Legislative Affairs

According to SBIR Insider Rick Shindell…  "There is some important news on the SBIR Reauthorization front. The word for this bill is COMPROMISE, and lots of it.

The good news about compromise is that it may allow reauthorization to become a reality, the bad news is that nobody gets fully satisfied.  Unlike the House’s myopic reauthorization effort which can best be described as a "High Wire Act at Low Altitude," the Senate’s actions took many diverse views and needs into account in hammering out a compromise.  

This will not be an exhaustive report, but we will cover the items of greatest interest to the SBIR community.  If you like what you see, I’ve been advised to urge you to contact your Senators and ask them to cosponsor S. 3362, the SBIR/STTR Reauthorization Act of 2008. Many cosponsors will increase the likelihood of passage in the Senate AND apply leverage for conferencing with the House.  

SBIR REAUTHORIZATION, SENATE SBE STYLE 

The Senate Committee on Small Business and Entrepreneurship (SBE) passed by a vote of 19 to 0, their ‘SBIR/STTR Reauthorization Act of 2008′’ aka S. 3362. This is a completely new bill and not related to H.R. 5819, the House’s SBIR/STTR Reauthorization Act passed in the House, April 2008.  In what can be described as a Herculean effort on the part of some SBE Senators and their staffers to create a new, reasonable and workable bill, and the willingness of Senator Kerry to reach out directly to Senator Bond to strike a livable if unsatisfying compromise, S. 3362 came to fruition and was passed in a brief markup session held Wednesday morning, July 30, 2008.  Don’t let the 19/0 vote mislead you. Due to all the competition for Senators’ time, only slightly more than half the committee (10) were able to attend, but that constituted the needed quorum for the vote. Nine votes were by proxy, resulting in a unanimous "yea" vote for the bill.  Mindful of the full schedules of his committee members, Kerry wasted no time calling the session to order. Only two Senators voiced objections to the bill, Kit Bond (R-MO) and Maria Cantwell (D-WA), both BIO supporters targeting the VC and NIH issues. In spite of their reservations, they voted in the affirmative for the bill. Regardless of the outcome of this legislation, in the eyes of this reporter, one person stands above the rest. Ms. Kevin Wheeler of Senator Kerry’s SBE committee staff performed gallantly, above and beyond the call of duty. This is not to diminish the contributions of many Senators and their staff in this reauthorization effort.  

It is unlikely that the full Senate will take up passage of the bill prior to returning from their recess September 8. At the time of this writing the bill wasn’t on Thomas, but we have a copy for you at www.zyn.com/sbir/insider/s3362_bill.pdf 

 THE DETAILS 

Here are some of the major points of the bill, with "unofficial" perspectives from some insiders concerning the bill’s rationale. Also listed are some of the House’s more contentious provisions that the Senate "frowned" on. The items are listed in the order of most interest as expressed by our reader’s questions: 

1. Award Amounts - Both SBIR and STTR raised to $150k phase I, and $1m phase II, with the ability to exceed the guidelines by a maximum of 50%. The agencies must report and justify all awards exceeding the guidelines.  [ This action is to limit the use of "Jumbo Awards" that were never intended to be a part of the SBIR program. However, it is expected that BIO will fight this provision.] 

2. Increase in SBIR/STTR Cap (allocation) - SBIR will be increased from 2.5% to 3.5% at a rate of .1% over 10 years, EXCEPT for NIH, which will stay at 2.5%. STTR will double from 0.3% to 0.6% over 6 years.  [ Aside from the agencies, academia was the main objector to an increase in the cap. Universities believe that the additional funding for SBIR would be taken from their resource pool. Most of this was NIH related and hence the NIH is exempted from the increase. Will this satisfy the AAU? In STTR, the university sector is a major beneficiary and it is thought that academia’s objections to an increase would be limited. Most of our insiders are not so sure. Nevertheless, the SBE is striving for a reasonable compromise here.]  

3. VC Eligibility - A "small business" that is majority owned and controlled by multiple VCs will be eligible to participate in the SBIR program under certain conditions: No single VC can own more than 49% of the small business entity; the VC must be a United States Venture Capital Company; the VC owned small business must register with the SBA when they submit an SBIR proposal. The NIH will be limited to awarding not more than 18% of their SBIR award funding to such VC owned small businesses, and the remaining 10 agencies are limited to 8%.  [ This is a valiant attempt to offer both sides some win and protection. However, this provision, coupled with the restricted award amounts is a bitter pill to the BIO/VC community who desperately want their "Jumbo Awards".]  

4. Length of Reauthorization - 14 years, resulting in new sunset dates of September 30, 2022, for SBIR and September 30, 2023, for STTR.  [ Unlikely to stand, but since adjustments to SBIR/STTR legislation can be done at any time, this may be agreed to.] 

