Lawmakers negotiating long-term extension of small business funding

Lawmakers in both the House and the Senate are hoping the next time’s the charm when it comes to long-term authorizations for programs meant to boost small business participation in federal research.

Both the Small Business Innovation Research and Small Business Technology Transfer programs are set to run through Dec. 16, after each has faced more than a handful of short-term reauthorizations in recent years.

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With that in mind, top members on both the House and Senate small business panels have been negotiating for some time to try to hammer out a longer-term reauthorization for the programs and end the parade of short-term agreements.

“I believe that it is vital that we expedite reauthorization of the SBIR program so that small businesses across the country can continue to compete for the government contracts that will, in turn, springboard innovative ideas, create jobs and spur economic growth,” Rep. Sam Graves (R-Mo.), the chairman of the House Small Business Committee, said in a statement.

But lawmakers still have broad differences that need to be bridged – though, in something of a twist for a gridlocked Congress, those disagreements are not necessarily between Democrats and Republicans.

In fact, the problem lies more between the two chambers: Republicans and Democrats in the House have largely coalesced behind a different vision for the programs than a bipartisan group in the Senate.

All in all, SBIR – at almost 30 years old, the older of the two programs – has received 13 piecemeal authorizations since 2008, when an eight-year agreement for the program expired.

SBIR allows small businesses to pursue research and development opportunities with 11 federal agencies, which are required to earmark 2.5 percent of their R&D budgets to program participants.

As it stands, SBIR has three phases, during which businesses prove the feasibility of their idea and, if all goes well, get the opportunity to pursue commercial opportunities.

The small business initiatives were last re-upped in mid-November, and officials at the time said they hoped another month would give them enough time to come together on a longer deal.

Sens. Mary Landrieu (D-La.) and Olympia Snowe (R-Maine), the chairwoman and ranking member respectively of the Senate Small Business Committee, announced plans last week to attach a reauthorization of the two programs to a defense spending bill.

At the time, Landrieu said she hoped passing a Senate version would give talks with the House added momentum.

“My goal remains achieving a final product that recognizes the value of these programs, while ensuring they stay true to their primary goal of assisting small business,” Snowe told The Hill in a statement earlier this month. “We are making good progress toward that end and I am optimistic, if this progress continues, we will move toward reauthorization.”

A reauthorization of the two programs failed to clear the Senate in May, but that appeared to be more because of a showdown between Senate Majority Leader Harry Reid (D-Nev.) and Snowe than the actual details of the Senate proposal.

In general, Senate negotiators like Landrieu and Snowe have tried to stay true to past reauthorizations of the two programs.

But the House Small Business panel, led by Graves and Nydia Velazquez (D-N.Y.), have been open to making more drastic changes.

For instance, the House bill, introduced in April, would allow businesses that are mostly owned by venture capital firms to receive 45 percent of grants from some agencies, like the National Institutes of Health, and 35 percent from other federal offices.

By contrast, the Senate bill would limit venture capital-backed firms to 25 percent of NIH awards and 15 percent of grants from most participating agencies.

House lawmakers would also like to essentially scrap the first phase of the SBIR program, which the Senate says is important for ensuring the viability of a company’s idea. 

The Senate, meanwhile, would like to reauthorize SBIR for eight years, the length of past agreements. But the House wants to shave that down significantly, to three years. 

And finally, the House plan would effectively limit the amount of awards a company can get, a proposal critics have derided as a quota.

In the end, officials in both the House and the Senate are not quite sure how the two chambers gravitated to such different visions for the programs.

The House Small Business panel has said that it believes its proposal allows for more oversight of SBIR, by shortening the reauthorization period, and would open up the program by loosening restrictions on capital. 

The House bill, which has cleared the committee, also has the support of Small Business subcommittee chairs and ranking members. 

But Rep. Buck McKeon (R-Calif.), the chairman of the House Armed Services Committee, has expressed some concerns in October about his chamber’s proposal to implement what he called “arbitrary quotas” into the reauthorization.

On the other side of the Capitol, the Senate Small Business Committee passed out its version reauthorizing the programs in March, with just one dissenting vote. Groups like the National Venture Capital Association and the U.S. Chamber of Commerce have backed the Senate bill.

A bipartisan group including Sens. Jeanne Shaheen (D-N.H.) and Scott Brown (R-Mass.) has contacted the top lawmakers on both chambers’ small business panels to express concern about the House proposal, saying it undercut what the characteristics of SBIR and STTR that had proven to be successful.

The group of 11 senators said, among other things, that a three-year reauthorization would not be long enough to give participating companies and agencies enough certainty.

The Save SBIR Coalition, a group of small business advocates, has also cropped up to push back against the House proposals.

But even with all the back-and-forth, officials from the two chambers do believe they’re on the path to finding common ground.

“If you put the House and Senate bills side-by-side, I think you can make a good case that a compromise would use equal parts of both pieces of legislation,” said DJ Jordan, a spokesman for the House Small Business Committee.