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[Senate Report 115-454]
[From the U.S. Government Publishing Office]

                                                        Calendar No. 352
                                                       
115th Congress  }                                            {     Report
                                 SENATE
 2d Session     }                                            {    115-454

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                 SUPPORT STARTUP BUSINESSES ACT OF 2018

                                _______
                                

               December 21, 2018.--Ordered to be printed

                                _______
                                

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

                              R E P O R T

                         [To accompany S. 2419]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Small Business and Entrepreneurship, to 
which was referred the bill (S. 2419) to amend the Small 
Business Act to improve the technical and business assistance 
services under the SBIR and STTR programs, having considered 
the same, reports favorably thereon with an amendment in the 
nature of a substitute and recommends that the bill, as 
amended, do pass.

                            I. INTRODUCTION

    The Support Startup Businesses Act of 2018 (S. 2419) was 
introduced by Senator Christopher A. Coons, for himself, and 
Senator Cory Gardner on February 13, 2018.
    This bill as introduced increased the discretionary 
technical assistance funding to Small Business Innovation 
Research Program and Small Business Technology Transfer (SBIR/
STTR) awardees from $5,000 a year per award to 5% of the award. 
It broadened the uses of the funds to include business 
assistance, such as services for intellectual property (IP) 
protections, market research, and development of regulatory and 
manufacturing plans. It expanded the number of vendors an SBIR 
agency or a participant could select to provide the technical 
or business-related assistance services, and allowed vendors to 
be private or public, or a state-funded agency that specializes 
in commercializing technology. Finally, it directed the 
Administrator of the Small Business Administration (SBA) to 
submit a report reviewing the efficacy of the technical and 
business assistance.
    For the markup of the bill, Senator Coons filed a 
substitute amendment that caps the dollar amount used for 
commercialization assistance at $50,000 per award for Phase II 
awards. The amendment requires that the discretionary technical 
assistance funds be taken out of a small business's Phase II 
SBIR or STTR award amount instead of being made in addition to 
their SBIR and STTR award amount. Finally, the amendment 
strengthens the oversight requirements by requiring a survey of 
vendors and awardees receiving this assistance and a report to 
Congress to determine the efficacy of these technical and 
business assistance changes.
    The bill, as amended, was approved unanimously by a roll 
call vote as part of an eight-bill manager's package.

              II. HISTORY (PURPOSE & NEED FOR LEGISLATION)

    The SBIR program was authorized by the Small Business 
Innovation Development Act of 1982. A sister program, STTR, was 
authorized by the Small Business Research and Development 
Enhancement Act of 1992. The SBIR program requires federal 
agencies with extramural research and development budgets of 
$100 million or more to allocate at least 3.2 percent of their 
extramural funds for research awards to small businesses. 
Awards are competitive and merit-based, given to small 
businesses that have proposals or technology that could benefit 
the awarding agency: Phase I awards are given to determine the 
feasibility of an idea; Phase II awards are for technology that 
is particularly promising but needs further development; and 
Phase III is for the small business to pursue commercialization 
objectives resulting from the Phase I/II R&D activities. The 
SBIR program does not fund Phase III. This Phase may involve 
follow-on non-SBIR federal R&D funding or production contracts 
for products, processes or services for the federal government. 
Currently eleven federal agencies participate in the SBIR 
program. The STTR program has a similar three phase award 
structure but focuses on public-private partnerships in which 
small businesses partner with research institutions with the 
intention of eventually commercializing their ideas. The STTR 
program requires federal agencies with an extramural research 
and development budget of $1 billion or more to allocate at 
least 0.45 percent of their extramural funds for STTR awards. 
Currently five federal agencies participate in the program.
    The provisions of this bill were developed to increase 
commercialization of SBIR/STTR technologies. While the National 
Academy of Sciences has found that 40 to 70 percent of SBIR and 
STTR projects reach the market, in many cases, small businesses 
carrying out research and development work enter a so-called 
``valley of death,'' in which small firms struggle to bridge 
the gap between research and the commercialization of an idea 
or product.
    The Support Startup Businesses Act of 2018 addresses this 
issue by allowing for a larger amount of discretionary 
technical assistance funds to be used for commercialization, 
allowing for more agency-approved commercialization vendors, 
and expanding the definition of allowable commercialization 
expenses. In the interest of robust congressional oversight, 
the bill also directs the SBA to issue a report on the efficacy 
of the commercialization and technical assistance changes made 
in this bill.
    In the 114th Congress, Senator Christopher A. Coons 
introduced the Support Startup Businesses Act of 2016 (S. 
2751), which contained similar language to this bill. During 
Committee consideration of the SBIR and STTR Reauthorization 
and Improvement Act of 2016 (S. 2812), which was sponsored by 
the Committee's Ranking Member, Senator Jeanne Shaheen, and the 
Committee's Chairman, Senator David Vitter, a number of 
provisions from S. 2751 were included in S. 2812. The bill was 
reported favorably by the Committee by an 18-1 vote, but did 
not receive consideration by the full Senate.
    In the 115th Congress, similar language was included in the 
Support Startup Businesses Act of 2017 (H.R. 2789). While not 
considered independently, the text of H.R. 2789 was included as 
part of the Small Business Innovation Research and Small 
Business Technology Transfer Improvements Act of 2017 (H.R. 
2763), which passed the House Small Business Committee on 
September 14, 2017 and passed the House of Representatives on 
October 11, 2017.

