Congressional action on small business research grants goes down to the wire

The federal Small Business Innovation Research (SBIR) grant program has proven itself over time. Since 1982, it has led to more than 67,000 patents and the creation of tens of thousands of small businesses nationwide – many of which have grown into much larger firms employing thousands of workers.

In Wisconsin, on average, about 40 to 50 emerging companies win competitive SBIR grants worth about $30 million every year. Those companies use that money to grow by attracting private investment, developing products and attracting customers – all the while reporting on their progress and accounting for the dollars spent.

Given all this is accomplished with a fraction of overall federal research and development spending in any given year, one might think reauthorizing SBIR and its related programs would be a slam dunk for a Congress that was preoccupied with stimulating the economy.

Think again. Until the closing days of the 111th Congress, legislation renewing SBIR was repeatedly delayed while the program limped along on a series of “continuing resolutions.” Simply put, such resolutions are little more than borrowed time.

That stalemate was apparently broken recently, when the Senate unanimously approved an eight-year reauthorization for SBIR and the House gave its tentative nod. However, the House must give its final approval on Jan. 3, 2011 – the last day of the current session – or the compromise bill will go back into limbo with the new Congress.

Will that 11th hour approval happen? Not unless people familiar with the success of SBIR come to its defense by reaching out to their House representatives.

A premise of the Small Business Innovation Research grant program is that small businesses are a vital source of new ideas, but they’re likely to need some support in the early stages as they turn those ideas into novel products and services. Through carefully metered grants that get larger as an idea gains momentum, businesses can test concepts, build prototypes and more.

Through SBIR and a small related program, 2.5 percent of the outside research budgets of 11 federal agencies (including the Department of Defense and the National Institutes of Health) are set aside for small businesses. The program funds around $2.3 billion in private-sector research per year. By way of comparison, the federal government spent about $50 billion on science and engineering grants to 672 universities and colleges in 2009.

A compromise bill sponsored by U.S. Sen. Mary Landrieu, D-La., and Olympia Snowe, R-Maine, would extend the SBIR program through 2018. Among its major provisions, the bill:

– Allows small firms that are majority-owned by multiple venture capital firms to compete for a percentage of SBIR grants;

– Increases award levels that had been stagnant for years and allows inflationary increases over time;

– Increases the amount of money set aside for SBIRs within the 11 federal agencies by 1 percentage point, from 2.5 percent of all federal R&D spending to 3.5 percent, and;

– Reauthorizes the Federal and State Technology Partnership program, a part of SBIR that has historically helped rural small business win competitive grants.

The compromise has the support of the Biotechnology Industry Organization, the National Venture Capital Association, the Small Business Technology Council, the Small Biotechnology Business Coalition, the U.S. Chamber of Commerce, the National Small Business Association, the National Federation of Independent Businesses and a number of state and regional tech-based organizations.

If the bill doesn’t pass before the 112th Congress takes office Jan. 4, however, the whole process starts from scratch and the program will expire Jan. 31, 2011.

In Wisconsin, SBIR grants have helped a number of early stage companies grow. The list in the past 10 years alone includes TomoTherapy, Virent Energy, DNAStar, Third Wave Technologies, Mirus, NimbleGen, Imago Scientific Instruments, Orbital Technologies, Gammex, Stratatech and EraGen, to name a few. While not every SBIR company survives, the intense competition for the grants – fewer than one in 10 applications are approved – means many are poised for commercial success.

In an era when the effectiveness of some federal programs can be questioned, SBIR grants have shown themselves to be a wise investment. It would be a shame if a strong program fell victim to a bad calendar.

Tom Still is president of the Wisconsin Technology Council.

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