```

[Senate Report 115-450]
[From the U.S. Government Publishing Office]

                                                       Calendar No. 349
                                                       
115th Congress   }                                            {   Report
                                 SENATE
 2d Session      }                                            {  115-450

======================================================================

 
    SBIR AND STTR OVERSIGHT AND PILOT PROGRAM EXTENSION ACT OF 2017

                                _______
                                

               December 20, 2018.--Ordered to be printed

                                _______
                                

 Mr. Risch, from the Committee on Small Business and Entrepreueurship, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 1061]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Small Business and Entrepreneurship, to 
which was referred the bill (S. 1961) to amend the Small 
Business Act to temporarily reauthorize certain pilot programs 
under the Small Business Innovation Research Program and the 
Small Business Technology Transfer Program, and for other 
purposes, having considered the same, reports favorably thereon 
with an amendment in the nature of a substitute and recommends 
that the bill, as amended, do pass.

                            I. INTRODUCTION

    The SBIR and STTR Oversight and Pilot Program Extension Act 
of 2017 (S. 1961) was introduced by Senator James E. Risch, the 
Committee's Chairman, for himself, and Senator Jeanne Shaheen 
on October 16, 2017.
    This bill, as introduced would have extended, through 
September 30, 2018, four pilot programs that were enacted as 
part of the Small Business Innovation Research/Small Business 
Technology Transfer (SBIR/STTR) Reauthorization Act of 2011. 
These programs include the ``Phase Flexibility Pilot Program,'' 
the ``Phase 0 Proof of Concept Partnership Pilot Program,'' 
``Commercialization Readiness Pilot Program for Civilian 
Agencies Pilot Program,'' and the ``SBIR/STTR Administrative 
Funding Pilot Program''.
    For the markup of the bill, the Chairman filed a substitute 
amendment that extends the reauthorization of the pilot 
programs in this bill through September 30, 2019. By authority 
of the Cordon Rule, there was also a technical correction to 
the name of the EPSCoR program, which will read, ``Established 
Program to Stimulate Competitive Research.''
    The bill, as amended, was approved unanimously by a roll 
call vote as part of a manager's package.

              II. HISTORY (PURPOSE & NEED FOR LEGISLATION)

    The Small Business Technology Research (SBIR) program was 
authorized by the Small Business Innovation Development Act of 
1982. A sister program, the Small Business Technology Transfer 
(STTR) program, was authorized by the Small Business Research 
and Development Enhancement Act of 1992. The SBIR program 
requires federal agencies with extramural research and 
development budgets of $100 million or more to allocate at 
least 3.2 percent of their extramural funds for research awards 
to small businesses. Awards are competitive and merit-based, 
given to small businesses that have proposals or technology 
that could benefit the awarding agency: Phase I awards are 
given to determine the feasibility of an idea; Phase II awards 
are generally given to Phase I awardees--though there are 
exceptions--for technology that is particularly promising but 
needs further development; and Phase III allows the small 
business to pursue commercialization objectives resulting from 
the Phase I/II research and development (R&D) activities. The 
SBIR program does not fund Phase III. This Phase may involve 
follow-on non-SBIR federal R&D funding or production contracts 
for products, processes or services for the federal government. 
Currently, eleven federal agencies participate in the SBIR 
program. The STTR program has a similar three phase award 
structure, but focuses on public-private partnerships in which 
small businesses partner with research institutions with the 
intention of eventually commercializing their ideas. The STTR 
program requires federal agencies with an extramural research 
and development budget of $1 billion or more to allocate at 
least 0.45 percent of their extramural funds for STTR awards. 
Currently, five federal agencies participate in the STTR 
program.
    In the 112th Congress, the SBIR/STTR Reauthorization Act of 
2011 was reported favorably by the Committee and was later 
incorporated into the National Defense Authorization Act for 
Fiscal Year 2012 (P.L. 112-81). This bill, among other things, 
reauthorized the SBIR and STTR programs through September 30, 
2017 and created four new pilot programs. These four pilots 
including the Phase Flexibility Pilot Program, the Phase 0 
Proof of Concept Partnership Pilot Program, the 
Commercialization Readiness Pilot Program for Civilian 
Agencies, and the SBIR/STTR Administrative Funding Pilot 
Program--were agreed to after lengthy discussion and 
negotiation and the inclusion of reporting requirements to 
provide insight into the success of the programs at the 
agencies, including information about how funds are being 
spent. Congress has yet to receive sufficient or complete 
information from the agencies or SBA on the pilot programs. The 
pilots programs expired on October 1, 2017,\1\ in spite of 
several legislative efforts to temporarily extend them.
