79–010 

Calendar No. 94 

111TH CONGRESS REPORT " ! SENATE 1st Session 111–37 

SBIR/STTR REAUTHORIZATION ACT OF 2009 

JULY 2, 2009.—Ordered to be printed 

Filed, under authority of the order of the Senate of June 25, 2009 

Ms. LANDRIEU, from the Committee on Small Business and 

Entrepreneurship, submitted the following 

R E P O R T 

[To accompany S. 1233] 

The Committee on Small Business and Entrepreneurship, to 

which was referred the bill (S. 1233) to reauthorize and improve 

the SBIR and STTR programs, and for other purposes, having considered the same, reports favorably thereon with an amendment 

and recommends that the bill, as amended, do pass. 

I. PURPOSE AND NEED FOR LEGISLATION

The purpose of the ‘‘SBIR/STTR Reauthorization Act of 2009’’ is 

to reauthorize, make current, and improve the Small Business Innovation Research (SBIR) and Small Business Technology Transfer 

(STTR) programs. The SBIR program needs to be reauthorized because it was set to sunset on September 30, 2008. The program has 

been extended two times since the original sunset date, as part of 

a temporary reauthorization bill for all of the Small Business Administration’s programs. First, it was extended through March 20, 

2009 (S. 3026, P.L. 110–235, signed into law May 23, 2008), and 

most recently it was extended through July 31, 2009 (H.R. 1541, 

P.L. 111–10, signed into law March 20, 2009). The Committee believes that these programs need to be fully reauthorized in order 

to stimulate America’s innovation economy, to remedy the continued underrepresentation of small businesses in federal research 

and development, and to use small businesses to help government 

agencies meet national needs. Small businesses continue to receive 

only about 4 percent of federal research and development dollars 

despite the fact that small businesses employ about one-third of 


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1 National Science and Engineering Indicators 2003, National Science Foundation, Division of 

Science Resources Statistics. See also, Testimony of NSBA member Robert Schmidt before the 

House Subcommittee on Technology and Innovation, Committee on Science and Technology, ‘‘Reauthorization of the Small Business Innovation Research Programs and ‘Unleashing American 

Innovation,’ ’’ 110th Congress, April 26, 2007. 2 Committee on Prospering in the Global Economy of the 21st Century, Rising Above the Gathering Storm: Energizing and Employing America for a Brighter Economic Future, Kate Kelly ed. 

(National Academies Press, 2007), p. 3. 3 National Research Council, SBIR Challenges and Opportunities, Charles Wessner ed. (National Academies Press, 1999), p. 7. 

America’s scientists and engineers, produce more patents than 

large businesses and universities, and are powerful vehicles for the 

dissemination of scientific and technical knowledge.1 SBIR and 

STTR are two of the very few federal programs that utilize this 

largest sector of the scientific and technological community. 

It is important to reauthorize these two worthy and highly successful programs for economic and national security reasons. 

Globalization, in particular, has resulted in increased competition 

and a new series of challenges to the economic and military preeminence America has enjoyed since World War II. In a comprehensive evaluation of the state of American innovation, the National Academy of Sciences’ report, Rising Above the Gathering 

Storm, underscored the dangers the United States faces in science 

and technology: 

The scientific and technological building blocks critical 

to our economic leadership are eroding at a time when 

many other nations are gathering strength...We are worried about the future prosperity of the United States. Although many people assume that the United States will always be a world leader in science and technology, this may 

not continue to be the case inasmuch as great minds and 

ideas exist throughout the world. We fear the abruptness 

with which a lead in science and technology can be lost— 

and the difficulty of recovering a lead once lost, if indeed 

it can be regained at all.2

Government-industry partnerships in innovation and research 

have become increasingly critical to keeping our nation competitive 

internationally and to fulfilling the needs of the American people.3

Together, SBIR and STTR form one of the largest such public-private partnerships in the nation, and they are essential to fulfilling 

the priority research needs of the country. Furthermore, these programs utilize the innovative capabilities of small businesses to create jobs, to stimulate local economies, and to commercialize ideas 

originally developed in our federal science agencies and universities. The SBIR and STTR programs also serve as powerful mechanisms to involve a diverse group of individuals, geographically and 

demographically, in federal research and development, thereby increasing competition, diversifying the government’s supply base, 

and reducing costs. For these reasons, the programs need and deserve to be reauthorized, strengthened, and improved. 

II. SUMMARY

The ‘‘SBIR/STTR Reauthorization Act of 2009’’ (S. 1233), reauthorizes the Small Business Administration’s (SBA) SBIR and 

STTR programs for 14 years each, through 2023. The legislation 

gradually increases, over ten years, the allocation for the SBIR proVerDate Nov 24 2008 07:05 Jul 07, 2009 Jkt 079010 PO 00000 Frm 00002 Fmt 6659 Sfmt 6602 E:\HR\OC\SR037.XXX SR037

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4SBIR and STTR participating agencies: At the time of Committee passage of S. 1233, 11 

agencies qualified to have SBIR programs and five qualified to have STTR programs. The SBIR 

participating agencies are as follows: Department of Defense, Department of Health and Human 

Services, NASA, Department of Energy, National Science Foundation, Department of Homeland 

Security, Department of Agriculture, Department of Education, Department of Commerce, Environmental Protection Agency, and Department of Transportation. The STTR participating agencies are as follows: Department of Defense, Department of Health and Human Services, NASA, 

Department of Energy, and the National Science Foundation. 

gram at all participating agencies from 2.5 percent to 3.5 percent 

of the agency’s extramural research and development budget, and, 

for the STTR program, it gradually increases, over six years, the 

allocation at all participating agencies from 0.3 percent to 0.6 percent of this same budget. It increases the award size guidelines for 

the SBIR and STTR programs from $100,000 to $150,000 for Phase 

I and from $750,000 to $1 million for Phase II, with authority for 

the SBA to make adjustments every three years based on inflation, 

instead of every five years, as is currently the law. Also, in order 

to protect against abuses in issuing ‘‘jumbo’’ awards, the bill restricts agencies from making Phase I and Phase II awards that are 

more than 50 percent larger than the guidelines. Awards over the 

50 percent cap can still be made, but a Federal agency cannot use 

funds from the SBIR and STTR allocations to provide the supplemental funding. To increase geographic participation in the SBIR 

and STTR programs, particularly in rural states, S. 1233 enhances 

and reauthorizes through 2014 the Federal and State Technology 

Partnership (FAST) program and the Rural Outreach Program 

(ROP). To help move SBIR and STTR technologies across the ‘‘valley of death’’ (a phrase used to describe the funding gap between 

Phases II and III or transitioning projects to the commercialization 

stage), the legislation improves and makes permanent what is currently known as the Commercialization Pilot Program at the Department of Defense (DoD) and creates commercialization pilot programs at the other SBIR agencies, authorizing all such pilots 

through 2014. This bill includes a compromise on the issue of the 

participation of companies majority-owned and controlled by multiple venture capital companies in the SBIR program, allowing the 

National Institutes of Health (NIH) to award up to 18 percent of 

its SBIR dollars to companies majority-owned and controlled by 

multiple venture capital companies and the other SBIR qualifying 

agencies to apply to award up to 8 percent of their SBIR dollars 

to this class of firms.4 The affiliation rule itself and the 500 employee standard remain unchanged in this bill. Last, the legislation 

seeks to improve oversight by giving more autonomy and resources 

to the Small Business Administration’s Office of Technology, by 

building in regular assessments by the National Academy of 

Sciences, and by streamlining data collection and reporting requirements to help Congress better assess the programs’ effectiveness, 

to guide future policy changes, and to address record-keeping problems identified by GAO and NAS in their reports on the SBIR program. 


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5 Joint Hearings before the U.S. Senate Select Committee on Small Business and the U.S. 

House of Representatives Subcommittee on Antitrust, Consumer and Employment and Subcommittee on Energy, Environment, Safety and Research of the Committee on Small Business, 

‘‘Underutilization of Small Business in the Nation’s Efforts to Encourage Industrial Innovation,’’ 

99th Cong. (1978) (Transcript of the two-day proceedings). 6 National Research Council, SBIR Challenges and Opportunities, 1999. 7Senators who cosponsored P.L. 97–219 and still serve in the Senate: Max Baucus; Robert 

C. Byrd; Thad Cochran; Christopher Dodd; Chuck Grassley; Orrin G. Hatch; Daniel K. Inouye; 

Edward M. Kennedy; Patrick J. Leahy; Carl Levin; Richard G. Lugar; and Arlen Specter. 

III. HISTORY OF THE PROGRAM

A. SMALL BUSINESS INNOVATION RESEARCH (SBIR) PROGRAM

1982 Establishment of SBIR: ‘‘Small Business Innovation Development Act of 1982’’ (P.L. 97–219, S. 881, July 22, 1982) 

The federal SBIR program was created more than 25 years ago 

out of growing concern since the 1960s that, despite the increasing 

prominence of small businesses in innovation, federal research and 

development expenditures had disproportionately been awarded to 

large businesses, colleges, universities, and federally funded research and development centers. As a result, in 1976, Roland Tibbetts, at the National Science Foundation (NSF), took the lead in 

directing a greater and more significant share of its extramural research and development funds to small business in a new innovation and research program, with a focus on discovering, funding, 

and evaluating the initial, highest-risk, most cutting-edge exploratory research that is necessary to achieve significant technological 

innovations and breakthroughs. The purpose was to make small 

but sufficient awards to test as many ideas as possible. The program at NSF led policymakers to consider taking further steps to 

unleash the innovative potential of small businesses.5 On August 

9 and 10, 1978, the House and Senate Committees on Small Business held a joint hearing on the underutilization of small businesses in American innovation. There was a clear consensus that 

small businesses deserved a greater share of federal research and 

development funds, not only because of the innovative and development successes of small firms, but also because of their achievements in job creation and cost efficiency and their powerful contribution to the greater science and technology communities. The 

1980 White House Conference on Small Business echoed these sentiments and recommended legislation to expand the NSF concept 

to other agencies.6 The end result of the recommendation was the 

Small Business Innovation Development Act of 1982, which first 

authorized the SBIR program (P.L. 97–219, S. 881, July 22, 1982). 

The bill was introduced by Senator Warren Rudman (R–NH), and 

had 84 cosponsors, 12 of whom are still serving in the Senate.7

Senator Snowe, then serving in the House of Representatives, was 

an original co-sponsor of the SBIR legislation adopted in 1982. The 

Act creating SBIR had four objectives: 

1. To stimulate technological innovation; 

2. To use small business to meet federal research and development needs; 

3. To foster and encourage participation by minority and disadvantaged persons in technological innovation; and 

4. To increase private sector commercialization of innovation 

derived from federal research and development. 


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8 National Research Council, SBIR Challenges and Opportunities, Charles Wessner ed. (National Academies Press, 1999), pp. 18–21. 

The intent of the 1982 Act and the original NSF program was 

not for the SBIR program to be merely a commercialization program. Small businesses in SBIR were designed to be vehicles for 

fulfilling the priority research needs of federal agencies and the nation at large while stimulating local economies. Further, as mentioned earlier, the program was designed to fund as many ideas as 

possible, rather than to take only a few ideas from concept to market or insertion into a government product or technology. The allocation of funds for SBIR in its first year of existence totaled $45 

million, or 0.2 percent of the extramural research and development 

budgets of federal agencies that had extramural research and development budgets that exceeded $100 million. Per P.L. 97–219, 

the allocation was gradually increased over six years, until the 

final mandated allocation for SBIR of 1.25 percent was reached. 

Modeled after the NSF program, the program was structured in 

three phases. Phase I awards were modest and capped at $50,000 

and were meant to test the feasibility of an idea or product. Phase 

II awards, capped at $500,000, were meant to be used to begin 

product development and prototyping. In Phase III, the graduation 

stage of SBIR, small businesses were to obtain outside funding, 

whether private funding or non-SBIR federal funding, to continue 

development toward a commercial product or products or systems 

to further the mission of an agency.8 P.L. 97–219 authorized the 

SBIR program for six years, through 1988. 

1986 SBIR Extension: ‘‘A bill to provide the Small Business Administration continuing authority to administer a program for 

small innovative firms’’ (P.L. 99–443, H.R. 4260, Oct. 6, 1986) 

SBIR was not set to expire until 1988, six years after its establishment, but, due to the program’s political support, in 1986, it 

was extended for another seven years, through 1993. 

1992 SBIR Reauthorization: ‘‘Small Business Research and Development Enhancement Act of 1992’’ (P.L. 102–564, S. 2941, Oct. 

