HOUSE RELEASES ITS NEW SBIR REAUTHORIZATION BILL

      The House Small Business Committee has introduced it's first cut of their SBIR reauthorization effort.  This comes to us from the new Subcommittee on Healthcare and Technology chair, Renee Ellmers (R-NC). The bill titled "Creating Jobs Through Small Business Innovation Act of 2011" aka H.R. 1425 was introduced on April 7, 2011. 

 

     Although Ms. Ellmers is new to congress, the language of her bill is directly from the annals of representatives Graves, Velazquez and Altmire. Once again we see their disingenuous efforts that attempt to obfuscate items such as being able to bypass phase I and go directly to phase II, under the bill's language of "PHASE I REQUIRED." As you would expect, the VC issue is at the forefront, offering 45% to VC's.  But wait, there's more! Now they've added hedge funds and private equity firms to the mix!  Imagine what that could have done to forestall Bernie Madoff's collapse.

 

     Largely overlooked is the fact that VC's can, and do have access to SBIR as long as they don't exceed 49% ownership of a small business.  Majority ownership and control of a small business by one or more VCs have always been considered by the SBA as a non-small business entitiy.  Let's rephrase that, a small fish swallowed by a big fish is now part of the big fish, and SBA Size Standards (which govern access to SBA small business programs) always considered an entity majority owned by a non-small business, to be a non-small business, thereby ineligible for SBA's small business programs (including but not limited to SBIR). However, some exceptions do apply i.e., a VC can have majority ownership of a small business if the VC organization itself qualifies under SBA rules as a small business. 

 

 

     In their current SBIR bill (S.493), the Senate agonized to find an acceptable VC compromise that would appease BIO, NVCA, SBTC and others.  They all accepted a compromise that was to give VC owned firms access to 25% of the NIH, NSF and DOE award dollars and 15% to the other 8 agencies.  In spite of the Senate compromise with these organizations, the House, GV&C (Graves, Velazquez & Company) are insisting on giving 45% to majority VC owned entities, and other large concerns.   

 

 

      Graves & Velazquez have been fighting this VC issue since 2003 and have been handsomely rewarded by their big business lobbyists. Did you ever wonder why these legislators never requested the SBA's Gary M. Jackson (Assistant Administrator for Size Standards during those years) as a witness?  His office regulated the policies of size standards and the VC issue.  He knew the truth but the House didn't want to hear it. 

 

 

     Did you ever wonder why Maurice Swinton (SBA Assistant Administrator for the Office of Technology at that time) wasn't brought up as a witness on the VC issue?  Because he also knew the truth, and voiced it.  Consequently he was reassigned to a non-SBIR related office (by "higher powers") although his work was always exemplary. 

 

 

     Did anyone report on (or even mention) the 11 field hearings the SBA held across the country (June 2005) on the VC issue?  Of course not because 10 of the 11 were overwhelmingly opposed to majority VC ownership! 

 

     In addition to the VC issue, Graves, Velazquez & Company are against the Senate's raising the SBIR/STTR allocation from 2.5% to 3.5% (SBIR) and 0.3% to 0.6% (STTR) over 10 years.  The Senate wanted that raise to help accommodate their compromise of allowing VC owned companies to compete for up to 25% of SBIR award dollars. Another reason for the increased allocation is to allow 3% of the SBIR dollars to be used by the agencies for their administration of the program.  GV&C like the idea of the admin money but want it to come out of the existing 2.5%.  

 

 

     In essence if the House gives 45% of the SBIR money to non-small businesses and approximately an additional $75 million of SBIR dollars to the agencies for admin, the loss to actual small businesses would be close to $1.2 billion.   

 

 

     In addition we see the House authorization for only 3 years, up from their previous 2 years but distant from the Senate's 8 years.  There are some good provisions in the House bill, many of which were picked up in the Senate's bill.