. 

And, Senator Ernst. 

Senator ERNST. Thank you. I would like to thank the Chair and 

the Ranking Member for holding this meeting. 

This is really important and I want to echo what Senator Enzi 

had said about reauthorization of these programs. These programs 

are phenomenal, and I have heard from a lot of Iowa small companies that have utilized this process to get off the ground. So, thank 

you, Mr. Chair, Ranking Member. Thank you for doing this very, 

very important work. 

As you can imagine, back in Iowa, we do not have a lot of venture capital to get a lot of these programs started, so it has been 

an essential tool in Iowa. Sometimes we talk about brain drain, our 

young college graduates that are moving on to other areas. Well, 

with these programs, we have found that a number of them have 

been able to stay in Iowa and develop their own businesses. So, we 

have a lot of great talent that is now staying in Iowa, a lot of technology companies, and so forth. We are really excited about it, so 

thank you for that. These are great programs. 

You have touched on a number of issues. Mr. Williams, you 

talked about the underrepresented areas. Rural areas fall into that. 

Iowa is obviously a very rural area. So, I am glad that you do those 

types of activities. I actually live just about an hour from Omaha, 

Nebraska, so that is one that would be important for a lot of folks 

in Southwest Iowa, Western Iowa, to know about. 

We have talked about streamlining the process. Senator Fischer 

brought that up, as well. And, one thing about streamlining the application process, you said the government puts more emphasis on 

the paperwork. You would maybe like to see that streamlined. 

Folks from Iowa have said that the different agencies do things a 

little bit differently. So, what is your best advice on how do we 

streamline this, yet allow flexibility for those agencies to work with 

their population? 

Mr. WILLIAMS. First, on August 16—— 

Senator ERNST. August 16, thank you. 

Mr. WILLIAMS. So, the streamlining—the small businesses would 

love one form for all agencies and just be able to fill it out and 

push it, and unfortunately, I do not have the power and authority—nothing personal, but I am not even sure you do—I certainly 

do not—— 

[Laughter.] 

To make that happen. 

Senator ERNST. Well, you are right. 

[Laughter.] 

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Mr. WILLIAMS. So, it is something we need to strive towards, but 

their view, and I fully understand that, is we have a role, the FAR, 

the DFAR, this is how we do contract. Just because it is a small 

business and SBIR, we cannot treat them differently. 

We have tried to look and we are continuing to look at flexible 

ways of some of the different contract authorities that you can do. 

We have gotten pretty good at Phase Is. Grants seem to be a better 

way to contract quickly with a lot less paperwork. But certain 

agencies in the DOD have issues with the amount of profits you 

can allow under a grant that does not allow the flexibility. 

So, there is—again, these are issues that kind of are the contracting community. So, most of my peers work on the technical 

side. We understand the science, we understand where it goes, and 

then we have to throw it over the wall to the contracting office and 

say, now, please award this in a timely fashion, and there are a 

lot of pressures by that community on getting other contracts in 

place and things like that. 

So, as I am sure you are aware, the problem in contracts is widespread across the government. It is a staffing and it is, you know, 

things that are different, and the big ones get done faster. And, it 

is a real problem for small businesses. 

I think what has helped is that we have—we are actually—I am 

hosting a meeting when we have our annual event in D.C. in May. 

We are going to have a one-day event where we are bringing in a 

bunch of contracting officers and grants officers and we are going 

to have two different rooms to say best practices and try to learn. 

So, those are the things that we can do, but I think pressure 

from above on asking those questions and measuring. 

Senator ERNST. Okay. I think that is great. I think we have been 

tasked right there with finding some sort of solution along the way. 

And for Mr. Smith, I know my time is getting short here, but the federal government spends about $530 billion in procurement every 

year and about $154 billion is on DOD weapons systems. A number 

of us serve on Armed Services, as well. And, the weapons system 

acquisition has been on the GAO’s High-Risk List since 1990, a 

very long time, because of the recurring issue of cost overruns and 

program management. 

So, the SBIR does play a huge role in DOD acquisitions. If you 

could just give me an overview on how you ensure that there is 

proper oversight and program management for the types of programs that you are working with. 

Mr. SMITH. Thank you for that. There are two things recently 

that have occurred. One is the change to the 5002, which now requires you have plans for small business. One of the great things 

Secretary Stackley has done was put out his memo, Doing Business 

with Small Business in a Big Way, which designated the deputy 

program managers as the small business advocate. So, we have 

seen from that them reaching out on how we can help them do 

their job effectively and efficiently, because they are busy folks. So, 

we have been doing outreach and training within the Navy with 

our program managers to help them do their job more efficiently. 

We have quite the vetting process to get a topic even issued for 

a company to reply to, and then it does get down to FAR, where 

we do a source selection competitive selection process for it. And 

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from that, it is only a five percent selection rate. It is exceedingly 

difficult, and that is why we do get such great results, because only 

the best get selected. 

Senator ERNST. Very good. Well, I thank you. 

My time is up. Thank you, Mr. Chair. 

Chairman VITTER. Thank you. 

Senator Coons. 

Senator COONS. Thank you, Chairman Vitter and Ranking Member Shaheen, for convening this important hearing into a valuable 

program that is, I think, among the most effective in terms of technology transfer and helping get out of our national labs innovations 

and to encourage federal resources to be used more broadly for research and development. 

Making sure that America continues to lead in the global innovation economy requires sustained and strategic efforts from both 

public and private sectors in support of both basic science and applied R&D, and I think they are the lifeblood of great American 

companies, large and small, and we have often seen that small 

businesses are the ones that are the best at taking risks, at quickly 

commercializing and taking to scale the most groundbreaking innovations. 

So, that is why I, too, support a permanent authorization, reauthorization of SBIR and STTR. I think the need to provide a predictable, stable long-term funding for the small business community in support of innovation is critical to their effective planning. 

