Letter to Chair Landrieu, Chair Graves, Ranking Member Snowe, and Ranking Member Velazquez

Letter

In a letter to the leaders of the Senate and House Committees on Small Business, U.S. Senators Jeanne Shaheen (D-NH), Scott Brown (R-MA), and several other Senate colleagues are pressing for the passage of a long-term reauthorization of the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. The letter comes amidst an effort in the House Small Business Committee that would dramatically change the hallmarks of these currently successful small business programs and shorten their authorization.

"SBIR is an important program to our present and future economic strength," said Senator Shaheen, a member of the Senate Committee on Small Business. "It supports innovative entrepreneurs in New Hampshire and across the country who will help keep America competitive and create jobs. Businesses need the certainty of a long-term reauthorization for this program to be effective. I urge the negotiators of this bill to resolve their differences quickly and pass a version of this bill that will be truly effective for small business owners."

"I am deeply committed to passing a long-term reauthorization of the SBIR bill. The SBIR program is of critical importance as we try to create an environment where small businesses can grow, take risks, and create jobs," said Senator Brown, a member of the Senate Committee on Small Business. "The SBIR program has been successful because it is a merit-based competition and the participating agencies are forced to go through a series of investment steps that ensures they are making smart investments in small businesses that have proven themselves viable over time. Unfortunately, the House Small Business Committee-passed version of the SBIR reauthorization threatens these very characteristics of the small business program that has made it so successful. We cannot cut corners with this important job creating program and I plan to continue voicing my concerns alongside my colleagues on the Senate Small Business Committee."

The letter is as follows:

October 20, 2011

The Honorable Mary Landrieu The Honorable Olympia Snowe
Chair Ranking Member
Committee on Small Business Committee on Small Business

The Honorable Sam Graves The Honorable Nydia Velazquez
Chair Ranking Member
Committee on Small Business Committee on Small Business

Dear Chair Landrieu, Chair Graves, Ranking Member Snowe, and Ranking Member Velazquez:

We write to express our strong support for passage of a long-term reauthorization of the Small Business Innovation Research (SBIR) and Small Business Technology Transfer programs in this work period. We would also like to call your attention to four provisions in the House legislation, H.R. 1425, with which we have deep concerns. As you negotiate the final legislation, we respectfully urge you to omit sections 105, 106, 505, and 101 of H.R. 1425 from any compromise.

SBIR has been recognized as a highly effective program that encourages entrepreneurs to develop high-tech products that will keep our economy innovative and be competitive in the twenty-first century. We are deeply concerned that section 505 of H.R. 1425, which would limit the number of SBIR awards and award dollars that participants in the program can competitively win, will have an adverse impact on technology research needed by the agencies and small business commercialization. SBIR works because it is a merit-based program -- it allows our federal agencies to select the best entity to respond to agencies' research and development (R&D) needs. However, the effect of section 505 would be to handcuff our federal agencies into meeting quotas based on a median state average for the nation, not to mention directly contradict section 502 in H.R. 1425 that requires all funds awarded to use "competitive selection and merit-based procedures." Section 505 will not cause states which have little to no SBIR awards to suddenly win more. It will redistribute SBIR funds to firms that scored lower on the scientific merits of their proposals. The greatest strength of the SBIR program is that it is merit-based, not quota-driven, ensuring that the taxpayers' dollars are invested wisely and that small businesses with the greatest potential to grow are given that chance. As such, we would have strong reservations about supporting a bill that included this language.

We are also concerned about the proposal to allow SBIR awardees to avoid Phase I and move directly to Phase II grants. Phase I is an important protection for taxpayer dollars because it requires that entities prove the feasibility of a solution before a larger federal investment is made. Any provision to eliminate or scale back Phase I would hurt the program's effectiveness. Contrary to arguments that skipping Phase I would save money and speed commercialization, skipping Phase I means that the government would be spending $1 million of taxpayer dollars and a wait time of up to two years to find out whether a technology was promising, instead of $150,000 and six months. The SBIR program purposely contains several tiers of federal investment to guarantee that, as in the private sector, the government is making an investment that has been proven to be a risk worth taking.

We are also concerned with H.R. 1425's expansion of the Senate-House compromise language that would have changed the definition of a small business in order to allow the participation of firms majority owned by multiple venture capital firms. S. 493 was a compromise that struck a balance that enabled firms that are venture capital majority owned to participate in the SBIR program, while also protecting the majority of the research projects for the competition of small businesses that are still owned and controlled by individuals that need seed capital to explore innovative ideas. The Senate-House compromise also balanced the venture capital change by increasing the allocation percent. We also oppose the House's further opening of SBIR to organizations backed by private equity and hedge funds. The language in S. 493 is the only version that is supported by all major small business advocacy organizations, as well as BIO and the National Venture Capital Association. Section 106 would upset the Senate-House balance achieved in S. 493, and we oppose its inclusion.

Finally, we fully support an eight-year authorization for SBIR and do not support Section 101 in H.R. 1425. Our small innovators and federal agencies need the certainty that is associated with a long-term extension. Avoiding short-term fixes ensures that the program remains a successful, highly effective program that encourages small entrepreneurs to develop the products that will keep America competitive.

We look forward to working with you to ensure that any compromise legislation will be able to pass the House and Senate.

Sincerely,

Jeanne Shaheen Scott P. Brown

Ben Cardin Joseph Lieberman

John Kerry Kelly Ayotte

Michael Enzi John Thune

Richard Blumenthal Mark Pryor

Dianne Feinstein

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