Mr. KERRY . Mr. President, today I rise to urge passage of S. 856, the Small Business Technology Transfer (STTR) Program Reauthorization Act of 2001. This legislation reauthorizes the Small Business Administration's highly successful Small Business Technology Transfer (STTR) Program for an additional eight years. Absent legislative action to reauthorize the Small Business Technology Transfer (STTR) program, it will expire on September 30, 2001.
On July 19, 2001, the Committee on Small Business and Entrepreneurship (Committee) considered S. 856, the Small Business Technology Transfer (STTR) Program Reauthorization Act of 2001, unanimously reported the bill and recommended its passage. This legislation also makes changes to the STTR program to facilitate more effective collaboration between small businesses and research institutions.
The STTR program funds research and development (R&D) projects performed jointly by small companies and research institutions as an incentive to advance the nation's technological progress and the government's research and development goals. It complements the Small Business Innovation Research (SBIR) program, which was reauthorized last year. Whereas the SBIR program funds R&D projects at small companies, STTR funds cooperative R&D projects between a small company and a research institution, such as a university or a Federally funded R&D lab. Like SBIR R&D projects, STTR projects help participating agencies achieve their missions in the research and development arena. It was also designed to convert the billions of dollars invested in research and development at our nation's universities. Federal laboratories and non-profit research institutions into new commercial technologies.
The STTR program was started as a pilot in 1992, and the first grants were made in 1994. The program was reauthorized in 1997 for four years. The program is not funded out of the Small Business Administration's (SBA ) budget, but out of the extramural R&D budgets of Federal agencies or departments with extramural R&D budgets of $1 billion or more. Such agencies must award at least .15 percent of that money for STTR projects. Five agencies currently qualify: the Department of Defense (DoD); the National Institutes of Health (NIH); the National Aeronautics and Space Administration (NASA); the National Science Foundation (NSF); and the Department of Energy (DoE).
There are three phases of the program. Phase I is a one-year grant for $100,000, and its purpose is to determine the scientific and commercial merits of an idea. Phase II is a two-year grant for $500,000, and its purpose is to further develop the idea. Phase III is used to pursue commercial applications of the idea and cannot be funded with STTR funds. Only private-sector and non-STTR Federal funds may be used in Phase III.
At the Committee on Small Business and Entrepreneurship hearing on S. 856 we heard from Dr. Anthony N. Pirri, Director of the Division of Technology Transfer at Northeastern University in Boston, Mass.; Mr. Clifford C. Hoyt, Vice President and Chief Technology Officer of Cambridge Research and Instrumentation in Woburn, Mass.; Dr. Barna Szábo, Founder and Chairman of Engineering Software Research and Development Inc. in St. Louis, Mo.; Mr. Kirk Ririe, President and CEO of Idaho Technology, Inc. in Salt Lake City, Utah; Mr. Maurice Swinton, Assistant Administrator for the Office of Technology at the Small Business Administration; and Mr. Jim Wells, Director of Natural Resources and Environment at the General Accounting Office.
There was consensus that the program is meeting its objectives, should be continued, and the Phase II award amount should be increased. Examples were given of technological advances which improved industries, grew businesses, created jobs and more than returned the Federal government's investment. One comment, in particular, from Mr. Kirk Ririe of Idaho Technology Inc., which started modestly in a potato shed and now has locations in Idaho and Utah, demonstrates the power of the STTR program:
We were a tiny company--six people working with the university group. We were able to, within two years, launch (with about $100,000 in funding) a product that basically filled a hole in biotechnology research and development ..... that has gone on to generate over $100 million in sales ..... The GAO figures may not [reflect this, but] I guarantee that we have paid a lot more money back to the government in taxes than we received in any of the funding ..... The program has been absolutely crucial to us. If we had not had this program, we would still be in the potato shed .....
