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▶ 0:15:13before we uh before we get started I want to recognize Congressman stabber from the great state of Minnesota to lead us in the pledge and the prayer e
▶ 0:16:18and I now call the committee on small business into order uh without objection the chair is authorized to declare a recess of the committee at any time in prior to opening statements I ask unanimous sent to enter a letter to the record from the house select committee on the Chinese Communist Party requesting to wave onto today's hearing without objection so ordered now persu to the rules of the house and the rules of the committee I ask unanimous consent that members of the House select committee on the Chinese Communist Party be waved
▶ 0:16:48unto the committee for the purpose of making an opening statement and asking questions and without objection that is so ordered I now recognize myself for my opening statement I want to welcome everybody today to the hearing fostering American innovation insights in the sbir and sttr programs I want to thank our Witnesses today for being here and many of you traveled a long ways to get here and we're interested in your perspectives and your experiences and we deeply value your time and your voice small businesses are the backbone of innovation and economic prosperity in America
▶ 0:17:18the ability to take an idea develop it into a product and bring it to the market drives Innovation and economic growth strengthening our nation's competitiveness for over four decades the SB and the sttr programs have fueled American innovation by providing early stage funding to small businesses align them to develop Cutting Edge technologies that strengthen our economy and support our military from life-saving medical advances to Next Generation defense capabilities these programs have empowered Main Street to turn ideas into reality for the government and
▶ 0:17:48the private sector the SB and the sttr programs Channel Federal R&D dollars and phases to small business enabling the development of innovative ideas that align with the need needs of federal agencies these agencies can offer sbir and sttr awards through two Avenues first through targeted solicitations where the agency requests a product that meets specific requirements or through open topics where small business uh small businesses propose innovative solutions to meet an agency's Mission
▶ 0:18:19prominent companies including Qualcomm 23 and me and and boss and Bose began as small businesses that Leverage The SB program to enter uh to become industry leaders demonstrating the program's power to drive Innovation and economic growth our responsibility right here in Washington is to ensure that these programs continue to Foster groundbreaking advancements by remaining free from foreign exploitation in today's hearing we will examine these programs challenges and addresses and propose unresolved solutions from
▶ 0:18:49the last reauthorization SB and sttr have long supported American in Ingenuity yet these vital programs still face growing threats the CCP continues to exploit the sbir and the sttr program siphoning taxpayer funded research back to China the this undermines American innovators intellectual property rights and jeopardizes our nation's National Security the due diligence program establishing the last reauthorization continues to face limitations in
▶ 0:19:19effectively preventing CCP infiltration at the same time small businesses participating in these programs face significant barriers in transitioning from research to commercial ization lacking access to Capital with sbir and sttr set to expire in September 2025 we have a critical opportunity to make changes to ensure these programs operate efficiently and support small businesses growth to ultimately accomplish the program's goal of fulfilling R&D needs ensuring these programs are awarded by
▶ 0:19:49Merit after rigorous competition will continue driving the best Innovations to the top innovators thrive in an environment where competition Reigns Supreme where they are free from limitations or caps on their success working alongside the Trump Administration we will continue to prioritize policies that protect our innovators cut bureaucratic red tape and create an environment where Main Street America Can Survive and Thrive with that I would yield to our distinguished ranking member my friend from New York Miss Velasquez
▶ 0:20:20thank you Mr chairman and thank you for calling this uh hearing to discuss one of our most important priorities of The 100 19th Congress reauthorization small business Innovation research and small business technology transfer programs the timing could not be more critical sbir and sttr are among the federal government's most effective engine for driving Innovation
▶ 0:20:50these programs Channel just a small percentage of extra mutal R&D budgets into highly competitive Awards s that fuel Cutting Edge discoveries create new Industries and drive economic growth at just under $5 billion annually this program have had an outside impact on our economy helping to launch companies like IR robot Sonic Air 23m and qualcom they
▶ 0:21:20have played a role in Game changing advances from second generation lasc eye surgery to critical mineral recycling that reduces our dependence on foreign sources to advancement that help us investigate the inner workings of the human brain to study disorders like Alzheimer's and Parkinson's more recently an SBI back company boom Aerospace whose CEO testified
▶ 0:21:50in this room three years ago conducted a test flight that broke the sound barrier over the moabit desert with the help of sbir and the private Capital it has helped attract our country's innovators are one step closer to Bringing supersonic passenger jet travel into reality yet despite its overwhelming success these programs are among the only core SBA programs
▶ 0:22:20that are not permanently authorized if Congress fails to act before its expiration on September 30th a lapse in the program will have severe implications for Americans entrepreneurs even a short-term disruption would deliver a substantial setback for America's Innovation pipeline meanwhile China is aggressively investing in its own
▶ 0:22:51R&D ecosystem just last month the release of their dip sick AI model rattled Glo Global markets exposing the complacency of the dominant us firms that have grown too comfortable with their Market power the SB program is uniquely positioned to counter this technation funding Nimble emerging businesses to challenge entrench Tech Giants and restore
