WASHINGTON – Today Senators John Kerry and Edward Kennedy said a new report shows Massachusetts has benefited from the Small Business Innovation Research (SBIR) program that uses small businesses to meet federal research and development needs while also encouraging the private sector to commercialize it. Kerry, Ranking Member on the Committee on Small Business and Entrepreneurship, and Kennedy, Ranking Member on the Committee on Health, Education, Labor and Pensions, requested the Government Accountability Office (GAO) conduct the study in June 2005.

“The SBIR program invests about $300 million a year in small research and development firms in Massachusetts,” said Kerry. “This collaboration between small businesses and the federal government results in cures for diseases and cutting-edge technologies to keep our troops and country secure. This report gives us important information to assess how the program is working and how to keep the Administration from eliminating it.”

The objective of the study was to compare how the Small Business Administration’s (SBA) definition of a small business has impacted the program since tighter enforcement was implemented in 2003. Kerry and Kennedy, in requesting the report were seeking data that would be helpful to resolving growing concerns in the technology community about who is, and who should be, eligible to participate in this critical small business program – including the extent to which venture capital firms should own and control companies that participate in the program.

“SBIR grants have been critical for Massachusetts’ leadership in biotechnology and other innovative industries,” said Kennedy. “As GAO’s report makes clear, SBIR applications continue to be of high quality and our state continues to do well. These are positive results and it’s essential to maintain them for the future.”

There were some concerns that tighter enforcement has excluded firms with venture capital and hurt the quality of research. However, the GAO found that the number of SBIR grants from the National Institutes for Health and the Defense Department -- the two largest agencies that participate in the program -- increased to small businesses with venture capital investment. In addition, the amount of grant money that companies with venture capital received went up, the competition for the grants increased, and the quality of proposals remained high. Specifically, the GAO findings include:

  • At NIH, number of awards to firms with venture capital increased 61%
  • At DoD, number of awards to firms with venture capital increased 167%
  • At NIH, award dollars to firms with venture capital increased from 14% to 22%
  • At DoD, award dollars to firms with venture capital increased from 6% to 7%
  • At NIH, since enforcement, applications increased 48%, from 3,601 to 6,122
  • At DoD, since enforcement, applications increased 53%, from 8,225 to 33,922
  • The Small Business Administration (SBA) is currently reviewing the eligibility criteria for small firms to receive SBIR grants. Kerry and Kennedy believe the GAO report provides SBA with more information to finish its rulemaking.