79–006 

111TH CONGRESS REPT. 111–190 " ! HOUSE OF REPRESENTATIVES 1st Session Part 1 

ENHANCING SMALL BUSINESS RESEARCH AND 

INNOVATION ACT OF 2009 

JUNE 26, 2009.—Ordered to be printed 

Ms. VELA ́ ZQUEZ, from the Committee on Small Business, 

submitted the following 

R E P O R T 

[To accompany H.R. 2965] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Small Business, to whom was referred the bill 

(H.R. 2965) to amend the Small Business Act with respect to the 

Small Business Innovation Research Program and the Small Business Technology Transfer Program, and for other purposes, having 

considered the same, report favorably thereon with an amendment 

and recommend that the bill as amended do pass. 

CONTENTS 

Page 

I. Purpose of the Bill and Summary ................................................................ 11 

II. Background and Need for Legislation .......................................................... 13 

III. Hearings ......................................................................................................... 18 

IV. Committee Consideration .............................................................................. 18 

V. Committee Votes ............................................................................................ 18 

VI. Section-by-Section Analysis of H.R. 2965 .................................................... 22 

VII. Congressional Budget Office Cost Estimate ................................................ 30 

VIII. Committee Estimate of Costs ....................................................................... 30 

IX. Oversight Findings ........................................................................................ 31 

X. Statement of Constitutional Authority ........................................................ 31 

XI. Compliance With Public Law 104–4 ............................................................ 31 

XII. Congressional Accountability Act ................................................................. 31 

XIII. Federal Advisory Committee Statement ...................................................... 31 

XIV. Statement of No Earmarks ........................................................................... 31 

XV. Performance Goals and Objectives ............................................................... 31 

XVI. Changes in Existing Law Made by the Bill, as Reported ........................... 31 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 


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SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

(a) SHORT TITLE.—This Act may be cited as the ‘‘Enhancing Small Business Research and Innovation Act of 2009’’. 

(b) TABLE OF CONTENTS.—The table of contents for this Act is as follows: 

Sec. 1. Short title; table of contents. 

TITLE I—PROGRAM EXTENSION AND VENTURE CAPITAL OPERATING COMPANY INVOLVEMENT 

Sec. 101. Extension of termination dates. 

Sec. 102. Ensuring that innovative small businesses with substantial investment from venture capital operating 

companies are able to participate in the SBIR and STTR programs. 

TITLE II—COMMERCIALIZATION ACTIVITIES AND RESEARCH TOPICS DESERVING SPECIAL 

CONSIDERATION 

Sec. 201. Focus on commercialization. 

Sec. 202. Inclusion of energy-related research topics and rare disease-related research topics as deserving ‘‘special consideration’’ as SBIR research topics. 

Sec. 203. Nanotechnology-related research topics. 

Sec. 204. Clarifying the definition of ‘‘Phase Three’’. 

Sec. 205. Agency research goals. 

Sec. 206. Commercialization programs. 

TITLE III—RURAL DEVELOPMENT AND OUTREACH 

Sec. 301. Outreach and support activities. 

Sec. 302. Rural preference. 

Sec. 303. Obtaining SBIR applicant’s consent to release contact information to economic development organizations. 

Sec. 304. Increased partnerships between SBIR awardees and prime contractors, venture capital investment 

companies, and larger businesses. 

TITLE IV—SBIR AND STTR ENHANCEMENT 

Sec. 401. Increased number of research topic solicitations annually and shortened period for final decisions on 

applications. 

Sec. 402. Agencies should fund vital R&D projects with the potential for commercialization. 

Sec. 403. Federal agency engagement with SBIR awardees that have been awarded multiple Phase One awards 

but have not been awarded Phase Two awards. 

Sec. 404. Funding for administrative, oversight, and contract processing costs. 

Sec. 405. Comptroller general audit of how Federal agencies calculate extramural research budgets. 

Sec. 406. Agency databases to support program evaluation. 

Sec. 407. Agency databases to support technology utilization. 

Sec. 408. Interagency Policy Committee. 

Sec. 409. National Research Council SBIR Study. 

Sec. 410. Express authority to ‘‘fast-track’’ Phase Two awards for promising Phase One research. 

Sec. 411. Increased SBIR and STTR award levels. 

Sec. 412. Express authority for an agency to award sequential Phase Two awards for SBIR-funded projects. 

Sec. 413. First phase required. 

Sec. 414. Involvement of Chief Counsel for Advocacy. 

TITLE I—PROGRAM EXTENSION AND VENTURE 

CAPITAL OPERATING COMPANY INVOLVEMENT 

SEC. 101. EXTENSION OF TERMINATION DATES. 

(a) SBIR.—Section 9(m) of the Small Business Act (15 U.S.C. 638(m)) is amended 

by striking ‘‘2008’’ and inserting ‘‘2011’’. 

(b) STTR.—Section 9(n)(1)(A) of the Small Business Act (15 U.S.C. 638(n)(1)(A)) 

is amended by striking ‘‘2009’’ and inserting ‘‘2011’’. 

SEC. 102. ENSURING THAT INNOVATIVE SMALL BUSINESSES WITH SUBSTANTIAL INVESTMENT 

FROM VENTURE CAPITAL OPERATING COMPANIES ARE ABLE TO PARTICIPATE IN 

THE SBIR AND STTR PROGRAMS. 

Section 9 of the Small Business Act (15 U.S.C. 638) is amended by adding at the 

end the following: 

‘‘(aa) VENTURE CAPITAL OPERATING COMPANIES.—Effective only for the SBIR and 

STTR programs the following shall apply: 

‘‘(1) A business concern that has more than 500 employees shall not qualify 

as a small business concern. 

‘‘(2) In determining whether a small business concern is independently owned 

and operated under section 3(a)(1) or meets the small business size standards 

instituted under section 3(a)(2), the Administrator shall not consider a business 

concern to be affiliated with a venture capital operating company (or with any 

other business that the venture capital operating company has financed) if— 

‘‘(A) the venture capital operating company does not own 50 percent or 

more of the business concern; and 

‘‘(B) employees of the venture capital operating company do not constitute 

a majority of the board of directors of the business concern. 


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‘‘(3) A business concern shall be deemed to be ‘independently owned and operated’ if— 

‘‘(A) it is owned in majority part by one or more natural persons or venture capital operating companies; 

‘‘(B) there is no single venture capital operating company that owns 50 

percent or more of the business concern; and 

‘‘(C) there is no single venture capital operating company the employees 

of which constitute a majority of the board of directors of the business concern. ‘‘(4) If a venture capital operating company controlled by a business with 

more than 500 employees (in this paragraph referred to as a ‘VCOC under large 

business control’) has an ownership interest in a small business concern that 

is owned in majority part by venture capital operating companies, the small 

business concern is eligible to receive an award under the SBIR or STTR program only if— 

‘‘(A) not more than two VCOCs under large business control have an ownership interest in the small business concern; and 

‘‘(B) the VCOCs under large business control do not collectively own more 

than 20 percent of the small business concern. 

‘‘(5) The term ‘venture capital operating company’ means a business concern— 

‘‘(A) that— 

‘‘(i) is a Venture Capital Operating Company, as that term is defined 

in regulations promulgated by the Secretary of Labor; or 

‘‘(ii) is an entity that— 

‘‘(I) is registered under the Investment Company Act of 1940 (15 

U.S.C. 80a–51 et seq.); or 

‘‘(II) is an investment company, as defined in section 3(c)(1) of 

such Act (15 U.S.C. 80a–3(c)(1)), which is not registered under such 

Act because it is beneficially owned by less than 100 persons; and 

‘‘(B) that is itself organized or incorporated and domiciled in the United 

States, or is controlled by a business concern that is incorporated and domiciled in the United States.’’. 

TITLE II—COMMERCIALIZATION ACTIVITIES 

AND RESEARCH TOPICS DESERVING SPECIAL CONSIDERATION 

SEC. 201. FOCUS ON COMMERCIALIZATION. 

Section 9(a) of the Small Business Act (15 U.S.C. 638(a)) is amended by adding 

at the end the following: ‘‘It is further the policy of Congress that the programs established in this section should focus on promoting research and development of 

projects governed by commercial business plans, which have significant potential to 

produce products or services for the marketplace or for acquisition by Federal agencies.’’. 

SEC. 202. INCLUSION OF ENERGY-RELATED RESEARCH TOPICS AND RARE DISEASE-RELATED 

RESEARCH TOPICS AS DESERVING ‘‘SPECIAL CONSIDERATION’’ AS SBIR RESEARCH 

TOPICS. 

Section 9(g)(3) of the Small Business Act (15 U.S.C. 638(g)(3)) is amended— 

(1) in the matter preceding subparagraph (A) by inserting after ‘‘critical technologies’’ the following: ‘‘or pressing research priorities’’; 

(2) in subparagraph (A) by striking ‘‘or’’ at the end; and 

(3) by adding at the end the following: 

‘‘(C) the National Academy of Sciences, in the final report issued by the 

‘America’s Energy Future: Technology Opportunities, Risks, and Tradeoffs’ 

project, and in subsequent reports issued by the National Academy of 

Sciences on sustainability, energy, and alternative fuels; 

‘‘(D) the National Institutes of Health, in the annual report on the rare 

diseases research activities of the National Institutes of Health for fiscal 

year 2005, and in subsequent reports issued by the National Institutes of 

Health on rare diseases research activities; or 

‘‘(E) the National Academy of Sciences, in the final report issued by the 

‘Transit Research and Development: Federal Role in the National Program’ 

project and the ‘Transportation Research, Development and Technology 

Strategic Plan (2006–2010)’ issued by the United States Department of 

Transportation Research and Innovative Technology Administration, and in 

subsequent reports issued by the National Academy of Sciences and United 


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States Department of Transportation on transportation and infrastructure;’’. 

SEC. 203. NANOTECHNOLOGY-RELATED RESEARCH TOPICS. 

(a) SBIR.—Section 9(g)(3) of the Small Business Act (15 U.S.C. 638(g)(3)), as 

amended, is further amended— 

(1) in subparagraph (D) by striking ‘‘or’’ at the end; 

(2) in subparagraph (E) by adding ‘‘or’’ at the end; and 

(3) by adding at the end the following: 

‘‘(F) the national nanotechnology strategic plan required under section 

2(c)(4) of the 21st Century Nanotechnology Research and Development Act 

(15 U.S.C. 7501(c)(4)) and in subsequent reports issued by the National 

Science and Technology Council Committee on Technology, focusing on 

areas of nanotechnology identified in such plan;’’. 

(b) STTR.—Section 9(o)(3) of the Small Business Act (15 U.S.C. 638(o)(3)) is 

amended— 

(1) in subparagraph (A) by striking ‘‘or’’ at the end; 

(2) in subparagraph (B) by adding ‘‘or’’ at the end; and 

(3) by adding at the end the following: 

‘‘(C) by the national nanotechnology strategic plan required under section 

2(c)(4) of the 21st Century Nanotechnology Research and Development Act 

(15 U.S.C. 7501(c)(4)) and in subsequent reports issued by the National 

Science and Technology Council Committee on Technology, focusing on 

areas of nanotechnology identified in such plan;’’. 

SEC. 204. CLARIFYING THE DEFINITION OF ‘‘PHASE THREE’’. 

Section 9(e) of the Small Business Act (15 U.S.C. 638(e)) is amended— 

(1) in paragraph (4)(C) in the matter preceding clause (i) by inserting after 

‘‘a third phase’’ the following: ‘‘, which shall consist of work that derives from, 

extends, or logically concludes efforts performed under prior SBIR funding 

agreements (which may be referred to as ‘Phase III’)’’; 

(2) in paragraph (8) by striking ‘‘and’’ at the end; 

(3) in paragraph (9) by striking the period at the end and inserting ‘‘; and’’; 

and 

(4) by adding at the end the following: 

‘‘(10) the term ‘commercialization’ means the process of developing marketable 

products or services and producing and delivering products or services for sale 

(whether by the originating party or by others) to government or commercial 

markets.’’. 

SEC. 205. AGENCY RESEARCH GOALS. 

Section 9 of the Small Business Act (15 U.S.C. 638), as amended, is further 

amended by striking subsection (h) and inserting the following: 

‘‘(h) AGENCY RESEARCH GOALS.— 

‘‘(1) IN GENERAL.—In addition to the requirements of subsection (f), each Federal agency that is required by this section to have an SBIR program and that 

awards annually $5,000,000,000 or more in procurement contracts shall, effective for fiscal year 2010 and each fiscal year thereafter, establish annual goals 

for commercialization of projects funded by SBIR awards. 

‘‘(2) SPECIFIC GOALS.—The goals required by paragraph (1) shall include specific goals for each of the following: 

‘‘(A) The percentage of SBIR projects that receive funding for the third 

phase (as defined in subsection (e)(4)(C)). 

‘‘(B) The percentage of SBIR projects that are successfully integrated into 

a program of record. 

‘‘(C) The amount of Federal dollars received by SBIR projects through 

Federal contracts, not including dollars received through the SBIR program. 

‘‘(3) SUBMISSION TO COMMITTEES.—For each fiscal year for which goals are required by paragraph (1), the agency shall submit to the Committee on Small 

Business and the Committee on Science and Technology of the House of Representatives and the Committee on Small Business and Entrepreneurship of the 

Senate— 

‘‘(A) not later than 60 days after the beginning of the fiscal year, the 

goals; and 

‘‘(B) not later than 90 days after the end of the fiscal year, data on the 

extent to which the goals were met and a description of the methodology 

used to collect such data.’’. 


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SEC. 206. COMMERCIALIZATION PROGRAMS. 

Section 9 of the Small Business Act (15 U.S.C. 638) as amended, is further 

amended, by adding at the end the following: 

‘‘(bb) COMMERCIALIZATION PROGRAMS.— ‘‘(1) IN GENERAL.—Each agency required by this section to conduct an SBIR 

program shall establish a commercialization program that supports the progress 

of SBIR awardees to the third phase. The commercialization program may include activities such as partnership databases, partnership conferences, multiple second phases, mentoring between prime contractors and SBIR awardees, 

multiple second phases with matching private investment requirements, jumbo 

awards, SBIR helpdesks, and transition assistance programs. The agency shall 

include in its annual report an analysis of the various activities considered for 

inclusion in the commercialization program and a statement of the reasons why 

each activity considered was included or not included, as the case may be. 