28, 1992) 

The next congressional review of the program came with the 

‘‘Small Business Research and Development Enhancement Act of 

1992,’’ which reauthorized SBIR for eight years, through FY 2000, 

and made several modifications to the program. Lawmakers 

praised SBIR for its accomplishments in commercialization and towards its other goals in innovation and research over its first ten 

years of operation. The SBIR allocation was doubled to 2.5 percent, 

and award sizes were increased for Phase I to $100,000 and for 

Phase II to $750,000. Among the arguments put forth to justify the 

increase to the SBIR allocation were that the SBIR program had 

been ‘‘an effective catalyst for the development of technological innovations’’ and that small firms in SBIR ‘‘[had] provided high quality research and development in a cost-effective manner.’’ 


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2000 SBIR Reauthorization: ‘‘Small Business Reauthorization Act 

of 2000’’ (P.L. 106–554, H.R. 5667, Dec. 21, 2000) 

In 2000, the SBIR program was again reauthorized and extended 

for eight years, through September 30, 2008. The House bill incorporated changes to SBIR originally outlined in the Senate bill, S. 

3236. The final legislation emphasized the need for systematic 

evaluation of the program and mandated a comprehensive evaluation by the National Academy of Sciences (NAS) of SBIR at federal 

agencies with an SBIR budget greater than $50 million. The law 

also established the FAST, created to increase the participation of 

small firms across the country in the SBIR program. 

2008 SBIR Temporary Extension: ‘‘An Act to provide for an additional temporary extension of programs under the Small Business Act and the Small Business Investment Act of 1958’’ (P.L. 

110–235, S. 3029, May 23, 2008) 

The SBIR program was extended for eight months through 

March 20, 2009. This was the fifth time that the Committee temporarily extended the SBA’s programs since 2006 but the first time 

that it was applicable to the SBIR program. More specifically, this 

legislation amended P.L. 109–136, which temporarily authorized 

through February 2, 2007, any program, authority, or provision, including any pilot program, authorized under the Small Business 

Act or the Small Business Investment Act of 1958 that was scheduled to expire on or after September 30, 2006, but before February 

2, 2007, by substituting March 20, 2009, for the 2007 date. Since 

the SBIR program was set to expire on September 30, 2008, the 

program was temporarily extended under this Act to sunset on 

March 20, 2009. 

This temporary extension of the sunset date was important because the previous sunset date of September 30, 2008, was fast approaching and the likelihood of passing legislation through both 

houses of Congress, reconciling the differences, and enacting it into 

law before September 30, 2008, was low. The extension, which covered all of the SBA’s programs, gives Congress additional time to 

complete the comprehensive SBIR reauthorization process, while 

preventing the agencies from slowing down or shutting down their 

SBIR programs, as happened around the time of the 2000 reauthorization, hurting many small businesses and delaying research. 

2009 SBIR Temporary Extension: ‘‘An Act to provide for an additional temporary extension of programs under the Small Business Act and the Small Business Investment Act of 1958’’ (P.L. 

111–10, H.R. 1541, March 20, 2009) 

The SBIR program was extended for an additional four months 

through July 31, 2009. This legislation, like the eight-month extender bill described above, amended P.L. 109–136 and was necessary because the 2008 election brought changes in the administration with a new president and significant changes in the Senate 

and House of Representatives that delayed organization of the bodies and their committees and therefore pushed back legislation. 

Furthermore, the new Administrator of the SBA had not yet been 

confirmed, and it was important to wait for her to take over leadership of the SBA and allow the new administration time to weigh 

in on major pieces of legislation, including reauthorization of the 


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SBIR and STTR programs. As with the last extension, this legislation gave Congress additional time to complete the comprehensive 

SBIR reauthorization process, while preventing the agencies from 

slowing down or shutting down their SBIR programs, as happened 

before the 2000 reauthorization, hurting many small businesses 

and delaying research. 

B. SMALL BUSINESS TECHNOLOGY TRANSFER (STTR) PROGRAM

1992 Establishment of STTR: ‘‘Small Business Research and Development Enhancement Act of 1992’’ (P.L. 102–564, S. 2941, Oct. 

28, 1992) 

This legislation not only reauthorized the SBIR program, as discussed above, but also created, as a pilot, the Small Business Technology Transfer program, with a three-year authorization. The goal 

of this program, which complements the SBIR program, was to 

stimulate partnerships between small businesses and non-profit research institutions, such as universities and federally funded research laboratories. STTR likewise has three phases, corresponding 

to the three phases in SBIR, and the two programs operate in a 

similar fashion and have similar goals. STTR was also designed to 

convert the billions of dollars invested in research and development 

at our nation’s universities, federal laboratories, and non-profit research institutions into new commercial technologies. P.L. 102–564 

required federal agencies with an extramural research and development budget of $1 billion or more to dedicate 0.05 percent of this 

budget to the STTR program in 1994, 0.1 percent in 1995, and 0.15 

percent in 1996. 

1996 STTR Extension: ‘‘Omnibus Consolidated Appropriations Act, 

1997’’ (P.L. 104–208, H.R. 3610, Sept. 30, 1996) 

This legislation extended the STTR pilot program for one year 

and maintained the 1996 allocation level of 0.15 percent of the extramural research and development budget of participating agencies. This made the new sunset date September 30, 1997. 

1997 STTR Reauthorization: ‘‘Small Business Reauthorization Act 

of 1997’’ (P.L. 105–135, S. 1139, Dec. 2, 1997) 

In the 105th Congress, the STTR program was reauthorized for 

four years, through fiscal year 2001. This bill also established the 

Rural Outreach Program, designed to increase the participation of 

small business concerns in areas with low participation rates in the 

SBIR and STTR programs. 

2001 STTR Reauthorization: ‘‘The Small Business Technology 

Transfer Program Reauthorization Act of 2001’’ (P.L. 107–50, 

H.R. 1860, Oct. 15, 2001) 

This bill reauthorized the STTR program for eight years and doubled the STTR allocation from 0.15 percent to 0.3 percent of the extramural research and development budget of federal agencies with 

an extramural research and development budget of $1 billion or 

more. The STTR program is currently set to sunset on September 

30, 2009. 


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IV. HISTORY OF LEGISLATION AND VOTES IN COMMITTEE

The ‘‘SBIR/STTR Reauthorization Act of 2009’’ (S. 1233) was introduced by Senator Mary L. Landrieu, for herself and Senator 

Snowe, on June 10, 2009. As introduced, the bill reauthorizes the 

Small Business Innovation Research and Small Business Technology Transfer programs for 14 years each, through September 30, 

2023. The Committee passed the bill unanimously by a roll call 

vote of 18–0 on June 18, 2009. 

S. 1233 incorporated most of the SBIR and STTR provisions 

adopted by the Committee in the 109th Congress from S. 3778 and 

in the 110th Congress from S. 3362. 

S. 3778, the ‘‘Small Business Reauthorization and Improvements 

Act of 2006,’’ was introduced as an original bill on August 2, 2006 

by Senator Snowe, then chair of the Committee, the text of that 

legislation was reported out of the Committee unanimously, by a 

vote of 18–0, on July 27, 2006. According to Senate procedure, 

original bills reported from a Committee may only be introduced by 

one Senator; however, members of the Committee wishing to cosponsor the bill included Senators Kerry, Vitter, Lieberman, 

Landrieu, and Cantwell. S. 3778 was not passed by the full Senate 

before the adjournment of the 109th Congress. S. 3362, the SBIR/ 

STTR Reauthorization Act of 2008, was introduced by Senator 

Kerry, chair of the Committee in the 110th Congress, for himself 

and Senator Snowe, on July 29, 2008, and was cosponsored by Senators Jeff Bingaman, Benjamin Cardin, Norm Coleman, Ken 

Salazar, Carl Levin, Thomas Harkin, Sherrod Brown, Mark Pryor, 

Joseph Lieberman, Mary Landrieu, Pete Domenici, and Evan Bayh. 

Like S. 3778 of the 109th Congress, S. 3778 was reported out of 

the Committee unanimously, by a vote of 19–0 (on July 30, 2008), 

but it was not passed by the full Senate before the end of the relevant Congress, the 110th. 

While the framework for S. 1233, the SBIR/STTR Reauthorization Act of 2009, and most of its text was derived from S. 3778 and 

S. 3362, several changes were incorporated to address concerns 

that contributed to preventing the bills from passing the full Senate in the 109th and 110th Congresses. For example, in the 109th 

Congress, the Committee voted to double the SBIR and STTR allocation percentages, whereas this bill is more moderate and increased the allocation by 40 percent from 2.5 percent to 3.5 percent, phased in gradually at 0.1 percent per year over 10 years. 

Also in the 109th Congress, the Committee voted to allow up to 25 

percent of SBIR dollars to go to firms majority-owned and controlled by multiple venture capital firms, and this bill is more moderate, allowing up to 18 percent of the SBIR dollars at NIH to go 

for this purpose and up to eight percent of the SBIR dollars at the 

other agencies. 

From the 109th Congress, S. 1233 also incorporated an amendment from Senator Coleman to create a pilot program to encourage 

innovative small businesses to provide opportunities to college students studying science, technology, engineering, and math. 

From the 110th Congress, S. 1233 also incorporated provisions 

from S. 2988, Senator Lieberman’s ‘‘Accelerating Cures Act of 

2008,’’ S. 3274, Senator Kerry’s ‘‘National Nanotechnology Initiative Amendments Act of 2008,’’ S. 3343, Senator Landrieu’s ‘‘Rural 


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Small Business Enhancement Act of 2008,’’ and an amendment 

from Senator Cardin to clarify that small businesses with Cooperative Research and Development Agreement (CRADA) with federal 

labs can still participate in the SBIR program. 

From this Congress, S. 1233 incorporated in its manager’s substitute amendment several changes: A provision from Senator 

Snowe to eliminate the exemption for NIH from the allocation increase so that they will be treated like the other agencies and 

gradually increase the percent of funding dedicated to small business research; a provision from Senator Levin to make the commercialization pilot program at DoD permanent; a provision from Senator Enzi for agencies to collect data and report annually on 

awards to companies in states that have little participation in federal research and development; a provision from Senator Shaheen 

to enhance an amendment from Senator Landrieu that was adopted in the 110th Congress that makes the matching requirements 

of the FAST program more affordable for rural states and those 

with low participation in the SBIR and STTR programs; and a provision from Senator Cardin that clarifies that the cap on ‘‘jumbo’’ 

awards does not prevent agencies from making larger awards but 

that when they do go beyond the caps, they cannot use scarce SBIR 

and STTR funds for the excess amounts, it must come from the 

agencies’ other R&D funds, which currently are more than 97 percent of their R&D budgets. 

The SBIR and STTR programs and the provisions in S. 1233 

were deliberated in a series of hearings and roundtables in the 

109th, 110th, and 111th Congresses. 

On July 12, 2006, the Committee held a hearing entitled 

‘‘Strengthening Participation of Small Businesses in Federal Contracting & Innovation Research Programs.’’ The purpose was to discuss the state of the SBIR program and the challenges and opportunities inherent in it in anticipation of legislation to reauthorize 

the program (S. 3778). Witnesses included members of the Small 

Business Technology Counsel, members of the Biotechnology Industry Organization, owners of businesses in the biotechnology sector 

that had received significant amounts of venture capital and those 

that had not, persons familiar with SBIR initiatives on the state 

level, and the lead on the comprehensive National Academy of 

Sciences study of the SBIR program. The Committee heard testimony both for and against allowing companies majority-owned and 

controlled by multiple venture capital firms to participate in the 

program and covered issues ranging from the appropriateness of 

award sizes to how best to increase the diversity of the program, 

both geographically and demographically. 

On August 1, 2007, the Committee held a roundtable, ‘‘Reauthorization of the Small Business Innovation Research Program: National Academies’ Findings and Recommendations,’’ to follow-up on 

the 2006 hearing and to bring the discussion on reauthorization upto-date by inviting the National Academies to present the results 

of its overall assessment of the SBIR program. In addition to NAS, 

a variety of stakeholders participated in the roundtable, including 

SBIR program managers at federal agencies, staff of the Office of 

Technology at the SBA, small business owners, trade association 

representatives, and providers of technical assistance to SBIR 

award recipients. The discussion was wide-ranging and gave parVerDate Nov 24 2008 06:42 Jul 07, 2009 Jkt 079010 PO 00000 Frm 00009 Fmt 6659 Sfmt 6602 E:\HR\OC\SR037.XXX SR037

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ticipants the opportunity to provide feedback on the findings and 

recommendations of the NAS report, providing the Committee with 

further insight into a number of issues relevant to reauthorization. 