5. Agency Administrative Funding - Not mentioned. [The agencies really want some relief on their admin costs, but if the only way to accomplish this is to raise the cap, it is basically out of one pocket into the other. There is not much chance for additional admin funding coming directly from the SBIR award pool.] 

6. Direct Access to Phase II (bypassing phase I) - A defiant "no no" 

7. Crossover between agencies - A phase I at one agency becoming a phase II at another is permitted. 

8. Crossover between SBIR and STTR - A phase I of SBIR can become a Phase II of STTR, or vice versa.  

9. Commercialization Pilot Program (DoD) - Is supported. [ This is a complex and often misunderstood program that requires expert analysis, not within the scope of this report. We hope to have follow up for you soon.] 

10. Commercialization Pilot Program (Civilian Agencies) - A new pilot program that requires expert analysis, not within the scope of this report. We hope to have follow up for you soon.] 

11. FAST/ROP - A refocusing of the Federal & State Technology Partnership Program, and the Rural Outreach Program, that the SBA Administrator may fund up to $5m per year, sans any new appropriation.  

12. Ability of a small business to partner/subcontract or enter into a CRADA with a federal laboratory or FFRDC without the need of an SBA waiver.  [ In the interest of full disclosure, my company has a working relationship with many of the federal labs, and I’m a supporter of this section. However, there were some abuses in the past that led the SBA in 2002 to disallow subcontracting back to federal facilities, but SBA did create a method by which an agency could submit a waiver for the small business to work with a federal lab. The use of a federal lab on an SBIR project should be for a unique resource.] OTHER S. 3362 ITEMS There are many other items (mostly good) included in this bill. One of the more important is section 102, calling for a reorganization of the SBA’s Office of Technology (OT), whose primary responsibilities are the SBIR and STTR programs. Over the years this office has suffered major cuts in budget and staff, was intentionally neutered and rendered ineffective. This bill aims to restore some of the importance and relevance to this office by moving it out from under the contracts department, and making it answerable directly to the SBA Administrator. I only hope they can provide additional funding and resources.  Congresswoman Mary Landrieu (D-LA) recognized the SBA problem and dropped a bill of her own on July 26, 2008, the "Rural Small Business Enhancement Act of 2008", S. 3342. Several of her concerns were picked up in the SBIR reauthorization  

SUPPORT COMMENTS FROM SBTC’s JERE GLOVER

"The Senate Small Business and Entrepreneurship Committee has worked hard to come up with a compromise bill that insures this important program continues. Unlike the House bill that makes significant and unnecessary changes to a proven program, S 3362 preserves the basic character and fundamentals of the SBIR." "As a small firm that has benefited from the SBIR, I urge that you cosponsor S 3362 to reauthorize the SBIR. This is too important a program to let expire." The SBTC is hosting a reauthorization conference call Thursday July 31, 2008 at 3:00pm edt.  Non members are also invited to join us on this call. The phone number is 616-712-8000, and the access code is 727524#.  You can visit the SBTC’s newly redesigned web site at www.sbtc.org  

OPPOSITION FROM ASBL’s LLOYD CHAPMAN 

In a conversation with the American Small Business League President, Lloyd Chapman, he voiced his organization’s strong opposition to the passage of S 3362. Mr. Chapman’s chief concern is that the bill’s compromise on allowing VC ownership and control of a small business establishes a dangerous precedent that BIO, NVCA and others could try to exploit in other areas of federal small business contracting.  Chapman came out in strong opposition to the House’s SBIR bill H.R. 5819 for the same reasons, even more so. He told the SBIR Insider not to believe that BIO/NVCA and others only have their sites set on SBIR.  He cited last year’s House Small Business Committee bill H.R. 3567, Small Business Investment Act of 1958, which according to former House SBC chair and small business champion, Donald Manzullo (R-IL) "would allow large businesses and universities that establish a VC to potentially game the system to benefit from not just various SBA technology programs but every other SBA loan and procurement assistance program." You can get more information from the ASBL’s web site at www.asbl.com

AN INDEPENDENT VIEW  (Rick Shindell/SBA Insider) I appreciate and respect both Glover’s and Chapman’s view on this bill. However, as strongly opposed as some are (including myself) to BIO’s strong armed tactics, you should be aware that without compromise you will have no reauthorization.  The Senate SBE gave NIH almost everything it could ask for, it gave BIO and Bond a lot, but still not enough to satisfy them. I can promise you, without compromise there will be no SBIR program. Several have told me that they would rather see the program end than cut a deal with "those guys."  If the SBIR program is of vital importance to you and your business, please..PLEASE.. talk to your Senators and ask them to cosponsor and support S 3362.

Go to http://www.senate.gov/general/contact_information/senators_cfm.cfm choose your state from the dropdown window on the left, and click on your Senators’ name. This will take you to their web site where you can find the contact information for their local or regional offices.