‘‘(2) FUNDING FOR COMMERCIALIZATION PROGRAMS.— ‘‘(A) IN GENERAL.—From amounts made available to carry out this paragraph, the Administrator may, on petition by agencies required by this section to conduct an SBIR program, transfer funds to such agencies to support the commercialization programs of such agencies. 

‘‘(B) PETITIONS.—The Administrator shall establish rules for making 

transfers under subparagraph (A). The initial set of rules shall be promulgated not later than 90 days after the date of the enactment of this paragraph. 

‘‘(C) AUTHORIZATION OF APPROPRIATIONS.—There is authorized to be appropriated to the Administrator to carry out this paragraph $27,500,000 for 

fiscal year 2010 and each fiscal year thereafter. 

‘‘(3) FUNDING LIMITATION.—For payment of expenses incurred to administer 

the commercialization programs described in paragraphs (1) and (2), the head 

of an agency may use not more than an amount equal to 1 percent of the funds 

set aside for the agency’s Small Business Innovation Research program. Such 

funds— 

‘‘(A) shall not be subject to the limitations on the use of funds in subsection (f)(2); and 

‘‘(B) shall not be used for the purpose of funding costs associated with salaries and expenses of employees of the Federal Government.’’. 

TITLE III—RURAL DEVELOPMENT AND 

OUTREACH 

SEC. 301. OUTREACH AND SUPPORT ACTIVITIES. 

Section 9 of the Small Business Act (15 U.S.C. 638), as amended, is further 

amended by inserting after subsection (r) the following: 

‘‘(s) OUTREACH AND SUPPORT ACTIVITIES.— 

‘‘(1) IN GENERAL.—Subject to the other provisions of this subsection, the Administrator shall make grants on a competitive basis to organizations, to be 

used by the organizations to do one or both of the following: 

‘‘(A) To conduct outreach efforts to increase participation in the programs 

under this section. 

‘‘(B) To provide application support and entrepreneurial and business 

skills support to prospective participants in the programs under this section. 

‘‘(2) AUTHORIZATION OF APPROPRIATIONS.—There is authorized to be appropriated to the Administrator $10,000,000 to carry out paragraph (1) for each of 

fiscal years 2010 and 2011. 

‘‘(3) AMOUNT OF ASSISTANCE.—For each of subparagraphs (A) and (B) of paragraph (1), the amount of assistance provided to an organization under that subparagraph in any fiscal year— 

‘‘(A) shall be equal to the total amount of matching funds from non-Federal sources provided by the organization; and 

‘‘(B) shall not exceed $250,000. 

‘‘(4) DIRECTION.—An organization receiving funds under paragraph (1) shall, 

in using those funds, direct its activities at one or both of the following: 

‘‘(A) Small business concerns located in geographic areas that are underrepresented in the programs under this section. 

‘‘(B) Small business concerns owned and controlled by women, small business concerns owned and controlled by service-disabled veterans, and small 

business concerns owned and controlled by minorities. 


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‘‘(5) ADVISORY BOARD.— ‘‘(A) ESTABLISHMENT.—Not later than 90 days after the date of the enactment of this subsection, the Administrator shall establish an advisory board 

for the activities carried out under this subsection. 

‘‘(B) NON-APPLICABILITY OF FACA.—The Federal Advisory Committee Act 

(5 U.S.C. App.) shall not apply to the advisory board. 

‘‘(C) MEMBERS.—The members of the advisory board shall include the following: 

‘‘(i) The Administrator (or the Administrator’s designee). 

‘‘(ii) For each Federal agency required by this section to conduct an 

SBIR program, the head of the agency (or the designee of the head of 

the agency). 

‘‘(iii) Representatives of small business concerns that are current or 

former recipients of SBIR awards, or representatives of organizations 

of such concerns. 

‘‘(iv) Representatives of service providers of SBIR outreach and assistance, or representatives of organizations of such service providers. 

‘‘(D) DUTIES.—The advisory board shall have the following duties: 

‘‘(i) To develop guidelines for awards under paragraph (1), including 

guidelines relating to award sizes, proposal requirements, measures for 

monitoring awardee performance, and measures for determining the 

overall value of the activities carried out by the awardees. 

‘‘(ii) To identify opportunities for coordinated outreach, technical assistance, and commercialization activities among Federal agencies, the 

recipients of the awards under paragraph (1), and applicants and recipients of SBIR awards, including opportunities such as— 

‘‘(I) podcasting or webcasting for conferences, training workshops, 

and other events; 

‘‘(II) shared online resources to match prospective applicants 

with the network of paragraph (1) recipients; and 

‘‘(III) venture capital conferences tied to technologies and sectors 

that cross agencies. 

‘‘(iii) To review and recommend revisions to activities under paragraph (1). 

‘‘(iv) To submit to the Committee on Small Business and Entrepreneurship of the Senate and the Committee on Small Business and the 

Committee on Science and Technology of the House of Representatives 

an annual report on the activities carried out under paragraph (1) and 

the effectiveness and impact of those activities. 

‘‘(6) SELECTION CRITERIA.—In awarding grants under this subsection, the Administrator shall use selection criteria developed by the advisory board established under paragraph (5). The criteria shall include— 

‘‘(A) criteria designed to give preference to applicants who propose to 

carry out activities that will reach either an underperforming geographic 

area or an underrepresented population group (as measured by the number 

of SBIR applicants); 

‘‘(B) criteria designed to give preference to applicants who propose to 

carry out activities that complement, and are integrated into, the existing 

public-private innovation support system for the targeted region or population; 

‘‘(C) criteria designed to give preference to applicants who propose to 

measure the effectiveness of the proposed activities; and 

‘‘(D) criteria designed to give preference to applicants who include a 

Small Business Development Center program that is accredited for its technology services. 

‘‘(7) PEER REVIEW.—In awarding grants under this subsection, the Administrator shall use a peer review process. Reviewers shall include— 

‘‘(A) SBIR program managers for agencies required by this section to conduct SBIR programs; and 

‘‘(B) private individuals and organizations that are knowledgeable about 

SBIR, the innovation process, technology commercialization, and State and 

regional technology-based economic development programs. 

‘‘(8) PER-STATE LIMITATIONS.— 

‘‘(A) IN GENERAL.—To be eligible to receive a grant under this subsection, 

the applicant must have the written endorsement of the Governor of the 

State where the targeted regions or populations are located (if the regions 

or populations are located in more than one State, the applicant must have 

the written endorsement of the Governor of each such State). Such an endorsement must indicate that the Governor will ensure that the activities 


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to be carried out under the grant will be integrated with the balance of the 

State’s portfolio of investments to help small business concerns commercialize technology. 

‘‘(B) LIMITATION.—Each fiscal year, a Governor may have in effect not 

more than one written endorsement for a grant under paragraph (1)(A), and 

not more than one written endorsement for a grant under paragraph (1)(B). 

‘‘(9) SPECIFIC REQUIREMENTS FOR AWARDS.—In making awards under paragraph (1) the Administrator shall ensure that each award shall be for a period 

of 2 fiscal years. The Administrator shall establish rules and performance goals 

for the disbursement of funds for the second fiscal year, and funds shall not be 

disbursed to a recipient for such a fiscal year until after the advisory board established under this subsection has determined that the recipient is in compliance with the rules and performance goals.’’. 

SEC. 302. RURAL PREFERENCE. 

Section 9 of the Small Business Act (15 U.S.C. 638), as amended, is further 

amended by adding at the end the following: 

‘‘(cc) RURAL PREFERENCE.—In making awards under this section, Federal agencies 

shall give priority to applications so as to increase the number of SBIR and STTR 

award recipients from rural areas.’’. 

SEC. 303. OBTAINING SBIR APPLICANT’S CONSENT TO RELEASE CONTACT INFORMATION TO 

ECONOMIC DEVELOPMENT ORGANIZATIONS. 

Section 9 of the Small Business Act (15 U.S.C. 638), as amended, is further 

amended by adding at the end the following: 

‘‘(dd) CONSENT TO RELEASE CONTACT INFORMATION TO ORGANIZATIONS.— 

‘‘(1) ENABLING CONCERN TO GIVE CONSENT.—Each Federal agency required by 

this section to conduct an SBIR program shall enable a small business concern 

that is an SBIR applicant to indicate to the agency whether the agency has its 

consent to— 

‘‘(A) identify the concern to appropriate local and State-level economic development organizations as an SBIR applicant; and 

‘‘(B) release the concern’s contact information to such organizations. 

‘‘(2) RULES.—The Administrator shall establish rules to implement this subsection. The rules shall include a requirement that the agency include in its 

SBIR application forms a provision through which the applicant can indicate 

consent for purposes of paragraph (1).’’. 

SEC. 304. INCREASED PARTNERSHIPS BETWEEN SBIR AWARDEES AND PRIME CONTRACTORS, 

VENTURE CAPITAL INVESTMENT COMPANIES, AND LARGER BUSINESSES. 

Section 9 of the Small Business Act (15 U.S.C. 638), as amended, is further 

amended by adding at the end the following: 

‘‘(ee) INCREASED PARTNERSHIPS.— 

‘‘(1) IN GENERAL.—Each agency required by this section to conduct an SBIR 

program shall establish initiatives by which the agency encourages partnerships 

between SBIR awardees and prime contractors, venture capital investment companies, business incubators, and larger businesses, for the purpose of facilitating the progress of the SBIR awardees to the third phase. 

‘‘(2) DEFINITION.—In this subsection, the term ‘business incubator’ means an 

entity that provides coordinated and specialized services to entrepreneurial 

businesses which meet selected criteria during the businesses’ startup phases, 

including providing services such as shared office space and office services, access to equipment, access to telecommunications and technology services, flexible leases, specialized management assistance, access to financing, mentoring 

and training services, or other coordinated business or technical support services designed to provide business development assistance to entrepreneurial 

businesses during these businesses’ startup phases.’’. 

TITLE IV—SBIR AND STTR ENHANCEMENT 

SEC. 401. INCREASED NUMBER OF RESEARCH TOPIC SOLICITATIONS ANNUALLY AND SHORTENED PERIOD FOR FINAL DECISIONS ON APPLICATIONS. 

(a) INCREASED NUMBER OF RESEARCH TOPIC SOLICITATIONS ANNUALLY.—Section 

9(g)(2) of the Small Business Act (15 U.S.C. 638(g)(2)) is amended by inserting before the semicolon at the end the following: ‘‘, but not less often than twice per 

year’’. 

(b) SHORTENED PERIOD FOR FINAL DECISIONS ON APPLICATIONS.—Section 9(g)(4) of 

the Small Business Act (15 U.S.C. 638(g)(4)) is amended by inserting before the 

semicolon at the end the following: ‘‘, but a final decision on each proposal shall be 


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rendered not later than 90 days after the date on which the solicitation closes unless 

the Administrator determines, on a case by case basis, that a decision may be extended from 90 days to 180 days’’. 

SEC. 402. AGENCIES SHOULD FUND VITAL R&D PROJECTS WITH THE POTENTIAL FOR COMMERCIALIZATION. 

Section 9 of the Small Business Act (15 U.S.C. 638), as amended, is further 

amended by adding at the end the following: 

‘‘(ff) MULTIPLE FIRST PHASE SBIR AWARDS REPORT.—The Administrator shall, on 

an annual basis, submit to the Committee on Small Business and the Committee 

on Science and Technology of the House of Representatives and the Committee on 

Small Business and Entrepreneurship of the Senate a list identifying each small 

business concern that, for the period covered by the preceding 5 fiscal years, received 15 or more first phase SBIR awards and no second phase SBIR awards.’’. 

SEC. 403. FEDERAL AGENCY ENGAGEMENT WITH SBIR AWARDEES THAT HAVE BEEN AWARDED MULTIPLE PHASE ONE AWARDS BUT HAVE NOT BEEN AWARDED PHASE TWO 

AWARDS. 

Section 9 of the Small Business Act (15 U.S.C. 638), as amended, is further 

amended by adding at the end the following: 

‘‘(gg) REQUIREMENTS RELATING TO FEDERAL AGENCY ENGAGEMENT WITH CERTAIN

FIRST PHASE SBIR AWARDEES.—Each Federal agency required by this section to 

conduct an SBIR program shall engage with SBIR awardees that have been awarded multiple first phase SBIR awards but have not been awarded any second phase 

SBIR awards and shall develop performance measures with respect to awardee progression in the SBIR program.’’. 

SEC. 404. FUNDING FOR ADMINISTRATIVE, OVERSIGHT, AND CONTRACT PROCESSING COSTS. 

Section 9 of the Small Business Act (15 U.S.C. 638), as amended, is further 

amended by adding at the end the following: 

‘‘(hh) ASSISTANCE FOR ADMINISTRATIVE, OVERSIGHT, AND CONTRACT PROCESSING

COSTS.— 

‘‘(1) IN GENERAL.—From amounts made available to carry out this subsection, 

the Administrator may, on petition by Federal agencies required by this section 

to conduct an SBIR program, transfer funds to such agencies to assist with the 

administrative, oversight, and contract processing costs relating to such program. 

‘‘(2) PETITIONS.—The Administrator shall establish rules for making transfers 

under paragraph (1). The initial set of rules shall be promulgated not later than 

180 days after the date of the enactment of this subsection. 

‘‘(3) LIMIT ON TRANSFER.—A Federal agency may not receive under this subsection in a fiscal year an amount greater than 3 percent of the SBIR budget 

of such agency for such fiscal year. 

‘‘(4) AUTHORIZATION OF APPROPRIATIONS.—There is authorized to be appropriated to the Administrator to carry out this subsection $27,500,000 for each 

of fiscal years 2010 and 2011.’’. 

SEC. 405. COMPTROLLER GENERAL AUDIT OF HOW FEDERAL AGENCIES CALCULATE EXTRAMURAL RESEARCH BUDGETS. 