It is also a reason I was glad to work with Senator Enzi and the 

other Senators on a permanent extension of the vital R&D tax 

credit and steps to make it accessible to early stage and small businesses. 

Just a quick example, if I could, of SBIR’s impact in Delaware. 

A company I am familiar with, Compact Membrane Systems, which 

is an advanced materials company based in Newport, Delaware. It 

has over a million in annual revenue from projects that were originally funded through the SBIR Program. Their technologies add 

value in a range of applications, from power plants, to global transport, to paper mills, saving their clients millions of dollars while reducing waste, risk, and environmental impact. 

I just wanted to take a moment and recognize that SBIR has had 

this kind of meaningful, lasting impact, I suspect in every one of 

our states. In fact, CMS continues to benefit from SBIR support 

and is working on new solutions with NIH, Energy, EPA, and Ag. 

Just a great example of what is possible. 

So, I would be interested if both members of the panel might 

speak to how federal agencies can do a better job of ensuring that 

potential grantees understand the benefits, the challenges, the application processes for both programs, and what we can do to help 

our researchers and entrepreneurs to develop the business skills 

that they need to access the market. And if that question has previously been asked, forgive me and feel free to adjust your answer 

accordingly. 

Mr. Williams, if you might. 

Mr. WILLIAMS. Sure. Well, I will answer it again. We have definitely talked about the area, and, so, one of the challenges is it is 

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mercialize. We fund research, and especially where I came from, 

the DOD, there really is not a commercialize. We are the customer 

and things like that. But, even in NIH and things like that, we hire 

people that are experts in those medical science areas and we do 

not hire business development people and things like that. So, that 

is the structure for good reasons, that we are put in place and that 

is what we live with. 

So, with SBIR, we have been lucky to have the administrative 

dollars where we have started to then hire outside consultants to 

do that commercialization. When I was at the Navy, I was fortunate to have an administrative budget where none of my other 

peers at the other agencies did, and one of the things we did, we 

ran a program for about 15 years where we helped every Phase II 

company develop that commercialization plan, understand their 

market, understand how to get into that, understand where their 

financing is, can they build it, so they license, all those kind of 

things. 

So, I think there has been—well, I know there has been a goal 

of commercialization within this program since the beginning. The 

challenge has been it is not a normal government activity and so 

we have been—and we have not necessarily—the agencies have not 

been willing to put the extra resources to do that to benefit the private sector. And, so, I think the three percent helps with that. 

Senator COONS. You say it is not a normal government activity. 

Do you have any fundamental objection to it? Do you think it is 

a—— 

Mr. WILLIAMS. I do not. 

Senator COONS [continuing]. Unwelcome or an abnormal government activity? I do think that is an area that has not been a core 

competency for the federal government, but in this setting, in the 

small business setting, in the SBIR transition, to make sure we 

have got more Phase Is who go to II and III, it is a vital role. 

Mr. WILLIAMS. Right. I agree. 

Senator COONS. Mr. Smith. 

Mr. SMITH. Two things, Senator. Outreach—I really had a great 

year last year, going out to the SBA Road Tours and seeing these 

companies and talking to these young companies about how to 

work with the Navy. They have not had the 20 years of experience 

of working within the federal government. They are probably a recent graduate from their university who have just a great idea and 

they are ready to go forward. So, congratulations. You have gotten 

your first Phase I, $150,000. 

And the first thing the Navy throws at you is, what are you 

going to do if it is successful? Start thinking about this. The beauty 

of the program is, from a Phase I to Phase II to Phase III, you have 

five to seven years to mature that technology, usually to where we 

see realization of its commercialization. That is time for you and 

your company to grow. But, you do not know what you do not 

know. You are an engineer. You did not get your MBA, much less 

get our Juris Doctorate to understand how to work with the federal 

government. 

That is where we talk about those experts that are not the scientists and engineers helping them in the teamwork concept on 

how to become a successful company. 

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Senator COONS. Thank you. 

I see my time has expired. Thank you, Mr. Chairman. 

Chairman VITTER. Thank you, and thanks to our first two witnesses. 

Senator SHAHEEN. Mr. Chairman. 

Chairman VITTER. Sure. Senator Shaheen has some follow-up. 

Senator SHAHEEN. Thank you. 

I just wanted to go at this Phase III issue a little more, because 

as part of the 2011 authorization, the Department of Defense was 

required to establish goals related to Phase III to help boost commercialization of technologies developed through SBIR and STTR. 

The goal there was to promote greater commercialization. I wonder 

if either of you can tell me if DOD has established those Phase III 

goals and how they are working and what this committee might do 

to encourage a greater sense of urgency on the part of the Department of Defense to do that. 

So, I do not know, Mr. Smith, if you want to start, and then Mr. 

Williams. 

Mr. SMITH. I can answer that we have not been given goals to 

achieve within DOD. I know it is important to the Navy that we 

transition, because we find the value from it. I cannot speak for 

DOD. I will go back and talk to Mr. Wesley about that to see where 

it is at. I do know we made the change to 5002, which requires you 

to have small business goals. We are now looking at acquisition 

strategy within the Navy as they move forward to make sure it is 

addressed. But, we have not quantified what that goal should be, 

ma’am. 

Mr. WILLIAMS. So, yes. I have not seen the goals. I think one of 

the issues that was raised to me was, it was in the legislation, but 

it requires a FAR and DFAR change since it did not say to do immediately, and so—and as you probably are aware, FAR and DFAR 

changes take some time. And, so, I have not focused on that, and 

maybe at SBA we need to try to work to do the FAR and DFAR. 

But, I think if language talked about implement immediately, that 

gets around that FAR/DFAR. And, so, yes, they have not implemented it that I have seen. 