On October 18, 2007, the Committee held another roundtable, 

‘‘Reauthorization of the Small Business Innovation Research Program: How to Address the Valley of Death, the Role of Venture 

Capital, and Data Rights,’’ in order to expand upon previous discussions of these three critical issues. Participants again included 

program managers at federal agencies and staff of the SBA Office 

of Technology, as well as small business owners in a variety of industries. The roundtable focused on initiatives in effect at SBIR 

agencies to help small businesses move their innovative technologies across the ‘‘valley of death’’ from the laboratory to the 

marketplace, the debate over the involvement of companies majority-owned and controlled by multiple venture capital firms in the 

SBIR program, and the problems inherent in how SBIR data rights 

are treated by federal agencies and prime contractors. 

On June 4, 2009, the Committee held a roundtable, ‘‘SBIR and 

STTR Reauthorization: Ensuring a Strong Future for Small Business in Federal Research and Development.’’ The purpose of the 

roundtable was to give participants the opportunity to discuss past 

proposals and offer justifications to either retain or change provisions previously adopted by the Committee, including length of reauthorization, the size of awards, preserving the basic program 

structures, outreach and technical and commercialization assistance initiatives, and eligibility for firms majority-owned and controlled by multiple venture capital firms. The discussion also included presentations by the Government Accountability Office 

(GAO) and the National Academy of Sciences’ National Research 

Council (NRC) on studies regarding the participation of firms with 

venture capital in the SBIR and STTR programs. In addition to 

GAO and NRC, participants included small businesses, SBA and 

several program agencies, as well as business and industry associations. 

The National Academy of Sciences and the Government Accountability Office issued several reports on the program since the 2000 

reauthorization of SBIR that have guided the work of the Committee in drafting S. 1233. 

NRC Studies: In order to better measure the progress of the 

SBIR program toward its objectives, when the SBIR program was 

reauthorized for eight years in 2000 (P.L. 106–554), Congress requested a comprehensive external evaluation by the National Research Council (NRC) for the National Academy of Sciences of 

SBIR at federal agencies with an SBIR budget greater than $50 

million. The goals of the studies were to determine how SBIR has 

stimulated innovation and used small firms to meet the research 

needs of the nation and to provide overall recommendations for the 

program. The result of the five-year, $5 million review by the NRC 

was a series of reports, issued beginning in 2007. 

The Council’s comprehensive assessment of SBIR, ‘‘An Assessment of the Small Business Innovation Research Program,’’ was 

published in July 2007. The core finding of the NAS study was that 

the SBIR program is ‘‘sound in concept and effective in practice.’’ 

The report also included the following short summary of the SBIR 

program: 


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9 National Research Council, ‘‘An Assessment of the Small Business Innovation Research Program,’’ 2007. 

‘‘The program is proving effective in meeting Congressional objectives. It is increasing innovation, encouraging 

participation by small companies in federal research and 

development, providing support for small firms owned by 

minorities and women, and resolving research questions 

for mission agencies. Should Congress wish to provide additional funds for the program in support of these objectives, with the programmatic changes recommended, those 

funds could be employed effectively by the nation’s SBIR 

program.’’ 9

The NRC also found that the SBIR program is effectively linking 

universities to public and private markets, increasing private sector commercialization of innovations, creating new companies, and 

providing widely distributed support for innovation activity. The report included a number of recommendations designed to strengthen 

and improve the program, including: a readjustment of the award 

sizes to $150,000 for Phase I and $1 million for Phase II, preservation of the basic three-phase structure of the program, regular external and internal evaluation, an increased emphasis on pilot programs, and more vigorous efforts to reach out to diverse sectors of 

the population, geographically and demographically, in order to improve rates of participation in the program across the country. 

Agency or topic-specific studies published by NRC in accordance 

with the mandate to evaluate the program originating in P.L. 106– 

554 include: 

• An Assessment of the SBIR Program at the National Aeronautics and Space Administration (December 2008) 

• An Assessment of the SBIR Program at the Department of 

Energy (June 2008) 

• An Assessment of the SBIR Program at the Department of 

Defense (November 2007) 

• An Assessment of the SBIR Program at the National Institutes of Health (November 2007) 

• An Assessment of the SBIR Program at the National 

Science Foundation (July 2007) 

• An Assessment of the Small Business Innovation Research 

Program (July 2007) 

• SBIR and Phase III Challenge of Commercialization (February 2007) 

• SBIR: Program Diversity and Assessment Challenges (September 2004) 

• Capitalizing on Science, Technology, and Innovation: An 

Assessment of the Small Business Innovation Research Program—Project Methodology (September 2004) 

• Revisiting the Department of Defense SBIR Fast Track 

Initiative (In Review) 

The wealth of information uncovered by this comprehensive effort to study the SBIR program informed the Committee’s work in 

drafting reauthorization legislation. 

Another NRC report reviewed as part of the Committee’s reauthorization efforts focused exclusively on the Small Business Administration’s eligibility rules with regard to the participation of 


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12 

10 National Research Council, ‘‘Venture Funding and the NIH SBIR Program,’’ 2009, pg 65. 

firms that are majority-owned and controlled by venture capital 

firms in the National Institutes of Health’s (NIH) SBIR program. 

The study, ‘‘Venture Funding and the NIH SBIR Program,’’ was 

commissioned in 2006 and paid for by the NIH, an agency that had 

requested in 2005 that SBA allow some firms majority-owned and 

controlled by a single or multiple venture capital firms to participate in NIH’s SBIR program. The premise of the NRC study, unlike the GAO study described below, was that the clarification by 

the Small Business Administration in 2002 that ‘‘individual’’ means 

natural persons and not entities, such as venture capital firms, was 

a rule change rather than a clarification. As such, the NRC assumed that firms majority-owned and controlled by venture capital 

firms were participating in the NIH’s SBIR program up until that 

2002. Consequently, the NRC report set out to answer two questions: (1) Which NIH SBIR award recipients, looking back ten fiscal 

years from 1992 to 2002, would have been or were likely to have 

been excluded if the SBA’s 2002 clarification on the definition of 

‘‘individual’’ and eligibility rules for firms majority-owned and controlled by venture capital firms have been affected; and (2) the likely impact of the 2002 clarification if it had been applied during the 

1992–2002 timeframe and probable current impact. Similar to the 

GAO research, the NRC report acknowledged that it is not possible 

to determine directly which firms are venture-funded or majorityowned and controlled by their venture investors, issued a ‘‘caveat’’ 

on the data and used proxies to decide whether a firm was majority-owned and controlled and therefore excluded from the SBIR 

program. Among other findings, the NRC concluded that a limited 

number of businesses majority-owned and controlled by venture 

capital firms appear to have been excluded, that businesses with 

demonstrated potential for significant commercialization were disproportionately affected, that SBIR firms majority-owned and controlled by venture capital firms are less likely to commercialize (55 

percent vs. 38 percent) but are much more likely to generate significant sales from their SBIR-funded projects, that restricting 

firms majority-owned and controlled by venture capital firms from 

access to the SBIR awards diminishes the positive impact of the 

nation’s investment in research and development. The final recommendation was to restore the ‘‘de facto status quo ante eligibility 

requirements for participation in the SBIR program or [make] some 

other adjustment that will permit the limited number of [firms majority-owned and controlled by venture capital firms] with significant commercial potential to compete for SBIR funding.’’ 10 This 

recommendation has been claimed by both sides of the argument 

as supporting their position: Proponents of changing the eligibility 

rules contend this is support for allowing such firms to participate, 

and opponents of changing the eligibility rules contend the recommendation supports the compromise adopted in Sec. 108 of S. 

1233 as passed by the Committee. 

GAO Study: Additionally, the GAO conducted a review of the 

SBIR program at the request of Senators Kerry and Kennedy, later 

joined by Senators Snowe and Enzi and Congressman Manzullo, 

that studied the impact of a 2002 SBA Office of Hearings and Appeals decision that clarified the definition of a small business for 


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11GAO–06–565 

the purposes of the SBIR program. The purpose of the review was 

to look at the agencies with the largest SBIR budgets to examine 

the extent to which firms with venture capital participated before 

and after the clarification, including those firms majority-owned 

and controlled by multiple venture capital companies. The goal of 

the study was to determine what role venture capital and firms 

majority-owned and controlled by multiple venture capital companies should play in the SBIR program, as well as the impact that 

the participation of these firms had on the program and the country’s innovation. 

The report, entitled ‘‘Small Business Innovation Research: Information on Awards Made by NIH and DoD in Fiscal Years 2001 

through 2004,’’ 11 was released in April of 2006. It found that, over 

the period of the study, the number of awards and dollars to firms 

with venture capital went up at both the National Institutes of 

Health and the Department of Defense and the percentage of SBIR 

dollars to firms with venture capital went up at the National Institutes of Health and held steady at the Department of Defense. Due 

to a lack of publically available data on the ownership structure of 

firms with venture capital, it was not possible for GAO to determine which firms were majority-owned and controlled by venture 

capital companies; however, it is generally acknowledged that the 

numbers from Fiscal Years (FY) 2001 and 2002 included awards to 

firms with venture capital, both majority-owned and not, and that 

the numbers from FYs 2003 and 2004 did not include majorityowned firms. The report also found that, on balance, firms with 

venture capital received larger awards, oftentimes well in excess of 

the established award levels of $100,000 for Phase I and $750,000 

for Phase II, and that awards were concentrated in a limited number of states. These findings helped to frame the Committee’s deliberations on the matter of allowing businesses owned and controlled 

by multiple venture capital companies to be eligible to receive 

awards in Phases I and II of the SBIR program. 

IV. DESCRIPTION OF BILL

TITLE I

Section 101 of the ‘‘SBIR/STTR Reauthorization Act of 2009’’ reauthorizes the SBIR and STTR programs for 14 years. Congress 

has a history of reauthorizing the SBIR program for long periods, 

including reauthorizations of eight years in 1992 and 2000. In 

2006, the Committee on Small Business and Entrepreneurship attempted to make the program permanent as part of S. 3778. The 

SBIR program had existed for 24 years and had proven effective, 

and the Committee agreed that it was time to make the program 

permanent. The small business community also argued that the 

program should be made permanent, not only because it had proven effective, but also because it should be stable and not in jeopardy of lapsing. They feared a reoccurrence of what happened in 

2000, when the program was last set to expire; the program was 

not reauthorized by September 30th and was not considered to be 

authorized under the series of continuing resolutions. 


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However, opponents of making the program permanent argued 

that, without reauthorizations built into the program, Congress 

would not regularly assess the program and make needed changes. 

Therefore, striking a balance between permanency and past longer 

reauthorizations, this bill extends the program for 14 years. A reauthorization of 14 years factors in the increase in the SBIR allocation, which is phased in over ten years, and sets the date so that 

it does not coincide with a presidential election year. The bill addresses concerns of oversight by building in assessments by the 

NAS to be published every four years. 

Section 102 concerns the SBA’s Office of Technology. Efforts to 

strengthen American competitiveness through small businesses 

begin with this office, which administers and monitors the implementation of both the SBIR and the STTR programs governmentwide. As these programs have grown, the responsibilities of the Office have increased, such as to monitor government-wide compliance with the SBA’s SBIR and STTR Policy Directives, to carry out 

the FAST and ROP programs, and to carry out the President’s Executive Order 13329, Encouraging Innovation in Manufacturing. At 

the same time, the budget and staff for this office have decreased. 

More specifically, since FY 1991, the SBIR and STTR programs 

have more than doubled, growing from $500 million to about $2 billion a year, yet the budget for the Office of Technology has been 

cut by more than half. According to the SBA’s ‘‘Historical Summary, Office of Technology,’’ in 1991, the Office of Technology had 

a budget of $907,000 and 10 positions. Today, the Office of Technology has a budget of $41,000 and four positions. 