The Comptroller General of the United States shall carry out a detailed audit of 

how Federal agencies calculate extramural research budgets for purposes of calculating the size of the agencies’ Small Business Innovation Research Program and 

Small Business Technology Transfer Program budgets. Not later than 1 year after 

the date of the enactment of this Act, the Comptroller General shall submit to the 

Committee on Small Business and the Committee on Science and Technology of the 

House of Representatives and the Committee on Small Business and Entrepreneurship of the Senate a report on the results of the audit. 

SEC. 406. AGENCY DATABASES TO SUPPORT PROGRAM EVALUATION. 

Section 9(k) of the Small Business Act (15 U.S.C. 638(k)) is amended— 

(1) in paragraph (2)(A)— 

(A) by striking ‘‘and’’ at the end of clause (ii); 

(B) by inserting ‘‘and’’ at the end of clause (iii); and 

(C) by adding at the end the following new clause: 

‘‘(iv) information on the ownership structure of award recipients, both 

at the time of receipt of the award and upon completion of the award 

period;’’; 

(2) by amending paragraph (3) to read as follows: 

‘‘(3) UPDATING INFORMATION FOR DATABASE.— 

‘‘(A) IN GENERAL.—A Federal agency shall not make a Phase I or Phase 

II payment to a small business concern under this section unless the small 


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business concern has provided all information required under this subsection and available at the time with respect to the award under which 

the payment is made, and with respect to any other award under this section previously received by the small business concern or a predecessor in 

interest to the small business concern. 

‘‘(B) APPORTIONMENT.—In complying with this paragraph, a small business concern may apportion sales or additional investment information relating to more than one second phase award among those awards, if it notes 

the apportionment for each award. 

‘‘(C) ANNUAL UPDATES UPON TERMINATION.—A small business concern receiving an award under this section shall— 

‘‘(i) in the case of a second phase award, update information in the 

databases required under paragraphs (2) and (6) concerning that award 

at the termination of the award period; 

‘‘(ii) in the case of award recipients not described in clause (iii), be 

requested to voluntarily update such information annually thereafter 

for a period of 5 years; and 

‘‘(iii) in the case of a small business concern applying for a subsequent first phase or second phase award, be required to update such 

information annually thereafter for a period of 5 years.’’; and 

(3) by adding at the end the following new paragraph: 

‘‘(6) AGENCY PROGRAM EVALUATION DATABASES.—Each Federal agency required to establish an SBIR or STTR program under this section shall develop 

and maintain, for the purpose of evaluating such programs, a database containing information required to be contained in the database under paragraph 

(2). Each such database shall be designed to be accessible to other agencies that 

are required to maintain a database under this paragraph. Each such database 

shall be developed and operated in a manner to ensure that each such database 

is relevant to and contributes to the agency’s oversight and evaluation of the 

SBIR and STTR programs. Paragraphs (4) and (5) apply to each database under 

this paragraph.’’. 

SEC. 407. AGENCY DATABASES TO SUPPORT TECHNOLOGY UTILIZATION. 

Section 9(k) of the Small Business Act (15 U.S.C. 638(k)), as amended, is further 

amended by adding at the end the following new paragraph: 

‘‘(7) AGENCY DATABASES TO SUPPORT TECHNOLOGY UTILIZATION.—Each Federal 

agency with an SBIR or STTR program shall create and maintain a technology 

utilization database, which shall be available to the public and shall contain 

data supplied by the award recipients specifically to help them attract customers for the products and services generated under the SBIR or STTR project, 

and to attract additional investors and business partners. Each database created under this paragraph shall include information on the other databases created under this paragraph by other Federal agencies. Participation in a database under this paragraph shall be voluntary, except that such participation is 

required of all award recipients who received supplemental payments from 

SBIR and STTR program funds above their initial Phase II award. Each database created under this paragraph shall be developed and operated in a manner 

to ensure that each such database is relevant to and contributes to the agency’s 

oversight and evaluation of the SBIR and STTR programs.’’. 

SEC. 408. INTERAGENCY POLICY COMMITTEE. 

(a) ESTABLISHMENT.—The Director of the Office of Science and Technology Policy 

shall establish an Interagency SBIR/STTR Policy Committee comprised of one representative from each Federal agency with an SBIR program and the Office of Management and Budget. 

(b) COCHAIRS.—The Director of the Office of Science and Technology Policy and 

the Director of the National Institute of Standards and Technology shall jointly 

chair the Interagency SBIR/STTR Policy Committee. 

(c) DUTIES.—The Interagency SBIR/STTR Policy Committee shall review the following issues and make policy recommendations on ways to improve program effectiveness and efficiency: 

(1) The public and government databases described in section 9(k) (1) and (2) 

of the Small Business Act (15 U.S.C. 638(k) (1) and (2)). 

(2) Federal agency flexibility in establishing Phase I and II award sizes, and 

appropriate criteria to exercise such flexibility. 

(3) Commercialization assistance best practices in Federal agencies with significant potential to be employed by other agencies, and the appropriate steps 

to achieve that leverage, as well as proposals for new initiatives to address 

funding gaps business concerns face after Phase II but before commercialization. 


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(4) Development and incorporation of a standard evaluation framework to enable systematic assessment of SBIR and STTR, including through improved 

tracking of awards and outcomes and development of performance measures for 

individual agency programs. 

(d) REPORTS.—The Interagency SBIR/STTR Policy Committee shall transmit to 

the Committee on Science and Technology and the Committee on Small Business 

of the House of Representatives, and to the Committee on Small Business and Entrepreneurship of the Senate— 

(1) a report on its review and recommendations under subsections (c)(1) and 

(c)(4) not later than 1 year after the date of enactment of this Act; 

(2) a report on its review and recommendations under subsection (c)(2) not 

later than 18 months after the date of enactment of this Act; and 

(3) a report on its review and recommendations under subsection (c)(3) not 

later than 2 years after the date of enactment of this Act. 

SEC. 409. NATIONAL RESEARCH COUNCIL SBIR STUDY. 

Section 108(d) of the Small Business Reauthorization Act of 2000 (15 U.S.C. 638 

note), enacted into law by reference under section 1(a)(9) of the Consolidated Appropriations Act, 2001 (Public Law 106–554), is amended— 

(1) by striking ‘‘of the Senate’’ and all that follows through ‘‘not later than 

3’’ and inserting ‘‘of the Senate, not later than 3’’; and 

(2) by striking ‘‘; and’’ and all that follows through ‘‘update of such report’’. 

SEC. 410. EXPRESS AUTHORITY TO ‘‘FAST-TRACK’’ PHASE TWO AWARDS FOR PROMISING 

PHASE ONE RESEARCH. 

Section 9 of the Small Business Act (15 U.S.C. 638), as amended, is further 

amended by adding at the end the following: 

‘‘(ii) AUTHORITY TO ‘FAST-TRACK’ PHASE TWO AWARDS FOR PROMISING PHASE ONE

RESEARCH.—To address the delay between an award for the first phase of an SBIR 

program and the application for and extension of an award for the second phase of 

such program, each Federal agency with an SBIR program may develop ‘fast-track’ 

programs to eliminate such delay by issuing second phase SBIR awards as soon as 

practicable, including in appropriate cases simultaneously with the issuance of the 

first phase SBIR award. The Administrator shall encourage the development of such 

‘fast-track’ programs.’’. 

SEC. 411. INCREASED SBIR AND STTR AWARD LEVELS. 

(a) SBIR AWARD LEVEL AND ANNUAL ADJUSTMENTS.—Section 9(j) of the Small 

Business Act (15 U.S.C. 638(j)) is amended by adding at the end the following: 

‘‘(4) FURTHER ADDITIONAL MODIFICATIONS.—Not later than 180 days after the 

date of enactment of this paragraph and notwithstanding paragraph (2)(D), the Administrator shall modify the policy directives issued pursuant to this subsection to 

provide for an increase to $250,000 in the amount of funds which an agency may 

award in the first phase of an SBIR program, and to $2,000,000 in the second phase 

of an SBIR program, and a mandatory annual adjustment of such amounts to reflect 

economic adjustments and programmatic considerations.’’. 

(b) STTR AWARD LEVEL AND ANNUAL ADJUSTMENTS.—Section 9(p)(2)(B)(ix) of the 

Small Business Act (15 U.S.C. 638(p)(2)(B)(ix)) is amended— 

(1) by striking ‘‘$100,000’’ and ‘‘$750,000’’ and inserting ‘‘$250,000’’ and 

‘‘$2,000,000’’, respectively; and 

(2) by striking ‘‘greater or lesser amounts’’ and inserting ‘‘with a mandatory 

annual adjustment of such amounts to reflect economic adjustments and programmatic considerations, and with lesser amounts’’. 

(c) LIMITATION ON CERTAIN AWARDS.—Section 9 of the Small Business Act (15 

U.S.C. 638), as amended, is further amended by adding at the end the following: 

‘‘(jj) LIMITATION ON PHASE I AND II AWARDS.—No Federal agency shall issue an 

award under the SBIR program or the STTR program if the size of the award exceeds the amounts established under subsections (j)(4) and (p)(2)(B)(ix).’’. 

SEC. 412. EXPRESS AUTHORITY FOR AN AGENCY TO AWARD SEQUENTIAL PHASE TWO 

AWARDS FOR SBIR-FUNDED PROJECTS. 

Section 9 of the Small Business Act (15 U.S.C. 638), as amended, is further 

amended by adding at the end the following: 

‘‘(kk) REQUIREMENTS RELATING TO ADDITIONAL SECOND PHASE SBIR AWARDS.— 

‘‘(1) IN GENERAL.—A small business concern that receives a second phase 

SBIR award for a project remains eligible to receive additional second phase 

SBIR awards for such project. 

‘‘(2) TECHNICAL OR WEAPONS SYSTEMS.—Agencies are expressly authorized to 

provide additional second phase SBIR awards for testing and evaluation assistance for the insertion of SBIR technologies into technical or weapons systems.’’. 


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SEC. 413. FIRST PHASE REQUIRED. 

Section 9 of the Small Business Act (15 U.S.C. 638), as amended, is further 

amended by adding at the end the following: 

‘‘(ll) FIRST PHASE REQUIRED.—Under this section, a Federal agency shall provide 

to a small business concern an award for the second phase of an SBIR program with 

respect to a project only if such agency finds that the small business concern has 

been provided an award for the first phase of an SBIR program with respect to such 

project or has completed the determinations described in subsection (e)(4)(A) with 

respect to such project despite not having been provided an award for the first 

phase.’’. 

SEC. 414. INVOLVEMENT OF CHIEF COUNSEL FOR ADVOCACY. 

Section 9 of the Small Business Act (15 U.S.C. 638), as amended, is further 

amended by adding at the end the following: 

‘‘(mm) INVOLVEMENT OF CHIEF COUNSEL FOR ADVOCACY.—The Chief Counsel for 

Advocacy, as described in section 201 of Public Law 94–305 (15 U.S.C. 634a), and 

any individual reporting to the Chief Counsel for Advocacy, without regard to 

whether such individual was hired under section 204 of Public Law 94–305 (15 

U.S.C. 634d), may not provide to the Administrator, to any individual who reports 

directly or indirectly to the Administrator, or to any Federal agency any advice, 

guidance, oversight, or review with respect to the programs authorized under this 

section.’’. 

I. PURPOSE OF THE BILL AND SUMMARY

The Enhancing Small Business Research and Innovation Act of 

2009 extends through fiscal year 2011 the Federal government’s 

largest small business research and development programs. The 

legislation modernizes the Small Business Innovation Research 

(SBIR) and Small Business Technology Transfer (STTR) programs, 

changing the legislative guidelines and policies in order to update 

the program in response to the unique challenges facing small research companies and the changing research priorities of Federal 

agencies. 

The Act is aimed at three broad goals. First, the bill seeks to encourage greater participation in SBIR. An increase in the number 

of small businesses applying for SBIR is critical to the on going 

success of the program. Second, the bill permits small companies 

that are majority-owned by qualifying venture capital firms to participate in the SBIR program. A 2003 ruling by the Small Business 

Administration (SBA) has made small firms with large investments 

from venture capital companies ineligible to participate in the 

SBIR program. The SBA ruling forces many small businesses to 

choose between accepting investments from venture capital firms 

and participating in the Federal government’s largest R&D program for small research firms. Third, the bill seeks to encourage 

and support commercialization initiatives at Federal agencies that 

administer SBIR programs. Under current law certain Federal 

agencies have the authority to develop commercialization programs. This bill extends to all agencies the authority to develop 

programs designed to support the commercialization of SBIR-funded research. 

Additionally, the bill seeks to codify in statute the programmatic 

flexibility that Federal agencies need in order to administer SBIR 

awards in a manner that is most consistent with the agency’s specific mission. Along with granting to Federal agencies a great degree of autonomy, the bill also requires Federal agencies to establish more concrete goals and objectives with respect to their SBIR 

programs and directs the agencies to provide Congress with more 

regular reports. 


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1Small companies majority-owned by a single venture capital firm are not be eligible to participate in the SBIR program under the Act. 

ENCOURAGING GREATER PARTICIPATION IN SBIR AND STTR

The Act includes a number of provisions designed to encourage 

more small firms to apply for SBIR and STTR awards. The bill 

more than doubles the size of SBIR and STTR awards for Phase 

I and Phase II grants and establishes a 90-day timeline for issuing 

a final decision on an SBIR application after the solicitation is 

closed. 

The legislation establishes a federal grant program to reach out 

to small firms located in underrepresented areas, and that are 

owned by service-disabled veterans, women, and minorities. Under 

the grant program established by the bill, the SBA Administrator 

is instructed to make competitive grants to organizations to conduct outreach efforts to increase participation in the SBIR program 

and provide application support and entrepreneurial and business 

skills support for current and prospective participants in the SBIR 

program. To be eligible for these awards, an organization must 

have the written endorsement of the Governor of the State where 

the targeted regions or populations are based. Awards made under 

grant program established by the bill cannot exceed $250,000 per 

year and require matching funds from sources other than the Federal government. 

PERMITTING SMALL COMPANIES THAT ARE MORE THAN 50%-OWNED BY

QUALIFYING VENTURE CAPITAL FIRMS TO PARTICIPATE IN SBIR

The Act includes provisions that establish clear guidelines governing the participation of small businesses with substantial investment from venture capital operating companies in the SBIR 

program. The provisions will allow a small company that is majority-owned by qualifying venture capital firms 1 to participate in the 

SBIR program, so long as the small business concerns do not (1) 

have a single venture capital company owning a majority of the 

concern or (2) have a venture capital company controlling a majority of the concern’s board of director’s seats. Safeguards—including 

limits on corporate-backed entities have been incorporated to prevent large companies from using the SBIR program at the expense 

of smaller researchers. 

