From the desk of Morgan Griffith
Small businesses are the engines that power the American economy.
According to data from the U.S. Small Business Administration, the 33.2 million small businesses across the country employ 61.7 million people, 46.4 percent of all U.S. employees. In Virginia, we benefit from 795,624 small businesses employing 1.6 million people.
If we do not work at a small business, many of our family and friends do. These enterprises pay taxes. Many of them donate to support local causes or events in the community.
The best thing the Federal Government can do is empower small businesses and make sure the hand of government does not weigh too heavily upon them.
I am happy to report that Congress recently passed a bill that will encourage small business innovation and meet federal research goals while also reducing the risk to taxpayer dollars. It is not the sort of bill that draws major headlines, but the difference it makes for innovative entrepreneurs in our country is meaningful, and its sensible policies drew wide bipartisan support.
The bill, numbered S. 4900, focuses on two existing programs, Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR).
SBIR was enacted by President Ronald Reagan in 1982. It reserves a modest percentage of federal research and development dollars for small businesses. This approach produces technical innovation and lets small businesses perform projects prioritized by the Federal Government. It also creates a pipeline for federally supported research to be patented and brought to market. STTR was established ten years later and requires a small business to partner with a nonprofit research institution, most often a university, to receive funding.
Under SBIR, federal agencies with a research budget above $100 million per year must set aside 3.2 percent of the funding Congress has appropriated for research and development contracted outside those agencies. Under STTR, federal agencies with research budgets above $1 billion per year must set aside 0.45 percent of research and development funding. The money set aside must be awarded to small businesses through a public and competitive process.
Among the agencies funding these programs are the National Science Foundation, the Departments of Defense and Energy, and the National Aeronautics and Space Administration.
These programs serve an important role for our economy, but that does not mean they cannot be improved. It is important for taxpayers to know that the money they put into research yields results.
National security also requires more vetting for the enterprises receiving money through these programs. The Department of Defense found instances of firms that had performed research on its behalf coming into China’s orbit. One startup had received a SBIR grant and then dissolved and transferred its research, development, and intellectual property to China. Others employed individuals with ties to the Chinese regime. American taxpayers should not be footing the bill for research that can be exploited by unfriendly powers.
Fortunately, S. 4900, the SBIR and STTR Extension Act of 2022, makes innovation easier for U.S. small businesses. Not China.
Further, it makes necessary reforms while extending the programs for three years. They require agencies involved in these programs to implement a more rigorous vetting process to combat foreign influence and increase transparency and oversight.
The bill also limits the number of research projects that a small business can perform if they are not already bringing previously patented inventions to market. These limits will hopefully incentivize all program participants to focus on innovation and not just winning government contracts.
The Senate passed the SBIR and STTR Extension Act of 2022 on September 20, and the House passed it on September 29.
Not every bill stirs strong feelings or earns a central place in the news, and not all of them should. There are plenty of things Congress can do to make things better without instituting drastic changes that unsettle our laws and society. This bill was one such case, and it drew support from Democrats and Republicans on its merits.
My hope and expectation is that the changes made in the SBIR and STTR extensions will strengthen these programs, protect taxpayer dollars, and help small businesses flourish.