I suggest you use the local one because they will be working your districts for much of the month of August (except convention week). I’m not asking you to do this for me, this is for you and thousands of other small businesses who depend on this program.

The SBIR - one of the most critical small business technology funding sources must be reauthorized by Congress this year so that our innovations continue to receive funding and support.   ASBA is tracking and has been part of the discussions on Capitol Hill - here is the lastest update. 

According to SBIR Insider…

We just heard that the Senate Committee on Small Business and Entrepreneurship (SBE) will hold a public markup of a bill to reauthorize the SBIR Program on Wednesday, July 30, 2008 at 11:30 a.m., in room 428A Russell Senate Office Building.  As previously reported by the SBIR Insider, much work has been on-going behind the scenes of the committee to try and reach a workable compromise on the VC issue, as well as some other issues. Many items of importance are being addressed in the Senate SBE’s SBIR bill, but without a VC compromise, the reauthorization would likely be stalled into oblivion.

The fact that a public markup will be held next week strongly suggests that a workable VC compromise has been struck. With a VC compromise at hand, the Bond & BIO clan may well support the Senate SBE effort and help get the bill passed in the committee. Details as to the bill itself are not available at this time. SBE chair John Kerry, and ranking member Olympia Snowe have held many hearings and roundtables on SBIR over the past couple of years, and are very familiar with the programs needs. It appears that this latest effort will be a short term solution to get the SBIR reauthorized without turning the program upside-down and loading it with special set-asides.  

Challenges: Even if the bill is passed in the committee, it has to be passed in the Senate. It is unlikely that a full Senate vote could happen prior to the Senate’s return on September 8, 2008. There are some Senators who don’t believe in small business programs, set-asides, SBA and SBIR, and they could pose a problem for Senate passage. If the bill passes the Senate, it will then be headed for conference with the House. The bill could be successful in the conference if BIO and NVCA support it. I believe they may, because the alternative is a continuing resolution (CR) which does them no good, or expiration of the program which would result in a crap shoot for the "must pass" end-of-the-year omnibus bill.  

I did hear something interesting from one of our readers, who is very active in keeping his politicos informed (kudos to him!). He told me that his hill visits reflected the thought that the SBIR would be kept alive via a CR and reauthorization would be addressed in June of 2009. This was before the announcement of the SBE’s markup of a reauthorization bill.  

Congress is in recess from August 9 (although they are trying to bail the week of August 4) through September 7. In addition to their national conventions, (Dems Aug 25-28, Reps Sept 1-4) your Senators and Representatives will be in their district/state work period, visiting folks like you (hopefully). This will be prime-time for you to reach out to them, without the cost of going to DC. We’ll get some advice from "professionals" as to how to approach them. (poor sentence construction, I’m not going to touch that…) 

In an upcoming future issue, we will be including a list of Representatives & Senators that support SBIR. I am very much interested in your experience as to which of your politicos support SBIR, and which ones don’t. We can include that in our list, while protecting your identity. 

Voting is our right and our honor.  Knowing who to vote for and WHY is our responsibility.  ASBA is proud to partner with the ATIC and other organizations to help you learn more about who is running for the Arizona Corporation Commission and where they stand on key issues that affect YOUR business. 

Check out the details below! 

Arizona Telecommunications and Information Council & the Arizona Clean Elections Commission Present: A series of Arizona Corporation Commission (ACC) Candidate Debates on July  15 and September 15, 2008 live at Rio Salado College in Tempe as well as Webcast, available on Cable TV, and subject of an Online Forum. See http://www.arizonatele.com/atic/  for more information.

What is the Arizona Corporation Commission? Why should I care who gets elected? The cost of electric and natural gas! Broadband deployment to rural communities! Renewable energy! Integrity of the pipelines that carry gasoline across the state! Arizona’s investment in utility infrastructure! These are among the issues to be debated at the July 15 Primary and the September 15, 2008 General Election debates for candidates for the Arizona Corporation Commission. 

Why should you attend? The Arizona Corporation Commission (ACC) is an independent regulatory authority created by the Arizona Constitution. This powerful body, often described as a Fourth Branch of Government, makes decisions that have an enormous impact on Arizona’s future and the finances, safety and quality of life of all citizens, businesses and organizations in Arizona. This year you will vote for 3 of the five Commissioners. The Commission sets the rates you pay for public utilities including telecommunications, water, electric, and natural gas services. Commission policies also determine the quality of these services and future utility infrastructure investments, including solar and other alternative energy sources. In addition to utilities regulation, the debates will also cover the other services under the jurisdiction of the Commission including Corporations and Securities Oversight, and Railroad and Pipeline Safety.

The nonpartisan debates will be presented by the Arizona Telecommunications and Information Council (ATIC), with support provided by the Arizona Citizens Clean Elections Commission. The debates will be moderated by Mark Goldstein, ATIC Board Secretary and a past Chairman of the group, as well as President of the International Research Center (IRC) located in Tempe. 