The Committee has raised this issue with the Agency on numerous occasions over the years, in budget and confirmation hearings 

and in letters, yet the problem has only gotten worse with regard 

to the resources and stature for this office. Consequently, there has 

been inadequate oversight of participating agencies’ compliance 

with the 2.5 percent allocation requirement, as well as of other 

compliance violations that have put at risk significant SBIR dollars. For example, this year, as part of the American Recovery and 

Reinvestment Act of 2009 (P.L. 111–5, signed into law on February 

17, 2009), referred to as the Recovery Act, the NIH requested, unbeknownst to SBA or the Committee, an oblique statutory reference that exempted the NIH from the current law to allocate 2.8 

percent of its extramural research and development (R&D) budget 

to SBIR and STTR projects so that it would not have to reserve any 

of its $8.2 billion in Recovery funds for small businesses. The result 

of this exemption is that small, high-tech firms will not be able to 

compete on a level playing field for nearly $230 million in federal 

R&D funds, even though the goals of the Recovery Act to create 

jobs and stimulate the economy were perfectly aligned with the 

SBIR and STTR programs. As a second example, at the Missile Defense Agency, at risk was $75 million in FY 2002 and $93 million 

in FY 2003; at the Air Force, in FY 2005, at risk was $175 million; 

and, in FY 2007, at risk was $260 million at the Army and Air 

Force. Congress intervened to ensure that the agencies awarded 

the appropriate amount in SBIR awards as opposed to transferring 

money to other accounts. As a third example, the SBA’s FY 2003 

annual reports on the SBIR and STTR programs reported two different Department of Defense extramural budgets for research and 


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development (the budget in one report exceeding the same budget 

in another report by about $3 billion), and, despite that significant 

discrepancy, the SBA did not have the resources to adequately review the reports to determine which one was correct and wrongly 

declared that the Department of Defense and other agencies complied with the SBIR and STTR programs’ requirements. 

The Committee urges the Agency to request that the Office of 

Management and Budget (OMB) and the Administration support 

requests which are reasonable for the Office of Technology to successfully operate and to carry out its management, data collection, 

and reporting requirements. This is particularly important given 

that this legislation places added emphasis on data collection and 

database maintenance, in order to remedy comments included in 

the NRC and GAO reports that the SBIR and STTR programs are 

insufficiently data-driven. Also, the bill requires that the Office of 

Technology be headed by an Assistant Administrator for Technology who will report only to the Administrator and that the office 

be independent from the Office of Government Contracting. The 

SBIR and STTR programs, which the Office of Technology is 

charged with overseeing, disburse billions of dollars in awards on 

an annual basis, and the Committee believes that it must have the 

stature and resources to defend the interests of small businesses 

that utilize these cross-agency programs. 

To stimulate America’s innovation economy and to remedy the 

continued under-representation of small businesses in federal research and development, sections 103 and 104 of the bill increase 

the allocations for both programs, from 2.5 percent to 3.5 percent 

for SBIR and from 0.3 percent to 0.6 percent for STTR. These increases are to be phased in over the course of ten years in the case 

of SBIR and six years in the case of STTR, in order to allow the 

agencies to adjust to the increase. A significant difference between 

this year’s bill and last year’s bill is that the allocation increase in 

the SBIR allocation will also apply to the Department of Health 

and Human Services, treating it equal to the other SBIR participating agencies instead of exempting it. At the Departments of Defense and Energy, the additional funds would be used, to the greatest extent possible, for the purposes of furthering the technology 

readiness levels of SBIR projects, including to conduct testing and 

evaluation, and not for Phase I and Phase II awards. Given the 

successes of the SBIR and STTR programs and the high praise 

they have garnered from the National Research Council, the Committee believes that these increases to the allocations are warranted. 

Further, the increases are moderate compared to past legislation. 

A doubling of the allocation was proposed in S. 2111, the ‘‘Small 

Business Growth Initiative Act of 2005,’’ introduced on December 

15, 2005, by Senator Evan Bayh, and later passed unanimously by 

the Committee as part of S. 3778, the ‘‘Small Business Reauthorization and Improvements Act of 2006,’’ introduced by Senator 

Snowe in the 109th Congress. However, the bill was never considered by the full Senate, in part because of holds that this provision 

and other provisions generated, and all subsequent proposed increases in the SBIR allocation have been strongly opposed by some, 

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12 National Science Foundatio, Science and Engineering Indicators 2006. 

ranted in the absence of a systematic and comprehensive performance evaluation to determine the success of the program. 

The Committee is not indifferent to these criticisms. However, a 

systematic and comprehensive evaluation of SBIR by the National 

Research Council is now available and its conclusions are unequivocally positive for the SBIR program. Evidence from this 

source, highly regarded by the university and research community, 

suggests that the SBIR program both contributes to university research and education in science and technology and is an important 

catalyst for bringing basic research out of labs and into the marketplace. Small businesses employ twice as many scientists and engineers as all American universities combined and the SBIR program 

has the implicit goal of utilizing the innovative capacities of this 

large sector of the science and technology community and linking 

it to the resources of academic research institutions.12 The 2007 

National Research Council’s assessment of SBIR applauds the program’s contribution towards linking universities and small businesses in innovation, as is evident by the following facts: • More than two-thirds of SBIR companies report that at 

least one founder was previously an academic; • About one-third of SBIR company founders were most recently employed as academics before founding the company; • Over a third of SBIR projects cite direct university involvement with: • 27 percent of projects having university faculty as contractors on the project; • 17 percent using universities themselves as subcontractors; and • 15 percent employing graduate students. 

It is clear that increases in the SBIR allocation will invest money 

in research, contracting, internships, and other collaborative activities done with universities, and that the contracting and patenting 

activities with SBIR companies are a sizable source of revenue for 

universities as well. The university-industry partnerships that 

SBIR, and STTR, creates are crucial in that they provide an applied research and commercialization focus that otherwise likely 

would not be present in university research. More specifically, the 

partnerships are important in exposing faculty and the next generation of scientists and engineers to commercial research and development. SBIR and STTR businesses provide graduate and undergraduate students with hands-on experience and job opportunities that universities would be unable to provide alone. In addition, 

the SBIR program supports the transfer of knowledge from universities to the commercial marketplace. The National Research Council’s assessment found that this transfer can happen in many different ways; for example, SBIR funding: 

• Helps university scientists form companies; 

• Enables small firms to use university faculty and to employ graduate students as specialized consultants; 

• Permits the use of university laboratory facilities; and 

• Encourages other less formal types of collaboration. 

The STTR allocation increase will likewise benefit universities 

and efforts to bring university-based research into the commercial 


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13 National Research Council, ‘‘An Assessment of the Small Business Innovation Research Program at the National Institutes of Health,’’ 2007. 

marketplace, as a partnership with a research institution, such as 

a university, is a requirement of all STTR award recipients. 

Furthermore, the same National Research Council’s report states 

that about half of small business respondents in SBIR across all 

agencies had results from their SBIR work published in a peer-reviewed scientific publication. In particular, at the National Institutes of Health, this percentage was high, with 53.5 percent companies publishing a scientific paper and two-thirds of those companies 

having published multiple times.13 This proves that SBIR projects 

are of high-quality and that the program is a mechanism for the 

dissemination of knowledge across the science and technology community. 

The Committee believes that the SBIR and STTR programs are 

vital to improving research and education in partnership with our 

nation’s research institutions and federal agencies, as well as to 

unleashing American innovation and making the United States 

more competitive globally. Yet, the Committee understands the importance of basic research conducted by our federal agencies and 

research institutions, and, in light of tight federal research and development budgets, the Committee proposes a much more modest 

and measured increase than the doubling of STTR that was included in S. 3778 in the 109th Congress. Last, the allocation increases at the Department of Defense and the Department of Energy are directed to further the technology readiness levels of SBIR 

projects, but are not to be used for Phase I and Phase II awards. 

In order to adjust for inflation, acknowledge the growing costs of 

research, and sustain the quality of applications, section 105 of the 

bill proposes an increase in the award size guidelines, from 

$100,000 to $150,000 for Phase I awards and from $750,000 to $1 

million for Phase II awards. The Committee believes that these increases in award size are timely, as the last increase in Phase I 

and Phase II awards was 17 years ago, in the 1992 reauthorization 

for SBIR. The ‘‘Small Business Reauthorization and Improvements 

Act of 2006’’ (S. 3778) proposed similar increases in award sizes, 

capping Phase I grants at the same $150,000 level but capping 

Phase II grants at $1.25 million. The award sizes in S. 3778 passed 

the Committee along with a doubling of the SBIR allocation. However, this bill does not increase the allocation to that extent. To increase the size of awards without substantially increasing the 

amount of dollars available necessarily reduces the number of 

awards that can be given and, consequently, the number of technologies developed and companies that benefit from SBIR. The 

award levels in this bill are intended to strike the appropriate balance between providing awardees with sufficient resources while 

continuing to generate ideas. The bill also provides for adjustments 

to these award levels every three years to account for inflation, instead of every five years, as is currently the law. Finally, the proposed Phase I and Phase II amounts of $150,000 and $1 million are 

not caps but, rather, guidelines. However, the bill does include a 

cap, prohibiting agencies from making awards that are 50 percent 

above the award guidelines with SBIR or STTR funds. 


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This cap serves to address the issue of jumbo awards that exceed 

the award guidelines and cut into the number of awards that can 

be given out by the agencies. For example, the 2006 GAO review 

of the program found that NIH had made a Phase I award of $1.7 

million and a Phase II award of $6.5 million. Small businesses, 

particularly those in rural states, have complained to the Committee for years that jumbo awards hurt them because they reduce 

the number of grants and awards that can be given out. In the case 

of a Phase I for $1.7 million, that eliminates the possibility of 16 

awards of $100,000. In the case of a Phase II for $6.5 million, that 

eliminates the possibility of almost seven awards of $750,000. To 

address this issue, as mentioned earlier, the bill prohibits federal 

agencies from making an award more than 50 percent higher than 

the guidelines established in this Act, which is a cap of $225,000 

for Phase I awards and $1.5 million for Phase II awards. Per existing requirements, the agencies must also continue to report to the 

SBA when they exceed the guideline amounts of $150,000 and $1 

million and provide a justification. The Committee believes that 

language is needed to strengthen the reporting requirements government-wide to help guide Congress in future policy decisions. 

Section 106 of the bill provides for portability of awards between 

different federal agencies and between the two SBIR and STTR 

programs by permitting eligible small business concerns to qualify 

for post-Phase I awards at another agency or through the other 

program. These measures ensure that small innovative businesses 

receive a full opportunity to participate in federal research and development and that the nation receives the full benefit of small 

business innovations. Today, research and development efforts to 

meet national priorities are conducted across federal agencies; for 

instance, the Departments of Energy and Agriculture work together on renewable energy research, and biodefense research is 

pursued by the Departments of Defense, Homeland Security, and 

Health and Human Services. At the same time, research project 

needs may require changes in relationships between the small 

business and its research institution partner. The Committee believes that the additional flexibility introduced by this legislation 

into the SBIR and STTR programs is much-needed. 

Section 107 of the bill specifically prohibits agencies from using 

Phase II invitations or any other screening process that would inhibit Phase I awardees from applying for a Phase II award in a 

competitive process open to all Phase I awardees. The Committee 

believes that this is an unfair practice which not only penalizes 

those companies that take the largest risk with unproven technologies and deprives such companies of the opportunity to take 

the lessons learned from Phase I into a Phase II effort, but also 

limits competition at Phase II. There is no provision in the current 

statute that specifies that there is a separate process between 

Phase I and Phase II, and this bill clarifies that it is Congress’ intent that there not be anything to limit competition for Phase II 

awards. 

Section 108 of S. 1233 includes a compromise struck between 

Senators Kerry and Bond during the 110th Congress that would 

allow firms majority-owned and controlled by multiple venture capital firms to participate in the SBIR program. The extent to which 

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ture capital companies should be able to participate in SBIR has 

been the foremost issue to reauthorizing the SBIR program over 

the past three Congresses. The venture capital issue stems from a 

2002 decision by the SBA’s Office of Hearings and Appeals that 

clarified that a business must have 500 or fewer employees, including affiliates, and be 51 percent owned and controlled by individuals to be eligible for the SBIR program and that venture capital 

companies are considered entities, not individuals, for the purposes 

of determining ownership. That clarification adversely affected 

some firms that had participated in the SBIR program, because 

they could no longer self-certify that they met the definition of a 

small business and, therefore, no longer could participate. Biotechnology firms that had participated in the SBIR program at 

NIH prior to the 2002 decision were most affected. 