At the request of the Chairman and Ranking member of the Committee, GAO surveyed all companies which had received Phase II awards from 1995 to 1997. GAO chose these years because they were the first years of the program and it generally takes three to nine years for a company to progress from basic research of a concept to commercialization of a developed product. Though this program is still relatively young, the survey results indicate it is working effectively. Of the 102 companies participating in the survey, 53.5 percent had either commercialized the technology or received follow-on funding for the technology. These companies had approximately $132 million in sales and $53 million in additional funding. These STTR winners expect additional sales of more than $90 million dollars by 2005. Putting this into perspective, the Government's total awards to these companies were less than $60 million, less than half of the sales to date and about five percent of the expected sales by 2005.
While S. 856 as reported reauthorized the program for nine years, the Manager's amendment reduces this to eight years. This was done in order to reach consensus promptly and enable the bill to pass both houses--before the expiration date of the program.
In FY2004 and thereafter the bill increases from .15 to .3 percent of Federal extramural research and development funds going to this program. Recently the program was made $65 million annually for STTR awards. Based on that amount, increasing the percentage to .3 percent would make $130 million available annually for small business technology transfer. The Committee originally reported language that would have increased the percentage to .5 percent in 2007. In order to reach consensus, we agreed to delete the final incremental increase from the bill until we have more experience and information.
The bill also raises the Phase II grant award amount from $500,000 to $750,000. This change was intended to address concerns by the small businesses and the research institutions that $500,000 typically is no longer enough for this stage of research and development. As Dr. Pirri of Northeastern said at the hearing, ``By expanding the STTR program, funding levels will become more adequate to take technologies through the prototype stage and increase their probability of commercial success.'' Raising Phase II STTR awards to $750,000 makes them consistent with the Small Business Innovation Research (SBIR) program's Phase II awards.
GAO reported that only about 250 universities have participated in the program so far. The Committee believes, and GAO concurs, that there is tremendous potential to involve more universities in partnering with small businesses to convert research into new technologies. One of the goals of the STTR program is to create economic development around universities, Federal laboratories and non-profit research institutions across the country are attempting to duplicate the successful clusters similarly developed along Massachusetts' Route 128 and in California's Silicon Valley. In order to increase participation by a larger number of universities, S. 856 includes a provision encouraging the STTR agencies to reach out to universities to raise awareness of the program and to provide information to their faculty members.
S. 856 also strengthens the data rights protection for companies and research institutions that conduct STTR projects. The change in data rights is important because it clarifies that STTR companies, like SBIR companies, retain the data rights to their technology through all phases of a STTR project. Unfortunately some agencies have been interpreting the law to mean that STTR companies only retain their data rights through Phases I and II.
This clarification helps protect STTR companies from losing control of their research so that they have a greater chance of commercializing their technology themselves. This clarification is important because the Committee has learned some agencies are providing the data to bigger contractors for development, thereby cutting out the small business. This unfortunate situation not only robs small businesses of revenues, but it also results in expensive legal costs for small businesses to protect their data rights.
As last year's legislation did for the SBIR program, this bill strengthens the data collection requirements regarding awards and the data rights for companies and research institutions that conduct STTR projects. The goal is to collect better information about the companies doing the projects, as well as the research and development, so we can measure success and track technologies. The Manager's amendment expands the reporting requirements to include reporting on HUBZones small businesses under the SBIR and STTR programs. The amendment also requires the SBA and the agencies to develop a model agreement for intellectual property rights. Finally, the Manager's amendment includes a provision that requires SBA , when considering proposals under the recently enacted Federal and State Technology Partnership Program (FAST), to consider whether the proposals address the needs of small business concerns: (I) owned and controlled by women; (II) owned and controlled by minorities; and (III) concerns located in areas that have historically not participated in the SBIR and STTR Programs.
This bill will ensure that this successful program is continued and expanded. It will also provide Congress with important information and data on the program and encourage more outreach to small businesses and research institutions.
Mr. President, I want to encourage my colleagues to learn about this program, to find out the benefits to their state's hi-tech small business, research universities and labs, and to join me in passing this legislation in the Senate. To my friend from Missouri, Senator Bond, I want to thank you and your staff for working with me and my staff to build this country's technological progress. I especially want to thank one member of Senator Bond's staff, David Bohley. Dave has worked tirelessly and effectively for the technology and small business community. He is leaving the Committee, and we will all miss working with him. I wish him well in his new job at the Federal National Mortgage Association (FNMA). I also want to thank all of the members of the Committee for their work on this legislation and for helping small business. All 19 members of the Committee voted for and supported this legislation.