                      III. HEARINGS & ROUNDTABLES

    In the 113th Congress, the Committee held a roundtable on 
December 18, 2013 entitled, ``SBIR/STTR: Measuring the 
Effectiveness of the Reauthorization Act.'' Most participants 
in the roundtable expressed strong support for the 
commercialization aspect of the program. The participants also 
discussed which agencies could improve commercialization.
    In the 114th Congress, the Committee held a hearing on 
January 28, 2016 entitled, ``Reauthorization of the SBIR/STTR 
Program: The Importance of Small Business Innovation to 
National and Economic Security.'' At this hearing, Chairman 
Vitter discussed the importance of commercialization of 
research and technology for small firms participating in the 
SBIR/STTR programs. Senator Coons also expressed his belief 
that commercialization was an integral part of the program. Mr. 
John Williams, Director of Innovation and Technology, Office of 
Investment and Innovation, Small Business Administration, 
testified that commercialization was a fundamental goal of the 
program and that outside expertise was a helpful option for 
firms that were attempting to commercialize their technology.

                        IV. DESCRIPTION OF BILL

    The bill allows for greater flexibility in the use of SBIR/
STTR Phase II award funds by agencies and awardees for 
commercialization activities. Currently, the discretionary 
technical assistance funding for SBIR and STTR awardees is 
limited to $5,000 per year for Phase I awards and $5,000 per 
year for Phase II awards. The commercialization assistance used 
by awardees is not taken out of their award dollars. In 
general, this means $5,000 per Phase I award, and $10,000 per 
Phase II award.
    This bill as introduced allows for up to five percent, per 
year, per Phase I and Phase II award to be used for 
commercialization activities. In general, this change would 
have yielded $7,500 per Phase I award of $150,000 and $50,000 
per Phase II award of $1,500,000. However, based on the most 
complete data on SBIR and STTR awards (FY2015), in some cases 
the new formula could have been insufficient or excessive.
    To address these cases and concerns that program changes 
not reduce the number of awards going to small businesses, 
Senator Coons offered a substitute amendment that capped the 
dollar amount used for commercialization assistance at $50,000 
per award for Phase II awards. The amendment also eliminated 
the changes to Phase I and required that the discretionary 
technical assistance funds be taken out of a small business's 
Phase II SBIR or STTR funds instead of being made in addition 
to their SBIR and STTR award amount.
    In addition to increasing the amount of discretionary 
technical assistance for SBIR and STTR agencies and awardees, 
the bill expands the uses of the funds to allow for business 
assistance, such as obtaining intellectual property protection 
for a new invention, market validation and research, 
manufacturing plans, and business model development. This bill 
also increases the number of agency-approved commercialization 
vendors from one to several. It requires the SBA to report on 
the use of these funds and requires small businesses to provide 
participating agencies with a description of the assistance 
provided by the agency-approved vendors. Finally, the bill 
requires the SBA to conduct a survey of vendors and awardees 
receiving this assistance and report to Congress on the 
efficacy of these changes to the SBIR/STTR programs.