During the 109th Congress, in July 2006, when the Committee 

marked up S. 3778, a comprehensive SBA reauthorization bill that 

included a title on reauthorization of the SBIR and STTR programs, the Committee adopted an amendment put forward from 

Senator Bond that would have allowed all qualifying agencies to direct up to 25 percent of their SBIR budgets to companies that are 

majority-owned by multiple venture capital companies. Senator 

Bond introduced the amendment in part because he was concerned 

that the 2002 decision by SBA had become a roadblock for many 

small businesses, especially small biotech and life science companies, working to develop life-saving cures, and that the decision 

was leading to a decline in the number of applications to the NIH 

SBIR program. Senator Bond spoke in support of the critical early 

stage research. Though there was no vote on the amendment in 

2006, Senator Kerry spoke out against it, in part because he was 

concerned that directing up to 25 percent of SBIR funds to firms 

majority-owned and controlled by venture capital firms, on top of 

the almost 22 percent, in FY 2004, already going to firms with venture capital (but that were not majority-owned) at NIH, would 

steer too many of the program’s projects away from early-stage, 

high risk research that would not be done but for the government 

and instead towards projects with larger potential market shares 

and a greater potential to deliver better returns for investors in a 

shorter amount of time. Furthermore, the majority-owned venture 

capital provision in S. 3778 was opposed by some senators, and this 

was one of several issues that attracted holds and prevented floor 

consideration. In order to have a better chance of getting an SBIR 

reauthorization bill through the Senate in the 110th, and now in 

the 111th Congress, it was necessary to moderate the provision. 

Senators Snowe, Lieberman, and Coleman played a significant role 

in reaching the compromise adopted as part of S. 3362 in the 110th 

Congress. 

Instead of allowing all agencies to apply to direct up to 25 percent of their SBIR funds to firms majority-owned and controlled by 

multiple venture capital firms, the agreement adopted as part of S. 

3362 and included in this bill, S. 1233, would allow NIH to apply 

to the SBA to award up to 18 percent of its SBIR dollars to companies majority-owned and controlled by multiple venture capital 

companies. The remaining qualifying SBIR agencies would be able 

to apply to award up to 8 percent of their SBIR dollars to this class 

of firms. It is important to note that this is the percentage of dolVerDate Nov 24 2008 06:42 Jul 07, 2009 Jkt 079010 PO 00000 Frm 00019 Fmt 6659 Sfmt 6602 E:\HR\OC\SR037.XXX SR037

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14 2006 SBIR Program Data, SBA Office of Technology, provided to the Committee on March 

10, 2008. 15 ‘‘Small Business Innovation Research: Information on Awards Made by NIH and DoD in 

Fiscal Years 2001 through 2004,’’ GAO 06–565, April 2006, p. 20. 16GAO 06–565, p. 32. 

lars that would be allowed to be awarded to companies majorityowned and controlled by venture capital companies (the companies 

that are currently ineligible). Companies that have some venture 

capital investment but that are still majority-owned and controlled 

by individuals have always been eligible for SBIR dollars and will 

remain eligible to compete for the entirety of the SBIR allocation 

under this legislation. 

The Committee believes that this compromise remains reasonable, addressing each side of the venture capital debate and paving 

the way for the Committee to act and the full Senate to pass this 

reauthorization legislation. For the small businesses that opposed 

changing the eligibility rules, this bill’s compromise preserves more 

SBIR dollars for companies that are not majority-owned and controlled by venture capital companies than the 2006 amendment 

would have. Based on 2006 data, the most recent data available, 

it is estimated that this compromise would preserve an additional 

$69 million at NIH and $147 million at the other agencies, compared to the one adopted in 2006.14 It was particularly important 

to moderate these percentages because, unlike S. 3778 from the 

109th Congress, this legislation (SBIR/STTR Reauthorization Act of 

2009) does not double the SBIR allocation (although it does increase the percentage of the allocation at all agencies), and the 

Committee needed to adjust the percentages to offset concerns that 

allowing these new entities to participate would crowd out small 

businesses. This was of particular concern to those in rural states 

where there is less venture capital investment and where GAO 

found little to no SBIR awards to firms with venture capital, further diminishing their participation in SBIR, the most important 

government research and development program available to small 

businesses. Specifically, GAO found that, in 17 largely rural states, 

none of the firms that had received SBIR awards from NIH had received venture capital investment, and, in 21 largely rural states, 

none of the firms that had received SBIR awards from DoD had received venture capital investment.15 It is also to the benefit of 

small businesses currently participating in the program that this 

bill maintains the affiliation rule, helping to keep current participants on a level playing field with the new class of companies that 

will be made eligible. 

The Committee believes that this is also a positive compromise 

for the companies that have been supporting a change to the rules, 

because it provides companies majority-owned and controlled by 

multiple venture capital firms with access to more SBIR dollars, 

proportionately and dollar-wise, than they were getting before the 

SBA clarified in 2002 that such firms were not eligible to participate in the program. For example, before the clarification, in 2001, 

GAO found that firms with venture capital received 14 percent, or 

$57 million, of all SBIR dollars at NIH, and, in 2002, they received 

14 percent, or $72 million, of all SBIR NIH dollars.16 These dollars 

were shared between firms that were majority-owned and controlled by multiple venture capital firms and those that were not. 


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17GAO 06–565, p. 32. 18 13 CFR 121.103. 

Based on 2008 SBIR data, the most recent available, this offer 

would make it possible for NIH to award up to 18 percent, or $104 

million, of its SBIR funds to small businesses owned and controlled 

by multiple venture capital companies. These dollars would not be 

shared with companies that have venture capital but are not majority-owned and controlled by venture capital companies. If the 

full 18 percent is utilized, this could be a possible increase of 84 

percent over the amount of funds firms with venture capital were 

sharing in 2001, and a possible increase of 45 percent over what 

they were sharing in 2002. 

The same GAO study also looked at DoD, where it found that, 

in 2001, companies with venture capital received 5 percent, or $34 

million, of all SBIR dollars and, in 2002, they received 7 percent, 

or $48 million, of all SBIR dollars.17 Again, based on the most recent SBIR data available, this offer would make it possible for companies owned and controlled by multiple venture capital firms to 

get up to 8 percent, or $91 million, of DoD’s SBIR dollars all to 

themselves. If the full 8 percent is utilized, this could be a possible 

increase of 65 percent over the amount of funds firms with venture 

capital were sharing in 2001, and a possible increase of 47 percent 

over the amount of funds they were sharing in 2002. 

As was the case with S. 3778 in the 109th Congress and S. 3362 

in the 110th Congress, the affiliation rule itself and the 500 employee size standard remain unchanged in this bill, meaning that 

all SBIR and STTR applicants, whether majority-owned by venture 

capital companies or not, must still have 500 or fewer employees, 

including the employees of their affiliates. In the case of companies 

majority-owned and controlled by multiple venture capital companies, this means that the employees of venture capital companies 

that control or have the power to control the SBIR applicant, as 

well as the employees of portfolio firms of those venture capital 

companies that the venture capital companies control or have the 

power to control, will be added together and, in aggregate, must be 

500 or fewer.18 In testimony before Congress and in Statements of 

Administration Policy, the SBA under President George W. Bush 

stressed the importance of the affiliation rule because it allows the 

SBA to look into who is controlling the firm and the amount of resources that they bring to the table. Affiliation, as illustrated in the 

Federal Regulations, is determined by the ‘‘totality of the circumstances’’ and is the current regulatory tool to ensure that a 

small firm is not controlled by a large firm. The SBA has also been 

concerned about the precedent that waiving the affiliation rule 

would set for other SBA programs. Furthermore, some small businesses have argued to the Committee that it would be unfair to exempt the employees of venture capital firms and the employees of 

their portfolio firms from the affiliation rule, allowing them to play 

by different rules, unless an alternative size standard is established, because it would create an unfair playing field, particularly 

in the biotech industry, where the majority of firms have fewer 

than 50 employees, significantly less than the current cap of 500 


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19 Critical Technology Assessment of Biotechnology in U.S. Industry (October 2003) U.S. Department of Commerce Technology Administration and Bureau of Industry and Security. http:// 

www.technology.gov/reports/Biotechnology/CD120a—0310.pdf. And testimony before Congress 

from the Biotechnology Industry Organization on July 22, 2004; June 17, 2005; June 25, 2005; 

and July 27, 2005. 20For further discussion of the affiliation issue, see the Committee Roundtable, ‘‘Reauthorization of the Small Business Innovation Research Program: How to Address the Valley of Death, 

the Role of Venture Capital, and Data Rights,’’ Transcript of Proceedings, October 18, 2007, p. 

50–117. 

employees.19 Other small businesses, especially biotech firms, are 

concerned that SBA has been applying the affiliation rule inconsistently, making it difficult to determine eligibility and self certify. In 

addition, those same small businesses are concerned about the 

process by which SBA applies affiliation to an SBIR applicant’s minority investors’ other portfolio companies that they argue are unrelated to the SBIR applicant or their research, which, therefore, 

also creates an unfair playing field.20

In addition, in order to address concerns from companies with 

venture capital that it is difficult to determine who their affiliates 

are and, therefore, whether they are, in fact, eligible to participate 

in the SBIR program, this bill includes language to assist an SBIR 

applicant in interpreting the affiliation rule when self-certifying. 

Specifically, the bill directs the SBA to post a document on its 

website that helps SBIR applicants determine who is affiliated 

with them. Language is also in the bill that requires the SBA to 

update the relevant website information to keep it current and to 

respond in a timely way to requests from firms to determine if they 

are eligible. 

While the affiliation rule is an administrative issue, and, therefore, does not require legislation to make any changes, the report 

also includes data collection requirements on the participation of 

firms with venture capital, both majority and non-majority-owned, 

to help the Committee collect necessary information to assess how 

the SBA’s existing affiliation rule is affecting the participation of 

firms and whether 500 employees, including those of affiliates, is 

a realistic limit. 

On November 22, 2006, the Court of Appeals for the Federal Circuit ruled in favor of the U.S. Air Force dismissing Night Vision’s 

breach of contract claim. The Committee believes that the Federal 

Court, in the case of Night Vision v. United States, disregarded the 

special acquisition preference intended by the Congress for Phase 

III awards by effectively placing upon the small businesses the burden of proof that a Phase III award would be practicable. The Committee believes that any questions with regard to the capacity of 

small business concerns to perform as Phase III awardees should 

be established by the relevant agency. Therefore, section 109 of the 

bill codifies and clarifies the existing special acquisition preference. 

Section 110 of the bill seeks to improve the collaboration of SBIR 

or STTR firms with federal labs. In 2002, the SBA proposed and 

subsequently implemented a requirement that SBIR/STTR firms 

seeking to subcontract with federal laboratories and research and 

development centers obtain a waiver from the SBA to enter into 

such subcontracts. Such subcontracts are typically concluded 

through cooperative research and development agreements 

(CRADAs). As a result, small firms which plan to utilize the worldclass technical facilities or research capabilities of federal labs may 

be denied a waiver even after receiving their SBIR awards. The 


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Committee believes that greater cooperation between small businesses and federal labs is a worthy goal, though agencies and departments cannot demand that a small business work with a federal lab in order to win the project. For that reason, the bill permits small businesses to subcontract portions of the work on SBIR 

and STTR awards to federal labs and research and development 

centers without having to seek a waiver from the SBA, as the SBA 

currently requires. Small businesses receiving SBIR and STTR 

awards where a portion of the work is subcontracted to federal labs 

and research and development centers shall not perform a smaller 

percentage of work than is required by the SBIR and the STTR 

Policy Directives. At the same time, the Committee acknowledges 

that the SBA waiver process was instituted in response to attempts 

by federal agencies to recapture SBIR funds through the CRADA 

subcontracting process regardless of scientific merit. Consequently, 

federal agencies shall not require small businesses to subcontract 

with federal labs and research and development centers as a condition of receiving SBIR or STTR awards, and the SBA shall ensure 

that no such requirements whatsoever are imposed. SBIR and 

STTR awards shall be based strictly on merit, and participation of 

federal labs and research and development centers in SBIR and 

STTR research shall be considered only to the extent that it 

strengthens the merits of the proposals. 

A provision authored by Senator Cardin from last year’s bill was 

retained in this legislation and clarifies that grantees who have entered into Cooperative Research and Development Agreements and 

are housed in NIH or other federal facilities can continue to receive 

CRADA grants and still retain or apply to the SBIR program. The 

practices of various national laboratory administrations have resulted in interpreting the rules differently. The effect has been to 

deny CRADA recipients the opportunity to keep or apply for SBIR 

funds. This amendment clarifies the language and permits contemporaneous participation in both the SBIR and CRADA programs. 

To promote effective enforcement of the SBIR and STTR Policy 

Directives, section 111 requires the SBA to notify Congress of its 

appeals or other actions to enforce the Policy Directives. Likewise, 

the Committee expects that the SBA Administrator will be promptly informed concerning any case or controversy surrounding the 

SBIR or the STTR program. The Committee believes that SBA 

must always be presented an opportunity to defend its programs in 

legal proceedings. 

