As House and Senate lawmakers meet this week to iron out the differences between competing versions of the annual defense bill, small business committees in both chambers are racing to negotiate the terms of an amendment to spur small business research and innovation.

Sen. Mary Landrieu (D-LA) believes committees in both chambers will manage to compromise on an SBIR/SBTT amendment, but they’re running short on time. (Carolyn Kaster - AP) On one side of the Hill, the Senate version of the National Defense Authorization Act includes an amendment reauthorizing the Small Business Innovation Research program and the Small Business Technology Transfer programs, which require government agencies to set aside a portion of their annual research budgets for contracts and grants to small businesses. No such amendment was included by the House, where lawmakers have in the past been hesitant to attach such measures to defense authorization legislation.

Both programs are currently running on a temporary resolution that expires next Friday.

“Small business is the primary source of innovation and new technology development, and that’s been the truth for a long time,” said Jere Glover, executive director of the Small Business Technology Council and President Clinton’s former small business advocate. “But these programs are really the only ones designed to make sure small business at least gets some part of the innovation budget.”

Last year, the SBIR program alone distributed approximately $2.5 billion in funding to small businesses, according to government data, compared to only $1.7 billion in early-stage investments made by the entire venture capital industry. The program is designed to fund research projects that private sector investors deem too early or too risky.

University of California at Davis researchers also found that SBIR-nurtured firms consistently account for a quarter of all United States R&D 100 Awards, which are handed out each year by R&D Magazine recognizing the most significant research and development advances across multiple disciplines. The report touted the pattern as “a powerful indication that the SBIR program has become a key force in the innovation economy of the United States.”

Despite their success, SBIR and SBTT (both established in 1982) have survived only through temporary extensions for the last three years. The Senate amendment, which passed unanimously, would not only reauthorize the programs through 2019, but also slightly increase the SBIR allocation from 2.5 to 3.5 percent.

Supporters of the amendment argue that long-term reauthorization is imperative in order to stabilize the programs, encourage investors to back science and technology pioneers, and promote innovation on the part of small businesses.

“This amendment not only keeps these programs alive, it also gives them stability,” Sen. Mary Landrieu (D-LA), chair of the Senate Committee on Small Business and Entrepreneurship, said in a statement on Friday. “I am hopeful our counterparts in the House will work with us to bring this to the President’s desk immediately.”

However, House lawmakers have their own stance on the continuation of the programs, the details of which they put forth earlier this year in a separate reauthorization bill, HR 1425. The House Small Business Committee (in which the bill remains pending) and House Science Committee will meet with the Senate Small Business and Entrepreneurship Comittee in the coming days, both sides hoping to compromise on an amendment that can be pegged to the final defense bill. However, the committees are running short on time and several points of contention threaten the survival of the amendment and, by extension, the survival of the programs.

Among the most divisive negotitating points between the two sides are proposed changes to the funding process, per-firm funding limits, and length of reauthorization, according to a Senate staffer familiar with the negotiations. The House committee favors reauthorizing the program for the next three years in order to give Congress increased oversight and the ability to make any necessary changes more easily in the years ahead, according to House Small Business Committee spokesman DJ Jordan.

House lawmakers also want to cap the amount of funding that can go to a single firm each year and allow comanies with advanced research to bypass the first small round of funding mandated by the current SBIR guidelines. Both changes were proposed in HR 1425 but later left out of the amendment to the Senate NDAA.

“There are companies that have proven their products are solid and they have been working on them with their own funds for years,” Jordan said. “We want to move them on to increased phase II funding right away and reserve phase I funding for more elementary-stage companies.”

The two chambers also have slightly different views on raising the SBIR allocation percentage as well as the eligibility of businesses majority-owned by venture capital firms and hedge funds, but those appear to be gaps more easily bridged. The same cannot be said for the structural funding changes and award limits proposed by the House, which Glover says represent the “most radical changes” ever to SBIR and pose serious challenges for everyone at the negotiating table.

“This is not tuning or tweaking or making the program better,” said Glover, who has played a role in the programs’ reauthorization each time over the past 30 years and testified on the matter before the Senate this spring. “They want to radically modify the most successful innovation program in the United States. Now, will the changes make the programs better? I certainly don’t think so, I think they’ll be a disaster. But either way, with the success and popularity of the program, why would you even propose such radical changes?”

Meanwhile, both sides are holding out hope that they can strike a reauthorization deal as part of the defense bill, and Jordan said the Senate committee is willing to “negotiate and bend” on several measures, including the number of years of reauthorization. House Small Business Committee Chairman Sam Graves (R-MO) added that he remains “optimistic that all sides can come together in good faith to negotiate a plan that not only reauthorizes, but improves the program.”

Senator Landrieu echoed Graves’ optimism but declined to comment further on which points her committee is willing to be flexible. “We’re not going to be negotiating this in the press,” she said. “These negotiations are going on and both sides are working in good faith. I believe we can get a deal by Friday.”

Glover, on the other hand, sounded far less confident than the two lawmakers.

“My fear is that we have personalities and ‘my way or the highway’ attitudes that may slip into these discussions, and that if people can’t get exactly what they want, the programs could be in danger,” Glover said. “I’ll be horribly disappointed but certainly not shocked if this doesn’t get resolved. Not shocked at all.”

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