The following is a letter from U.S. Congressman Edward J. Markey (D-MA) and Congresswoman Niki Tsongas (D-MA) to their Congressional Colleagues.

Dear Colleague:

We write to seek your support for small business and the Small Business Innovation Research (SBIR) program.

The SBIR program came into existence a quarter-century ago. The intent was to increase federal agency access to innovative ideas, technologies and capabilities that exist in the small business community. The SBIR program is a unique collaboration, allowing government agencies to fund projects to meet specific agency needs while expanding opportunities for small businesses, including women and minority-owned businesses. SBIR has enhanced the role of innovative small businesses and higher education research institutions in federally-funded research and development, while fostering competition, productivity and economic growth.

SBIR has proven to be one of the most successful federal programs for technological innovation in U.S. history, delivering more than 55,000 patents and hundreds of valuable innovations in agriculture, defense, energy, health sciences, homeland security, space, transportation, and other fields. The National Research Council of the National Academies (NRC) 2007 report “An Assessment of the Small Business Innovation Research Program” states: “…the SBIR program is sound in concept and effective in practice”. The SBIR program has created a competitive, entrepreneurial environment upon which small, independently owned businesses can compete and strengthen America’s high technology economy.

The SBIR program will be reauthorized through the SBIR/STTR Reauthorization Act (H.R. 5819). The reauthorization bill was introduced and marked up in both the House Science and Technology Committee and the Small Business Committee last week and will be on the House Floor this week.

While it is very important for the SBIR program to be reauthorized, some changes included in the bill could negatively affect many legitimate small businesses in your districts. At issue is the bill’s ownership rule change that would open the SBIR program to businesses that are majority backed by venture capital (VC) firms with large holdings in employees and market share in particular research industries. We are concerned that this may steer SBIR awards towards R&D projects that emphasize short-term profitability. While we support VC participation in the program and commercialization potential, having large VC majority-owned firms qualify for SBIR funding calls into question whether this program, intended for genuinely small businesses, is, in fact, still focused on these firms. The SBIR program has been instrumental in funding innovative “infant” industry R&D where acquiring private capital is not yet an option.

Also, changing size standards could allow venture firms to mitigate their financial risk with federal SBIR funds that otherwise would go to small businesses that meet the current SBA size standards.

H.R. 5819 also triples the dollar amount limit for SBIR awards. An analysis of HR 5819 by the Small Business Technology Council, estimates that higher awards combined with the ownership rule change will result in at least 50% less awards being granted. We encourage you to contact businesses and business groups in your district to find out if they are participating in the SBIR program presently and to ask them what they think about the ownership rule change. The Defense Department awards nearly half of all SBIR awards, so small defense contractors in your district may also be able to provide some insight on the reauthorization, including the proposed changes.

Please review the attached news article from Fortune Magazine from April 11, 2008, highlighting some of the risks associated with altering the small business ownership rule.

For a program that is often described as the most successful government R&D program, we ask that you give its reauthorization careful consideration so that the next generation of innovation can be fully realized and that the program continues to serve small businesses.

If you have any questions about the SBIR program, please contact Roberto Peña (Rep. Markey) at 5-2836, or Kate Lynch (Rep. Tsongas) at 5-3411.

Sincerely,