Small Business Bushwhacked Again on SBIR Research Grants


Small Business Bushwhacked Again on SBIR Research Grants

By Keith Girard
March 28, 2011

The new Congress is looking a lot like the old Congress in the debate over two key conduits of federal research and development grants for small businesses -- the Small Business Innovation Research (SBIR) program and the Small Business Technical Transfer (STTR) program. Funding authorization for both is hanging by a thread and still deeply mired in politics.

You may recall that a bill extending the authorization was rushed through the Senate on the final day of the lame-duck legislative session last year, but failed during the final hour of deliberation in the House of Representatives. The stumbling block was none other than then-House Small Business Committee Chairman Nydia Velazquez, D-N.Y.

Velazquez has been a champion of multi-billion dollar venture capital firms that want to regain access to the programs. They were kicked out in 2003 by an administrative law judge, who determined that the research firms they substantially owned failed to qualify as a small business as defined by the landmark Small Business Act of 1958.

Ever since then, the venture capital industry has been trying to wield its considerable influence on Capitol Hill to reverse the judge's ruling. Velazquez and former House Speaker Nancy Pelosi repeatedly ramrodded legislation through the House, but the Senate always killed it.

The subsequent midterm elections were thought to be a game changer because supposedly pro-small business Republicans won control of the House last November and increased their numbers in the Senate.

But so far, the current Congressional session has been anything but pro-small business on this issue. In fact, Sam Graves, R-Mo., the new House Small Business Committee chairman, has also strongly favored overturning the administrative judge's ruling.

"He has worked closely with Velazquez for many years under a variety of circumstances, and the VC issue has been a major Bond (pardon the pun) between them," according to Rick Shindell, who publishes the SBIR Insider newsletter. "Several times Mr. Graves has introduced legislation to allow full access to SBIR programs by companies owned by one or more VCs," he said.

What makes the current situation so frustrating is the fact that the biomedical industry, venture capitalists, and small business technology groups have worked out a compromise that all of the warring parties now support. It made up the substance of the failed lame-duck Senate bill, which has been reintroduced again by Sens. Mary Landrieu, D-La., and Olympia Snowe, R-Maine.

The bill (S.493) sailed through the Senate Committee on Small Business & Entrepreneurship, which Snowe now chairs, but things have taken a turn for the worse in the full Senate.

When the bill hit the Senate floor, lawmakers offered more than 70 amendments, only about a dozen of which were even related to the programs, according to Shindell. The process turned the simple measure into what's known as a "Christmas Tree." That's because it's now laden with all kinds of political and special interest plums that almost guarantee its failure if adopted.

The SBIR bill alone, for example, had a fiscal impact of about $150 million over five years, according to the Congressional Budget Office. But as amended the cost of the bill would balloon by $25 billion over the same time.

"Once again it appears that an SBIR reauthorization bill in the Senate is being hijacked to address other congressional interests," Shindell said.

There is a term known to legislative insiders when lawmakers pile unrelated "ornaments" onto a bill. It's call "loving it to death," because the real point of attaching so many amendments is to kill the legislation. How crazy are some of the measures?

Well, Sen. Rand Paul, R-Ky., has proposed an amendment to force the government to cut $200 billion in spending from the FY2011 budget; Sen. Kay Bailey Hutchinson, R-Tex., has filed a measure to block the administration's health reform law, but the amendment proposed by Sen. Mike Johanns, R-Nebr., amendment takes the cake.

He's filed a measure to make changes in the tax code, including repeal of the new IRS 1099 reporting requirement for small businesses. This seemingly small business-friendly measure, however, would be an automatic deal killer. By rule, all tax measures must originate in the House. "This is a slap in the face to the House and an assured road to nowhere for the Senate bill," said Shindell.

The House Small Business Committee held a hearing last week on a reauthorization bill for the two programs. To his credit, Graves allowed a representative from the Small Business Technology Council (SBTC) to testify. The group represents small, independent research companies. Under Velazquez, the committee never invited the group to speak.