How You Can Participate: Join the live audience at Rio Salado College, logon to the webcast at http://www.arizonatele.com/atic/ during and after the debates, or view the debates on Cox Cable Channel 7 and other Cable stations around the state after the debates. The public is also welcome to propose debate questions on the ATIC website and to discuss issues and interact with other Arizona voters on the Online Forum. Participation is free, however, registration for the live event and webcast is requested.  See our web site for details http://www.arizonatele.com/atic/ Help Spread the Word! See the "Be a Cooperating Organization" link on the web site to see how you can help us get the word out about these important debates. For more information or to get involved, contact: Steve Peters, ATIC Debate Coordinator, 520-321-1309, mailto:stevepeters@tucsonlink.org * President, Community Information and Telecommunications Alliance (CITA - http://www.tucsonlink.org/) * Board Member, Greater Arizona Learning Association (GAZEL - http://www.gazel.org/) * Board Member, Arizona Telecommunications and Information Council (ATIC - http://www.arizonatele.com/atic/) 

Small technology based companies from across the country "flew in" to Washington DC today to meet with Senate offices regarding protecting the SBIR.

 Few programs have meant more to small business over the last 25 years than the SBIR program.  It has provided the seed money to help start up and second stage companies develop new technologies, prove innovative concepts, and move them along to levels where they can either stand on their own OR access investment capital.  Without SBIR - many new American technologies would never make it out of the lab or off the bench!

 This session, Congress must reauthorize the SBIR program.  The bill that came through the House has signigficant changes, many of them that favor VC’s and bigger businesses much more than the small businesses the program is intended to support.  The biggest of these changes is the trippling of the size of awards from $100K to $300K for phase one and to millions for phase two commercialization.  It sounds good at first until you read on and discover that they did not make the total amount of money to be allocated bigger - just the awards.  What this means is that if this goes through we cut the number of projects that can benefit from this program by two-thirds.  This puts all technology oriented small businesses at a disadvantage. 

Other changes include allowing businesses that are controlled by VC’s at 51% or more to still be continued ’small".  Again this is not a good idea.  With majority interest the VC has control - not the entrepreneur.  As one business owner stated to her Senator - at that point I am not the entrepreneur  any more - I am just another employee. 

Now the bill moves to the Senate - where hopefully cooler - less influenced heads will prevail.  It is up to us to let our Senators McCain and Kyl know how important the SBIR is to small business and that it keeps to its original mandate - support of innovation and research for SMALL businesses.

 What do you think?  

One of my favorite movies is the old Jimmy Stewart classic - Mr. Smith Goes to Washington.  Well, this week I got a taste of what Mr. Smith got to experience.

June 2- 5, small business leaders from around the country came together at the National Small Business Association (NSBA) Washigton Presentation. 

NSBA is ASBA’s partner in Washington and I have the honor of serving as a member of their board of trustees,  While most of ASBA’s work is done in our home state of Arizona, NSBA’s team represents us in the nation’s capitol, fighting for all of us on key issues including healthcare, taxation, access to capital, and small business procurement contracts.

Tuesday morning we discussed not only status and issues but also a powerful message - Small Business - 70 Million Strong and Voting!

Why is the message so important - you can look at it this way.  For every pair of workers in the US, one is either a small business owner or works in a small business.  We are the largest single work group in  the country, and one of the least represented on the national stage.  We don’t have big T.V. budgets, millions of dollars to invest in lobbyists to champion our cause, rich PAC’s to influence candidates, or a seat that the President’s Cabinet table.  We are simply hard working, tax paying Americans doing what we do best - building businesses and quietly supporting the economy in good times and bad.

Small Business is the major economic and innovative force in our country.  That is the message I took with me to Washington.  In my visits to the offices of Congressman Mitchell, Senator McCain, and Senator Kyl’s I brought them messages from home as well as copies of BizAZ Magazine and the 2007 Arizona Companies to Watch Profiles.  We shared information on what ASBA is doing to make a difference on key issues like healthcare and workforce development.

My visit was not one of demand, but one of reminders.  Sharing the stories of our Arizona small businesses and the challenges they face on the healthcare front, how they are dealing with the obstacles created due to lack of action on immigration reform, and offering hope in the form of the innovative activities occuring in our state and at ASBA.  Washington is not solving these challenges - so Arizonans are stepping into the breach and taking action.

If there was a major disappointment from my visits, it was in hearing what I expected to hear.  On these important issues - nothing much will happen before next year.  Washington will soon be consumed with the election process at the state and presidental level. We’ll have to wait for help from Washington.  So it is still up to us to keep taking care of business at home, continuing to work out our challenges the way we have up untl now - by justing taking care of business on our own.  After all - that is what small business does best.