Senator SHAHEEN. Well, as a number of people have mentioned, 

there are a number of Armed Services Committee members on this 

committee, and so perhaps we can take this up before the Armed 

Services Committee, as well. 

Just a final point that I would like to make. I had the opportunity to go out and embark with the USS New Hampshire nuclear-powered Virginia Class submarine last spring, and as I was 

getting the tour, one of the things that they talked about was the 

challenge of getting laundry done on a submarine. It sounds really 

simple, but because of the danger of fires, that is one of the biggest 

concerns that submarines have. 

And, I was able to tell them that I had visited a company in New 

Hampshire, Creare, that was working on technology to address the 

problem of fires resulting from dryers on submarines. And, so, it 

was really exciting to be able to talk about that. Even though that 

is not what most people think of as a national security issue, it is 

very critical as we think about how the Navy operates. 

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So, Mr. Smith, can you just sum up why innovation through the 

SBIR is so important to the work that you do. 

Mr. SMITH. It comes back to that culture, Senator. Part of it is, 

it is we are in there for the long game, because it may take years 

to finally get that overnight success. And it is working for today’s 

warfighter, fixing the dryers so they work, so the quality of life for 

that sailor is better, so they can more focus on their job to be a 

warfighter and not a laundry person. To the long-term, how do I 

stay in front of the enemy who wants to think faster than I do. 

So, these small companies are agile. They can address it right 

now very quickly. Not only do they cause competition within the 

small business community, but they also make the big guy look 

over their shoulder and make them leaner and faster. 

Senator SHAHEEN. Thank you. Very well put. 

Thank you, Mr. Chairman. 

Chairman VITTER. Thank you. 

And Senator Cardin, to wrap up our first panel. 

Senator CARDIN. Thank you, Mr. Chairman. I apologize for being 

late. Other committees were in session. This is an extremely important subject. 

Mr. Williams, I want to sort of ask you a question here. You are 

not only in charge of a very important program, but you are also 

the advocate for small business. And, I appreciate we have a representative of Defense. I find that the set-asides for small business, 

the requirements to actively engage smaller companies at times becomes more of a burden for our agencies than a commitment to engage the smaller companies. 

We all have talked about here today how important small businesses are in regards to technology growth for our national defense 

or for health or for transportation or for communication. We could 

go through the list. The set-asides in the SBIR program are critically important. We are coming to a point where Congress is going 

to have to look at a reauthorization bill. The sooner we get that 

done, I think, the better for predictability. 

But, I would hope that you would share with us your thoughts 

of how we could improve this program. I see in my State of Maryland so many of the companies that benefit from the partnerships 

they have on the research funds and what they are able to do with 

it, but there is a constant friction between the small companies and 

our academic centers and the larger companies as to how the federal mandate interferes with what they would like to see done. 

So, if you are prepared to talk a little bit here, I would appreciate it, as to ways that we could make the program from a statutory point of view, Congressional action, a smoother program, a 

program that builds on the benefits of the innovation from smaller 

companies, but in a way that is, I guess, less confrontational. Is 

there a way that we can get this done in the next authorization 

level that we should be thinking about now? And, as the advocate 

for small business, we would hope that you would be pretty aggressive in giving us options to improve the program statutorily. 

Mr. SMITH. So, I probably want to get back to you on some of 

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uation, especially in the DOD, but I think in all agencies. There is 

a challenge in understanding how to commercialize, having the 

business wherewithal. So, a lot of our small businesses that are extremely strong in the technical sides, but they need assistance in 

the business side that the government could do more of and mandating more of those activities. But, that requires money put towards those things. 

So, with the SBIR, the money is all put, except for this new 

admin funding with the three percent, it was all put to go towards 

the company. Anything else, the agency then would have to provide 

out of hide to provide additional assistance and to get their foot in 

the door or put more money on them. And, so, that has been a constant challenge, and I think the administrative pilot has started to 

break that free a little bit, and I think expanding upon that. 

But, also potentially—I do not know if it is requiring another 

program, but there has been a talk about a program that would 

take things that were proven out of SBIR, developed and 

prototyped, then into scale-up and things like that. And, so, whether you set kind of a tax aside for that kind of activity or that idea, 

or how do you encourage that activity. 

Unfortunately, my experience, the way, especially my background at DOD, money has to be laid out way in advance. It goes 

to the big primes and things like that. So, for it to go to small companies in a more rapid program, you have to almost do something 

like SBIR, which allows ideas to come in and get funding quickly. 

Senator CARDIN. I agree with that, and I think moving towards 

Phase III is much more of a challenge, so it does require some additional attention as to how we can make that easier for the smaller 

tech companies. 

I know Mr. Glover is here from the Maryland Small Business 

Tech Council, and there are other states that have done some creative things. I would hope that you would reach out to get their 

ideas. Be prepared to work with members of the Senate who will 

be looking for ways that we can make this program more effective 

as we reauthorize, and I hope we do that, again, sooner rather than 

later. 

I was part of the group during the last authorization process, as 

were members of this committee, and we were very proud we got 

to the finish line. It was not an easy process. It is never an easy 

process to get to the finish line on any bill around here. But, I 

think the more that you have coalesced the needs of the small business tech community, the easier our job will be and the sooner we 

will be able to get that done. So, I look forward to getting your 

thoughts and ideas. 

Mr. SMITH. I am available at any time. 

Senator CARDIN. Thank you. 

Chairman VITTER. Great. Well, thanks again to our first two witnesses. 

We will now move to our second panel, which reflects stakeholders who have used the SBIR and STTR Programs. 

Ranking Member Shaheen, I will first turn to you to introduce 

your constituent, Dr. Kline-Schoder, and then I will introduce the 

rest of the panel. 

Senator SHAHEEN. Well, thank you very much, Mr. Chair. 

