NMTC SBIR-STTR Public Comment

National Minority Technology Council

NMTC SBIR–STTR PUBLIC COMMENT

10/4/12

Commercializing for Citizen Benefit

NMTC SBIR–STTR Public Comment

The National Minority Technology Council represents the common business interest of over 9,000 Registered minority technology companies across the US. The purpose of this document is to illuminate the capabilities of our members and to begin the relevant discussion of why the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) [SBIR-STTR] program exists and how the change in SBA Policy could create a shift in the purpose and distribution of future funding. We also have recommendations with regard to the current interpretation of how the SBA allocates Agency funding, and how Congress may begin to explore a needs based allocation model for the incremental portion of the SBIRSTTR funding.

sbir.nmtcouncil.org

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NMTC SBIR–STTR Public Comment

NMTC SBIR–STTR Public Comment COMMERCIALIZING FOR CITIZEN BENEFIT

BRIEF HISTORY OF SBIR-STTR The SBIR-STTR Reauthorization Act of 2011, and the recently released SBIR and STTR Policy Directives, will bring about numerous changes to the SBIR-STTR programs. In order to fully put these changes in context one needs to understand why the law was first enacted. The late 70’s early 80’s were plighted with a recession and competing products from Japan and other foreign markets. This productivity slowdown in the United States reduced the nation's ability to compete economically in the global economy especially in steel and auto manufacturing, and semiconductors industries. In light of this development, government initiated several public policies to stimulate innovation and commercialize new technologies. SBIR program was born as one of these public policy responses.

The purposes of the Small Business Innovation Development Act of 1982 were(1) to stimulate technological innovation; (2) to use small business to meet federal research and development needs; (3) to foster and encourage participation by minority and disadvantaged persons in technological innovation; and (4) to increase private sector commercialization innovations derived from federal research and development.

The Act has undergone a series of reauthorizations over the last 30 years culminating into the 2011 Act and Policy Directives germane to this Public Comment. This paper will highlight in more detail how the idea for the Act was developed and how the Agency (employee) led germination of the Act spawned a perpetual byAgency implementation over the past three decades of funding.

Biased Attained by Program Initiation In 1973 then President Nixon in collaboration with a Democratic Congress both inquired as to the citizen merit derived from our federal investment in Research and Development. President Nixon directed the National Science Foundation to initiate a new applied research program entitled “Research Applied to National Needs”(RANN). Embedded in the order was an articulated set-aside for applied research to small business.

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NMTC SBIR–STTR Public Comment

This new focus on small business germinated into staff responsibility and eventually in 1976 the federal Small Business Innovation Research program framework was designed all within the National Science Foundation.

Implementation of the Nixon RANN directive proved difficult as Congress was not ready for NSF to change it’s focus from basic research to applied research. What in interesting was the focus on social needs instead of pure science. There was political pressure to utilize NSF funds to help “solve” instead of simply research problems ailing our country.

It is important to put these actions in context. The “internet” was still managed by ARPANET. Businesses were not yet “networked”. The way we do business today would be considered STAR WARS in the late 70’s.

There was a spark of a notion critically held by internal champions inside of NSF. An idea that small high tech firms could increase the economic return on investment from NSF research. An idea that you could fund highrisk, potentially high-payoff, and innovative ideas that could be “sold” instead of shelved purely for the purpose of discovery.

The SBIR program was created in 1982 by the Small Business Innovation Development Act under the Regan Administration. As one of the nation's several innovation programs, it is instituted to stimulate technological innovation among small private sector businesses while providing government agencies new, cost effective technical and scientific solutions to meet their diverse mission needs. This private public partnership program offers competitive awards to provide early stage financial support for high risk technologies with commercial potential. The program was funded similar to the RANN set-aside by multiplying a percentage (2.5%) of the Agency R&D budget for Agencies who were allocated more than $100 million for R&D. What is illuminated here is the SBIR program was born at the NSF but is managed by the SBA. There is a conflicting bias between the pure science heritage of the NSF and the political desire for the SBIR and the STTR program’s Commercial viability.

