The future of American small business programs is in the balance of Congress

Senate Sen. Rand Paul, a member of the Senate Small Business Committee, has vowed to suspend licensing programs unless Congress imposes amendments. Democrats view some of the resolutions as inconsistent with the promotion of innovation, so the negotiations are dragging on, say aides.

The controversy is part of a wider debate on the best way for the United States to strengthen its defense-industrial base in China, which is committed to US innovation in Washington, Silicon Valley and others. Many critical technologies are now being developed by tech startups and other unconventional defense contractors.

Small-business programs have used many now-established technology companies, including Qualcomm Ink.,

Semiconductor giant, and DNA testing company 23andMe Inc.

The differences between the legislators and the programs are already affecting them. The Department of Defense, the largest participating agency in the SBIR program, has recently canceled an upcoming award because it is unsure of the program’s future.

In a June letter to six Senate and Senate committees reviewed by the Wall Street Journal, two Pentagon correspondents said failure to renew the programs meant too little to respond to war demands. “Any failure can cause thousands of small businesses to lose their jobs or be diverted to other sources of income and increase foreign investment,” he said. Pentagon It saw 22: 1 return on investment between SBIR and STTR contracts in 1995 and 2012 between 2018 and 2018.

The current legislative campaign focuses on small businesses that have won many awards, with a total of $ 50,000 to $ 750,000. Mr. Paul calls these companies “SBIR mills.” He accused them of playing the system to get funding for research. A company wants to determine the number of prizes it receives each year.

“We need to stop diverting taxpayer money to these same organizations over and over again,” Mr Paul said in a statement.

Mr. Paul urged Republican Senate Majority Leader Johnny Ernest of Iowa that Congress should investigate government agencies that seek funding from SBIR to prevent exploitation by enemies such as China. A.D. A 2021 study by the Pentagon found opportunities for SBIR recipients to invest in China or work with Chinese stakeholders in the defense industry, the Journal reported in May.

Sen. Ben Cardin (D., MD) and Rep. Nidia Velazquez (D., NY), who heads the Senate and House Small Business Committees, said they were open to discussing national security concerns in the statements. At the meetings, however, they objected to the widespread targeting of recipients, saying that the companies provide invaluable research and technology.

“Our main goal is to close the program and avoid the consequences,” she said in a statement. “Rejection of these programs will hurt American small businesses, innovations and national defense.”

During the negotiations, more than 200 businesses each received more than 100 SBIR awards, some of which received more than 900 awards, according to Paul’s aides.

In a June blog post, Ben Van Rou, a defense firm that received funding from SBIR and STTR and who consulted with lawmakers on its programs, argued for a prize: “Are a few dozen SBIR mills drinking the air from a small business venture?”

He mentioned the inventions of Luna, which was listed by Nasdak Ink.,

From 2009 to 2021, SBIR contracts with 1,200 defense departments earned $ 165 million, a manufacturer of fiber optics and other technologies, representing 30 percent of that time.

“Most of the technologies developed by SBIR have been sold or released to those who can do business,” Luna’s spokesman said. Much of the company’s SBIR work was sold to a private group earlier this year, and SBIR’s work is now less than 5% of its revenue, he said.

According to the SBIR program, the government is expected to provide $ 3.9 billion in funding for the fiscal year ending September 30. Agencies request different types of applications. “Open Topics” are open calls to apply for financial support for any ideas or technology that you think may be used by companies. “Common topics” are specific project questions by agencies.

Common topics tend to attract bids from large and small businesses with experience in both gift-writing and specialized research, and open topics tend to attract new small companies, according to researchers and industry representatives.

“This is a philosophical debate. What should Congress understand? What is a SBIR program? Is it a research program or a productivity program?”

Mr Katz said the current SBIR system would benefit Pentagon scientists, award-winning companies and members of Congress who see money going to their district. On the other hand, he said that for the military’s demand for technology, startups and taxpayers who cannot enter the system are not good.

Alex Orban, a member of the Small Business Technology Council [awards] Too much for one company ‘The points of the program are lost. Those prizes represent 100 different technologies or research applications.

Mr. Orban thinks common topics are preferable because it eliminates speculation for small businesses. In any case, individual agencies and services must decide how to conduct the award process, not Congress.

A 2014 Air Force Economic Impact Survey shows that the more companies receive SBIR and STTR awards, the less likely they are to successfully trade their products. The 2018 Air Force decision has brought in new applicants to increase open topics, including companies that are part of Mr. Cats ’business team.

Published by the National Economic Research Bureau, a non-profit, non-partisan group. They are seen as measurements of success.

The Air Force still opposes the idea of ​​President Paul’s award-winning hat to the Senate Small Business Committee, and the Office of the Secretary of Defense agrees and supports his colleagues’ efforts to use a standardized benchmark process to measure recipients. Business success according to a June review of the Journal.

Senator Paul and his Democratic counterparts say they have been trading proposals for the benchmarking system.

Write Kate O’Keeffe at kathryn.okeeffe@wsj.com