Michael R. Squillante, vice president of Radiation Monitoring Devices (RMD) in Watertown, Mass, who testified on behalf of the group, noted that Biotechnology Industry Organization (BIO), Bay Area Innovation Alliance, U.S. Chamber of Commerce, the National Venture Capital Association (NVCA), and several other tech groups support the Senate compromise bill.

Among other things, the compromise makes 25 percent of the programs' funds available to substantially venture-back companies, while still ensuring that independent research firms are "not edged out of the program," he said.

But supporters are pessimistic about the bill's chances in the House. "The word compromise does not seem to exist in Velazquez's lexicon, as she again demonstrated in the hearing, displaying no interest in the Senate's 25 percent VC compromise," Shindell noted.

As things now stand, the two programs, which only comprise 3 percent of the government's budget for research grants, are surviving on yet another continuing resolution authorizing their funding, but that runs out in May. Without further action, the programs will end.

At the end of the hearing, Velazquez offered a stern statement that clearly suggested she opposed the compromise. "We all want to get this reauthorization done. But if we're going to authorize this for 10 to 14 years, we have to do it right, and it has to be in a way that works, and works for the small firms. Otherwise we cannot abdicate our responsibility in this committee," she said.

Graves clearly shared her sentiments. "I'd like to echo the ranking member's remarks," he said. "We're going to work hard to get a bill out and to the House floor in May and ultimately as quick as we can to the president's desk so he can hopefully sign it."

Don't hold your breath.


What is Obama trying to hide?


What is Obama trying to hide?

By Lloyd Chapman
The Daily Caller
March 28, 2011

The American Small Business League has filed 12 Freedom of Information Act (FOIA) lawsuits against the Obama administration for refusing to release simple, routine information on federal small business contracting programs. I don’t think most people realize that although President Obama promised to have the most transparent administration in history, he actually has maintained one of the least transparent.

Despite the lip service he gives to small businesses, President Obama is clearly working with big business interests in mind while masquerading as a populist.

To make matters worse, the information that we have filed suit over clearly shows that the Obama administration is giving federal small business contracts to some of the largest corporations on earth.

Why should this bother the average American? More importantly, why should this bother you? Because small businesses are responsible for over 90 percent of net new jobs, half of GDP, over 90 percent of U.S. exports, and over 90 percent of all innovations. It’s irrefutable. Small businesses are America’s economic backbone, and its chief job creators.

Despite these facts, the Obama administration has given virtually none of the stimulus funds to small businesses and continues to give an estimated $100 million an hour in small business funds to some of the biggest companies in the world. Since President Obama moved into the White House, some of the firms that have received small business contracts include Boeing, Lockheed Martin, Northrop Grumman, Raytheon, Dell Computer, Xerox, SAIC, General Dynamics, Bechtel and John Deere.

What do you think would happen if we took a survey of the American people and asked the following question: Do you think Fortune 500 firms and some of the biggest firms in Europe and Asia should be getting hundreds of billions of dollars in small business contracts?

My guess is that nearly 100 percent of respondents would come back with a resounding “no.” Yet President Obama continues to divert billions of dollars a month in federal funds — funds that by law should be going to the middle class — to corporate giants around the world.

This is one of the major reasons that unemployment is not going down. You cannot create jobs by giving stimulus money to Fortune 500 firms. It is well known that Fortune 500 firms have not created one net new job in America since 1977. Just think of the lunacy of giving over 97 percent of the stimulus funds to a segment of the economy that has not created one net new job since 1977, while at the same time short-changing the small businesses that create a majority of net new jobs.

As I love to say, people need to quit listening to President Obama’s rhetoric and start looking at what he actually does. When you really look at his actions, I think you have to come to the conclusion that he is an anti-small-business president. I cannot think of a more egregious crime against the middle class than diverting federal small business funds to Fortune 500 firms. If the government were to quit giving federal small business contracts to large businesses, and ensure that small businesses receive the congressionally mandated 23 percent of all federal contracts, two things would happen.