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Dr. Kline-Schoder, as I said, has been heading Creare and has 

been very successful both at the work that Creare has done with 

SBIR and the—being able to get grants awarded, and it has been 

important not just for Creare, but I think it has been a very important model for other small businesses in New Hampshire to see the 

success that they have been able to achieve and to have them sort 

of proselytize on SBIR in a way that is very helpful. 

So, it is very nice to have you here and thank you very much for 

being willing to share the story of Creare and how successful you 

have been. 

Chairman VITTER. Great. And we are also joined by Mr. Jere 

Glover, Executive Director of the Small Business Technology Council and an attorney representing small businesses on SBIR-related 

issues. 

Mr. Glover has public and private sector experience, having 

served as a Chief Counsel for Advocacy at the SBA, as well as the 

CEO and principal of a biotech company and a medical technology 

company. He is a well-known leader and a strong voice for small 

innovative firms and the SBIR program. 

We were supposed to have Mr. Roy Keller, Director of the Louisiana Technology Transfer Office at Louisiana State University’s 

Innovation Park. Unfortunately, Roy is unable to join us today due 

to illness. His full testimony will be included in the record. And, 

in addition, I have an outline of highlights of that testimony, which 

I think the highlights are particularly significant about the program in general and his specific experience in Louisiana. So, I will 

also add that outline to the record. 

[The prepared statement of Mr. Keller follows:] 

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Chairman VITTER. And, with that, let us start with Dr. KlineSchoder. 

STATEMENT OF ROBERT J. KLINE-SCHODER, Ph.D., 

PRESIDENT, CREARE LLC, HANOVER, NH 

Mr. KLINE-SCHODER. Thank you, Chairman Vitter, Ranking 

Member Shaheen, and other distinguished members of the Committee on Small Business and Entrepreneurship, for inviting me 

here today to testify in front of you about the reauthorization of the 

SBIR and STTR Programs. 

As you have heard, Creare has had a long relationship with the 

SBIR program and which we think serves as a very strong example 

of a successful public and private partnership. Since 1982, the program has played a key role in our business and in the economy in 

our region of New Hampshire. Our family of companies now employs over 2,200 individuals in high-paying manufacturing and 

high-tech service jobs, and most of those positions are still actually 

in New Hampshire. 

SBIR has helped Creare to establish some of these spin-off companies to develop new products for important government missions, 

as well as to license SBIR-funded technologies to product firms. 

Through every economic downturn during the past 35 years, 

Creare has been able to continue to grow, to develop new technologies, and to create high-paying jobs, due in large part to the 

SBIR Program. 

Since the last reauthorization, the programs continue to operate 

much as they have since the beginning. They are a highly competitive, highly efficient contracting mechanism for the small businesses to meet some of the research and development needs of the 

federal government while also fostering the capability to develop 

products that could be used commercially. 

The increase in the award sizes and in the set-aside in the last 

reauthorization has made the program stronger by allowing more 

work to be done for a given award while maintaining the ability 

to award a diversity of breadth and number of technologies. 

In addition, the funding that has been targeted since the reauthorization for these Phase III type activities that we have just 

been talking about has also been very effective. These new Transition Assistance Programs, like the Rapid Innovation Fund, have allowed many DOD programs to benefit by increasing the speed at 

which new technologies, enhanced capabilities, and cost savings 

can be incorporated into mission critical programs. 

As the program moves forward towards the next reauthorization, 

we make the following recommendations. As you—probably no surprise—reauthorize for an adequate term or make permanent. Frequent reauthorizations over time are very disruptive to both the 

small businesses as well as the federal agencies that rely on the 

program. We recommend the program be reauthorized for at least 

ten years, and hopefully made permanent. 

Continue the competitive structure. We believe that the competitive Phase I/Phase II program has been a hallmark from the beginning of the program and has made it very strong, that this focuses 

the funding only on those programs and those technologies that 

really deserve to be funded. 

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Maintain the eligibility requirements. The last time through in 

the reauthorization, there was a compromise that came about, and 

we support that compromise and would like to see that continue. 

Keep, certainly, and potentially expand the allocation levels. As 

I mentioned, we endorse the current allocation level and would 

even advise that we increase that allocation level, similar to the 

way we have done in the past, increasing it slowly over time to 

help keep pace with inflation. 

Enforce the existing regulations on award size. As you mentioned, or as previous speakers have mentioned, the current law 

recognizes a good balance, in our mind, between the number of 

awards and the amount of work that can be done for each given 

award. 

Enforce Phase III requirements. As was also mentioned previously, there is some language that suggests that DOD and other 

agencies use SBIR technologies to the greatest extent possible. 

However, we still notice reluctance on behalf of large DOD contractors as well as some government agencies to actually embrace some 

of the SBIR technologies that have been developed. 

And then, finally, standardize the commercialization data and 

data gathering, as both Mr. Williams and Mr. Smith have talked 

about earlier. Today, much of that data is gathered agency by 

agency with very different rules, and it makes it a little complicated to keep up with all the changes and all the requirements. 

On behalf of all of the employees of Creare, I would like to thank 

you for your efforts to reauthorize, hopefully permanently, the 

SBIR and STTR Programs and for your continuing work to preserve and enhance the participation of small businesses in federal 

research and development. 

Thank you. 

[The prepared statement of Mr. Kline-Schoder follows:] 

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Chairman VITTER. Thank you very much. 

Now, Mr. Glover. 

STATEMENT OF JERE W. GLOVER, EXECUTIVE DIRECTOR, 

SMALL BUSINESS TECHNOLOGY COUNCIL, ANNAPOLIS, MD 

Mr. GLOVER. Good morning. My name is Jere Glover. I am Executive Director of the Small Business Technology Council of the National Small Business Association, the oldest small business organization in America. 