---------------------------------------------------------------------------
    \1\The Administrative Funding Pilot Program first expired in 2015, 
but was extended for two years, through September 20, 2017, as part of 
the National Defense Authorization Act for Fiscal Year 2016 (P.L. 114-
92).
---------------------------------------------------------------------------
    In the 114th Congress, the Improving Small Business 
Innovation and Technologies Research Act of 2015 (S. 2136), 
introduced by Chairman David Vitter and Senator Mike Enzi, was 
reported favorably by the Committee. This bill extended the 
SBIR/STTR Administrative Funding Pilot Program. It also 
modified that pilot program by allowing a portion of the 
administrative funds to establish the Regional SBIR State 
Collaborative Initiative Pilot Program. The Regional 
Collaborative was designed to increase competiveness in the 
proposal and selection process for states which fall in the 
bottom half of states receiving SBIR awards, and to increase 
technology transfer and commercialization of their projects. 
Finally, the legislation reauthorized the Federal and State 
Technology Partnership (FAST) Program. This bill did not 
receive consideration by the full Senate, but the language 
extending the Administration Funding Pilot through September 
30, 2017, was incorporated into the National Defense 
Authorization Act for Fiscal Year 2016 (P.L. 114-92).
    In the same Congress, the Committee favorably reported the 
SBIR and STTR Reauthorization and Improvement Act of 2016 (S. 
2812), introduced by Ranking Member Shaheen, Chairman David 
Vitter, and Senators Kelly Ayotte and Ed Markey. This bill 
would have made comprehensive changes to the SBIR and STTR 
programs, including making permanent the SBIR and STTR programs 
and the Commercialization Readiness Pilot Program for Civilian 
Agencies. Of note, this legislation incorporated the Improving 
Small Business Innovative Research and Technologies Act of 2015 
(S. 2136). The legislation never received consideration by the 
full Senate as a free-standing bill, but the most essential 
portion of the bill--extension of the SBIR and STTR programs 
was--enacted as part of the National Defense Authorization Act 
for Fiscal Year 2016 (P.L. 114-92), a full year ahead of 
expiration. The final version extended the programs for five 
years, through September 30, 2022.
    Because an extension of the pilot programs was not included 
in the five-year reauthorization for the SBIR and STTR programs 
last Congress, and attempts earlier this Congress to extend the 
programs through expedited consideration have not been 
possible, the pilot programs expired on October 1, 2017. 
Several agencies that robustly participated in the pilot 
programs would like to see the pilots extended. They contend 
that their agencies and awardees have been or will be adversely 
affected by the lapse of these pilots. Collectively, these 
pilots attempt to improve the commercialization outcomes of 
awardees, allow for more program flexibility, improve program 
outreach and efficiency, as well as improve the administration 
of the programs and support for awardees. This bill strikes a 
compromise by extending the pilots long enough for the agencies 
to get the programs back up and running as the agencies work 
through the backlog of reports due to Congress on the 
performance of these pilots.

                      III. HEARINGS & ROUNDTABLES

    In the 112th Congress, the Committee held a hearing on 
February 17, 2011 entitled, ``Reauthorization of the SBIR and 
STTR Programs.'' Dr. Charles Wessner, Director of the 
Technology, Innovation, and Entrepreneurship program at the 
National Academy of Sciences, expressed his concern that good 
ideas were being lost in between Phase awards. Dr. Wessner also 
observed that shortening the award process time would be 
beneficial for the program. Several senators and witnesses 
endorsed a stronger relationship between universities and the 
SBIR program, as well as improved program outreach.
    In the 113th Congress, the Committee held a roundtable on 
December 18, 2013 entitled, ``SBIR/STTR Measuring the 
Effectiveness of the Reauthorization Act and Maximizing 
Research Dollars to America's Small Businesses.'' Dr. Charles 
Wessner, Director of the Technology, Innovation, and 
Entrepreneurship program at the National Academy of Sciences, 
expressed support for strengthening ties between universities 
and the SBIR program. Mr. Manny Oliver, Director of the SBIR 
and STTR programs at the Department of Energy, also expressed 
support for greater cooperation between universities and the 
SBIR program. All of the participants expressed support for 
more program outreach.