TITLE II

Section 201 of S. 1233 reauthorizes the Federal and State Technology Partnership program (FAST) and the Rural Outreach Program (ROP) for five years each, through 2014, and increases the 

amount of dollars allocated to the Rural Outreach Program from $2 

million to $5 million per year. Congress created the Federal and 

State Technology Partnership (FAST) program in 2000 to strengthen the technological competitiveness of small business concerns in 

all 50 states by providing competitive matching grants to states to 

help support the SBIR and STTR programs. These grants are traditionally used to raise awareness of SBIR and STTR, assist technology transfers by universities to small businesses, provide technical assistance to firms participating in the SBIR program, and 


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encourage commercialization of technology developed through SBIR 

funding. The FAST program has proven vital to rural states, which 

have traditionally been in the lower tier of states in terms of SBIR/ 

STTR awards and total dollars. For this reason, technical assistance provided under FAST grants is extremely important to rural 

small businesses and universities. In general, the more SBIR applications that are submitted by small businesses in a state, the more 

SBIR awards are made in that state. 

While rural states have utilized the FAST program successfully, 

authority expired at the end of fiscal year 2004. The Committee believes that rural areas need additional technical assistance to help 

their small businesses compete in the SBIR program and so has reauthorized and enhanced the program. Currently, each participating state that receives FAST awards is required to match each 

federal dollar that is provided with state funds. The Committee 

supports this approach, as each recipient should match funds considering that the federal government is putting up the majority of 

funds for these activities. As the FAST program is currently structured, the 18 states receiving the fewest SBIR Phase I awards are 

required to put up 50 cents for each federal dollar. The lower tier 

of states requires additional technical assistance, so they should 

have a greater incentive to apply for these grants. Next, the 16 

states receiving the greatest number of Phase I awards are required to match dollar for dollar each federal dollar awarded. 

States not included in either of these two categories, those in the 

middle tier, are required to match 75 cents for each federal dollar. 

There is also a special match requirement for low-income areas, 

which is 50 cents for each federal dollar. 

In reviewing this current structure, the Committee continues to 

believe that rural areas and rural small businesses could benefit 

from a reduced match requirement for the FAST program. Consequently, S. 1233 includes a provision offered by Senator Landrieu 

in the last Congress, taken from S. 3343, that creates special 

match requirements for rural areas (50 cents to each Federal dollar) and areas that are both rural and in the bottom 18 of states 

that receive SBIR awards (35 cents). This provision was modified 

in the manager’s package based on an amendment filed by Senator 

Shaheen. Specifically, the matches for the states that rank in the 

bottom 18 in participation will decrease from 50 cents to 35 cents, 

the states that rank in the middle on participation (17 to 34) would 

have their match reduced from 75 cents to 50 cents. The rural 

areas would have the match reduced from 50 cents to 35 cents, and 

the enhanced rural areas (rural and bottom 18 recipients) would 

have their match reduced from 35 to 15 cents. These changes 

would provide increased technical assistance where it is most needed—our rural small business and universities. This change does 

not affect the allocation of SBIR program awards but does provide 

rural areas with a level playing field when competing for these 

awards. 

Section 202 of the bill includes a provision from Senator Coleman, proposed as an amendment to S. 3778, in the 109th Congress, 

which establishes a five-year workforce development grant pilot 

program to match up innovative small businesses with college students studying science, technology, engineering, and math. The 

proposal would provide SBIR grantees with a 10 percent bonus 


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grant, for either Phase I or Phase II SBIR grants, with a total maximum award of $10,000 per year for small businesses that provide 

opportunities to these students. 

In order to provide SBIR awardees with a more appropriate 

amount of technical assistance, section 203 of the bill increases the 

amount of discretionary technical assistance that may be given by 

federal agencies from $4,000 per Phase I award to $5,000 and from 

$4,000 per year of a Phase II award to $5,000 per year. To make 

the law consistent, the bill states that this technical assistance 

shall be in addition to the SBIR award for both Phases I and II. 

To address concerns from small businesses that the technical assistance provider that they are required to use may not provide 

them with the type of technical assistance that would best suit 

their needs, the bill includes a provision allowing award recipients 

to seek out their own technical assistance provider and to receive 

the same amount as do those who use the agency’s contracted provider. Finally, the bill clarifies that agencies may only pay the contractor for those recipients who utilize the services provided by the 

agency’s technical assistance provider. Participants at the Committee’s roundtable on August 1, 2007, had expressed concerns that 

federal agencies were bundling the technical assistance contracts 

and that technical assistance providers were being compensated for 

services that were not used. 

During the 108th Congress, Senator Snowe sponsored and Senator Kerry cosponsored S.Amdt. 2531, creating the SBIR Commercialization Pilot Program (CPP) at the Department of Defense, 

which incorporated relevant amendments offered by both Senators 

to S. 1042, the FY 2006 Defense Authorization bill. The CPP authorized incentives for prime contractors and provided assistance to 

SBIR firms in order to facilitate Phase III awards at the prime contract and the subcontract level. Examples of appropriate incentives 

are provided in the May 17, 2006, guidance letter from Senators 

Snowe and Kerry and Congressman Donald Manzullo (at the time 

Chairman of the House Committee on Small Business) to the Undersecretary of Defense Kenneth Krieg and in the White Paper of 

the Small Business Technology Council, Incentives and Technology 

Transition: Improving Commercialization of SBIR Technologies in 

Major Defense Acquisition Program (Robert-Allen Baker, May 

2006). The Committee believes that CPP is a valuable mechanism 

to move technologies across the ‘‘valley of death,’’ and section 204 

of this bill adopts a change requested by Senator Levin to strengthen CPP at the Department of Defense, extend it to the STTR program, and make it permanent. 

The bill also includes a provision in section 205 that permits civilian SBIR agencies to establish their own commercialization pilot 

programs and authorizes these pilot programs through 2014. In response to questions during a Committee hearing on July 12, 2006, 

Dr. Charles Wessner of the National Academies testified that efforts to promote greater funding of Phase II technologies would be 

valuable, and the Committee has included these pilot programs for 

that purpose. The goal of the commercialization pilot programs is 

to help move existing Phase II technologies across the ‘‘valley of 

death’’ and closer to the commercial marketplace. Federal agencies 

would be permitted to use up to 10 percent of their SBIR and 

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gram, and awards made under these pilot programs would be allowed to exceed the cap on award size, up to three times the award 

cap, or $3 million per award. To address concerns that these 

awards would cut into the SBIR allocation and to further facilitate 

the strategic connections that will allow for SBIR and STTR technologies to be transitioned into a government system or to be commercialized, awards given under these pilot programs would need 

to be matched by private or federal non-SBIR, non-STTR dollars, 

for technologies that will be acquired by the government. In the 

last Congress, the award size was capped at two times the Phase 

II award guideline (max of $2 million). However, at the request of 

Senator Snowe, this bill raises the cap to three times a Phase II 

award (max of $3 million) and also changes the matching requirement so that it only applies to technologies acquired by the government. 

Recognizing that nanotechnology has the potential to revolutionize our way of life and to make a significant contribution to our 

economy moving forward, section 206 of the bill encourages the 

submission of applications for support of nanotechnology-related 

projects. This provision was carried over from the 110th Congress 

and came from S. 3274, the ‘‘National Nanotechnology Initiative 

Amendments Act of 2008,’’ sponsored by Senator Kerry and cosponsored by Senator Snowe. Nanotechnology involves the understanding and control of matter at scales between 1 and 100 nanometers and includes nanoscale science, technology, and engineering. In the eight years since the creation of the National Nanotechnology Initiative, it has become clear that our ability to manipulate, engineer, and manufacture nanoparticles provides unlimited 

potential for innovation and growth throughout our economy. For 

instance, an estimated $50 billion in products worldwide incorporated nanotechnology in 2006, and that figure has been projected 

by some to reach $2.6 trillion over the next eight years. From technologies to improve the capabilities of our military to life-changing 

medical devices, nanotechnology has demonstrated its unique ability to break barriers and to expand the realm of what is possible. 

The Committee believes that it is important for the federal government to encourage the development of nanotechnology-related 

projects and that the SBIR and STTR programs are suitable mechanisms for furthering progress toward this goal. This provision sunsets after five years, because the Committee believes that emphasis 

on certain sectors should not exist in perpetuity but, rather, should 

be updated to be relevant to current needs and challenges. 

The bill also includes a pilot program, in section 207, designed 

by Senator Lieberman, also carried over from the 110th Congress, 

taken from S. 2988, to improve the operations of the SBIR program 

at NIH. Each year, patients are diagnosed with an increasing number of orphan diseases. Many of these diseases lack an appropriate 

treatment. The need for effective and affordable treatments, vaccines, or cures for these diseases is growing. According to the findings of the National Research Council’s 2007 report, the SBIR program at NIH could be enhanced through the following means: establishment of a centralized advisory body that makes recommendations based on comprehensive metrics, further development of the program’s ability to capture this data, enhanced flexibility in terms of addressing scientific translation and product deVerDate Nov 24 2008 06:42 Jul 07, 2009 Jkt 079010 PO 00000 Frm 00026 Fmt 6659 Sfmt 6602 E:\HR\OC\SR037.XXX SR037

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velopment, and a reduction of the time between Phase I and Phase 

II awards. 

Pursuant to these recommendations, this section establishes an 

advisory board at the NAS to improve the utilization of data in decision-making. The board will be comprised of the NIH Director, 

the Director of the NIH SBIR program, relevant senior NIH managers, and subject matter experts. In addition, to bring business development experience to the board, one-half of the members will be 

prior SBIR grantees. The principal purpose of the board is to collect 

the relevant metrics to determine the effect of various SBIR program initiatives on commercialization. The board will also review 

a new requirement of the SBIR program at NIH. Program managers, when awarding grants and contracts, will emphasize applications that from the onset, identify putative products and services 

that may enhance the development of cures and therapies. 

Additionally, this section strengthens data-capture to ensure that 

decisions aimed at encouraging the translation of basic science to 

marketed treatments are evidence-based. An emphasis is placed on 

collecting the metrics identified in the National Research Council’s 

2007 review of the SBIR program at NIH. 

The NAS recommended further enhancing the flexibility of the 

NIH’s SBIR program and this section seeks to provide the SBIR 

program at NIH with that opportunity. Prior to adoption of new 

procedures, it is important to test ideas on a smaller scale. This 

section permits 1 percent of the NIH extramural budget for research and development to be utilized to establish pilot programs 

in order to investigate new approaches to enhancing the development of novel products for disease treatments. The pilot programs 

may be designed to establish inventive new strategies or a program 

may focus on program management initiatives. These may include: 

adding successful SBIR grantees during the review process, hiring 

experienced business development personnel to staff positions to 

bolster the programs subject-matter expertise, separating the scientific and commercial review process, and assessing the efficacy of 

awarding larger grants on the overall success of product development. The NIH director will be required to submit a report to Congress and the NAS advisory board reviewing these programs. 

Last, the provisions adopted from Senator Lieberman will encourage the director of the SBIR program at NIH to reduce the 

time period between Phase I and Phase II grants to six months, to 

the greatest extent possible. This section will sunset five years 

after enactment. 

TITLE III

In order to address continued concerns that the SBIR and STTR 

programs are insufficiently data-driven and to provide Congress 

with a better base of information to use when considering future 

policy changes to the programs, the bill includes many oversight 

and evaluation provisions, encompassing sections 301 through 309. 

The data collection and reporting requirements focus, in particular, 

on the effect of the change made in the bill to allow firms majorityowned and controlled by multiple venture capital companies to participate in the SBIR program, on the involvement of women, minorities, and people from rural areas in the programs, and on collaboration between small businesses participating in the programs 


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and universities. To ensure that this information is collected, synthesized, and used to improve the progress toward the programs’ 

goals, the bill requires the agencies to maintain databases and requires the SBA to coordinate the databases so that the information 

is centralized and easily accessible. Section 307 of the bill extends 

the NRC’s review of the SBIR program and requires NRC to make 

recommendations on the program every four years. 

In order to address concerns that federal agencies are inaccurately calculating their extramural research and development 

budgets, from which the SBIR and STTR allocations are determined, section 306 of the bill directs the GAO to conduct periodic 

fiscal and management audits of the program to verify that agencies are meeting the allocation requirements of the SBIR and STTR 

programs. The Committee also directs the GAO to make a recommendation as to whether or not it would be more effective for 

the SBIR and STTR allocations to be determined based on the entirety of federal agencies’ research and development budgets, internal and external. 