  1. Billions of dollars in existing federal infrastructure spending would be directed to America’s chief job creators, small businesses.
  2. An influx of job creation would sweep the nation, and put the Obama administration’s job proposals to shame.

If you want a true economic stimulus package, this is it, BUT don’t hold your breath. It’s not likely to happen. The Fortune 500 firms that are getting these federal small business contracts own Washington, and they control virtually every relevant committee.

The House and Senate small business committees are an excellent example. For the last several years, contributions to the two committees have been dominated by the very corporate giants that are currently receiving the lion’s share of all federal small business contracts.

Why aren’t more people complaining about this? It’s simple…

Look at any group that you think represents small businesses, and then look at their board of directors and primary funders. Guess what? Nearly every group that claims to represent American small businesses is actually funded by the very Fortune 500 firms that are currently receiving federal small business contracts.

For example, the U.S. Chamber of Commerce has a board of directors made up of a “Who’s Who” of Fortune 1000 firms who are either currently receiving small business contracts or have received them in the past. Unless more people in the media start to realize how the economy is being devastated by the Obama administration’s diversion of federal small business funds to large businesses, it is not likely that our economy is going to recover anytime soon.

You don’t have to be a Nobel Prize-winning economist to realize that when the government cheats the firms where most Americans work and where an overwhelming majority of net new jobs are created, it’s going to be a long time before we see a significant drop in unemployment. Quite frankly, I’m predicting that, unless the Obama administration stops diverting funds from small businesses, the worst is yet to come.

Lloyd Chapman is the president of the American Small Business League.


American Small Business League Sues Navy Over Transparency


American Small Business League Sues Navy Over Transparency

By Staff
March 25, 2011

The American Small Business League (ASBL) on March 23 filed a suit against the U.S. Department of the Navy after the agency allegedly refused to fully release subcontracting reports on contracts awarded to Science Applications International Corporation (SAIC).

The ASBL contends that the "refused" reports could show that SAIC and the Navy's contracts avoid a federal law that requires 23 percent of federal contracts be awarded to small businesses.

Initially, the ASBL requested individual subcontracting reports and a summary subcontracting reports on "a prime contract awarded to SAIC under the U.S. Freedom of Information Act (FOIA)," according to a press release.


Navy Sued for Refusing to Release SAIC Contracting Data

Press Release

Navy Sued for Refusing to Release SAIC Contracting Data

March 24, 2011

Petaluma, Calif. - On Wednesday, March 23, the American Small Business League (ASBL) filed suit against the U.S. Department of Navy after the agency repeatedly refused to fully release subcontracting reports on contracts awarded to contracting giant SAIC. (  

The ASBL originally requested Individual Subcontracting Reports (ISR) and Summary Subcontracting Reports (SSR) on a prime contract awarded to SAIC under the U.S. Freedom of Information Act (FOIA).  The suit was filed in United States District Court, Northern District of California.

The ASBL believes the requested information may show that SAIC and the Navy cooperated in an effort to circumvent federal law, which requires 23 percent of all federal contracts to be awarded to small businesses.  Wednesday’s lawsuit represents the ASBL’s 12th lawsuit against the Obama Administration.  The ASBL is gathering information on a series of major government prime contractors in preparation for litigation that may include cases filed under the False Claims Act, and Section 16(d) of the Small Business Act. 

Despite continuing to promise the most transparent administration in history, the Obama Administration has forced the ASBL to file suit over information previously deemed releasable by federal courts.  In 1992, the 9th Circuit Court of Appeals ruled that subcontracting reports are releasable to the public, and do not contain trade secret or proprietary information.