I am here to urge you to make a great program better by increasing the allocations and by making the program permanent. This is 

half of the National Academy of Science’s reports on the SBIR Program. Over $10 million have been spent and there have been 25 

GAO reports. I would direct your attention to Appendix 1, which 

has selected quotes from all of those reports, but let me just give 

you one. 

The SBIR Program has a history of supporting not only the 

growth of jobs and the overall economy, but also the agency’s missions. Every study that has been done comes to more or less that 

conclusion. After 5,000 pages of National Academy studies, 25 GAO 

reports, 33 years of success helping thousands of small businesses, 

it is time to make this program permanent and it is time to make 

it larger and bigger. 

When we look at the chart, we see where innovations come from, 

and the Keller and Block study looked at key innovations and 

found that if you look at the red line, large firms in America have 

been steadily declining in creating key innovations, and this one 

little SBIR Program, two percent of the whole federal R&D budget 

and 3.3 percent of the extramural budget, goes to this one little 

program that creates 25 percent of the key innovations. 

Let us go to the next chart. When you look at the Air Force Impact Study, what you find in that study is very interesting in terms 

of return on investment. The government, the Air Force, for every 

dollar they spent on SBIR, they get a dollar in military sales and 

2.6 dollars in additional commercial sales, and 50 cents of venture 

capital outside money added to those projects. Ten percent of those 

companies—this is all the companies that got awards from the Air 

Force Phase II between 2000 and 2013—10 percent of them had 

sales in excess of $10 million. Four of them had sales in excess of 

$500 million. Ten percent of those companies license their technology to somebody else. Another 10 percent were acquired. This 

study, that is the first really comprehensive that got a 96 percent 

response rate, shows how effective the SBIR Program has been. 

Now, there is a lot of discussion about success stories and there 

are certainly on my website links to all those, but I will simply 

mention one, IntraLase, which is highlighted in the Air Force 

study. It is a LASIK, a small business that got a LASIK—an award 

to improve LASIK surgery so pilots—as we get a little older, sometimes our eyesight is not quite as good and they suddenly get 

kicked out of the air. They cannot fly and do what they were 

trained to do. This new surgery allows them to keep doing that. So, 

not only does it keep pilots in the air, it saves the government 

thousands of dollars training. 

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The second thing is the ‘‘valley of death,’’ I want to address briefly. It is really a ‘‘Grand Canyon of death’’ when it comes to technology. When we look at it, there are a number of reasons that 

small businesses do not commercialize and succeed in taking their 

technology. Institutional bias against small business, minority, 

women, veterans, well known, well documented. It is there against 

high technology companies there, as well. 

Banks have been declining in their lending to small business. 

Home equity loans, a lot of home equity is gone. Venture capital— 

let us go to the next chart. What you find in venture capital, unfortunately, is seed investing is way down. A hundred-and-eighty-five 

seed investments made in the entire U.S. in 2015, and quite frankly, many states and many industries did not get a single seed dollar. So, SBIR is the only opportunity. It is a great program. 

The Rapid Innovation Fund has been mentioned. It is truly a 

wonderful program. Eleven-thousand firms applied to the Rapid Innovation. Only 435 got awards. It shows you how much demand 

there is for follow-on technology that is not being met. Four percent 

is all of the companies that applied that actually won. So, there 

needs to be a lot more done. 

The law that was passed in the reauthorization bill four years 

ago has yet to be implemented in many instances. We still do not 

have reports. We do not know what Phase III contracts, we do not 

know how many prime contractors are making awards to small 

business, all specifically required in the law, Section 5122. Section 

5108 says that to the greatest extent practicable, federal agencies 

and prime contractors shall issue Phase III awards to SBIR and 

STTR award recipients. 

Only the Navy has issued a directive requiring—encouraging, not 

requiring—encouraging folks to do that. Nothing from the civilian 

agencies, nothing from the rest of DOD. I, quite, frankly, am sort 

of old school. I kind of believe when Congress passes laws, people 

should adhere to them. Unfortunately, we have not seen that. 

So, we urge you to make a great program better and reauthorize 

this. Thank you. 

[The prepared statement of Mr. Glover follows:] 

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Chairman VITTER. Thank you very much, Mr. Glover. 

Let me kick off questions. Again, we will have a five-minute 

round. 

Mr. Glover, as we reauthorize, what are the top three or so 

tweaks or reforms or improvements that you would suggest we 

make? 

Mr. GLOVER. Well, my first recommendation is make people comply with the law. Find out why the civilian agencies have not to 

the greatest extent practicable opened the rest of their 97 percent 

of their federal R&D dollars open to small business and giving 

SBIR the preference the law required. 

Also, make sure that the reporting requirements and that are 

done quickly. There is no excuse for these reports not to be—to be 

years and years behind. If SBA cannot get them filed, then they 

ought to send them directly to the committee and get that information in. There is no accountability in the system and it needs to be 

done. 

In terms of the top three priorities for new legislation, one, make 

it permanent. This uncertainty for businesses knowing what is 

going on is just driving you crazy. We have people lose good scientists and engineers because the 14 Continuing Resolutions, why 

work for this company when you can go work for somebody else 

that has a long-term plan. 

Two, increase the program significantly. This is a great program. 

It is working well. There is no other R&D program that even comes 

close to this program. So, why is it still down three, four, five, six 

percent? It ought to be double that or more. The STTR Program, 

likewise, needs to be increased substantially. So, that is number 

two. 

And, one of the questions that came up earlier, I would like to 

address, and that is the simplification of the process. There are all 

kinds of rules and regulations for government contractors, rooms 

and rooms of regulations. There is no reason that Congress cannot 

direct the government to come up with simple, clear rules that just 

apply to SBIR. You may want to cap it at some number of dollars, 

but there is no reason we cannot have a simple program like it was 

when it started. That is the whole idea. The money that people 

spend complying with government regulations when it is this small 

amount means that they are not spending the money on doing the 

innovation and they are not doing the money on commercialization. 