▶ 0:23:22competition to The Innovation economy in many ways Mr chairman our task this year should not just be about a simple extension of the programs but rather rather a bipartisan collaboration to making sbir and sttr stronger than ever before it is my greatest hope that we can work together to grow the programs in several ways first we must work to make the program
▶ 0:23:52permanent given small innovators operating on The Cutting Edge of their Industries more certainty and stability to invest their time money and staff into competing for sbir or sttr Awards second we must expand the programs allowing for greater agency allocation time and growing the volume of small business grants and contracts available this will bring
▶ 0:24:22more competition to our economy and our industrial defense base third we must work to help participating companies overcome the valley of death by expanding commercialization services and growing phase three of the program and finally we must continue protecting small business firm from foreign threats that seek to undermine our national security and these are just a few of many
▶ 0:24:52priority we can consider thank you to all the witnesses be for appearing before us today and thank you to the chair and ranking member of the select committee on the Chinese Communist party for joining us I look forward to your testimony I yield back gentle lady yields back I now recognize the distinguished chair of the house select committee on the Chinese Communist Party chairman John molinar from the great state of Michigan for his opening remarks thank you chairman Williams and
▶ 0:25:23uh ranking member of Velasquez for holding today's hearing on the small business innovation research as well as the small business technology transfer programs and I want to thank you for allowing Raja Chris morthy and I to to wave on to this important meeting um the sbir and sttr programs have long Been instrumental in fostering American innovation allowing small businesses to develop cuttingedge technologies that serve both the
▶ 0:25:53public and the private sectors these programs are critical to maintaining America's technological Edge particularly in Industries vital to our national security that being said as we examine the effectiveness of these programs today we must also acknowledge the serious threats they face most notably the Chinese Communist party's persistent efforts to exploit these programs for its own military and economic gain China has systematically targeted American innovation
▶ 0:26:24using tactics like Talent recruitment programs State sponsor Investments and University Partnerships to siphon off US taxpayer funded research this is not just a matter of intellectual property theft it is a direct National Security risk some us firms that have received sbir Awards have later partnered with CCP linked entities or established Chinese subsidiaries effectively transferring sensitive
▶ 0:26:54technology into the hands of our foremost adversar the CCP is actively seeking to integrate Advanced us Research into its military modernization efforts including through artificial intelligence Quantum Computing and Next Generation defense Technologies as a September 30th reauthorization deadline approaches we must close the gaps that allow China to take advantage of the SBI and sttr programs
▶ 0:27:25at the same time we must not lose sight of the core mission of sbir and sttr supporting American small businesses instead of limiting opportunities for small businesses we should focus on strengthening safeguards against foreign exploitation while preserving A merit-based system that rewards Innovation the United States cannot afford to let China turn our most successful small business research and development program into a tool for its own strategic
▶ 0:27:55advancement we must take decisive action to protect sbir and sttr from CCP infiltration and ensure that taxpayer dollars are used to support American innovation not our adversaries and I'm confident that under chairman Williams and ranking member of Alaska's leadership this committee will be successful in doing just that and the select committee on China stands ready to support the small business committee's important efforts to protect American
▶ 0:28:25innovation strengthen our economic security and counter threats posed by the Chinese Communist party and with that Mr chairman I yield back thank you gentleman yields back and I now recognize the distinguished ranking member of the House select committee on the Chinese Communist Party ranking member Russia Chris no Mory but I know him better as the Raj from the great state of Illinois for his opening remarks well thank you Mr chairman and by the way when I first on my first day of college
▶ 0:28:56I introduced myself uh I said hi my name is Raja and the person said what part of Boston are you from Roger so any case wonderful to be with you thank you uh ranking member Velasquez my good friend and of course my good friend and colleague and the leader of our committee chairman John mullard thank you for your leadership um I want to take this opportunity to speak on the small business committee about uh the sbir and satr programs in full
▶ 0:29:26disclosure as a former small business person my former company actually benefited from sbir programs and I lived in the Valley of Death frequently uh and so it's not a pleasant place to be and sbir thanks to the work of this committee and um this government uh we were allowed to benefit from those programs and uh we developed technology for night vision uh both for space and for military applications
▶ 0:29:57and it's helping the world war fighter today for decades these programs have served as the backbone of us research and development empowering small businesses by turning new ideas into real technology they've helped advances in defense energy and medicine and in a study from 1995 to 2018 revealed that these programs have created a whopping 1.5 million jobs averaging over 65,000 jobs annually these Investments
▶ 0:30:27have led to breakthrough Technologies such as Advanced Prosthetics for wounded veterans revolutionary Medical Imaging systems and cuttingedge cyber Security Solutions I I want to say um I Echo the sentiments of chairman molinar our adversaries do know the strengths and weaknesses of our Innovation ecosystem and in and and on occasion they've taken advantage of it and targeted some of the beneficiary
▶ 0:30:58of these sbir and satr programs for intellectual property theft one notable example was a US company that was a former SB awarde that lost $1 billion doll in shareholder value and 700 American jobs after an employees stole wind energy technology for a Chinese firm um as another anecdote I should just mention uh chair and ranking member when I was running this company in the private sector