Mr. President, I urge the Senate to pass S. 856, as amended.
On July 19, 2001, the Committee on Small Business and Entrepreneurship (Committee) considered S. 856, the Small Business Technology Transfer (STTR) Program Reauthorization Act of 2001, unanimously reported the bill and recommended its passage. This legislation also makes changes to the STTR program to facilitate more effective collaboration between small businesses and research institutions.
The STTR program funds research and development (R&D) projects performed jointly by small companies and research institutions as an incentive to advance the nation's technological progress and the government's research and development goals. It complements the Small Business Innovation Research (SBIR) program, which was reauthorized last year. Whereas the SBIR program funds R&D projects at small companies, STTR funds cooperative R&D projects between a small company and a research institution, such as a university or a Federally funded R&D lab. Like SBIR R&D projects, STTR projects help participating agencies achieve their missions in the research and development arena. It was also designed to convert the billions of dollars invested in research and development at our nation's universities. Federal laboratories and non-profit research institutions into new commercial technologies.
The STTR program was started as a pilot in 1992, and the first grants were made in 1994. The program was reauthorized in 1997 for four years. The program is not funded out of the Small Business Administration's (SBA ) budget, but out of the extramural R&D budgets of Federal agencies or departments with extramural R&D budgets of $1 billion or more. Such agencies must award at least .15 percent of that money for STTR projects. Five agencies currently qualify: the Department of Defense (DoD); the National Institutes of Health (NIH); the National Aeronautics and Space Administration (NASA); the National Science Foundation (NSF); and the Department of Energy (DoE).
There are three phases of the program. Phase I is a one-year grant for $100,000, and its purpose is to determine the scientific and commercial merits of an idea. Phase II is a two-year grant for $500,000, and its purpose is to further develop the idea. Phase III is used to pursue commercial applications of the idea and cannot be funded with STTR funds. Only private-sector and non-STTR Federal funds may be used in Phase III.
At the Committee on Small Business and Entrepreneurship hearing on S. 856 we heard from Dr. Anthony N. Pirri, Director of the Division of Technology Transfer at Northeastern University in Boston, Mass.; Mr. Clifford C. Hoyt, Vice President and Chief Technology Officer of Cambridge Research and Instrumentation in Woburn, Mass.; Dr. Barna Szábo, Founder and Chairman of Engineering Software Research and Development Inc. in St. Louis, Mo.; Mr. Kirk Ririe, President and CEO of Idaho Technology, Inc. in Salt Lake City, Utah; Mr. Maurice Swinton, Assistant Administrator for the Office of Technology at the Small Business Administration; and Mr. Jim Wells, Director of Natural Resources and Environment at the General Accounting Office.
There was consensus that the program is meeting its objectives, should be continued, and the Phase II award amount should be increased. Examples were given of technological advances which improved industries, grew businesses, created jobs and more than returned the Federal government's investment. One comment, in particular, from Mr. Kirk Ririe of Idaho Technology Inc., which started modestly in a potato shed and now has locations in Idaho and Utah, demonstrates the power of the STTR program:
We were a tiny company--six people working with the university group. We were able to, within two years, launch (with about $100,000 in funding) a product that basically filled a hole in biotechnology research and development ..... that has gone on to generate over $100 million in sales ..... The GAO figures may not [reflect this, but] I guarantee that we have paid a lot more money back to the government in taxes than we received in any of the funding ..... The program has been absolutely crucial to us. If we had not had this program, we would still be in the potato shed .....
At the request of the Chairman and Ranking member of the Committee, GAO surveyed all companies which had received Phase II awards from 1995 to 1997. GAO chose these years because they were the first years of the program and it generally takes three to nine years for a company to progress from basic research of a concept to commercialization of a developed product. Though this program is still relatively young, the survey results indicate it is working effectively. Of the 102 companies participating in the survey, 53.5 percent had either commercialized the technology or received follow-on funding for the technology. These companies had approximately $132 million in sales and $53 million in additional funding. These STTR winners expect additional sales of more than $90 million dollars by 2005. Putting this into perspective, the Government's total awards to these companies were less than $60 million, less than half of the sales to date and about five percent of the expected sales by 2005.