So, we do need a simplified, streamlined process. There is no reason to wait around for years for a DCAA audit. They are, on average, three or four years behind anyhow. Let CPAs do it. It is not 

that much money. We could certainly streamline the process. 

So, those three would be three recommendations. I have a number more in my testimony. 

Chairman VITTER. Okay. Thank you. 

To both of you, we have talked a lot about the challenge of commercialization, either within these programs or outside of these 

programs. What can we do to help smaller firms meet that commercialization challenge? 

Mr. GLOVER. Well, one of the things that I think that John Williams mentioned earlier is that we need to have specific allocations 

of the testing and evaluation, the 6.4 and above kind of money, 

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going specifically to not only SBIR, but other challenging companies. There are some university technology that have small businesses license it. There are some other non-traditional vendors that 

need to get into the process. So, there needs to be a way to open 

all that up, but there needs to be a significant pot of money. 

And I think the Rapid Innovation Fund is a great program, but 

it only helps 100 companies a year—only 100 a year. We can do 

better than that, because every time we create a need—we meet a 

need for the military, what we are finding is 2.5 times that much 

in commercial sales on the outside. So, this is a huge job creation 

and economy program. It really does great things, and the multiplier effect of a dollar spent on this program, 3.6—58 percent of 

those Phase IIs at the Air Force ended up with sales in excess of 

a million dollars. 

Mr. KLINE-SCHODER. So, one of the things we have seen is that 

some of the large Defense contractors, when they have a very large 

program, are reluctant to hire a small business because we do not 

seem stable. We are not going to be around for a long time, and 

so they do not want to invest their program funds in taking technology from a small company and inserting it into a program that 

might have a 30-year lifetime. 

So, one of the things that might be helpful would be to reduce 

that risk for the large contractors, and I think it is also partly some 

of the folks in the federal government, as well. They see we are 

going to have this long program. You know, I have been asked, ‘‘Is 

Creare going to be around in 10 years?’’ Well, I usually say, I know 

I am going to be around. Are you going to be around in 10 years? 

And, so, what—if you could come up with a way of potentially— 

as for instance, we have worked on some very expensive refrigerators that go into space, and we compete against the Lockheeds, 

the Boeings, the Raytheons, and Ball Aerospace and Northrup 

Grumman, and then they have cryocoolers and we have a 

cryocooler. And when a large program looks at which one should 

we take, you know, it is a little hard for us to compete against 

these multi-billion-dollar companies. 

And, so, if there were a way to help either develop technologies 

in parallel in a situation like that, to provide funding so that it 

could give reassurance to the program managers and also the contractors, the Defense contractors, that we are behind Creare. We 

are really going to help them make sure that they make it and they 

are going to be there for the rest of the time. But, if they are not, 

in parallel, we are going to allow you to fund a little bit extra work 

over here to come up with an alternative in case your primary selection does not pan out for the long term. 

So, reducing that risk, I think, in people’s minds and providing 

some reassurance is something that could be helpful. 

Chairman VITTER. Okay. Thank you very much. 

Senator Shaheen. 

Senator SHAHEEN. Thank you, Mr. Chairman, and thank you 

both for that really helpful and informative testimony. 

I was interested, there was a lot of discussion on the first panel 

about simplifying the regulations, the paperwork around SBIR and 

STTR awards. Mr. Glover, you talked about that in your testimony. 

But, I was interested, Mr. Kline-Schoder, that you did not talk 

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about that. If the program were going to simplify the paperwork, 

the regulations, where would you like to see that simplification 

first occur? 

Mr. KLINE-SCHODER. Right. So, I am not an attorney. I am an 

engineer, one of those guys. And, so, I am told the Uniform Commercial Code is 30 pages long and it has been in existence for 

about 50 years. As I think all of you know, the FAR, I think, is 

30,000 pages and keeps changing every single year. And, so, to the 

extent that one could look at trying to simplify some of those 

30,000 worth of pages that do get imposed upon small businesses, 

that would probably be quite helpful. 

The other thing that I think is actually quite helpful that we 

have been trying to do a little bit more is actually to do more firm 

fixed price contracts. I know there has been a push, I think, in the 

Senate Armed Services Committee to try to encourage that, and 

those contracts actually are not audited in the end, so it gets 

around the problem that Jere was talking about, having the DCAA 

come in three or four or five or six, or in our case seven or eight, 

years later to look at sort of what has happened and then make 

changes after the fact. And, so, that would be something that I 

would consider, as well. 

Most Phase I projects actually are firm fixed price contracts. 

There is a reluctance for some reason for the contracting officers 

to use firm fixed price contracts for Phase II awards, and I am not 

exactly sure why that is, but if we could encourage that a little bit 

more. NASA does that, and so I guess I am not sure—I do not see 

why other contracting agencies can do that, anyway. 

There is, as you all know, a difference between the contracting 

agencies and the granting agencies. As it turns out, I think what 

John Williams said earlier is actually true. The contracting agencies actually have a much simpler application process than the 

granting agencies do. But when it comes to contracting, they are 

totally opposite. Once you are awarded a contract, then you enter 

into the world of talking to contracting officers and doing all those 

things. 

On the grant side, one day a notice shows up in your e-mail and 

says your grant started, and you do not have to sign anything, you 

do not have to do anything. It just happens. 

And, so, although on this side it usually takes nine months to 

have that happen, things are happening, I guess behind the scenes 

on this side. So, in the end, it sort of winds up being the same 

amount of time, but it does seem like we could gather something 

from either side, to take the best from both worlds and try to combine those. 

Senator SHAHEEN. That is a good thought. 

