Measure includes compromises on reauthorization length and investor-owned business participation.

The Small Business Innovation Research (SBIR) program would be reauthorized for six years under a decision reached by conferees from the Senate and House of Representatives Monday night who are hashing out a joint defense bill. The six-year reauthorization marks a compromise between the Senate, which sought to reauthorize SBIR for eight years, and the House, which envisioned three years.

Established in 1982 with its companion Small Business Technology Transfer (STTR), SBIR assists some 6,000 companies a year. Yet until now, it has subsisted on the same $2.2 billion annual budget it had when its authorization ended with the 2008 fiscal year thanks to 13 stopgap continuing resolutions (CRs); the current one expires December 16.

The reauthorized SBIR would also raise the percentage that agencies would have to set aside for SBIR by 0.1% each fical year from FY 2012 through FY 2017 when it would be 3.2% more. The Senate had originally envisioned the increase going as high as 3.5% in FY 2023. Until now, SBIR required federal agencies with extramural R&D budgets that exceed $100 million to set aside 2.5% of their R&D budget to the program. STTR funding would be raised from 0.3% to 0.45% of federal agency R&D budgets over the course of the reauthorization.

In addition, the reauthorized SBIR raises the maximum amount of grant funding for awardee businesses in the program’s guidelines for the first time since 1982, from $100,000 to $150,000 for Phase I and from $750,000 to $1 million for Phase II. In addition, projects deemed to be especially promising will be allowed to pursue a second Phase II grant. That provision is a compromise between some hosue members, who sought to abolish the program’s first phase.

Another key provision of the reauthorized SBIR adopts the Senate percentages for funds that can be awarded to businesses that are majority-owned by multiple venture capital firms, hedge funds, or private equity firms: 25% of SBIR funds from NIH, DOE, and NSF and 15% for all other agencies. The House sought even larger percentages: It wanted  NIH, NSF, NASA, and the energy department to award up to 45% of their SBIR funds to investor-owned small businesses and all other federal agencies to set aside up to 35% of their funds to such businesses.

The SBIR reauthorization will be an amendment to the National Defense Authorization Act (NDAA), which continues to face uncertainty over its eventual passage because of concerns raised publicly by President Barack Obama’s administration over wording in the bill requiring military detention of suspects charged with aiding terrorism. The House and Senate sought to address those concerns through compromise language.

Other provisions of the reauthorized SBIR include greater coordination between the U.S. Small Business Administration (SBA) and participating agencies, with the goal of combating waste, fraud, and abuse within the SBIR and STTR programs. Most participating agencies will be required to complete their review process for applicants within 90 days or 180 days if the agency is granted an extension by the SBA. The time limits are designed to give small businesses more certainty about when they can expect a decision on their awards.

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