ADVANCING COMMERCIALIZATION OF SBIR-FUNDED RESEARCH AND

DEVELOPMENT PROJECTS

To support the successful commercialization of SBIR-funded research, the Act permits an agency to grant multiple Phase Two 

awards and requires agencies to establish initiatives designed to 

encourage partnerships between SBIR awardees and prime contractors, venture capital investment companies and larger businesses. The legislation also allows an agency to issue a Phase Two 

award to a qualifying applicant, even if the applicant’s research 

proposal had not been awarded a Phase One grant. 

The Act defines ‘‘Phase Three’’ of the SBIR program and requires 

agencies to establish commercialization programs that support the 

progress of SBIR awardees towards ‘‘Phase Three’’ of the SBIR program. The commercialization programs may include activities such 


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as partnerships databases, partnership conferences, mentoring initiatives between prime contractors and SBIR awardees, SBIR 

helpdesks and transition assistance programs. The legislation authorizes appropriations to the SBA funds equal to approximately 

1% of the SBIR set-aside. The SBA will allocate these funds to 

agencies to support the commercialization programs that they are 

required to implement. 

RETAINS PROGRAMMATIC FLEXIBILITY

The Committee’s legislation makes these meaningful changes to 

the SBIR without reducing the programmatic flexibility that is a 

central feature of the SBIR program as it is currently administered. 

II. BACKGROUND AND NEED FOR LEGISLATION

In 1982, Congress passed the Small Business Innovation Development Act which established the SBIR program. The intent of the 

Act was to increase government funding of small, innovative companies for the performance of research and development with commercial potential. Supporters of the SBIR program argued that 

while small companies were highly innovative, such firms were 

underrepresented in federal R&D activities. 

The potential of small companies to be sources of significant innovation led Congress to establish the SBIR program. From the 

program’s original development, however, SBIR has been intended 

to stimulate technological innovation related to each participating 

agency’s goals and mission, use small businesses for federal R&D 

needs and increase private sector commercialization of innovations 

derived from federal R&D expenditures. To meet these objectives, 

the Act required that Federal departments with an extramural research budget of $100 million or more to set aside a small percentage of their agency’s overall research budget and award technology 

development contracts to small firms. The percentage of R&D activities to be conducted by small firms has increased since the Act 

was originally passed and now stands at 2.5 percent. 

Currently, eleven agencies have research budgets large enough to 

require participation in the SBIR program. In 2006, Federal agencies awarded more than $2 billion to small research firms through 

the SBIR program. In 2007, the Department of Defense alone 

awarded more than $1 billion to small firms for the development 

of advanced technologies. From the program’s inception in FY1983 

through FY2006, over $20 billion in awards have been made for 

more than 90,000 projects. 

A key element of the SBIR program is that it establishes a threephase development system for participants. During Phase One, 

participating agencies fund a proposed idea to determine if it has 

scientific and technical merit and is feasible. Projects that demonstrate potential after the initial endeavor can compete for Phase 

Two awards (lasting one to two years) to perform the principal 

R&D. Generally, Phase One and Phase Two awards may not exceed 

$100,000 and $750,000, respectively. A third phase of the program, 

aimed at the commercialization of a product or process developed 

in the earlier phases, is intended to be funded by the private sector. 


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2The agencies examined by the NRC study, in order of program size, are the Department of 

Defense, the National Institutes of Health, the National Aeronautics and Space Administration, 

the Department of Energy, and the National Science Foundation. 

Since SBIR’s inception in 1983, the program has been the focus 

of numerous studies, assessments and evaluations. The Government Accountability Office (GAO) has issued a series of reports on 

the implementation of the Small Business Development Act. The 

National Academies of Science completed a comprehensive threeyear evaluation of the SBIR program in 2007. Additionally, participating federal agencies have also provided assessments of their 

agency’s SBIR program. 

INDEPENDENT EVALUATIONS OF THE SBIR PROGRAM

The Small Business Innovation Development Act directed the 

GAO to assess the implementation of the Act. GAO has issued at 

least nine reports documenting its findings. A 1987 study found 

that both the evaluation and selection processes were sufficient to 

‘‘reasonably’’ ensure awards were based on technical merit. In 

1989, GAO reported that agency heads found the SBIR effort to be 

beneficial and met the organization’s R&D needs. A GAO report 

issued in May 1992 noted that almost two-thirds of the projects already had sales or received additional funding (primarily from the 

private sector) totaling approximately $1.1 billion. Another GAO 

study, released in April 1998, noted that between 35% and 50% of 

SBIR projects had resulted in sales or additional private sector investment. A more recent report by GAO in June 2005 found that 

the effort appears to be achieving its goal of ‘‘enhanced’’ participation of small business in the R&D enterprise. 

As part of the reauthorization of the SBIR program in 2000, Congress directed the National Research Council (NRC) of the National 

Academies to ‘‘conduct a comprehensive study of how the SBIR program has stimulated technological innovation and used small businesses to meet Federal research and development needs’’ and to 

make recommendations with respect to the SBIR program. After 

more than 3 years of research and analysis, the NRC study released its assessment of the SBIR program as administered by the 

five federal agencies that together make up some 96 percent of 

SBIR program expenditures in July 2007.2

The core finding of the study is that the SBIR program is sound 

in concept and effective in practice. In support of the report’s core 

finding, the NRC concludes that the SBIR program is: (1) stimulating technological innovations, (2) increasing private sector commercialization of innovations, (3) using small business to meet federal research and development needs and (4) providing widely distributed support for innovation activity. 

2009 NRC REPORT ON VENTURE CAPITAL FUNDING IN THE NATIONAL

INSTITUTES OF HEALTH (NIH)

A recent NRC report on the venture capital prohibition in the 

SBIR program found that the impact of the 2003 ruling falls disproportionately on the most promising firms i.e., those firms that 

have repeatedly been selected by both NIH for their promising 


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3 Venture Funding and the NIH SBIR Program, National Research Council of the National 

Academies of Science, May 2009. 4 Ibid. 

5 Ibid. 

6 Ibid. 

technologies and by venture investors for their commercial potential.3

While the report does site a percentage of venture-backed firms 

likely excluded from the SBIR program (4.1 percent to 11.9 percent), it qualifies this by stating that there is a downward bias— 

this means the percentage excluded is likely higher.4 This is due 

to the fact that venture capital investment smaller firms considered by the study (1) was just beginning in the 1990s and (2) has 

matured dramatically in the last five years to favor investment in 

commercially viable technologies and therapies. The result is that 

the level of exclusion is likely much higher that the report states. 

The report concludes that restricting access to SBIR funding for 

firms that benefit from venture investments would thus appear to 

disproportionately affect some of the most commercially promising 

small innovative firms. To this extent, the SBA ruling has the potential to diminish the positive impact of the nation’s investments 

in research and development in the biomedical area.5

The NRC states that by selecting out some of the most commercially promising innovative small firms, the SBA directive appears 

to limit opportunities to exploit the nation’s substantial investments in research at NIH. This is contrary to one of the four key 

goals of the SBIR program, which is the commercialization of federal research. The implementation of the SBA ruling appears to be 

negatively affecting current participation by firms and the longterm commercialization potential of the NIH SBIR program.6

The Need to Reauthorize and Modernize the SBIR Program 

The SBIR program has been reauthorized three times since its 

enactment, first in 1986 and subsequently in 1992 and 2000. The 

latest authorization was set to expire on September 30, 2008 but 

was temporarily extended by the SBA through March 20, 2009, and 

again extended by a continuing resolution passed by the House and 

Senate. Under the current extension, SBIR will expire on July 31, 

2009. The STTR program was last reauthorized in 2001 and is 

scheduled to sunset on September 30, 2009. 

The positive evaluations of the SBIR program issued by independent research organizations and testimony presented to the 

Committee on Small Business during the 110th Congress and 

111th Congress in support of SBIR and STTR create the basis of 

support for H.R. 2965. Small firms, federal agencies, patient organizations, economic development organizations and academics have 

testified in strong support of reauthorization of the SBIR and STTR 

programs. 

During the eight years that have elapsed since Congress last 

passed legislation extending and modernizing the SBIR program, 

our country’s R&D priorities and the role of small innovative companies in the U.S. economy have changed. The manner in which 

the participating federal agencies administer their SBIR programs 

has also changed over the last eight years. Reflective of these 

changes, participating small firms, participating federal agencies, 


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research organizations and other interested parties support modernizing the SBIR program. Specifically, expert witnesses have testified that legislation is necessary in order to make the following 

important changes to SBIR program. 

EXPAND COMMERCIALIZATION OPPORTUNITIES FOR SBIR AND STTR

R&D PROJECTS

Witnesses have testified before the Committee that small businesses face serious challenges in commercializing their research following Phases I and II. Many potential partners and investors require that a product achieve a certain degree of technological readiness before they are willing to support or invest in a given product’s later stage development. This is described as the ‘‘valley of 

death,’’ where promising research is derailed because the small 

business does not have the funding required to develop the product 

to the requisite technological readiness. Witnesses have described 

how SBIR- and STTR-funded projects can stall or fail at the end 

of a Phase II award due to a lack of available funding to continue 

developing the product to the desired specifications. 

In order to address the ‘‘valley of death,’’ several federal agencies 

have developed initiatives within their SBIR programs that offer 

commercialization support to SBIR awardees. These initiatives include business planning assistance, business-to-business mentoring, manufacturing assistance, technology transition assistance, 

partnership assistance and/or additional funding. Although these 

initiatives are only a few years old, early anecdotal data from these 

agencies suggest that the programs are increasing commercialization of SBIR-funded research and development projects. 

PERMIT VENTURE-BACKED FIRMS TO PARTICIPATE IN THE SBIR

PROGRAM

To qualify for SBIR awards, small firms must affirm that they 

meet certain ownership criteria, such as being 51 percent or more 

owned by individuals who are U.S. citizens or permanent resident 

aliens. In 2003, an SBA administrative law judge issued a decision 

that venture capital firms could not be considered ‘‘individuals’’ for 

the purpose of satisfying the ownership criteria of the SBIR program. As a result, a number of firms that are majority-owned by 

venture capital firms that had once been eligible to participate (or 

did, in fact participate) in the SBIR program before the 2003 ruling 

are no longer eligible. Small venture-backed companies that have 

been ruled ineligible for SBIR are unable to secure necessary funding to conduct important research activities. 

The ruling created confusion among program participants and 

has led some firms to steer away from the program. Since 2003, 

NIH reports that SBIR applications have been decreasing and 

awards to new applicants are also decreasing. In FY 2006, only 

about one-forth of the awardees were new to the program—the lowest proportion in a decade. Many of the small research companies 

that are rendered ineligible by the SBA’s 2003 ruling have fewer 

than 100 employees and—in the case of small biotechnology companies—no revenue. 

Legislation is needed so that small firms with significant venture 

capital investment can compete for and win SBIR awards. However, legislation should also prohibit small firms from receiving and 


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competing for SBIR awards if either: (1) a single venture capital 

company owns a majority of the small firm or (2) a single venture 

capital company controls a majority of the concern’s board of director’s seats. 

INCREASE OUTREACH TO RURAL AREAS AND UNDERSERVED

POPULATIONS

Effective outreach to small firms owned and controlled by 

women, veterans and minorities and to businesses located in areas 

that are underrepresented in the SBIR and STTR programs is a 

continuing challenge for the programs. Some state economic development offices run effective application support and entrepreneurial and business skills support for current and prospective participants in the programs while other states offer no such support. 

Federal agencies report that, despite their outreach efforts, they 

struggle to receive applications from underrepresented populations. 

The SBIR reauthorization legislation that Congress passed during the 106th Congress included the authorization for funding of a 

‘‘Federal and State Technology Partnership Program’’ (FAST). 

FAST was designed to promote awards in states that do not have 

a high volume of SBIR awards, and in low-income areas of all 

states. Before authorization for the program expired in 2005, between 2002 and 2005 the SBA was able to make grants to organizations to support the development of SBIR proposals. 

RESOURCES FOR SBIR MANAGEMENT AND EVALUATION

Under current law, participating federal agencies are prohibited 

from using any of the 2.5 percent SBIR set-aside to fund the program’s administrative costs, including costs associated with salaries and expenses. Authorizing agencies to separately fund operating expenses may enhance SBIR program utilization, management and evaluation. Federal agencies that set aside special funds 

to pay for SBIR management expenses have asserted that they 

have more effective programs than agencies that do not set aside 

special funds for administration of the program. Proposals have 

also called for databases to collect relevant information on project 

outcomes and milestones to provide greater transparency to the 

programs for both the government and the private sector. 

INCREASE AWARD SIZE AND SIMPLIFY APPLICATION PROCESS

The SBIR application process should be reviewed to ensure that 

it is not overly burdensome and that firms receive a timely decision. Witnesses have also recommended that the size of SBIR 

awards be increased. The award levels set out in the legislation 

have not increased since 1992 and the value of the awards has 

been eroded by inflation. Simplifying the application process and 

increasing the award levels would, according to witness testimony, 

increase the competition for SBIR awards and ultimately result in 

a more effective program. A related issue is a potential cap on the 

dollar amount that an SBIR agency can award a grantee. Under 

SBA’s existing policy directive, the agencies are able to grant 

awards that exceed the guidance provided in legislation. Representatives of Federal agencies that administer the SBIR program have 

testified that an inflexible cap on SBIR awards dollar amounts 


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would undermine programs that have successfully helped small 

firms commercialize SBIR-funded research and development. 

III. HEARINGS

In the 111th Congress, the Committee on Small Business held 

three hearings on the SBIR and STTR programs and related legislation. On June 17, 2009, the Committee convened a hearing entitled ‘‘Legislative Initiatives to Strengthen and Modernize the SBIR 

and STTR Programs.’’ Testimony was taken from a wide range of 

small businesses that use these programs in the defense, health 

care, and energy arenas. This hearing followed a previous full Committee hearing on April 22, 2009, which explored issues related to 

the overall effectiveness of the SBIR program and a legislative 

hearing in the Committee’s Contracting and Technology Subcommittee on June 4, 2009. 

