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A Bill on the Future of SBIR

Jonathan Ortmans, President, Public Forum Institute

The Senate Committee on Small Business and Entrepreneurship introduced this week a legislation to reauthorize the Small Business Administration’s (SBA) Small Business Innovation Research (SBIR) program along with the Small Business Technology Transfer program (STTR), which were scheduled to expire at the end of July and the end of September, respectively.  The legislation will reauthorize the programs for 14 years.

SBIR, started in 1982, directs a small portion (between 2.5% and 2.8%) of the federal research grant money to small businesses to conduct research geared toward making technological and scientific breakthroughs commercially viable. That it will be reauthorized for a long, stable period is a huge step forward for our economy. The bill (S. 1233) will also implement a measured approach to increasing the allocation to the program. SBIR has have been extremely successful in helping produce more than 85,000 patents and generate millions of well-paying jobs across the nation, making it a rare example of clearly positive government intervention.

The program’s reauthorization has been delayed since its sunset date of September 30, 2008. The program has since received two temporary extensions. A full reauthorization was delayed in great part because of the controversy surrounding the eligibility of venture capital-backed companies. In this regard, this bill attempts to strike a compromise. It amends the eligibility requirements to allow businesses majority-owned by venture capital firms to compete for a limited percentage of SBIR projects: no more than 8% of SBIR funds at federal agencies, except at NIH where the limit will be 18%. The bill also calls for such companies to compete based on merit with all eligible small businesses in an effort to make sure that there is a fair playing field for the small businesses that are independently owned and operated.  

We will continue to follow Congressional work on this bill. As it is, it secures the future of SBIR and rightly limits the ability of venture-backed companies from the dominating the process.

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