                           V. COMMITTEE VOTE

    In compliance with rule XXVI(7)(b) of the Standing Rules of 
the Senate, the following vote was recorded on March 14, 2018.
    A motion to adopt the Support Startup Businesses Act of 
2018, a bill to amend the Small Business Act to improve the 
technical and business assistance services under the SBIR and 
STTR programs, was approved unanimously by a roll call vote as 
part of a manager's package. Senators Risch, Rubio, Paul, 
Scott, Ernst, Inhofe, Young, Enzi, Rounds, Kennedy, Cardin, 
Cantwell, Shaheen, Heitkamp, Markey, Booker, Coons, Hirono, and 
Duckworth voted for the bill.

                           VI. COST ESTIMATE

    In compliance with rule XXVI(11)(a)(1) of the Standing 
Rules of the Senate, the Committee estimates the cost of the 
legislation will be equal to the amounts discussed in the 
following letter from the Congressional Budget Office:
                                                     July 16, 2018.
Hon. James E. Risch,
Chairman, Committee on Small Business and Entrepreneurship,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 2419, the Support 
Startup Businesses Act of 2018.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Stephen 
Rabent.
            Sincerely,
                                                Keith Hall,
                                                          Director.
    Enclosure.

S. 2419--The Support Startup Businesses Act of 2018

    S. 2419 would make several changes to the operations of the 
Small Business Innovation Research (SBIR) and Small Business 
Technology Transfer (STTR) programs.
    Under current law, those programs require certain federal 
agencies to set aside a portion of their budgets for extramural 
research and development for contracts with small businesses or 
for cooperative research between small businesses and federal 
laboratories or nonprofit research institutions. The 11 
agencies that participate in at least one program may provide 
technical assistance awards to small businesses that are in 
addition to any awards under the SBIR or STTR programs. S. 2419 
would expand the assistance that small businesses can receive, 
raise the maximum award and technical assistance amounts, and 
direct agencies to include those amounts as part of an SBIR or 
STTR award. Because awarding additional amounts for technical 
assistance would decrease the amounts available for SBIR or 
STTR awards by corresponding amounts and would not affect the 
underlying costs of administering those programs, CBO estimates 
that implementing those provisions would have no budgetary 
effect.
    S. 2419 also would direct the Small Business Administration 
(SBA) to conduct a survey of vendors and small businesses that 
provide and receive technical assistance and to submit a report 
to the Congress on the efficacy of that assistance. Using 
information from the SBA, CBO estimates that implementing the 
bill would cost the agency less than $500,000 over the 2019-
2023 period for the agency to update the program's regulations, 
conduct the required survey, and monitor the expanded awards. 
Such spending would be subject to the availability of 
appropriated funds.
    Enacting the bill would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    CBO estimates that enacting S. 2419 would not increase net 
direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2029.
    S. 2419 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act.
    The CBO staff contact for this estimate is Stephen Rabent. 
The estimate was reviewed by H. Samuel Papenfuss, Deputy 
Assistant Director for Budget Analysis.

                  VII. EVALUATION OF REGULATORY IMPACT

    In compliance with rule XXVI(11)(b) of the Standing Rules 
of the Senate, it is the opinion of the Committee that no 
significant additional regulatory impact will be incurred in 
carrying out the provisions of this legislation.

                   VIII. SECTION-BY-SECTION ANALYSIS

Section 1. Short title

    This section provides the short title for the Act, the 
``Support Startup Businesses Act of 2018''.

Sec. 2. Improvement to technical and business assistance

    This section allows for up to $50,000 per SBIR/STTR Phase 
II award to be used for commercialization activities and 
business assistance while increasing the number and type of 
agency-approved vendors that agencies and awardees may use. The 
$50,000 will be counted as part of the recipient's Phase II 
award.
    This section also allows the Administrator to impose a 
limit on the amount of technical and business services one 
small business may receive with respect to multiple Phase II 
SBIR/STTR awards in one fiscal year. Finally, this section 
requires a report on the efficacy of SBIR/STTR business and 
technical assistance be submitted to Congress by the SBA before 
the end of fiscal year 2019.
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