In the 110th Congress, the Committee on Small Business also 

convened three hearings on the reauthorization of the SBIR program. On January 29, 2008, the House Committee on Small Business convened a hearing entitled ‘‘SBIR: America’s Technology Development Incubator.’’ The hearing explored the numerous contributions that the SBIR program makes to national security priorities, economic development objectives and America’s international 

economic competitiveness. On February 13, 2008 the House Committee on Small Business, Subcommittee on Investigations and 

Oversight convened a hearing entitled ‘‘SBIR: Advancing Medical 

Innovations.’’ The Subcommittee hearing examined the impact of 

the SBIR program on the development of innovative medical technologies, therapies and products. On March 13, 2008 the Committee on Small Business held a hearing to review a Committee 

Print of proposed legislation that would reauthorize and modernize 

the SBIR program. 

IV. COMMITTEE CONSIDERATION

The Committee on Small Business met in open session on June 

25, 2009 and ordered H.R. 2965 reported, as amended, to the 

House by a recorded vote of 22 yeas to zero nays at 10:55am. Four 

amendments were offered during the markup. Ms. Vela ́zquez offered an amendment, which was adopted by voice vote, to require 

the interagency policy committee established in the legislation to 

develop an evaluation framework for the SBIR and STTR programs. Mr. Akin offered an amendment, which was adopted by 

voice vote, which would prevent the SBA’s Office of Advocacy from 

intervening in matters concerning the SBIR and STTR programs. 

Mr. King offered two amendments. His first amendment, which 

was rejected by voice vote, would have eliminated minorities and 

women from the focus of the legislation’s outreach program. His 

second amendment would have prohibited SBIR and STTR funds 

from being directed to certain organizations. This amendment was 

rejected by a recorded vote of 9 yeas to 13 nays at 10:49 am. 

V. COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion 

to report legislation and amendments thereto. As noted in the comVerDate Nov 24 2008 08:35 Jun 27, 2009 Jkt 079006 PO 00000 Frm 00018 Fmt 6659 Sfmt 6602 E:\HR\OC\HR190P1.XXX HR190P1

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prehensive description of the markup above, two recorded votes 

were conducted. During committee consideration of the legislation, 

an amendment numbered King #2 was offered by Mr. King. This 

amendment was NOT AGREED to by a recorded vote of 9 yeas to 

13 nays at 10:49 am. A motion by Ms. Vela ́zquez to report the bill, 

as amended, to the House with a favorable recommendation was 

AGREED to by a vote of 22 yeas to zero nays at 10:55 am. 


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VI. SECTION-BY-SECTION ANALYSIS OF H.R. 2965 

Sec. 1. Short title 

This provision sets a short title for the Act as ‘‘The Enhancing 

Small Business Research and Innovation Act of 2009.’’ 

Title 1. Program Extension and Venture Capital Investment 

Sec. 101. Authorization period 

The Small Business Act is amended to extend through FY2011 

the SBIR and STTR programs of the SBA. The Committee believes 

that a two-year authorization period is appropriate given the rapid 

changes in technological evolution and the constantly evolving 

needs on small firms. A biennial authorization provides for necessary congressional oversight and program evaluation. The Committee believes that programs as valuable as SBIR and STTR 

should be given regular oversight from Congress, which is most appropriately conducted through the legislative reauthorization process. 

The last SBIR reauthorization bill that Congress passed was in 

2001 and extended the SBIR program for eight years. The length 

of this authorization did not require Congress to focus its attention 

on this important research and development program and allowed 

years to pass between formal Congressional inquiries into the SBIR 

program’s implementation and effectiveness. 

It should be noted that Congress is able to reauthorize the Department of Defense (DoD), with a budget of nearly a trillion dollars (equal to more than 7 percent of GDP), each year. For comparison, the SBIR and STTR program’s cost is estimated at less than 

$70 million per year. If an agency as complicated as DoD, with varied and complex programs, can be reauthorized annually, it would 

seem reasonable that SBIR and STTR could be reauthorized biannually. 

The argument that the SBIR and STTR programs should be reauthorized for a longer period to give the programs stability is 

weak. Lengthy reauthorization periods serve little purpose other 

than to evade oversight and ultimately reduce the public policy 

nexus for government initiatives. In addition, a program like 

SBIR—which is technology-focused—needs to be continually updated to reflect the changing economic realities more frequently. 

Finally, the Committee notes that SBIR and STTR funding 

awards are made annually, just as federal contracts are made annually. The funding for future awards—much like future contracts—is dependent on the agencies budget being funded from 

Congress. Such an annual requirement has not deterred small 

firms from seeking work with the government and has not deterred 

small firms from applying to the SBIR and STTR programs. 

Sec. 102. Venture capital investment standards 

This provision permits small businesses with investment from 

venture capital companies to participate in the SBIR and STTR 

program. It reverses a policy that resulted from a 2003 SBA administrative ruling. This ruling, by an administrative law judge of the 

SBA’s Office of Hearing and Appeals, placed a restriction on venture capital investment in SBIR awardees. The Committee notes 

that this ruling could have been overturned by regulation in the 


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7For a broader discussion of the May 2009 NRC report please see Section II of this Committee 

Report. 

last six years, but the SBA has failed to revisit this issue fully. As 

a result, the Committee has incorporated this section into H.R. 

2965. 

The Committee believes that the capital structure of a small 

business concern is irrelevant for the purposes of the SBIR program. This is supported by the series of hearings conducted by the 

Committee over the last two years and independent research. The 

NRC has found in its May 2009 research report that small businesses engaged in federal research require sufficient sources of external capital to successfully commercialize their research.7 This is 

readily apparent in the medical and defense industries, but also in 

other fields including transportation and energy. As a result, the 

Committee believes that the overriding policy focus should be on 

enhancing small firms’ access to financing—including equity investment in the form of venture capital. The Committee believes that 

the recent NRC report provides further justification for restoring 

the SBIR program to its pre–2003 status when venture capital investment was permitted. 

The Committee understands that many research companies, in 

particular those that are small, do not possess positive revenue 

streams. This limits the impact on small businesses’ cash flow and 

increases their ability to carry out their research activities. Such 

realities make access to venture capital even more critical, as such 

investment often does not require immediate repayment. The Committee also recognizes that Congress has placed significant weight 

on small SBIR firms’ ability to secure non-federal private funding. 

This emphasis is clearly apparent in section 9(e)(4)(B)(ii) and 

9(e)(4)(C)(i) of the Small Business Act and suggests that reopening 

sources of external financing such as venture capital is aligned 

with Congress’ original intent in establishing the SBIR program. 

To accomplish this, the section specifies that portfolio companies 

of venture capital companies are not affiliated with the venture 

capital company itself or other portfolio companies of the same venture capital company for the purposes of the SBIR and STTR program. This treatment for affiliation is sensible for the venture capital industry as employees of one portfolio company do not regularly provide uncompensated services for, nor are they regularly 

dually employed by, other portfolio companies. In fact, it is not uncommon for portfolio companies of the same venture capital company to be in the same industry sector as other portfolio companies 

and even compete with one another. As a result, the Committee believes that small business concerns with venture capital investment 

should not have employees from other portfolio companies of the 

same venture capital company counted as its own employees. 

In addition, this provision deems a small business concern with 

venture capital investment to be independently owned and operated. The nature of venture capital is to provide investment capital 

and not day-to-day management and control of a business. Venture 

capital investors seek financial profits—not outright operational 

control. The Committee finds no evidence that venture capital companies are investing in small business concerns solely to access 

SBIR funds. Rather it finds that they are seeking to benefit as an 


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investor in the underlying research, which has the effect of contributing to the success of the small business. Often a venture capital 

company divests itself within seven years of its initial investment. 

As a result, the Committee believes that treating SBIR-eligible 

small business concerns with venture capital investment as independently owned and operated is appropriate. 

In both dealing with the affiliation standard and the independently owned and operated standard, the legislation is limited to 

small business concerns that: 1) do have a single venture capital 

company owning a majority of the concern and 2) do not have a 

venture capital company controlling a majority of the concern’s 

board of director’s seats. This ensures that while a majority of a 

small business concern may be owned by venture capital companies, no single venture capital company can own a majority or control its operations via the board of directors. 

The legislation defines venture capital company for the purposes 

of this Act, including requiring that such entity have less than 500 

employees and be domiciled in the United States. It also prevents 

the venture capital operating company from being controlled by a 

business that is not a small business concern. The Committee does 

not believe a cap of any size is appropriate and that such a restraint would create massive administrative problems within SBIR 

agencies and does not recognize the recent evolution of capital markets. Such constraints serve only to impair the underpinnings of a 

market-based economy and would impair the free flow of capital to 

small businesses. Such federal government intervention in the capital markets and such regulation of financial transactions is inconsistent with the needs of small firms participating in the SBIR program. 

Finally, the legislation clarifies the role that corporate-owned 

venture capital companies can play when investing in SBIR eligible 

companies. Under current law, corporate-owned venture capital 

companies can invest in SBIR eligible companies, so long as they 

do constitute a majority ownership share of the small business concern. This section specifies that an SBIR company can only have 

investment from two such corporate-owned venture capital companies and that together they can only own up to 20 percent of the 

SBIR eligible concern. 

TITLE II. COMMERCIALIZATION AND RESEARCH PRIORITIES

Sec. 201. Focus on Commercialization 

The Committee intends this section to place emphasis on applied 

research in the SBIR and the STTR programs. Taxpayer funds 

used for these initiatives are meant to go toward research that can 

be readily commercialized, not basic research which is the purview 

of the universities and the recipient of the lion’s share (97.5 percent) of federal extramural research budgets. The provision amends 

section 9 to modify the purpose and policy of the SBIR and STTR 

programs as follows: 

‘‘It is further the policy of Congress that the programs established in this section should focus on promoting research and development of projects governed by commercial business plans, which 

have significant potential to produce products or services for the 

marketplace or for acquisition by Federal agencies.’’ 


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Sec. 202. Rare Disease and Energy-related Research Focus and Priorities 

In issuing research SBIR solicitations, this section requires agencies to give special consideration to topics contained in the report 

of the National Institutes of Health, in the annual report on the 

rare diseases research activities of the National Institutes of 

Health for fiscal year 2005, and in subsequent reports issued by 

the National Institutes of Health on rare diseases research activities. In addition, this section requires agencies to give special consideration to topics contained in the report of the National Academy of Sciences, in the final report issued by the ‘America’s Energy 

Future: Technology Opportunities, Risks, and Tradeoffs’ project, 

and in subsequent reports issued by the National Academy of 

Sciences on sustainability, energy, and alternative fuels. 

The intention of this section is to expand the number of research 

activities into rare-disease research and energy-related research. 

The Committee expects federal agencies to increase SBIR solicitations in these areas and increase awards for meritorious proposals 

responding to such solicitations. 

Sec. 203. Nanotechnology Research Focus and Priority 

In issuing research SBIR and STTR solicitations, this section requires agencies to give special consideration to topics contained in 

the national nanotechnology strategic plan required under section 

2(c)(4) of the 21st Century Nanotechnology Research and Development Act (15 U.S.C. 7501(c)(4)) and in subsequent reports issued 

by the National Science and Technology Council Committee on 

Technology, focusing on areas of nanotechnology identified in such 

plan. 

The Committee intends that such designation will increase the 

likelihood of federal SBIR agencies issuing research solicitations in 

this area. 

Sec. 204. Definition of Phase Three 

This section revises the definition of ‘‘Phase Three’’ of the SBIR 

program so that it is clear that such work shall be directed toward 

commercial applications and derives from research and development completed in earlier phases. 

The purpose of the provision is to identify metrics that Federal 

agencies can use to measure how many of the Phase Two projects 

they fund have successfully reached Phase Three of the SBIR program. The Committee expects that a definition of ‘‘Phase Three’’ of 

the SBIR program will provide a basis for agencies to set goals for 

successful commercialization of SBIR-funded research. 

Sec. 205. Agency research goals 

This provision requires that agencies must establish annual 

goals associated with (1) the percentage of SBIR projects that receive Phase Three funds, (2) the percentage of SBIR projects that 

are integrated into a program of record and (3) the amount of nonSBIR federal dollars received by SBIR projects through Federal 

contracts. The Committee expects that each Federal agency that 

awards annually $5,000,000,000 or more in procurement contracts 

shall submit to Congress annual goals for commercialization and 

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pects that the report that agencies make to Congress will include 

a description of the methodology used to collect the data. 

Sec. 206. SBIR commercialization program 

This section requires that agencies establish efforts designed to 

support SBIR-funded research projects in their transition to Phase 

Three. This provision also authorizes an annual appropriation to 

the SBA of $27,500,000 for such purposes of carrying out this program. 

The Committee intends that Federal agencies will develop commercialization programs, and in doing so, will consider initiatives 

such as partnership databases, partnership conferences, multiple 

Phase Twos, mentoring between Primes and SBIR, multiple Phase 

Two with matching private investment requirements, jumbo 

awards, SBIR Helpdesks, and Transition Assistance Programs. The 

Committee intends for the agencies to petition the SBA in order to 

receive funds to pay for the administration of programs designed 

to help SBIR-funded research projects transition to Phase Three. 

The Committee expects that, not later that 90 days after the date 

of enactment of this section, the Administrator of the SBA will develop and establish rules for making transfer to agencies that have 

developed or are developing SBIR commercialization programs. 

TITLE III. OUTREACH AND PARTNERSHIPS

Sec. 301. Outreach and support activities 

The provisions will establish an annual competitive grant program where organizations in all fifty states may submit proposals 

to conduct SBIR outreach efforts and/or application support and 

business skills development efforts directed at small businesses in 

underrepresented states and regions, women-, service-disabled 

veterans- and minority-owned small businesses. The provisions are 

intended to increase the number of small firms applying for 

awards, increase the number of small companies owned and controlled by women and minorities that apply for SBIR awards, and 

encourage economic development organizations to develop effective 

programs to increase the size of the SBIR economy in their State. 