National Minority Technology Council’s Public Comment on the above Bias Our deep concern with the Policy Directive as it stands now is there is no directive to create a national fund to address research that is not specific to any one federal agency. Much like the Networking and Information Technology Research and Development (NITRD) Program the Council recommends that Congress and the SBA consider developing a separate organization that would use a percentage of the increase in funding from 2013-2017. Perhaps a carve out of 0.1% could be allocated to a National SBIR-STTR Fund that is governed much like NITRD. The idea behind NITRD was Federal IT R&D, which launched and fueled the digital revolution, continues to drive innovation in scientific research, national security, communication, and commerce to sustain U.S. technological leadership. The NITRD agencies' collaborative efforts increase the overall effectiveness and productivity of these Federal R&D investments, leveraging strengths, avoiding duplication, and increasing interoperability of R&D products. We welcome the idea that the SBIR-STTR program find it’s roots in solving social issues affecting the lives of every day Americans. This idea of developing an umbrella program would serve to create a relevant solutions based arm of the SBIR-STTR program that not only could garner ideas from the Small Business community but begin to engage NGO’s, Community Leaders, States, Cities, and other bodies on what are the pressing issues that could be researched and then provide solicitations that are either grant or contract based to help research and develop innovative solutions.

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NMTC SBIR–STTR Public Comment

AGENCY-SPECIFIC PERFORMANCE CRITERIA SBA has amended the SBIR Policy Directive to state that beginning on October 1, 2012, and ending on September 30, 2015, and upon establishment by SBA of the agency-specific performance criteria, SBA shall allow agencies to use no more than 3% of their SBIR funds for one or more specific activities. Specifically, the funding is to be used to assist with the substantial expansion in commercialization reporting; fraud, waste and abuse prevention; expanded reporting requirements; and other new activities required by the SBIR Program.

The administrative funds are not to be used to replace the agency's current administrative funding for the SBIR Program (e.g., pay for current personnel) but to supplement the agency's current administrative funding (e.g. pay for new personnel to assist solely with SBIR funding agreements) and cover the costs of new program initiatives.

The Reauthorization Act requires agencies to use some of these funds to increase participation by socially and economically disadvantaged small businesses (SDBs) and women-owned small businesses (WOSBs) in the SBIR Program, and small businesses in states with a historically low level of participation in the program. The agency may request a waiver of this statutory requirement by submitting a written statement explaining why there is a sufficient need for the waiver, and that the outreach objectives of the agency are already being met. The directive addresses this requirement.

The Reauthorization Act states that agencies may not use the SBIR funds for any of these administrative purposes until SBA establishes performance criteria to measure the benefits of using the funds and to ultimately determine whether the pilot program should be continued, discontinued, or made permanent. The Policy Directive explains that in order to help SBA establish the agency- specific performance criteria, each agency must submit an annual work plan to SBA at least 30 calendar days prior to the start of a fiscal year.

The work plan must set forth a prioritized list of initiatives to be supported in alignment with reporting requirements, the estimated amounts to be spent on each initiative, milestones for implementing the initiatives, the expected results to be achieved, and the assessment metrics for each initiative. The work plan must explain how these initiatives are above and beyond the agency's current practices and how they will enhance the program.

After review of the work plan, SBA will establish the performance metrics for that fiscal year by which use of these funds will be evaluated for that fiscal year. SBA will create a simplified template for agencies to use when creating their work plans. Agencies will submit work plans to SBA each fiscal year the pilot program is in operation.

National Minority Technology Council’s Perspective on Increased Participation by Minority Owned Technology Companies.

There is a great need to develop a national inter-agency program that not only exposes the great many minority technology companies that exist in the US (estimated 65,000 companies), there is a need to educate Agency leadership as well. It is our recommendation that the SBA considers developing a national network of NGO’s (Non-Government Organizations) who have direct access to SBD’s and/or WOSB’s with the intent to verify and validate the credibility and merit of each organization. Those organizations would then be made available to each qualifying SBIR-STTR funding Agency to enter into negotiations to develop a pilot program Page 4

NMTC SBIR–STTR Public Comment

that will work to increase participation of either SBD’s or WOSB’s or both. Our main concern is that as our nation’s business become more and more diverse that the SBIR-STTR program’s complexity has created a knowledge gap between minority technology companies that are creative and motivated but are either not informed about the SBIR-STTR program or are mystified by the apparent “barrier to entry”.

As our focus moves from scientific merit to technological merit we need to promote and advocate the value of the SBIR-STTR program to companies who are now seemingly disenfranchised from the SBIR-STTR program.

The current network of Small Business Advocates are not reaching the ears of the owners on minority technology companies. There is a perceived or perhaps real barrier that needs to be removed and NGO’s can facilitate this through many different approaches and strategies.

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NMTC SBIR–STTR Public Comment

Council Information LOCATION

National Minority Technology Council 1616 Anderson Road McLean VA, 22102 www.nmtcouncil.org

AUTHOR

Karl Cureton Chairman National Minority Technology Council karl.cureton@nmtcouncil.org

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