Did you want to add anything to that? 

Mr. GLOVER. I am mindful of Irwin Jacobs, head of Qualcomm, 

who testified here and also at the White House that the SBIR Program let Qualcomm get started and provided the early money that 

let them survive. He said there has been significant requirement 

creep. When the program first started, $25,000 was Phase I. He 

said, you just got the $25,000. You did your work. You sent a report in. They liked it. They funded another round. And you sent 

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that report in and you got paid. And it has been a lot of difference 

now. So, they have added more and more regulations. 

By the way, the FAR, they have not updated the FAR for the 

2000 reauthorization and 2001 STTR reauthorization, much less 

the 2011 one. So, do it immediately, but let us get serious. We are 

so low on their list, you know, 2000, it has not been done. No FAR 

regulation updates. None of that is in there. 

Senator SHAHEEN. So, you both talked about the allocation 

amounts and increasing those as a way to get more small businesses involved and to make the program more effective. Now, you 

have both been affiliated or associated with this program longer 

than I have. So, is the—I remember the last reauthorization debate 

and some of the concerns that Congress expressed about increasing 

the allocation amounts. Are there other concerns that you have 

heard over the years? Are there agency concerns about increasing 

those allocation amounts that you think we ought to take a look 

at, or what is the problem with increasing those amounts, since 

there seems to be agreement from all of you working with the program that we should do that. 

Mr. KLINE-SCHODER. I think what I have heard on the government side is they kind of view the SBIR as a tax on their programs, and for those organizations or those groups that do not actually participate actively, I could see how that would be a tax that 

you are just paying and you are not getting any return for. 

But, those groups that actually look at it as an opportunity rather than a tax are the ones that really benefit the most, because 

they are the ones who are most motivated to actually have something come out of the program, as well, and it allows them to do 

rapid innovations and insert new technologies much quicker than 

they can otherwise. 

Senator SHAHEEN. Mr. Glover. 

Mr. GLOVER. There is virtually no risk for somebody in the government making a decision to give Lockheed or Boeing or one of 

the giant companies a contract. If they fail, if they overrun, nobody 

gets punished. If they give an award to a small business, that is 

why the previous reauthorization, I believe Congress put in there, 

you will have goals, you will have incentives, you will do reports. 

Four years later, you heard the testimony, no goals. The incentives, 

they reauthorized to create any incentive they wanted to to insert 

this and they have not done it. And reports, no reports exist. 

So, you are going to have to get tough and you are going to have 

to be serious about it, because if not, they are going to continue to 

ignore it. Business as usual is always the easiest thing to do. Disruptive technology, there is disruptive government. If we do not 

disrupt the status quo, we will be sitting here in another 10 years 

saying, you know, we could have created a lot of jobs in America 

if we had made this program bigger and better. 

The Air Force study just to me nails it clear. Every dollar that 

is spent by the Air Force got 2.6 dollars in follow-on sales. I defy 

anybody in the government to find a better result on investment. 

It is just phenomenal and it has got—it needs to be done, for America, for job creation. How many innovative companies did not get 

started, did not grow because they did not have a chance? 

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Senator SHAHEEN. Well, thank you both very much for your testimony, and shame on us if we do not require the provisions that 

were passed in the reauthorization to be implemented by all of the 

government agencies involved. 

Chairman VITTER. Okay, thank you. 

And, Senator Ayotte. 

Senator AYOTTE. Thank you, and it is great to see you again, 

Doctor, and appreciate all the important work being done at 

Creare. 

I am very curious, Mr. Glover, and also just to hear, Dr. KlineSchoder, your feedback on the regulations. I think your analogy of 

the Uniform Commercial Code versus the contracting regulations 

and what you are dealing with, and even the grant regulations, it 

almost seems like we need to do—you know, I visit manufacturers 

and they are always talking about lean process. It seems like we 

need to do a lean process on how this whole thing—how do you— 

how does a small business go through this process, and whether it 

is a grant or whether it is a contract award, let us face it, it takes 

too long. Even when you are awarded the contract, the nine 

months that it takes is too long, especially for small businesses, especially if we are focusing on innovation. 

And, so, I guess I would ask both of you, especially you, Mr. 

Glover, you say they have not yet even done what we asked to do 

four years ago. So, you are in our shoes. What would you do? How 

do we get to the bottom of this so they actually make this easier, 

streamline it, do it in a logical way? We would love to see people 

like you at the table as they do that so that they are not just doing 

it in some vacuum. 

Mr. GLOVER. The three percent administrative money, we took 

three percent out. We were told by the government, we will streamline the process. We will make awards faster. We will compress it. 

The Navy has done it and they are to be commended. The rest of 

the government has not done it. If they want their three percent, 

make sure they comply with the law that is here and make certain 

that they streamline the process—— 

Senator AYOTTE. I like it. 

Mr. GLOVER [continuing]. Come up with a new set of regulations 

that are quick, short, simplified, and easy. Make this a model in 

government to show how you can eliminate government regulations. Every dollar a small business spends on accounting and paperwork, regulatory compliance, is a dollar they are not spending 

on innovation and technology. 

Senator AYOTTE. I like it. So, basically, you know, you want the 

three percent, then you make this happen, and we want to see accountability for it. I like it. 

I wanted to get your thoughts, Doctor. 

Mr. KLINE-SCHODER. Yeah. An analogy could be—and I know you 

are on the Senate Armed Services Committee—recently, the ITAR 

regulations were looked at—— 

Senator AYOTTE. Yes. 

Mr. KLINE-SCHODER [continuing]. And there has been a process 

to go through and kind of streamline those and try to get them 

modernized. It seems like the same thing could happen to the 

FAR—— 

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Senator AYOTTE. Yes. 