The federal government spends more than $50 billion a year in 

research and development contracts and billions more on contracts 

for goods and services which utilize innovative technologies. As a 

result, federal procurement spending can act as a strong force in 

stimulating small business innovation. Public authorities and officials in the European Union, the United Kingdom, Sweden, and 

other countries have proposed a three percent pro-innovation setaside for their small and medium enterprises (SMEs). To retain 

global competitive leadership, the Committee believes that the 

United States should consider adopting its own pro-innovation 

technology insertion goal for Phase III SBIR and STTR awards in 

all federal contracts for research, development, testing, and evaluation. This bill does not set such a goal, since there is currently no 

data from which to determine what a reasonable goal would be, but 

section 308 does establish reporting requirements on federal agencies that issue Phase III contracts in order to collect information 

to establish a baseline. 

Section 309 of the bill addresses concerns that relevant SBIR and 

STTR intellectual property protections are not being properly enforced. To attract small businesses for participation in federal research and development, the SBIR and the STTR programs guarantee data rights protections to small business innovators. Unfortunately, the scope of these protections has been misconstrued by 

the U.S. Court of Federal Claims in the case of Night Vision v. 

United States. The Court mistakenly relied on the Federal Acquisition Regulation to exclude prototypes from statutory data rights 

protections, even though the Small Business Act clearly and unambiguously provides that prototypes are within the scope of research 

and development activities which are part of SBIR and STTR. 

However, because the Committee is concerned that there is a lack 

of information on the extent of these violations that would serve to 

justify policy changes, this bill requires the GAO to conduct a study 

of the programs to determine if federal agencies are adhering to 

the data rights protections of SBIR awardees and if any clarification of law or policy directives is necessary. 


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TITLE IV

Finally, section 401 of the bill requires the SBA to amend the 

SBIR and STTR Policy Directives to conform to the directives of 

the bill and to publish the policy directives, as amended, in the 

Federal Register. 

V. COMMITTEE VOTE

In compliance with rule XXVI(7)(b) of the Standing Rules of the 

Senate, the following vote was recorded on June 18, 2009. 

A motion by the Chair to adopt the ‘‘SBIR/STTR Reauthorization 

Act of 2009,’’ as amended by the Manager’s Amendment, to reauthorize the SBIR and STTR programs and to report the bill favorably with an amendment in the nature of a substitute reflecting 

the text as amended by the Manager’s Amendment, was approved 

by a unanimous 18–0 recorded vote with the following Senators 

voting in the affirmative: Landrieu, Kerry, Levin, Harkin, 

Lieberman, Cantwell, Bayh, Pryor, Cardin, Shaheen, Hagan, 

Snowe, Bond, Vitter, Thune, Enzi, Isakson and Wicker. 

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. 

JUNE 22, 2009. 

Hon. MARY L. LANDRIEU, 

Chairman, Committee on Small Business and Entrepreneurship, 

U.S. Senate, Washington, DC. 

DEAR MADAM CHAIR: The Congressional Budget Office has prepared the enclosed cost estimate for S. 1233, the SBIR/STTR Reauthorization Act of 2009. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Susan Willie. 

Sincerely, 

DOUGLAS W. ELMENDORF. 

Enclosure. 

S. 1233—SBIR/STTR Reauthorization Act of 2009 

Summary: S. 1233 would extend and expand programs that require certain federal agencies to set aside portions of their research 

and development budgets for small businesses. The bill also would 

authorize appropriations for efforts to increase the number of small 

businesses participating in those programs. The bill would require 

participating agencies to collect and report more information about 

program participants that would be used both to evaluate the program and for business development. The bill would authorize the 

Government Accountability Office (GAO) and the National Academy of Sciences (NAS) to prepare studies concerning the operation 

and effectiveness of the programs. 

Based on information from the Small Business Administration 

(SBA) and other participating agencies, CBO estimates that implementing S. 1233 would cost $229 million over the 2010–2014 peVerDate Nov 24 2008 06:42 Jul 07, 2009 Jkt 079010 PO 00000 Frm 00029 Fmt 6659 Sfmt 6602 E:\HR\OC\SR037.XXX SR037

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riod, subject to appropriation of the necessary amounts. Enacting 

the bill would not affect direct spending or revenues. 

S. 1233 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA) 

and would impose no costs on state, local, or tribal governments. 

Estimated cost to the Federal Government: The estimated budgetary impact of S. 1233 is shown in the following table. The costs 

of this legislation fall within budget functions 050 (national defense), 250 (general science, space, and technology), 270 (energy), 

300 (natural resources and environment), 350 (agriculture), 370 

(commerce and housing credit), 400 (transportation), 500 (education, training, employment, and social services), 550 (health), and 

750 (administration of justice). 

By fiscal year, in millions of dollars— 

2010 2011 2012 2013 2014 2010– 

2014 

CHANGES IN SPENDING SUBJECT TO APPROPRIATION 

Reauthorize SBIR/STTR Programs: 

Estimated Authorization Level ................................. 33 34 34 35 36 172 

Estimated Outlays ................................................... 25 32 35 35 36 163 

Increase in R&D Budget Set-asides: 

Estimated Authorization Level ................................. 0 2 3 5 6 16 

Estimated Outlays ................................................... 0 2 3 5 6 16 

FAST Program Reauthorization: 

Authorization Level .................................................. 10 10 10 10 10 50 

Estimated Outlays ................................................... 2 5 9 10 10 36 

SBIR-STEM Workforce Development Program: 

Authorization Level .................................................. 0 1 1 1 1 4 

Estimated Outlays ................................................... 0 0 1 1 1 3 

National Academy of Sciences Study: 

Estimated Authorization Level ................................. 4 0 0 0 0 4 

Estimated Outlays ................................................... 1 1 1 1 0 4 

Additional Agency Activities: 

Estimated Authorization Level ................................. 7 0 0 0 0 7 

Estimated Outlays ................................................... 3 4 0 0 0 7 

Total Changes: 

Estimated Authorization level ........................ 54 47 48 51 53 253 

Estimated Outlays .......................................... 31 44 49 52 53 229 

Note.—SBIR = Small Business Innovation Research; STTR = Small Business Technology Transfer; FAST = Federal and State Technology

Partnership; STEM = Science, Technology, Engineering, and Math. 

Basis of estimate: Under current law, the Small Business Innovation Research (SBIR) program requires federal agencies with extramural budgets for research and development (R&D) that exceed 

$100 million per year to set aside 2.5 percent of that budget for 

contracts with small businesses. (Extramural budgets are made up 

of expenditures for activities not performed by agency employees.) 

Likewise, the Small Business Technology Transfer (STTR) program 

requires federal agencies with extramural budgets for R&D that 

exceed $1 billion per year to set aside 0.3 percent of that budget 

for cooperative research between small businesses and a federal 

laboratory or nonprofit research institution. 

Eleven agencies currently participate in one or both programs, 

including the Departments of Defense, Health and Human Services, Energy, Agriculture, and Homeland Security as well as the 

National Aeronautics and Space Administration, the National 

Science Foundation, and the Environmental Protection Agency. 

The cost of those programs to the participating agencies consists 

primarily of personnel and associated overhead expenses to solicit 


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applications, prepare reports, and track outcomes. The organizational structures of the program offices vary. Some agencies have 

full-time staff members devoted to the SBIR and STTR programs, 

with other staff assisting as part of their duties; other agencies, 

however, have employees working part-time on the program. 

For this estimate, CBO assumes that the bill will be enacted 

near the end of fiscal year 2009 and that the necessary funds will 

be appropriated near the start of each year. Based on information 

from SBA and participating agencies, CBO estimates that implementing S. 1233 would cost $229 million over the 2010–2014 period, assuming appropriation of the necessary amounts. 

Reauthorization of the SBIR and STTR programs 

The bill would extend both the SBIR and STTR programs 

through 2023. Under current law, the SBIR program is scheduled 

to terminate on July 31, 2009, and the STTR program is scheduled 

to terminate at the end of fiscal year 2009. Based on information 

from SBA and participating agencies, CBO estimates that administering the two programs will cost about $25 million in 2010 

(about $2 million of that amount will be for SBA). CBO estimates 

that reauthorizing both programs would cost $163 million over the 

2010–2014 period, assuming appropriation of the necessary 

amounts. 

Increase in the R&D budget set-asides for small businesses 

S. 1233 also would increase the amount of each participating 

agency’s R&D budget set aside for the programs starting in fiscal 

year 2011. For SBIR, the set-aside would increase by 0.1 percent 

each year over the 2011–2020 period, ending at 3.5 percent of each 

participating agency’s R&D budget. For STTR, the set-aside would 

increase by 0.1 percent every two years through 2015, ending at 0.6 

percent of each participating agency’s R&D budget. Based on information from SBA and the agencies, CBO expects that the expansion would lead to an increase in the number of applications received by both programs by more than a third over the 2010–2014 

period. Assuming appropriation of the necessary amounts, CBO estimates that processing the additional applications would cost $16 

million over the 2010–2014 period. 

FAST program reauthorization 

S. 1233 would reauthorize the Federal and State Technology 

(FAST) Partnership program to improve the competitiveness of 

small businesses in technological fields. A portion of the funds 

made available under the program also would be available to conduct outreach and provide technical assistance to increase the 

number of small businesses participating in the SBIR program. 

The bill would authorize $10 million for each of fiscal years 2010 

through 2014 to implement the program. Based on historical 

spending patterns of SBA’s other business assistance programs, 

CBO estimates that implementing this provision would cost $36 

million over the 2010–2014 period, assuming appropriation of the 

necessary amounts. 


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SBIR-STEM Workforce Development Program 

The bill would establish a program to encourage small businesses 

that participate in the SBIR program to provide internships to college students who are pursuing studies in the fields of science, 

technology, engineering, and math. Participating businesses would 

be eligible for a bonus grant equal to 10 percent of their SBIR 

award, up to a maximum of $10,000 per year. S. 1233 would authorize the appropriation of $1 million per year for fiscal years 

2011 through 2015 for this program. CBO estimates that implementing this provision would cost $3 million over the 2010–2014 

period, assuming appropriation of the necessary amounts. 

National Academy of Sciences Study 

The bill would direct certain agencies participating in the SBIR 

program to enter into an agreement with the NAS for the National 

Research Council to study the degree to which the SBIR program 

has stimulated innovation and used small businesses to meet federal R&D needs. Based on results from the study, NAS also would 

develop recommendations for improving the SBIR program. Based 

on information from NAS, CBO estimates that conducting a study 

as required by S. 1233 would cost $4 million over the 2010–2014 

period. 

Additional agency activities 

S. 1233 would require each agency participating in the SBIR or 

STTR program to expand the amount of information collected and 

maintained about applicants and businesses that receive awards 

under the programs. This information would serve as a source for 

two databases, one public and one governmental, maintained by 

SBA to evaluate the two programs. Based on information from the 

agencies, CBO estimates that collecting and maintaining additional 

data in each participating agency would cost about $6 million over 

the 2010–2014 period to expand the systems already in place. 

The bill also would require GAO to conduct two studies: one to 

determine whether the agencies participating in the SBIR and 

STTR programs are complying with the programs’ requirements to 

allocate a specific portion of their R&D budgets, the other to assess 

whether agencies participating in the SBIR program are sufficiently protecting the intellectual property rights of the small businesses that receive awards under the program. CBO estimates that 

conducting such studies would cost about $1 million, subject to the 

availability of appropriated funds. 

Intergovernmental and private-sector impact: S. 1233 contains no 

intergovernmental or private-sector mandates as defined in UMRA. 

The bill would reauthorize the FAST program, a matching-grant 

program to encourage states to assist in the development of hightechnology small businesses. Any costs to state governments to provide matching funds would be incurred voluntarily. 

Estimate prepared by: Federal Costs: Susan Willie; Impact on 

State, Local, and Tribal Governments: Elizabeth Cove Delisle; Impact on the Private Sector: Jacob Kuipers. 

Estimate approved by: Theresa Gullo; Deputy Assistant Director 

for Budget Analysis 


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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

Sec. 1. Short title 

This section specifies the short title of the legislation as the 

‘‘SBIR/STTR Reauthorization Act of 2009.’’ 

Sec. 2. Table of contents 

This section provides the table of contents for the legislation. 

Sec. 3. Definitions 

This section re-states applicable definitions from the Small Business Act. 