    In the 114th Congress, the Committee held a hearing on 
January 28, 2016 entitled, ``Reauthorization of the SBIR/STTR 
Program: The Importance of Small Business Innovation to 
National and Economic Security.'' During this hearing, Chairman 
Vitter and Ranking Member Shaheen expressed strong support for 
the SBIR/STTR Program. Chairman Vitter expressed support for a 
Regional SBIR State Collaborative Initiative Pilot Program, 
whose aim is to increase competiveness in the proposal and 
selection process for states who fall in the bottom half of 
states receiving SBIR awards. Mr. Robert L. Smith, Director of 
the Department of the Navy SBIR and STTR Programs expressed 
support for the Admin Funding Pilot Program, which he said 
helped to reduce Phase II award processing times, though these 
times are still too long. Overall, members were supportive of 
improved outreach, prompt reporting, and the reauthorization of 
the SBIR/STTR programs.

                        IV. DESCRIPTION OF BILL

    This bill extends, through September 30, 2019, four pilot 
programs that were included in the SBIR/STTR Reauthorization 
Act of 2011.
    The bill also would require the SBA and the relevant 
agencies to comply with reporting requirements. As passed out 
of Committee, agencies would have a hard deadline of December 
31, 2018, to provide their data to the SBA, and the SBA would 
be required to submit all the reports and evaluation data to 
the Congress by March 30, 2019. SBA and the agencies are 
required to report to Congress on how the funds are being used 
and whether the pilots are meeting their objectives. However, 
the reports have not been submitted, and what information has 
been provided to Congress has been incomplete. This information 
would help Congress decide if the pilots should be continued, 
improved or ended.
    The Phase Flexibility Pilot Program allows firms receiving 
research funds from the National Institutes of Health (NIH), 
Department of Defense (DoD), and the Department of Education to 
bypass the Phase I award process and become a Phase II awardee 
if the agency finds that the firm has already met the Phase I 
standards.
    The Phase 0 Proof of Concept Partnership Pilot Program 
allows the NIH to use $5 million of its annual STTR funds to 
make awards to research institutions. These awards cannot 
exceed $1 million per university, and grants to researchers 
cannot exceed $100,000. This pilot is designed to help 
researchers demonstrate which of their federally funded 
projects are commercially viable, while encouraging researchers 
to start businesses and apply for SBIR/STTR awards.
    The Commercialization Readiness Pilot Program for Civilian 
Agencies allows any SBIR agency, other than DoD, to use up to 
10 percent of its SBIR/STTR funding for follow-on awards to 
SBIR and STTR firms for technology development, testing, 
evaluation, and commercialization assistance. The purpose is to 
help small firms get over the valley of death and inserted into 
a government product or process, or commercialized in the 
private sector. The size of these awards may be up to $3 
million.
    The SBIR/STTR Administrative Funding Pilot Program allows 
an agency to set aside three percent of its SBIR funding for 
administrative needs to operate the programs. These funds may 
be used to conduct outreach to under-served states, shorten 
award review timelines, streamline reporting, and reduce waste, 
fraud, and abuse. The pilot requires SBA to establish 
performance criteria to measure the effectiveness of the 
activities by the agencies and report to Congress on how the 
funds are used. The pilot originally expired in 2015, but was 
extended through September 30, 2017, as previously noted as 
part of P.L. 114-328.
    This legislation also includes language that passed the 
Committee last Congress to direct 15 percent of the SBIR/STTR 
Administrative Funding Pilot Program funds to SBA to support 
regional, multi-state collaboratives to increase participation 
by small firms located in the states that receive fifty percent 
or less of SBIR awards.

                           V. COMMITTEE VOTE

    In compliance with rule XXVI (7)(b) of the Standing Rules 
of the Senate, the following vote was recorded on March 14, 
2018.
    A motion to adopt the SBIR and STTR Oversight and Pilot 
Program Extension Act of 2017, a bill to amend the Small 
Business Act to temporarily reauthorize certain pilot programs 
under the Small Business Innovation Research Program and the 
Small Business Technology Transfer Program, and for other 
purposes, was approved unanimously by a roll call vote as part 
of a manager's package. Senators Risch, Rubio, Paul, Scott, 
Ernst, Inhofe, Young, Enzi, Rounds, Kennedy, Cardin, Cantwell, 
Shaheen, Heitkamp, Markey, Booker, Coons, Hirono, and Duckworth 
voted for the bill.

                           VI. COST ESTIMATE

    In compliance with rule XXVI (11)(a)(1) of the Standing 
Rules of the Senate, the Committee estimates the cost of the 
legislation will be equal to the amounts discussed in the 
following letter from the Congressional Budget Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                   Washington, DC, August 21, 2018.