Mr. KLINE-SCHODER [continuing]. Spending a little time looking 

at that and asking the questions, you know, do we still need this, 

and is it—— 

Senator AYOTTE. And what are we accomplishing with it? 

Mr. KLINE-SCHODER [continuing]. With it, right, and for each of 

the—— 

Senator AYOTTE. That is a great idea. We should think about 

that as a way to—because there needs to be a forcing mechanism 

to have them look at all this, because as a small business, you 

know, you think about what it takes, all the regulations. A lot of 

people with great ideas are going to be discouraged and are not 

going to go forward just because of the paperwork. So, I think that 

would be a worthy undertaking as we, hopefully, permanently reauthorize these programs. 

And, Dr. Kline-Schoder, when we had the hearing, Senator Shaheen and I, in 2013 that you participated in, in Manchester, one 

of the things that you raised to us then is the need for uniformity 

in the administration of the SBIR, and that has sort of been, I 

think, a theme we have heard today at the hearing. So, have you 

seen—since we had this hearing in 2013, here we are in 2016—any 

change, any progress, or are we pretty much in the same situation? 

Mr. KLINE-SCHODER. It has probably gotten a little worse. 

Senator AYOTTE. It has gotten worse? 

Mr. KLINE-SCHODER. Yeah. 

Senator AYOTTE. Okay. 

Mr. KLINE-SCHODER. I think, although it may be one of those 

things where it needs to get worse before it gets better, and the 

benefit, actually, is going to go to John Williams, I think, because 

he had set up—and this is mostly related to the commercialization 

reporting that I was talking about as an example—— 

Senator AYOTTE. Right, uniformity. 

Mr. KLINE-SCHODER. Yeah. The current—you know, since we 

spoke, NASA came up with a different model of commercialization 

reporting than they had, or they had one and they added some 

things to it, and DOD changed theirs a little bit, and DOE changed 

theirs a little bit. And then SBA came in and they set up their own. 

And, I think the reason SBA set up their own is, hopefully, in the 

end, they are going to be the central—— 

Senator AYOTTE. The standard—— 

Mr. KLINE-SCHODER [continuing]. Repository for everybody. And, 

so, since then, we have had a few more changes, plus we had a new 

one that we have to deal with. But, John has been great about setting that up and making sure that it was as smooth as possible, 

and I am hoping that he is successful in getting all of the other 

agencies to kind of just standardize on that SBA database. 

Senator AYOTTE. What can we do to make sure that happens, so 

when we already look at where we are sort of behind on implementation, but if we can help this process and, obviously, make sure 

that it does become more uniform, that there is one central repository and you are not trying to meet all these different—— 

Mr. KLINE-SCHODER. Right. Yeah, I mean, I think what Jere said 

before in terms of having some incentive for the different agencies. 

I also liked what Mr. Smith said about maybe having a summit 

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where you get together with a number of the agencies so that they 

can talk about, you know, best practices and try to figure out how 

to get more streamlined-type things, that would probably be quite 

helpful, too. 

Senator AYOTTE. Great idea. 

Mr. GLOVER. The SBIR community is excited that John Williams 

is at SBA. He did a magnificent job at the Navy and we are excited 

he is there. 

The sad thing is he has got virtually no budget and virtually no 

people. To try to run a $2.5 billion a year program with four people 

is just a joke. Years ago, when it was less than half this size, they 

had 11 people in the office. And, to try to run it—it has just been 

lower and lower priority at SBA. It has just been bumped down 

and bumped down. It is a $2.5 billion program. 

It should be—somebody should be making sure that the Paperwork Reduction Act, which is a joke, is real. There is no reason. 

And, OMB should have allowed every agency to come up with 

anything they wanted to on commercialization. They should have 

said, SBA is going to be it. Everybody else, stop. And, quite frankly, we told SBA, use the Defense Department’s Commercial 

Achievement Index. It is working. It is great. We all understand it. 

Half the companies know how to use it. For whatever reason, they 

did not choose to do that. 

But, they are not thinking about paperwork reduction. They are 

not thinking about the burden they are putting on these companies. They do not understand, when they put burdens on the companies, they take away money that they could be using to innovate 

and create new jobs. 

Senator AYOTTE. Oh, absolutely. I mean, the people it takes to 

comply with this stuff is unbelievable, and a small business does 

not have an army of lawyers and accountants and every other person. 

Mr. GLOVER. We have been meeting with DCAA. We tried to do 

it the right way, and Senator Shaheen wanted to—but DCAA was 

coming along, helping out. The head of DCAA left and it is dead 

now. And, there are some—Armed Services did something—I am 

not sure it was good enough or far enough—in the last bill—— 

Senator AYOTTE. Right. 

Mr. GLOVER [continuing]. But that needs to be made tougher. 

And, quite frankly, there is no reason—for the kinds of awards 

they are making, you need to have auditors go in and hold up for 

years these accounting procedures. It drives the CEO of the company crazy—— 

Senator AYOTTE. Right. 

Mr. GLOVER [continuing]. When a DCAA auditor comes in on a 

million-dollar contract and stays there for weeks. 

Senator AYOTTE. Well, I was really struck when Dr. KlineSchoder talked about eight years later. That is absurd for any business. Eight years later? How do you possibly deal with that? 

So, I really appreciate both of you being here and the important 

feedback, and hopefully, as we take up a permanent reauthorization, we will also address these concerns to make it a more efficient 

program. 

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Chairman VITTER. Thank you very much, and thanks to both of 

you and our previous two witnesses again. I think this was a very 

informative and productive hearing, and we will absolutely take 

away these key thoughts and, hopefully, produce a good, strong bipartisan reauthorization which reauthorizes and improves the two 

programs. So, that is our very determined goal which we are actively working on. 

Thanks very much, and with that, the hearing is adjourned. 

[Whereupon, at 11:54 a.m., the committee was adjourned.] 

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