TITLE I—REAUTHORIZATION OF THE SBIR AND STTR PROGRAMS

Sec. 101. Extension of termination dates 

This section extends the SBIR and STTR programs for 14 years, 

making the new sunset dates for both programs September 30, 

2023. 

Sec. 102. Status of the SBA Office of Technology 

This section requires the SBA to maintain an Office of Technology headed by an Assistant Administrator who will report directly to the Administrator. It also requires that the Office of Technology be independent from the Office of Government Contracting 

and that it be sufficiently staffed and funded to oversee the SBIR 

and STTR programs and to comply with statutory data collection, 

evaluation, and reporting requirements. 

Sec. 103. SBIR allocation increase 

This section increases the SBIR allocation from 2.5 percent to 3.5 

percent by increasing it 0.1 percent each year from fiscal year 2010 

through 2019. The provision also requires the Department of Defense and the Department of Energy to direct these additional 

funds to further the technology readiness levels of SBIR projects, 

including conducting testing and evaluation, and not to be used for 

Phase I and Phase II awards. The section applies to all SBIR and 

STTR participating agencies. 

Sec. 104. STTR cap increase 

This section increases the STTR allocation from 0.3 percent to 

0.6 percent by increasing it by 0.1 percent every two years from fiscal year 2011 through 2015. 

Sec. 105. SBIR and STTR award levels 

This section increases the size of SBIR and STTR awards from 

$100,000 to $150,000 for Phase I and from $750,000 to $1 million 


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for Phase II and requires the SBA to make triennial adjustments 

of the award sizes for inflation. The provision prohibits any agency 

from issuing an SBIR or STTR award if the size of the award exceeds the award guidelines established in this section by more than 

50 percent. However, it does clarify that nothing shall prevent a 

Federal agency from supplementing an award under the SBIR or 

STTR programs with Federal funds that are outside of the SBIR 

and STTR allocations. Finally, the provision requires federal agencies to maintain information on awards exceeding the award guidelines, including the award amount, a justification for exceeding the 

guidelines, the identity and location of the recipient, and whether 

or not the recipient firm has received venture capital investment 

and, if so, whether or not it is majority-owned and controlled by 

multiple venture capital companies. 

Sec. 106. Agency and program collaboration 

The section allows SBIR and STTR applicants to receive awards 

for subsequent SBIR or STTR phases at another agency and also 

allows small business concerns which received SBIR or STTR 

awards to receive awards for subsequent phases in either the STTR 

or SBIR program, respectively. 

Sec. 107. Elimination of Phase II invitations 

This section requires that federal agencies conduct their solicitation of Phase II SBIR and STTR proposals without any invitation, 

pre-screening, pre-selection, or down-selection process between the 

first and second phase. 

Sec. 108. Majority-venture investments in SBIR firms 

This section allows the Department of Health and Human Services to apply for the authority to permit firms majority-owned and 

controlled by multiple venture capital companies to compete for up 

to 18 percent of the agency’s SBIR funds. All other qualifying federal agencies with an SBIR program may apply for the authority 

to permit firms majority-owned and controlled by multiple venture 

capital companies to compete for up to eight percent of the agency’s 

SBIR funds. The provision also requires the Administrator of the 

SBA to post and maintain a website providing a clear explanation 

of the SBIR program affiliation standards. 

Sec. 109. SBIR and STTR special acquisition preference 

This section codifies the language from the SBIR and STTR Policy Directives confirming the intent of Congress to establish a special acquisition preference for SBIR and STTR Phase III awards. 

The provision clarifies that preference for contracts concerning research developed with SBIR or STTR funds should go to the developers and holders of SBIR and STTR technologies to the greatest 

extent practicable. 

Sec. 110. Collaborating with Federal laboratories and research and 

development centers 

This section reduces the burden on cooperation between SBIR/ 

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oratories is not required of SBIR or STTR awardees. Finally, it 

clarifies that firms that have entered into a cooperative agreement 

with a federal laboratory are eligible to receive SBIR/STTR awards. 

Sec. 111. Notice requirement 

This section ensures that the SBA is notified any time the SBIR 

or STTR policy directives are challenged in court. It also requires 

the SBA to report to Congress on actions taken to enforce the SBIR 

and STTR policy directives. 

TITLE II—OUTREACH AND COMMERCIALIZATION INITIATIVES

Sec. 201. Rural and state outreach 

This provision reauthorizes the FAST program and the ROP 

through 2014, and increases the authorization for the ROP from $2 

million to $5 million. It creates a matching requirement category 

for FAST recipients in rural areas of 35 cents for each federal dollar. The provision further creates an ‘‘enhanced’’ match requirement of 15 cents for a FAST recipient in a rural area which is also 

located in one of the 18 states receiving the fewest SBIR Phase I 

awards. Finally, the matching requirements for states receiving an 

average moderate amount of awards is reduced from 75 cents to 50 

cents, and the match for states in the bottom 18 of recipients is reduced from 50 cents to 35 cents. 

Sec. 202. SBIR-STEM Workforce Development Grant Pilot Program 

This section establishes a five-year workforce development grant 

pilot program to match up innovative small businesses with college 

students studying science, technology, engineering, and math. The 

proposal would provide SBIR grantees with a 10 percent bonus 

grant, for either Phase I or Phase II SBIR grants, with a total maximum award of $10,000 per year for small businesses that provide 

opportunities to these students. 

Sec. 203. Technical assistance for awardees 

This section increases the amount of discretionary technical assistance that SBIR and STTR agencies can contract out to provide 

to awardees from $4,000 to $5,000 for Phase I awards and from 

$4,000 to $5,000 per year for Phase II awards. The provision also 

states that this amount shall be in addition to the amount of the 

recipient’s award. It also requires agencies to provide SBIR and 

STTR award winners who wish to procure their own technical assistance with the allowable amount. Finally, the provision prohibits 

the agencies from using these funds to pay its contractor for technical assistance for a given SBIR or STTR award unless the contractor provides the technical assistance to that awardee. 

Sec. 204. Commercialization program: Department of Defense 

This section makes the Commercialization Pilot Program (CPP) 

at the Department of Defense permanent for both the SBIR and 

STTR programs. The provision authorizes the Secretary of Defense 

to establish goals for transitioning Phase I and Phase II technologies in subcontracting plans for contracts of $100 million or 

more. The provision also requires the Secretary of Defense to set 

a goal to increase the number of Phase II contracts that lead to 


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technology transition into programs of record or fielded systems 

and to use incentives to encourage agency program managers and 

prime contractors to meet that goal. Finally, the provision includes 

reporting requirements on the status of projects funded through 

CPP. 

Sec. 205. Commercialization pilot programs for civilian agencies 

This section authorizes agencies other than the Department of 

Defense to create Innovation Development Transition Pilot Programs to support advanced development of small business technologies which are facing high manufacturing or regulatory costs. 

The provision authorizes these agencies to grant post Phase II 

awards up to three times the regular size (up to $3 million), reflecting current practices at NIH. As a condition of awards, matching 

private or federal non-SBIR funds are required if the technology 

will be acquired by the U.S. government. 

Sec. 206. Nanotechnology Initiative 

This section requires each agency with an SBIR or STTR program to encourage the submission of applications for support of 

nanotechnology related projects. The section sunsets in 2014. 

Sec. 207. Accelerating cures 

This section establishes an advisory board at the National Academy of Sciences consisting of the Directors of the NIH and its SBIR 

program, senior agency managers at the NIH, industry experts, 

and small business representatives to provide regular assessments 

of program management and effectiveness. Industry experts will be 

selected by the National Academy of Sciences in consultation with 

the Associate Administrator for Technology at the SBA and the Director of the Office of Science and Technology Policy at the White 

House. Half of the board shall be SBIR awardees and the total 

number of members, in addition to the Directors of the NIH and 

its SBIR program, shall not exceed ten. This section also encourages the creation of a pilot program, not to exceed 1 percent of extramural research and development dollars at NIH, to support innovation in program management and to enhance the development 

of cures and treatments. It also encourages NIH to reduce the time 

period between Phase I and Phase II to no more than six months 

to the greatest extent practicable. Finally, the section requires the 

NIH director to submit an annual report to Congress and the aforementioned NAS advisory board on the activities of the SBIR program at the NIH. Five years after enactment this section will sunset. 

TITLE III—OVERSIGHT AND EVALUATION

Sec. 301. Streamlining annual evaluation requirements 

This section requires the Administration to report to Congress at 

least annually the number of proposals received from firms with 

venture capital investment, including those owned and controlled 

by multiple venture capital firms. It also requires the Administration to report on efforts to increase outreach to firms owned and 

controlled by women and socially or economically disadvantaged individual, the implementation and compliance with the allocation of 


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funds for firms majority-owned and controlled by multiple venture 

capital companies, and appeals of Phase III awards and notices of 

noncompliance with the SBIR and the STTR Policy Directives. Finally, the section requires the Administration to coordinate the implementation of electronic databases at the participating agencies. 

Sec. 302. Data collection from agencies for SBIR 

This section requires agencies with an SBIR program to collect 

data on whether or not an applicant or awardee has venture capital, if it is majority-owned and controlled by multiple venture capital firms, the amount of venture capital it has received at the time 

of award, if it has foreign investors and who they are, if it is owned 

by a woman, if it is owned by a socially or economically disadvantaged individual, if it received assistance from the FAST program 

or the ROP, if it has a university affiliation, and if the award winner is from a state receiving less federal research funds for small 

businesses than a majority of other states. The provision also requires agencies to justify awards given that exceed the statuary 

guidelines. 

Sec. 303. Data collection from agencies for STTR 

This section requires agencies with an STTR program to collect 

data on whether or not an applicant or awardee has venture capital, if it is majority-owned and controlled by multiple venture capital firms, the amount of venture capital it has received at the time 

of award, if it has foreign investors and who they are, if it is owned 

by a woman, if it is owned by a socially or economically disadvantaged individual, if it received assistance from the FAST program 

or the ROP, if it has a university affiliation, and if the award winner is from a state receiving less federal research funds for small 

businesses than a majority of other states. The provision also requires agencies to justify awards given that exceed the statutory 

guidelines. 

Sec. 304. Public database 

This section requires that the public database maintained by the 

Administrator include information on whether or not a firm receiving an award has venture capital, is majority-owned and controlled 

by multiple venture capital companies, is owned by a woman, is 

owned by a socially or economically disadvantaged individual, has 

received assistance from the FAST program or the ROP, or has a 

university affiliation. 

Sec. 305. Government database 

This section requires that the government database maintained 

by the Administrator in coordination with the agencies for the purposes of evaluation of the SBIR and STTR programs include information on the ownership structure and affiliations of awardee 

firms that have venture capital and that are majority-owned and 

controlled by multiple venture capital companies. 

Sec. 306. Accuracy in funding base calculations 

This section requires the GAO to conduct an audit of the SBIR 

and STTR programs to determine whether federal agencies are 

complying with the allocation requirements. The provision also reVerDate Nov 24 2008 06:42 Jul 07, 2009 Jkt 079010 PO 00000 Frm 00037 Fmt 6659 Sfmt 6602 E:\HR\OC\SR037.XXX SR037

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quires that the GAO assess whether or not it would be a more effective to base participation on a percentage of an agency’s research 

and development budget rather than the extramural research and 

development budget and to report such information to Congress. 

Sec. 307. Continued evaluation by the National Academy of Sciences 

This section authorizes the National Academy of Sciences to continue its evaluation of the SBIR program through the end of fiscal 

year 2021 and requires that updates of the studies be provided to 

Congress every four years from the date of enactment. 

Sec. 308. Technology insertion reporting requirements 

This section requires the Administration to include in its annual 

report to Congress information on Phase III awards issued by SBIR 

and STTR agencies, including the dollar amount of these awards, 

their recipients, and the name of component or agency issuing 

them. 

Sec. 309. Intellectual property protections 

This section requires the GAO to conduct a study of the SBIR 

and STTR programs to assess whether the agencies are adhering 

to the data rights protections for SBIR and STTR awardees and 

their technologies, as well as whether the current laws and policy 

directives are sufficient to protect the rights of the awardees. The 

report is due to Congress 18 months after the enactment of the Act. 

TITLE IV—POLICY DIRECTIVES

Sec. 401. Conforming amendments to the SBIR and the STTR Policy Directives 

This section requires conforming amendments to the SBA SBIR 

and STTR Policy Directives within 180 days to implement the provisions of this Act. It also requires that the Administration publish 

the SBIR and STTR Policy Directives in the Code of Federal Regulations within 180 days. 

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