Hon. James E. Risch,
Chairman, Committee on Small Business and Entrepreneurship,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1961, the SBIR and 
STTR Oversight and Pilot Program Extension Act of 2018.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Stephen 
Rabent.
            Sincerely,
                                                Keith Hall,
                                                          Director.
    Enclosure.

S. 1961--SBIR and STTR Oversight and Pilot Program Extension Act of 
        2017

    S. 1961 would direct the Small Business Association (SBA) 
to develop a one-year pilot program to provide grants to 
research institutions and small businesses that collaborate, to 
improve those small businesses' ability to compete for awards 
under the Small Business Innovation Research (SBIR) and Small 
Business Technology Transfer (STTR) programs. Using information 
from several participating agencies, CBO estimates that 
implementing the bill would cost $6 million over the 2019-2023 
period; such spending would be subject to the availability of 
appropriated funds.
    Under current law, the SBIR program requires federal 
agencies with annual extramural research and development (R&D) 
budgets of more than $100 million to set aside 3.2 percent for 
small-business contracts. The STTR program requires agencies 
with more than $1 billion in their annual extramural R&D 
budgets to set aside 0.45 percent to fund cooperative research 
between small businesses and federal laboratories or nonprofit 
research institutions. Eleven agencies currently participate in 
at least one of those programs. Under an existing pilot program 
for administrative spending, agencies that participate in the 
SBIR program may use up to 3 percent of their SBIR funds--
instead of general operating funds--to pay for some of the 
activities of program administration. That pilot program is 
authorized through 2022.
    S. 1961 would direct agencies participating in that pilot 
program to transfer a portion of the funds to the SBA for 
grants under the bill's pilot program. The SBA could spend any 
transferred amounts above $5 million on administrative costs, 
additional grants, or another SBA grant program.
    Based on the historical use of the 3 percent set-aside by 
participating agencies, CBO estimates that transferring a 
portion of that amount to the SBA would require agencies to use 
additional funds to cover the costs of administering their SBIR 
and STTR programs. Using information from the SBA and several 
participating agencies about the size of their extramural R&D 
budgets, their respective administrative costs, and amounts 
historically set aside under the administrative-spending pilot 
program, CBO estimates that implementing that provision of S. 
1961 would cost $6 million over the 2019-2020 period; such 
spending would be subject to the availability of appropriated 
funds. That amount consists of $5 million to be transferred to 
the SBA and $1 million for the SBA to administer and report on 
the pilot program.
    CBO estimates that implementing other provisions of S. 
1961, such as updating agency rules and regulations related to 
the SBIR and STTR programs, would cost less than $500,000 over 
the 2019-2020 period; such spending would be subject to the 
availability of appropriated funds.
    Enacting S. 1961 would not affect direct spending or 
revenues; therefore pay-as-you-go procedures do not apply.
    CBO estimates that enacting S. 1961 would not increase net 
direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2029.
    S. 1961 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act.

                  VII. EVALUATION OF REGULATORY IMPACT

    In compliance with rule XXVI (11)(b) of the Standing Rules 
of the Senate, it is the opinion of the Committee that no 
significant additional regulatory impact will be incurred in 
carrying out the provisions of this legislation. There will be 
no additional impact on the personal privacy of companies or 
individuals who utilize the services provided.

                   VIII. SECTION-BY-SECTION ANALYSIS

Section 1. Short title

    This section provides the short title for the Act, the 
``SBIR and STTR Oversight and Pilot Program Extension Act of 
2017.''

Sec. 2. Pilot extensions and reporting compliance; Pilot program

    This section extends four SBIR/STTR Pilot Programs through 
fiscal year 2019. These include the ``Phase Flexibility Pilot 
Program,'' ``Phase 0 Proof of Concept Partnership Pilot 
Program,'' ``Commercialization Readiness Pilot Program for 
Civilian Agencies Pilot Program,'' and the ``SBIR/STTR 
Administrative Funding Pilot Program.'' This section also 
creates the ``Regional SBIR State Collaborative Initiative 
Pilot Program'' within the SBIR/STTR Administrative Funding 
Pilot Program. This pilot redirects 15 percent of the funds 
from this pilot program for SBA to be used to coordinate state 
participation in multi-state collaboratives, which aim to 
increase applications and awards to small businesses located in 
states that received fifty percent or less of SBIR awards.
```