The Committee expects that, not later than 90 days after the 

date of enactment of this subsection, the SBA Administrator will 

establish an Advisory Board for this program. The Board will develop guidelines for the administration of the program that are consistent with the statutory direction provided in this section. The 

Committee expects that the Advisory Board will serve as stewards 

of the program and will submit an annual report to Congress on 

the effectiveness and impact of the program. 

Sec. 302. Rural preference 

This section requires agencies to give a preference to SBIR and 

STTR award applications submitted by small businesses located in 

rural areas. The Committee notes that the language is written to 

give a priority for applications, not awards, and it meant generally 

to give an emphasis—not a binding requirement—to agencies for 

rural applicants. In addition, the Committee recognizes that there 

are several statutory definitions of ‘‘rural.’’ The Committee’s intent 

is that the SBA, when implementing this provision, select a narVerDate Nov 24 2008 08:35 Jun 27, 2009 Jkt 079006 PO 00000 Frm 00026 Fmt 6659 Sfmt 6602 E:\HR\OC\HR190P1.XXX HR190P1

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rower definition of the term ‘‘rural.’’ This would focus the initiative 

on those areas most in need of assistance while, in turn, would not 

likely have a significant effect on the number of SBIR and STTR 

applications or award determinations. 

Further, it is not the Committee’s intent that this provision is 

used by agencies to exclude meritorious research proposals from 

non-rural areas. The Committee expects the SBA to issue a rulemaking for notice and comment in this area and solicit a broad 

range of feedback from the SBIR and STTR community before implementing this provision. 

Sec. 303. Privacy and applicants consent required 

The section directs Federal agencies to enable SBIR applicants to 

permit the Federal agency to identify the applicant to appropriate 

local and state-level economic development organizations and release the concern’s contact information to such organizations. The 

Committee expects that Federal agencies will make necessary 

changes to the SBIR applications forms in order to comply with the 

requirements of this section. The Committee also expects that Federal agencies will respond to the data requests from appropriate 

local and State-level economic organizations and provide the data 

in a timely manner. 

Sec. 304. Partnering 

This section directs each agency to establish initiatives to encourage partnerships between SBIR awardees and prime contractors, 

venture capital investment companies, business incubators, and 

larger businesses in order to facilitate the progression of SBIR 

awardees to Phase Three. The SBA Administrator shall establish 

by regulation protections so that small firms retain a substantial 

benefit from any joint venture that results from this section. In addition, the Administrator shall establish by regulation joint venture 

size standards and affiliations requirements for this section 

TITLE IV. SBIR AND STTR ENHANCEMENT

Sec. 401. Research solicitations 

The intension of the section is to ensure that each agency issues 

at least two rounds of SBIR research solicitations each year. A single, annual solicitation forces many small firms to wait a year or 

more to have their SBIR application(s) evaluated. The Committee 

is concerned that the length of this delay can discourage potential 

applicants. The Committee also intends that agencies include acquisition personnel and executives in the development of the SBIR 

topics to ensure that SBIR topics are truly addressing future procurement needs. 

The section also directs Federal agencies to render a final decision on each proposal 90 days after the date a solicitation closes. 

A clear timeline will allow applicants to better forecast and prepare 

for receipt of potential SBIR awards. Recognizing that the agencies 

will not be able to meet with this directive in all cases, the section 

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8From the statement of Administrator Steven C. Preston delivered to the House Committee 

on Small Business on March 13, 2008. 

Sec. 402. Phase One reporting requirements 

This section requires the SBA to submit to Congress the firms 

that have received 15 or more Phase One awards and zero Phase 

Two awards in the previous five-year period. Given the statutory 

emphasis on commercialization, the intention of the provision is to 

ensure that the Congress have access to data about SBIR awardees 

that have received a large number of Phase One grants and have 

not received a Phase Two award. 

Sec. 403. Phase One performance measures 

This provision requires each agency to engage with SBIR awardees that have been awarded multiple Phase One awards but no 

Phase Two awards, and to develop performance metrics to measure 

awardee progress in the SBIR program. 

The Committee expects that the Administrator of the SBA shall 

‘‘develop quality metrics that can assist agencies in developing 

standards to limit the perceived effect of so-called ‘SBIR Mills’.’’ 8

The Committee further expects that the SBA will incorporate these 

metrics into the SBIR policy directives. 

Sec. 404. SBIR Agency Administration and Oversight 

This section authorizes funding at SBA for administrative, oversight, and contract-processing costs related to SBIR. This authority 

allows the SBIR program offices in each of the Federal SBIR/STTR 

agencies to withdraw funds from this account at SBA that is equal 

up to 3 percent of their respective agencies total SBIR set-aside. 

The Committee intends that these funds are used to strengthen 

management of the SBIR and STTR programs, increase the 

progress of companies in these initiatives, enhance oversight, and 

result in more SBIR/STTR funded research being incorporated into 

agency procurement actions. 

Sec. 405. Extramural Budget 

This provision is intended improve accountability of the way Federal agencies determine what is ‘‘extramural’’ and what is ‘‘intramural’’. The Committee is not aware of the existence of independent audits that confirm that the agencies are performing these 

calculations correctly. A GAO report analyzing this issue will provide more transparency to these calculations. 

Sec. 406. Outcomes database 

This section requires SBIR and STTR small business participants to provide updated project information for purposes of updating agency databases which evaluate the outcome of Phase One 

and Two awards; and participating agencies to develop and maintain such databases. This shall include milestones where appropriate. 

The intention of the section is to increase the data that Federal 

agencies collect about the small business concerns that participate 

in the SBIR and STTR programs and to require that Federal agencies develop a database for the purpose of program evaluation. 


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Sec. 407. Databases to support technology utilization 

This provision requires each agency to create and maintain a 

technology utilization database, available to the public, containing 

data supplied by award recipients. The purpose of this section is 

to enhance outreach to attract investors and potential business 

partners to the small companies that are participating in SBIR. 

Sec. 408. Interagency policy committee and reports 

The purpose of this section is to establish an Interagency SBIR/ 

STTR Policy Committee that will examine the programmatic challenges facing all agencies administering SBIR/STTR programs and 

develop recommendations on ways to improve program effectiveness and efficiency. In addition, the Interagency Policy Committee 

will make recommendations to the SBA regarding a process to systematically evaluate the SBIR and STTR program. This Interagency Policy Committee will act solely in an advisory capacity to 

the Congress and the SBA and will not have any formal authority 

to implement or enact policy directives regarding the SBIR and 

STTR programs. The Committee will report to Congress twelve 

months, eighteen months and twenty-fours months after the date 

of enactment of this section on its progress. 

Sec. 409. NRC SBIR study 

This section removes the authorization established in the Small 

Business Reauthorization Act of 2000 that the NRC provide an updated report on the SBIR program. 

Sec. 410. Fast track authority 

A funding gap of 6 to 12 months (which is the timeframe that 

often separates a Phase One and Phase Two grant) can derail a 

small company’s ability to continue its research. To address this 

issue, the Committee provided authority to agencies to issue Phase 

Two awards on a timeline that best supports the development of 

promising research and technologies. The Committee intends agencies to issue Phase Two SBIR awards to promising Phase One 

awardees as soon as is practicable, including in appropriate cases 

simultaneously with the issuance of the Phase One award. 

Sec. 411. Award size increase and authority to exceed awards levels 

Since 1992, the statutory prescriptions for SBIR award amounts have remained unchanged at $100,000 for a Phase One award and 

$750,000 for a Phase Two award. The Section increases the award 

levels to $250,000 for Phase One and $2 million for Phase Two for 

both the SBIR and STTR programs. The increase, which is greater 

than a simple indexing for inflation, is intended to encourage more 

small firms to apply for the awards. The amount designated by the 

Committee also recognizes the high costs associated with the development of valuable new technologies and therapies. 

The section is silent on whether or not federal agencies can exceed the award levels that are prescribed in the legislation. However, the Committee does not intend such silence to prevent agencies from exercising their independent judgment regarding awards 

in excess of the stated award sizes. The Committee recognizes that 

Federal agencies that previously exceeded the proscribed award 

levels are funding research at the level necessary to accomplish the 


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Agencies’ goals and supporting commercialization of promising research. As such, the Committee does not seek to end this practice 

of permitting participating agencies to exceed the proscribed award 

levels. 

Sec. 412. Multiple Phase Two awards 

The section permits the issuance of multiple Phase Two awards, 

including for purposes related to military technology and weapons 

systems. The Committee provides federal agencies with this explicit authority with the intention that agencies will issue multiple 

Phase II awards in order to ensure that a greater number of SBIR 

research projects cross the so-called ‘‘valley of death’’. 

Sec. 413. First Phase required 

The Committee intends this section to limit companies’ ability to 

evade Phase One. An exception is granted, however, for companies 

that can demonstrate to agency SBIR proposal evaluators that the 

company has completed phase one work. The Committee believes 

that this is a reasonable way to balance the hypothesis testing conducted in Phase One, with the realities that some small firms may 

have progressed passed this stage through other means. 

Sec. 414. Involvement of Chief Counsel for Advocacy 

This section provides that the Chief Counsel of SBA’s Office of 

Advocacy or any other reporting to the Chief Counsel may not provide advice, guidance, oversight, or review to any agency participating in the SBIR or STTR programs. The Committee intends 

such provision to limit any involvement by the Office of Advocacy 

in the operation of or policy decisions pertaining to the SBIR and 

STTR programs. 

VII. CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

The legislation is currently under review by CBO and the Committee expects that an estimate will be completed and as such 

made part of the Congressional Record prior to consideration of the 

legislation by the House. 

VIII. COMMITTEE ESTIMATE OF COSTS

Clause 3(d)(2) of rule XIII of the Rules of the House of Representatives requires an estimate and a comparison by the Committee of the costs that would be incurred in carrying out H.R. 

2965. The legislation is under review by CBO and an estimate will 

be made part of the Congressional Record prior to consideration of 

the legislation by the House. Based on estimates provide by CBO 

for H.R. 5819, as reported by the Committee on Small Business in 

the 110th Congress and further analysis by Committee staff, the 

Committee estimates that the bill could cost $142 million over the 

two year authorization. The Committee notes two major changes 

regarding cost between H.R. 5819 and H.R. 2965. First, H.R. 2965 

does not increase the SBIR and STTR set-aside, which H.R. 5819 

did and CBO estimated cost $29 million over the five-year budget 

period. Second, H.R. 2965 includes a management program that 

will reimburse agencies for their expenses associated with operating the SBIR and STTR programs. The Committee assumes that 


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this initiative will generally negate agencies direct expenses of operating the programs, which CBO estimated at $111 million over 

the five-year budget period. As such, the committee estimates the 

cost of H.R. 2965 would be $260.5 million over the 2010–2014 period, subject to appropriation of the specified and necessary 

amounts. In addition, based on prior CBO analysis and current 

staff review, the Committee does not believe that H.R. 2965 would 

affect direct spending or revenue. 

IX. OVERSIGHT FINDINGS

In accordance with clause (2)(b)(1) of rule X of the Rules of the 

House of Representatives, the oversight findings and recommendations of the Committee on Small Business with respect to the subject matter contained in H.R. 2965 are incorporated into the descriptive portions of this report. 

X. STATEMENT OF CONSTITUTIONAL AUTHORITY

Pursuant to clause 3(d)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee finds the authority for this legislation in Article I, Section 8, clause 18, of the Constitution of the 

United States. 

XI. COMPLIANCE WITH PUBLIC LAW 104–4 

H.R. 2965 contains no unfunded mandates. 

XII. CONGRESSIONAL ACCOUNTABILITY ACT

H.R. 2965 does not relate to the terms and conditions of employment or access to public services or accommodations with the 

meaning of section 102(b)(3) of P.L. 104–1. 

XIII. FEDERAL ADVISORY COMMITTEE STATEMENT

This legislation does not establish or authorize the establishment 

of any new advisory committees. 

XIV. STATEMENT OF NO EARMARKS

Pursuant to clause 9 of rule XXI, H.R. 2965 does not contain any 

congressional earmarks, limited tax benefits, or limited tariff benefits as defined in clause 9(d), 9(e), or 9(f) of Rule XXI. 

XV. PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House 

of Representatives, the Committee establishes the following performance related goals and objectives for this legislation: 

H.R. 2965 includes a number of provisions designed to modernize 

and make more effective the SBIR and STTR programs. 

XVI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

existing law in which no change is proposed is shown in roman): 


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SMALL BUSINESS ACT 

* * * * * * * 

SEC. 9. (a) Research and development are major factors in the 

growth and progress of industry and the national economy. The expense of carrying on research and development programs is beyond 

the means of many small-business concerns, and such concerns are 

handicapped in obtaining the benefits of research and development 

programs conducted at Government expense. These small-business 

concerns are thereby placed at a competitive disadvantage. This 

weakens the competitive free enterprise system and prevents the 

orderly development of the national economy. Is is the policy of the 

Congress that assistance be given to small-business concerns to enable them to undertake and to obtain the benefits of research and 

development in order to maintain and strengthen the competitive 

free enterprise system and the national economy. It is further the 

policy of Congress that the programs established in this section 

should focus on promoting research and development of projects 

governed by commercial business plans, which have significant potential to produce products or services for the marketplace or for acquisition by Federal agencies. 

* * * * * * * 

(e) For the purpose of this section— 

(1) * * * 

* * * * * * * 

(4) the term ‘‘Small Business Innovation Research Program’’ 

or ‘‘SBIR’’ means a program under which a portion of a Federal 

agency’s research or research and development effort is reserved for award to small business concerns through a uniform 

process having— 

(A) * * * 

* * * * * * * 

(C) where appropriate, a third phase, which shall consist 

of work that derives from, extends, or logically concludes efforts performed under prior SBIR funding agreements 

(which may be referred to as ‘‘Phase III’’)— (i) * * * 

* * * * * * * 

(8) the term ‘‘research institution’’ means a nonprofit institution, as defined in section 4(5) of the Stevenson-Wydler Technology Innovation Act of 1980, and includes federally funded 

research and development centers, as identified by the National Scientific Foundation in accordance with the governmentwide Federal Acquisition Regulation issued in accordance 

with section 35(c)(1) of the Office of Federal Procurement Policy Act (or any successor regulation thereto); øand¿ 

(9) the term ‘‘commercial applications’’ shall not be construed 

to exclude testing and evaluation of products, services, or technologies for use in technical or weapons systems, and further, 

awards for testing and evaluation of products, services, or technologies for use in technical or weapons systems may be made 

in either the second or the third phase of the Small Business 


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Innovation Research Program and of the Small Business Technology Transfer Program, as defined in this subsection ø.¿; and 

(10) the term ‘‘commercialization’’ means the process of developing marketable products or services and producing and delivering products or services for sale (whether by the originating 

party or by others) to government or commercial markets. 