In early 2010, the Associated Press conducted a review of FOIA reports filed by 17 major agencies, and found across the board increases in the number of rejections. While the federal government as a whole received fewer FOIA requests during the first year of the Obama Administration, agencies increasingly said “no” to requesters looking for public documents. (  

“The Obama Administration continually promises to be the most transparent administration in history, yet once again the ASBL has been forced to file suit over information that has always been released to the public,” ASBL President Lloyd Chapman said. “There is a credibility gap the size of the Grand Canyon when you look at what President Obama says and what he actually does.  It’s just amazing that you won’t see this on network news.”


Why the SBA Wants to Redefine "Small," And Why It Doesn't Matter


Why the SBA Wants to Redefine "Small," And Why It Doesn't Matter

By Jeff White
March 21, 2011

I set a personal best in the bench press this weekend. All I had to do was count every half pound as one pound, and next thing you know, I was lifting more than I had at 18. A cheap trick? Sure. But playing with definitions in a meaningless way is a fantastic method for faking progress. It's also a great way to start an argument to distract everyone.

Just ask the Small Business Administration.

The SBA last week proposed new size standards for 36 industries – a redefinition of exactly what constitutes a "small business" in fields like Information Technology, Engineering and Consulting Services.

The changes would allow more businesses to qualify as small by increasing the revenue ceilings for each industry – some drastically, some by small increments. They might even bring the government closer to meeting its small business contracting goals, with wordplay alone.

Predictably, the fights have already begun.

Roger Jordan, Vice President of the Professional Services Council (PSC), told the Washington Post that his group backs the changes, arguing that "It’s easy as a small business to graduate from your small-business set-asides because of being awarded one federal contract. You want to have the size standards large enough so small businesses can actually develop themselves.”

On the other hand, the National Federal Contractors Association (NFCA) released a statement blasting the move, saying that the move "entirely fails to address the particular challenges of competition in the federal marketplace and does little to promote the creation of jobs in that sector of the market."

Maybe one side is right. Maybe the other. I'm not sure, because it doesn't matter at all. You see, the Small Business Act [PDF] states that all small businesses should have the maximum practicable opportunity to participate in providing goods and services to the government. To ensure that small businesses get their fair share, the SBA negotiates annual procurement preference goals with each Federal agency and reviews each agency's results. The SBA is responsible for ensuring that the statutory government-wide goals are met in the aggregate.

They never have been. Not once.

According to the most recent available data [PDF], in 2009, the federal government missed its own targets for small business contracting and small business subcontracting, and hit just one of five targets for the various socio-economic small business set-asides. Each individual department missed its target as well – just as they always have.

And the consequences for agencies that miss the targets they themselves agree to?


They all missed even while giving themselves credit for things they didn't do. An American Small Business League investigation of the numbers [PDF] found that "more than 65 percent of the total volume of contract dollars coded as going to small businesses actually went to large businesses that would not currently qualify as small businesses and in some cases went to Fortune 500 firms."

The consequences for fudging the numbers?

You've already guessed them, I'm sure

Which is why, in the end, I can't bring myself to care much about whether the PSC's argument is right, or the NFCA's. Until we change the fact that the government has interpreted the law as though it is an admirable goal and not a statutory requirement, the definition of "small" doesn't really matter at all does it?

The government might actually hit its small business contracting goals by redefining the word "small." Or it might not. It won't matter at all, because there are no consequences for failure and no rewards for success.

So, sure, let's redefine the meaning of the word "pound," and make ourselves sound like we've done something more impressive in the gym. Nevermind that it won't make anyone any stronger.

Oh, I almost forgot – the proposed rule change is just that at this point…a proposal. The SBA will be accepting comments on it until May 16. To send them your thoughts, just go to the proposed rule at and click on "submit a comment." You can argue with them over whether the proposed changes make sense or not. I see good arguments on both sides. But whatever side you take, consider adding a comment telling them to ask Congress for an enforcement mechanism, or it's all just word games, anyway.

Jeff White is the founder of, the network that helps government contractors win new business every day. He can be reached at, or follow him on Twitter @Jeff_White1347.