Wednesday, March 30, 2011

Policy Tracker

Bill would give small firms more R&D funding

Small businesses would get a bigger share of federal research dollars under legislation that appears headed for passage in the Senate.

The bill reauthorizes the Small Business Innovation Research program, which requires 11 federal agencies with large outside research budgets to award at least 2.5 percent of this spending to small businesses.

The legislation would gradually increase this share to 3.5 percent by 2023.

“This means the federal government can make more awards to a greater number of small businesses out of its existing research and development budget,” said Sen. Olympia Snowe of Maine, the ranking Republican on the Senate Small Business and Entrepreneurship Committee.

The federal government currently spends more than $2 billion a year with small businesses through the SBIR program.

The bill also would open the program to small businesses that are majority-owned by venture capital firms. In 2003, an administrative law judge ruled that these types of companies don’t qualify as small businesses since they aren’t independently owned. This meant more than half of all small biotechnology companies in the U.S. could no longer compete for SBIR awards, according to the Biotechnology Industry Organization.

BIO and the National Venture Capital Association have been trying to regain SBIR access for VC-owned firms ever since. They have been opposed by current SBIR recipients and the National Small Business Association, which feared that firms without venture capital would be squeezed out of the SBIR program if deep-pocketed VC-owned firms were allowed in.

Now NSBA and its former opponents at BIO and NVCA have agreed on a compromise: The Senate bill would allow the National Institutes of Health, the Department of Energy and the National Science Foundation to award up to 25 percent of their SBIR funds to small businesses that are majority-owned by multiple venture capital firms.

It’s not clear, however, if the House will go along with this deal. Last Congress, the House passed SBIR legislation that included no limits on how many VC-owned firms could win SBIR awards.

The House Small Business Committee will mark up its own version of a reauthorization bill over the next couple of months.

— Kent Hoover, ACBJ Service