* * * * * * * 

(g) Each Federal agency required by subsection (f) to establish a 

small business innovation research program shall, in accordance 

with this Act and regulations issued hereunder— 

(1) * * * 

(2) issue small business innovation research solicitations in 

accordance with a schedule determined cooperatively with the 

Small Business Administration, but not less often than twice 

per year; 

(3) unilaterally determine research topics within the agency’s 

SBIR solicitations, giving special consideration to broad research topics and to topics that further 1 or more critical technologies or pressing research priorities, as identified by— 

(A) the National Critical Technologies Panel (or its successor) in the 1991 report required under section 603 of 

the National Science and Technology Policy, Organization, 

and Priorities Act of 1976, and in subsequent reports 

issued under that authority; øor¿ 

* * * * * * * 

(C) the National Academy of Sciences, in the final report 

issued by the ‘‘America’s Energy Future: Technology Opportunities, Risks, and Tradeoffs’’ project, and in subsequent 

reports issued by the National Academy of Sciences on sustainability, energy, and alternative fuels; 

(D) the National Institutes of Health, in the annual report on the rare diseases research activities of the National 

Institutes of Health for fiscal year 2005, and in subsequent 

reports issued by the National Institutes of Health on rare 

diseases research activities; 

(E) the National Academy of Sciences, in the final report 

issued by the ‘‘Transit Research and Development: Federal 

Role in the National Program’’ project and the ‘‘Transportation Research, Development and Technology Strategic 

Plan (2006–2010)’’ issued by the United States Department 

of Transportation Research and Innovative Technology Administration, and in subsequent reports issued by the National Academy of Sciences and United States Department 

of Transportation on transportation and infrastructure; or 

(F) the national nanotechnology strategic plan required 

under section 2(c)(4) of the 21st Century Nanotechnology 

Research and Development Act (15 U.S.C. 7501(c)(4)) and 

in subsequent reports issued by the National Science and 

Technology Council Committee on Technology, focusing on 

areas of nanotechnology identified in such plan; 

(4) unilaterally receive and evaluate proposals resulting from 

SBIR proposals, but a final decision on each proposal shall be 

rendered not later than 90 days after the date on which the solicitation closes unless the Administrator determines, on a case 


tjames on PRODPC75 with REPORTS
34 

by case basis, that a decision may be extended from 90 days to 

180 days; 

* * * * * * * 

ø(h) In addition to the requirements of subsection (f), each Federal agency which has a budget for research or research and development in excess of $20,000,000 for any fiscal year beginning with 

fiscal year 1983 or subsequent fiscal year shall establish goals specifically for funding agreements for research or research and development to small business concerns, and no goal established under 

this subsection shall be less than the percentage of the agency’s research or research and development budget expended under funding agreements with small business concerns in the immediately 

preceding fiscal year.¿ 

(h) AGENCY RESEARCH GOALS.— 

(1) IN GENERAL.—In addition to the requirements of subsection (f), each Federal agency that is required by this section 

to have an SBIR program and that awards annually 

$5,000,000,000 or more in procurement contracts shall, effective 

for fiscal year 2010 and each fiscal year thereafter, establish 

annual goals for commercialization of projects funded by SBIR 

awards. 

(2) SPECIFIC GOALS.—The goals required by paragraph (1) 

shall include specific goals for each of the following: 

(A) The percentage of SBIR projects that receive funding 

for the third phase (as defined in subsection (e)(4)(C)). 

(B) The percentage of SBIR projects that are successfully 

integrated into a program of record. 

(C) The amount of Federal dollars received by SBIR 

projects through Federal contracts, not including dollars received through the SBIR program. 

(3) SUBMISSION TO COMMITTEES.—For each fiscal year for 

which goals are required by paragraph (1), the agency shall 

submit to the Committee on Small Business and the Committee 

on Science and Technology of the House of Representatives and 

the Committee on Small Business and Entrepreneurship of the 

Senate— 

(A) not later than 60 days after the beginning of the fiscal year, the goals; and 

(B) not later than 90 days after the end of the fiscal year, 

data on the extent to which the goals were met and a description of the methodology used to collect such data. 

* * * * * * * 

(j)(1) * * * 

* * * * * * * 

(4) FURTHER ADDITIONAL MODIFICATIONS.—Not later than 180 

days after the date of enactment of this paragraph and notwithstanding paragraph (2)(D), the Administrator shall modify the policy directives issued pursuant to this subsection to provide for an increase to $250,000 in the amount of funds which an agency may 

award in the first phase of an SBIR program, and to $2,000,000 in 

the second phase of an SBIR program, and a mandatory annual adjustment of such amounts to reflect economic adjustments and programmatic considerations. 


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35 

(k) DATABASE.— 

(1) * * * 

(2) GOVERNMENT DATABASE.—Not later than 180 days after 

the date of the enactment of the Small Business Innovation 

Research Program Reauthorization Act of 2000, the Administrator, in consultation with Federal agencies required to have 

an SBIR program pursuant to subsection (f)(1) or an STTR program pursuant to subsection (n)(1), shall develop and maintain 

a database to be used exclusively for SBIR and STTR program 

evaluation that— 

(A) contains for each second phase award made by a 

Federal agency— 

(i) * * * 

(ii) information collected in accordance with paragraph (3) on additional investment from any source, 

other than first phase or second phase SBIR or STTR 

awards, to further the research and development conducted under the award; øand¿ 

(iii) any other information received in connection 

with the award that the Administrator, in conjunction 

with the SBIR and STTR program managers of Federal agencies, considers relevant and appropriate; and 

(iv) information on the ownership structure of award 

recipients, both at the time of receipt of the award and 

upon completion of the award period; 

* * * * * * * 

ø(3) UPDATING INFORMATION FOR DATABASE.— 

ø(A) IN GENERAL.—A small business concern applying for 

a second phase award under this section shall be required 

to update information in the database established under 

this subsection for any prior second phase award received 

by that small business concern. In complying with this 

paragraph, a small business concern may apportion sales 

or additional investment information relating to more than 

one second phase award among those awards, if it notes 

the apportionment for each award. 

ø(B) ANNUAL UPDATES UPON TERMINATION.—A small 

business concern receiving a second phase award under 

this section shall— 

ø(i) update information in the database concerning 

that award at the termination of the award period; 

and 

ø(ii) be requested to voluntarily update such information annually thereafter for a period of 5 years.¿ 

(3) UPDATING INFORMATION FOR DATABASE.— 

(A) IN GENERAL.—A Federal agency shall not make a 

Phase I or Phase II payment to a small business concern 

under this section unless the small business concern has 

provided all information required under this subsection 

and available at the time with respect to the award under 

which the payment is made, and with respect to any other 

award under this section previously received by the small 

business concern or a predecessor in interest to the small 

business concern. 


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36 

(B) APPORTIONMENT.—In complying with this paragraph, 

a small business concern may apportion sales or additional 

investment information relating to more than one second 

phase award among those awards, if it notes the apportionment for each award. 

(C) ANNUAL UPDATES UPON TERMINATION.—A small business concern receiving an award under this section shall— 

(i) in the case of a second phase award, update information in the databases required under paragraphs (2) 

and (6) concerning that award at the termination of 

the award period; 

(ii) in the case of award recipients not described in 

clause (iii), be requested to voluntarily update such information annually thereafter for a period of 5 years; 

and 

(iii) in the case of a small business concern applying 

for a subsequent first phase or second phase award, be 

required to update such information annually thereafter for a period of 5 years. 

* * * * * * * 

(6) AGENCY PROGRAM EVALUATION DATABASES.—Each Federal 

agency required to establish an SBIR or STTR program under 

this section shall develop and maintain, for the purpose of evaluating such programs, a database containing information required to be contained in the database under paragraph (2). 

Each such database shall be designed to be accessible to other 

agencies that are required to maintain a database under this 

paragraph. Each such database shall be developed and operated in a manner to ensure that each such database is relevant 

to and contributes to the agency’s oversight and evaluation of 

the SBIR and STTR programs. Paragraphs (4) and (5) apply 

to each database under this paragraph. 

(7) AGENCY DATABASES TO SUPPORT TECHNOLOGY UTILIZATION.—Each Federal agency with an SBIR or STTR program 

shall create and maintain a technology utilization database, 

which shall be available to the public and shall contain data 

supplied by the award recipients specifically to help them attract customers for the products and services generated under 

the SBIR or STTR project, and to attract additional investors 

and business partners. Each database created under this paragraph shall include information on the other databases created 

under this paragraph by other Federal agencies. Participation 

in a database under this paragraph shall be voluntary, except 

that such participation is required of all award recipients who 

received supplemental payments from SBIR and STTR program 

funds above their initial Phase II award. Each database created under this paragraph shall be developed and operated in 

a manner to ensure that each such database is relevant to and 

contributes to the agency’s oversight and evaluation of the SBIR 

and STTR programs. 

* * * * * * * 

(m) TERMINATION.—The authorization to carry out the Small 

Business Innovation Research Program established under this section shall terminate on September 30, ø2008¿ 2011. 


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37 

(n) REQUIRED EXPENDITURES FOR STTR BY FEDERAL AGENCIES.— (1) REQUIRED EXPENDITURE AMOUNTS.— (A) IN GENERAL.—With respect to each fiscal year 

through fiscal year ø2009¿ 2011, each Federal agency that 

has an extramural budget for research, or research and development, in excess of $1,000,000,000 for that fiscal year, 

shall expend with small business concerns not less than 

the percentage of that extramural budget specified in subparagraph (B), specifically in connection with STTR programs that meet the requirements of this section and any 

policy directives and regulations issued under this section. 

* * * * * * * 

(o) FEDERAL AGENCY STTR AUTHORITY.—Each Federal agency 

required to establish an STTR program in accordance with subsection (n) and regulations issued under this Act, shall— 

(1) * * * 

* * * * * * * 

(3) unilaterally determine research topics within the agency’s 

STTR solicitations, giving special consideration to broad research topics and to topics that further 1 or more critical technologies, as identified— 

(A) by the National Critical Technologies Panel (or its 

successor) in reports required under section 603 of the National Science and Technology Policy, Organization, and 

Priorities Act of 1976; øor¿ 

(B) by the Secretary of Defense, in accordance with section 2522 of title 10, United States Code; or 

(C) by the national nanotechnology strategic plan required under section 2(c)(4) of the 21st Century Nanotechnology Research and Development Act (15 U.S.C. 

7501(c)(4)) and in subsequent reports issued by the National Science and Technology Council Committee on Technology, focusing on areas of nanotechnology identified in 

such plan; 

* * * * * * * 

(p) STTR POLICY DIRECTIVE.— 

(1) * * * 

(2) CONTENTS.—The policy directive required by paragraph 

(1) shall provide for— 

(A) * * * 

(B) a simplified, standardized funding process that provides for— 

(i) * * * 

* * * * * * * 

(ix) 1-year awards for the first phase of an STTR 

program, generally not to exceed ø$100,000¿ $250,000, 

and 2-year awards for the second phase of an STTR 

program, generally not to exceed ø$750,000¿ 

$2,000,000, øgreater or lesser amounts¿ with a mandatory annual adjustment of such amounts to reflect 

economic adjustments and programmatic considerations, and with lesser amounts to be awarded at the 

discretion of the awarding agency, and shorter or 


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38 

longer periods of time to be approved at the discretion 

of the awarding agency where appropriate for a particular project; 

* * * * * * * 

(s) OUTREACH AND SUPPORT ACTIVITIES.— 

(1) IN GENERAL.—Subject to the other provisions of this subsection, the Administrator shall make grants on a competitive 

basis to organizations, to be used by the organizations to do one 

or both of the following: 

(A) To conduct outreach efforts to increase participation 

in the programs under this section. 

(B) To provide application support and entrepreneurial 

and business skills support to prospective participants in 

the programs under this section. 

(2) AUTHORIZATION OF APPROPRIATIONS.—There is authorized 

to be appropriated to the Administrator $10,000,000 to carry 

out paragraph (1) for each of fiscal years 2010 and 2011. 

(3) AMOUNT OF ASSISTANCE.—For each of subparagraphs (A) 

and (B) of paragraph (1), the amount of assistance provided to 

an organization under that subparagraph in any fiscal year— 

(A) shall be equal to the total amount of matching funds 

from non-Federal sources provided by the organization; and 

(B) shall not exceed $250,000. 

(4) DIRECTION.—An organization receiving funds under paragraph (1) shall, in using those funds, direct its activities at one 

or both of the following: 

(A) Small business concerns located in geographic areas 

that are underrepresented in the programs under this section. 

(B) Small business concerns owned and controlled by 

women, small business concerns owned and controlled by 

service-disabled veterans, and small business concerns 

owned and controlled by minorities. 

(5) ADVISORY BOARD.— 

(A) ESTABLISHMENT.—Not later than 90 days after the 

date of the enactment of this subsection, the Administrator 

shall establish an advisory board for the activities carried 

out under this subsection. 

(B) NON-APPLICABILITY OF FACA.—The Federal Advisory 

Committee Act (5 U.S.C. App.) shall not apply to the advisory board. 

(C) MEMBERS.—The members of the advisory board shall 

include the following: 

(i) The Administrator (or the Administrator’s designee). 

(ii) For each Federal agency required by this section 

to conduct an SBIR program, the head of the agency 

(or the designee of the head of the agency). 

(iii) Representatives of small business concerns that 

are current or former recipients of SBIR awards, or 

representatives of organizations of such concerns. 

(iv) Representatives of service providers of SBIR outreach and assistance, or representatives of organizations of such service providers. 