While S. 856 as reported reauthorized the program for nine years, the Manager's amendment reduces this to eight years. This was done in order to reach consensus promptly and enable the bill to pass both houses--before the expiration date of the program.
In FY2004 and thereafter the bill increases from .15 to .3 percent of Federal extramural research and development funds going to this program. Recently the program was made $65 million annually for STTR awards. Based on that amount, increasing the percentage to .3 percent would make $130 million available annually for small business technology transfer. The Committee originally reported language that would have increased the percentage to .5 percent in 2007. In order to reach consensus, we agreed to delete the final incremental increase from the bill until we have more experience and information.
The bill also raises the Phase II grant award amount from $500,000 to $750,000. This change was intended to address concerns by the small businesses and the research institutions that $500,000 typically is no longer enough for this stage of research and development. As Dr. Pirri of Northeastern said at the hearing, ``By expanding the STTR program, funding levels will become more adequate to take technologies through the prototype stage and increase their probability of commercial success.'' Raising Phase II STTR awards to $750,000 makes them consistent with the Small Business Innovation Research (SBIR) program's Phase II awards.
GAO reported that only about 250 universities have participated in the program so far. The Committee believes, and GAO concurs, that there is tremendous potential to involve more universities in partnering with small businesses to convert research into new technologies. One of the goals of the STTR program is to create economic development around universities, Federal laboratories and non-profit research institutions across the country are attempting to duplicate the successful clusters similarly developed along Massachusetts' Route 128 and in California's Silicon Valley. In order to increase participation by a larger number of universities, S. 856 includes a provision encouraging the STTR agencies to reach out to universities to raise awareness of the program and to provide information to their faculty members.
S. 856 also strengthens the data rights protection for companies and research institutions that conduct STTR projects. The change in data rights is important because it clarifies that STTR companies, like SBIR companies, retain the data rights to their technology through all phases of a STTR project. Unfortunately some agencies have been interpreting the law to mean that STTR companies only retain their data rights through Phases I and II.
This clarification helps protect STTR companies from losing control of their research so that they have a greater chance of commercializing their technology themselves. This clarification is important because the Committee has learned some agencies are providing the data to bigger contractors for development, thereby cutting out the small business. This unfortunate situation not only robs small businesses of revenues, but it also results in expensive legal costs for small businesses to protect their data rights.
As last year's legislation did for the SBIR program, this bill strengthens the data collection requirements regarding awards and the data rights for companies and research institutions that conduct STTR projects. The goal is to collect better information about the companies doing the projects, as well as the research and development, so we can measure success and track technologies. The Manager's amendment expands the reporting requirements to include reporting on HUBZones small businesses under the SBIR and STTR programs. The amendment also requires the SBA and the agencies to develop a model agreement for intellectual property rights. Finally, the Manager's amendment includes a provision that requires SBA , when considering proposals under the recently enacted Federal and State Technology Partnership Program (FAST), to consider whether the proposals address the needs of small business concerns: (I) owned and controlled by women; (II) owned and controlled by minorities; and (III) concerns located in areas that have historically not participated in the SBIR and STTR Programs.
This bill will ensure that this successful program is continued and expanded. It will also provide Congress with important information and data on the program and encourage more outreach to small businesses and research institutions.
Mr. President, I want to encourage my colleagues to learn about this program, to find out the benefits to their state's hi-tech small business, research universities and labs, and to join me in passing this legislation in the Senate. To my friend from Missouri, Senator Bond, I want to thank you and your staff for working with me and my staff to build this country's technological progress. I especially want to thank one member of Senator Bond's staff, David Bohley. Dave has worked tirelessly and effectively for the technology and small business community. He is leaving the Committee, and we will all miss working with him. I wish him well in his new job at the Federal National Mortgage Association (FNMA). I also want to thank all of the members of the Committee for their work on this legislation and for helping small business. All 19 members of the Committee voted for and supported this legislation.
Mr. President, I urge the Senate to pass S. 856, as amended.
