The benefits of the Small Business Innovation Research (SBIR) program have been measured and reviewed in detail by many organizations, including the National Academy of Sciences. The program is generally credited with significant innovation, resulting in benefits such as patents, jobs and commercialized products. Reauthorization for the SBIR program has been stalled in Congress for the last few years leaving the program at the mercy of funding from continuing resolutions. The most recently proposed resolution lasts only two months. A program with as much community support and data backing up the benefits deserves better.
There are two bills under consideration that would reauthorize SBIR: Senate bill S.1233 and House bill H.R.2965. If you follow SBIR legislation, you have likely read that the largest difference in the two bills is the treatment of companies with majority venture capital (VC) ownership. While the Senate bill would allow for participation at 8 to 18% of the total SBIR program dollars available, the House bill would allow unlimited participation by companies with majority VC ownership. Unless you follow the issue in great detail, you have likely not heard about the other major differences in the bills. The House bill contains many provisions that would fundamentally change the SBIR program. Specific concerns about the House legislation include:
1. The House bill more than doubles the size of Phase I and Phase II SBIR awards ($250,000 and $2,000,000), which without an increase in the size of the program will result in half as many awards.
2. The Senate bill provides reauthorization until 2023 as opposed to only 2 years for the House bill, which does not provide significant continuity for administration of changes in the program.
3. The House bill allows for Phase II awards without Phase I participation. A Fast Track pathway already exists for Phase I/II participation.
The next step in passing legislation is a compromise between the House and Senate. Representatives Markey (D-MA), Tsongas (D-MA), Welch (D-VT) and Hodes (D-NH) have drafted a conferee letter ( http://www.sbircoach.com/files/Tsongas%20Dear%20Colleague%20Letter.pdf ) that aims to bring that compromise. The letter supports maintaining many of the successful features of the existing SBIR program that are included in the Senate bill. In addition to some of the issues above, the letter supports the Senate bill’s handling of participation by VC backed companies. The letter provides a compromise that would continue a strong program for small businesses while allowing companies with majority VC ownership to participate again. The proposal meets the recommendation in the report “Venture Funding and the NIH SBIR Program” by the National Academies Press (http://www.nap.edu/), which recommended that “consideration should be given either to restoring the de facto status quo ante eligibility requirements for participation in the SBIR program or to making some other adjustment that will permit the limited number of majority venture-funded firms with significant commercialization potential to compete for SBIR funding.”
Unfortunately, compromise is unlikely to come soon. The Senate has voted for a continuing resolution to extend the program to September 30, 2009. The House is expected to vote on the extension this week. Rather than spending time pushing for a continuing resolution every few months, a compromise should be reached that would extend the SBIR program with the majority of the successful features intact and a step in the direction to bring venture capital backed companies back into the program.
BioForward, which represents over 100 biotechnology industry member companies in Wisconsin, supports the compromise proposed in the conferee letter originated by Markey and others that maintains the strong tradition of innovation in small business.
Laura E. Strong, Ph.D.
President, Board of Directors, BioForward (formerly the Wisconsin Biotechnology and Medical Device Association)