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39 

(D) DUTIES.—The advisory board shall have the following duties: 

(i) To develop guidelines for awards under paragraph (1), including guidelines relating to award sizes, 

proposal requirements, measures for monitoring 

awardee performance, and measures for determining 

the overall value of the activities carried out by the 

awardees. 

(ii) To identify opportunities for coordinated outreach, technical assistance, and commercialization activities among Federal agencies, the recipients of the 

awards under paragraph (1), and applicants and recipients of SBIR awards, including opportunities such 

as— 

(I) podcasting or webcasting for conferences, 

training workshops, and other events; 

(II) shared online resources to match prospective 

applicants with the network of paragraph (1) recipients; and 

(III) venture capital conferences tied to technologies and sectors that cross agencies. 

(iii) To review and recommend revisions to activities 

under paragraph (1). 

(iv) To submit to the Committee on Small Business 

and Entrepreneurship of the Senate and the Committee 

on Small Business and the Committee on Science and 

Technology of the House of Representatives an annual 

report on the activities carried out under paragraph (1) 

and the effectiveness and impact of those activities. 

(6) SELECTION CRITERIA.—In awarding grants under this 

subsection, the Administrator shall use selection criteria developed by the advisory board established under paragraph (5). 

The criteria shall include— 

(A) criteria designed to give preference to applicants who 

propose to carry out activities that will reach either an 

underperforming geographic area or an underrepresented 

population group (as measured by the number of SBIR applicants); 

(B) criteria designed to give preference to applicants who 

propose to carry out activities that complement, and are integrated into, the existing public-private innovation support 

system for the targeted region or population; 

(C) criteria designed to give preference to applicants who 

propose to measure the effectiveness of the proposed activities; and 

(D) criteria designed to give preference to applicants who 

include a Small Business Development Center program 

that is accredited for its technology services. 

(7) PEER REVIEW.—In awarding grants under this subsection, 

the Administrator shall use a peer review process. Reviewers 

shall include— 

(A) SBIR program managers for agencies required by 

this section to conduct SBIR programs; and 

(B) private individuals and organizations that are knowledgeable about SBIR, the innovation process, technology 


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40 

commercialization, and State and regional technologybased economic development programs. 

(8) PER-STATE LIMITATIONS.— (A) IN GENERAL.—To be eligible to receive a grant under 

this subsection, the applicant must have the written endorsement of the Governor of the State where the targeted 

regions or populations are located (if the regions or populations are located in more than one State, the applicant 

must have the written endorsement of the Governor of each 

such State). Such an endorsement must indicate that the 

Governor will ensure that the activities to be carried out 

under the grant will be integrated with the balance of the 

State’s portfolio of investments to help small business concerns commercialize technology. 

(B) LIMITATION.—Each fiscal year, a Governor may have 

in effect not more than one written endorsement for a grant 

under paragraph (1)(A), and not more than one written endorsement for a grant under paragraph (1)(B). 

(9) SPECIFIC REQUIREMENTS FOR AWARDS.—In making 

awards under paragraph (1) the Administrator shall ensure 

that each award shall be for a period of 2 fiscal years. The Administrator shall establish rules and performance goals for the 

disbursement of funds for the second fiscal year, and funds 

shall not be disbursed to a recipient for such a fiscal year until 

after the advisory board established under this subsection has 

determined that the recipient is in compliance with the rules 

and performance goals. 

* * * * * * * 

(aa) VENTURE CAPITAL OPERATING COMPANIES.—Effective only for 

the SBIR and STTR programs the following shall apply: 

(1) A business concern that has more than 500 employees 

shall not qualify as a small business concern. 

(2) In determining whether a small business concern is independently owned and operated under section 3(a)(1) or meets 

the small business size standards instituted under section 

3(a)(2), the Administrator shall not consider a business concern 

to be affiliated with a venture capital operating company (or 

with any other business that the venture capital operating company has financed) if— 

(A) the venture capital operating company does not own 

50 percent or more of the business concern; and 

(B) employees of the venture capital operating company 

do not constitute a majority of the board of directors of the 

business concern. 

(3) A business concern shall be deemed to be ‘‘independently 

owned and operated’’ if— 

(A) it is owned in majority part by one or more natural 

persons or venture capital operating companies; 

(B) there is no single venture capital operating company 

that owns 50 percent or more of the business concern; and 

(C) there is no single venture capital operating company 

the employees of which constitute a majority of the board 

of directors of the business concern. 

(4) If a venture capital operating company controlled by a 

business with more than 500 employees (in this paragraph reVerDate Nov 24 2008 08:35 Jun 27, 2009 Jkt 079006 PO 00000 Frm 00040 Fmt 6659 Sfmt 6603 E:\HR\OC\HR190P1.XXX HR190P1

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41 

ferred to as a ‘‘VCOC under large business control’’) has an 

ownership interest in a small business concern that is owned in 

majority part by venture capital operating companies, the small 

business concern is eligible to receive an award under the SBIR 

or STTR program only if— 

(A) not more than two VCOCs under large business control have an ownership interest in the small business concern; and 

(B) the VCOCs under large business control do not collectively own more than 20 percent of the small business concern. 

(5) The term ‘‘venture capital operating company’’ means a 

business concern— 

(A) that— 

(i) is a Venture Capital Operating Company, as that 

term is defined in regulations promulgated by the Secretary of Labor; or 

(ii) is an entity that— 

(I) is registered under the Investment Company 

Act of 1940 (15 U.S.C. 80a–51 et seq.); or 

(II) is an investment company, as defined in section 3(c)(1) of such Act (15 U.S.C. 80a–3(c)(1)), 

which is not registered under such Act because it 

is beneficially owned by less than 100 persons; and 

(B) that is itself organized or incorporated and domiciled 

in the United States, or is controlled by a business concern 

that is incorporated and domiciled in the United States. 

(bb) COMMERCIALIZATION PROGRAMS.— (1) IN GENERAL.—Each agency required by this section to conduct an SBIR program shall establish a commercialization program that supports the progress of SBIR awardees to the third 

phase. The commercialization program may include activities 

such as partnership databases, partnership conferences, multiple second phases, mentoring between prime contractors and 

SBIR awardees, multiple second phases with matching private 

investment requirements, jumbo awards, SBIR helpdesks, and 

transition assistance programs. The agency shall include in its 

annual report an analysis of the various activities considered 

for inclusion in the commercialization program and a statement 

of the reasons why each activity considered was included or not 

included, as the case may be. 

(2) FUNDING FOR COMMERCIALIZATION PROGRAMS.— 

(A) IN GENERAL.—From amounts made available to carry 

out this paragraph, the Administrator may, on petition by 

agencies required by this section to conduct an SBIR program, transfer funds to such agencies to support the commercialization programs of such agencies. 

(B) PETITIONS.—The Administrator shall establish rules 

for making transfers under subparagraph (A). The initial 

set of rules shall be promulgated not later than 90 days 

after the date of the enactment of this paragraph. 

(C) AUTHORIZATION OF APPROPRIATIONS.—There is authorized to be appropriated to the Administrator to carry 

out this paragraph $27,500,000 for fiscal year 2010 and 

each fiscal year thereafter. 


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42 

(3) FUNDING LIMITATION.—For payment of expenses incurred 

to administer the commercialization programs described in 

paragraphs (1) and (2), the head of an agency may use not more 

than an amount equal to 1 percent of the funds set aside for 

the agency’s Small Business Innovation Research program. 

Such funds— 

(A) shall not be subject to the limitations on the use of 

funds in subsection (f)(2); and 

(B) shall not be used for the purpose of funding costs associated with salaries and expenses of employees of the Federal Government. 

(cc) RURAL PREFERENCE.—In making awards under this section, 

Federal agencies shall give priority to applications so as to increase 

the number of SBIR and STTR award recipients from rural areas. 

(dd) CONSENT TO RELEASE CONTACT INFORMATION TO ORGANIZA- TIONS.— 

(1) ENABLING CONCERN TO GIVE CONSENT.—Each Federal 

agency required by this section to conduct an SBIR program 

shall enable a small business concern that is an SBIR applicant to indicate to the agency whether the agency has its consent to— 

(A) identify the concern to appropriate local and Statelevel economic development organizations as an SBIR applicant; and 

(B) release the concern’s contact information to such organizations. 

(2) RULES.—The Administrator shall establish rules to implement this subsection. The rules shall include a requirement that 

the agency include in its SBIR application forms a provision 

through which the applicant can indicate consent for purposes 

of paragraph (1). 

(ee) INCREASED PARTNERSHIPS.— 

(1) IN GENERAL.—Each agency required by this section to conduct an SBIR program shall establish initiatives by which the 

agency encourages partnerships between SBIR awardees and 

prime contractors, venture capital investment companies, business incubators, and larger businesses, for the purpose of facilitating the progress of the SBIR awardees to the third phase. 

(2) DEFINITION.—In this subsection, the term ‘‘business incubator’’ means an entity that provides coordinated and specialized services to entrepreneurial businesses which meet selected 

criteria during the businesses’ startup phases, including providing services such as shared office space and office services, 

access to equipment, access to telecommunications and technology services, flexible leases, specialized management assistance, access to financing, mentoring and training services, or 

other coordinated business or technical support services designed to provide business development assistance to entrepreneurial businesses during these businesses’ startup phases. 

(ff) MULTIPLE FIRST PHASE SBIR AWARDS REPORT.—The Administrator shall, on an annual basis, submit to the Committee on 

Small Business and the Committee on Science and Technology of 

the House of Representatives and the Committee on Small Business 

and Entrepreneurship of the Senate a list identifying each small 

business concern that, for the period covered by the preceding 5 fisVerDate Nov 24 2008 08:35 Jun 27, 2009 Jkt 079006 PO 00000 Frm 00042 Fmt 6659 Sfmt 6603 E:\HR\OC\HR190P1.XXX HR190P1

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cal years, received 15 or more first phase SBIR awards and no second phase SBIR awards. 

(gg) REQUIREMENTS RELATING TO FEDERAL AGENCY ENGAGEMENT

WITH CERTAIN FIRST PHASE SBIR AWARDEES.—Each Federal agency required by this section to conduct an SBIR program shall engage with SBIR awardees that have been awarded multiple first 

phase SBIR awards but have not been awarded any second phase 

SBIR awards and shall develop performance measures with respect 

to awardee progression in the SBIR program. 

(hh) ASSISTANCE FOR ADMINISTRATIVE, OVERSIGHT, AND CON- TRACT PROCESSING COSTS.— (1) IN GENERAL.—From amounts made available to carry out 

this subsection, the Administrator may, on petition by Federal 

agencies required by this section to conduct an SBIR program, 

transfer funds to such agencies to assist with the administrative, oversight, and contract processing costs relating to such 

program. 

(2) PETITIONS.—The Administrator shall establish rules for 

making transfers under paragraph (1). The initial set of rules 

shall be promulgated not later than 180 days after the date of 

the enactment of this subsection. 

(3) LIMIT ON TRANSFER.—A Federal agency may not receive 

under this subsection in a fiscal year an amount greater than 

3 percent of the SBIR budget of such agency for such fiscal 

year. 

(4) AUTHORIZATION OF APPROPRIATIONS.—There is authorized 

to be appropriated to the Administrator to carry out this subsection $27,500,000 for each of fiscal years 2010 and 2011. 

(ii) AUTHORITY TO ‘‘FAST-TRACK’’ PHASE TWO AWARDS FOR PROM- ISING PHASE ONE RESEARCH.—To address the delay between an 

award for the first phase of an SBIR program and the application 

for and extension of an award for the second phase of such program, each Federal agency with an SBIR program may develop 

‘‘fast-track’’ programs to eliminate such delay by issuing second 

phase SBIR awards as soon as practicable, including in appropriate 

cases simultaneously with the issuance of the first phase SBIR 

award. The Administrator shall encourage the development of such 

‘‘fast-track’’ programs. 

(jj) LIMITATION ON PHASE I AND II AWARDS.—No Federal agency 

shall issue an award under the SBIR program or the STTR program if the size of the award exceeds the amounts established under 

subsections (j)(4) and (p)(2)(B)(ix). 

(kk) REQUIREMENTS RELATING TO ADDITIONAL SECOND PHASE

SBIR AWARDS.— 

(1) IN GENERAL.—A small business concern that receives a 

second phase SBIR award for a project remains eligible to receive additional second phase SBIR awards for such project. 

(2) TECHNICAL OR WEAPONS SYSTEMS.—Agencies are expressly 

authorized to provide additional second phase SBIR awards for 

testing and evaluation assistance for the insertion of SBIR technologies into technical or weapons systems. 

(ll) FIRST PHASE REQUIRED.—Under this section, a Federal agency shall provide to a small business concern an award for the second phase of an SBIR program with respect to a project only if such 

agency finds that the small business concern has been provided an 


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44 

award for the first phase of an SBIR program with respect to such 

project or has completed the determinations described in subsection 

(e)(4)(A) with respect to such project despite not having been provided an award for the first phase. 

(mm) INVOLVEMENT OF CHIEF COUNSEL FOR ADVOCACY.—The 

Chief Counsel for Advocacy, as described in section 201 of Public 

Law 94–305 (15 U.S.C. 634a), and any individual reporting to the 

Chief Counsel for Advocacy, without regard to whether such individual was hired under section 204 of Public Law 94–305 (15 

U.S.C. 634d), may not provide to the Administrator, to any individual who reports directly or indirectly to the Administrator, or to 

any Federal agency any advice, guidance, oversight, or review with 

respect to the programs authorized under this section. 

* * * * * * * 

SECTION 108 OF THE SMALL BUSINESS 

REAUTHORIZATION ACT OF 2000 

SEC. 108. NATIONAL RESEARCH COUNCIL REPORTS. 

(a) * * * 

* * * * * * * 

(d) REPORT.—The National Research Council shall transmit to 

the heads of agencies entering into an agreement under this section and to the Committee on Science and the Committee on Small 

Business of the House of Representatives, and to the Committee on 

Small Business øof the Senate— 

ø(1) not later than 3¿ of the Senate, not later than 3 years 

after the date of the enactment of this Act, a report including 

the results of the study conducted under subsection (a)(1) and 

recommendations made under subsection (a)(2)ø; and 

ø(2) not later than 6 years after that date of the enactment, 

an update of such report¿. 

Æ 


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