The Small Business Innovation Research program is a big step further away from ending.

The Senate passed a three-year authorization of SBIR and the Small Business Technology Transfer Research program by unanimous consent on Sept. 20.

Sen. Ben Cardin (D-Md.), chairman of Committee on Small Business and Entrepreneurship, introduced and the full body passed the SBIR and STTR Extension Act of 2022 on Wednesday after several months of delay because of concerns from Sen. Rand Paul (R-Ky.) about companies abusing the program.

The House is expected to take up the Senate’s bill on Sept. 28, according to a spokesman for the Small Business Committee.

“Since January, the possibility of program shutdowns has loomed over the operations of innovative small businesses and federal agencies and clouded their future. Yesterday’s Senate vote marks a crucial step toward ensuring that small businesses, research institutions, and their agency partners can continue driving American innovation forward. This agreement was the result of months of bipartisan and bicameral negotiations, and I look forward to voting for it in the House next week,” said Rep. Nydia Velázquez (D-N.Y.), chairwoman of the committee in a statement.

“SBIR and STTR represent the best of government-industry partnerships—harnessing the creativity and ingenuity of American entrepreneurs to solve our nation’s most pressing public health and national security challenges,” said Cardin in a release. “This bill will keep SBIR and STTR going for an additional three years, increase commercialization of technology developed through the programs, and protect our nation’s intellectual property. Passing this important bill gives our nation’s innovative small businesses and research institutions the certainty they need to continue developing the technology that will power the economy of tomorrow.”

Sen. Jeanne Shaheen (D-N.H.), a member of the Small Business Committee, said the Senate’s actions are a major win for agencies and small businesses alike.

“This bill extends the program for another three years, but to avoid these looming deadlines and unnecessary uncertainty for companies that rely on access to the SBIR and STTR programs – it’s time to reauthorize the programs permanently,” said Shaheen in a release.

The bill includes some changes to attempt to address Paul’s complaints.

“We were able to reach a bipartisan deal that puts needed controls in place to secure America’s investment in research from China’s espionage and malign influence. The deal also starts to mitigate abuse by so-called SBIR mills, holding them accountable for the egregious amount of taxpayer dollars they have received,” said Paul in a statement.

For instance, each agency with an SBIR or STTR program must, within 270 days of enactment, establish a due diligence program to assess the potential risk posed by foreign ties and obligations. SBA will collaborate with the Office of Science and Technology Policy (OSTP) and consult with the Committee on Foreign Investment in the United States (CFIUS) to facilitate best practice sharing between the 11 agency programs to support these activities, according to a section-by-section analysis of the bill.

Additionally, Cardin’s bill would require small firms to disclose any business or financial relationships with foreigners before receiving an award.

GAO to report on multiple award winners

The Government Accountability Office also will report on companies that have won 50 or more Phase 2 SBIR awards within 18 months. This comes from Paul’s concerns about what he termed “SBIR mills,” where companies were winning Phase 1 or Phase 2 awards without ever showing any value to the government.

“GAO must review their impact on the program; their ability to commercialize and meet the tenets of the SBIR and STTR programs; the impact on new entrants and seeding technology necessary to the federal agency mission or commercial markets; and whether the types of technology such concerns are pursing are primarily hardware, software, or system components for the warfighter (specific to DoD); an evaluation and study of varying levels of award caps and lifetime program earning caps; an assessment of the increased minimum performance standards on the behavior of those concerns and on the SBIR and STTR programs, and whether to continue the standards; and recommendations on whether alternative minimum performance standards are effective and the extent to which such alternative minimum performance standards preserve the competitive, merit-based foundation of the SBIR and STTR programs,” the analysis stated.

Finally, the bill also seeks to address Paul’s other concerns about what the government is getting from these investments.

The legislation would increase performance standards for more experienced firms winning Phase 2 awards. The bill defines experienced firms as those who have won more than 50 Phase 1 awards in the previous five years.

“These firms must double their transition rate. The current minimum standard applies to firms with more than 20 Phase 1 awards and requires a minimum transition rate of one Phase 2 award per four Phase 1 awards. Firms with more than 50 awards, as detailed above, will now be required to meet an average of at least two Phase 2 awards per four Phase 1 awards,” the analysis stated.

Performance standards for 50, 100 award winners

The bill also would require companies that have won more than 50 Phase 2 awards over the last 10 years to invest an average of $250,000 of sales and/or investments during the period of performance. The current standards is an average of $100,000 sales or investments for those who have won 15 Phase 2 awards.

Additionally for firms winning more than 100 awards in the last 10 years, they would have to invest an average of $450,000 of sales and/or investments per Phase 2 award. This is up from an average of $100,000.

“If a firm doesn’t meet an increased performance standard, it may not receive more than 20 Phase 1 or Direct to Phase 2 awards at each agency in the following year. An agency may implement more restrictive limitations on the number of Phase 1 or Direct to Phase 2 awards,” the analysis stated. “For example, NASA limits its SBIR program to 10 proposals and 5 awards, and its STTR program to 10 proposals and 2 awards; NASA would be permitted to continue those limitations.”

Had the Senate not acted, the SBIR and STTR programs would’ve expired after 40 years. Many experts said the impact on small firms and agencies alike would’ve been dramatic. The Defense Department, for instance made almost 17,000 individual Phase 2 awards worth $14.4 billion between 1995 and 2018. It also estimates that they receive a 22 to 1 return on investment from these programs.

Women-owned small business bills

Cardin also introduced bills to reauthorize two other small business programs, the Women’s Business Centers Improvement Act of 2022 — legislation to reauthorize and improve the Small Business Administration’s (SBA) Women’s Business Center (WBC) Program.

The Women’s Business Centers Improvement Act of 2022 will give the SBA and WBCs the tools necessary to meet the demands of a historic boom in new business formation. According to the U.S. Census Bureau, Americans registered 5.4 million new businesses in 2021 — the highest total on record and a nearly 2 million increase from 2019 when there were 3.5 million new business applications.

The Women’s Business Centers Improvement Act of 2022 will increase federal support to WBCs by doubling the maximum annual grant award to $300,000. Cardin’s bill also empowers the SBA administrator to provide greater flexibility to smaller, more under-resourced WBCs. Under the bill, the SBA administrator may waive, in whole or in part, the non-federal match requirement for one year based on an analysis of the economic conditions of the grant recipient, the demonstrated ability of the recipient to raise non-federal funds, and the past performance of the recipient. The bill also sets the responsibilities of the WBCs and requires the SBA to establish an accreditation program for WBCs. Additionally, the bill clarifies the duties of the SBA’s Office of Women’s Business Ownership and codifies the office’s mission in statute among other provisions.

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