▶ 0:31:28that I mentioned before um we were actually the victims of an attempted uh theft of intellectual property by um CCP controlled entities as well so I know this firsthand it happens and so we have to do whatever we can to help small businesses Ward it off prevent it Empower them to avoid being victims of CCP intellectual property theft Congress and the executive branch have taken steps to address and
▶ 0:31:58mitigate many of these threats for example the SP and satr extension Act of 2022 was an important step forward requiring greater disclosure of foreign ties and participation in Talent recruitment programs these efforts have proven effective in increasing awareness and bolstering protections but we cannot afford to be complacent when it comes to competing with the CCP as the SBA inspector General's 2024 advisory makes clear our current system still relies
▶ 0:32:28heavily on self-reporting from companies which can lead to Resource constraints for the government to verify these reports we must continue to support resources for due diligence so that we can see the results we enacted back in 20122 finally and above all we must recognize that Federal funding for research and Technology development is not just an investment in the present it's a commitment to our nation's future and actually chairman molinar and I just met with condalisa rice yesterday
▶ 0:32:59um of Stanford uh who heads the Hoover institution who brought uh a number of researchers to our office to talk to us about the technology competition and the fact that the only way that we are going to win this competition is for the federal government to invest in basic research and development supplemented by these additional investments in sbir and sttr which build upon progress the Blue Sky research uh in in in the private and public sector
▶ 0:33:30I just want to say thank you so much chairman Roger uh and thank you uh chairwoman uh vquez and chair John mullinar for your leadership your partnership your collaboration together we are going to win this competition the strategic competition against the CCP thank you and I yield back gentleman yelds back thank you for that and I will now introduce our Witnesses our first witness here with us today is Dr Bill Marin Dr Marinelli is the president CEO
▶ 0:34:00of physical sciences Inc located in Andover Massachusetts Dr Marinelli joined physical services in 1983 and has been involved as a scientist and program manager in a diverse range of technical areas in 2006 he was named Executive Vice President for defense systems 2018 he became Chief Operating Officer for the uh company and was named to the board of directors in 20121 Dr Marinelli then assumed the title of president and CEO in 2022 Dr Marinelli has made numerous contributions
▶ 0:34:30in the fields of chemical kinetics gas service interactions space physics and Advanced Diagnostics Dr Marinelli received his Ms and PhD degrees in physical chemistry from the University of California at Berkeley he is also a graduate Brown University where he earned a degree in chemistry I want to thank you for being with us today looking forward to your conversation our next witness here with us today is Miss ml Mackey Miss Mackey is the CEO of Beacon interactive systems located in walam Massachusetts
▶ 0:35:01uh Miss Mackey has co-founded Beacon interactive 1994 and along with her partner has grown the business into a valued nontraditional defense contractor and throughout her time Miss Mackey has won multiple Awards such as the West leadership award the tibits award small business executive of the Year small business advocate of the year and champion of small business Innovation Miss Mackey serves as the excom of nd's board and is the chair of the small business division she is past chair of n SBA
▶ 0:35:31and a current member of sba's innovation advisory committee in the National academies of Sciences Army and S&T Round Table M Mack is a graduate of Lehigh University with the Bachelor of Science and electrical engineering I want to thank you for being here also today our next witness here today is with is Mr Cyrus Maric uh Mr marata is the founder and CEO of ravelin uh usal located in Fairfax Virginia Mr maratus founded raveland
▶ 0:36:02in 2023 to serve as as a strategic consulting firm for the USG inclined innovators and prior to raveland he was with the Air Force office of special investigations and spearhead of the Department of Defense Counter Intelligence in Silicon Valley he enlisted in the US Army in 2000 and served as an Airborne fire team leader in Afghanistan in Iraq where he was decorated for actions Under Fire and for saving a civilian from an IED uh serves as board member for the Black Star orbital and tiger cat cyber as well as
▶ 0:36:32a board adviser for terrrace space he also has worked as a volunteer to set set of medical clinics in R Guatemala where he where over a thousand children have been treated a week he holds a master of arts degree in state craft and National Security from The Institute of world politics he is also a graduate of the National Security Institute space Institute in California State University where he received a bachelor degree in political science and government I want to thank you uh for being with us today and I'm looking forward to all of the testimony and I now recognize
▶ 0:37:02our ranking member from New York Miss Velasquez to introduce our last witness to praying for us today thank you Mr chairman our Final witness today is Mr Jerry globber the executive director of the small business Technology Council a trade Association of small high-tech companies most of whom are involved in the small business Innovation research program as Council to this house small business committee he directed and organized a set of
▶ 0:37:33hearings on small business and Innovation that laid the groundwork for the program in 1978 throughout the LW existence he has been one of its most active supporters Mr globber has a unique blend of public and private sector experience for more than six years he was the Federal government's lead Defender a small businesses in the regulatory process in the private sector he has been the CEO or principal
▶ 0:38:03of a biotech company and medical technology company and a group of medical clinics he obtained his undergraduate and low degrees from the University of Memphis and an llm in administrative law and economic regulation from George Washington University thank you Jerry we look forward to your testimony thank you Mr chairman lay yelds back uh before recognizing the witnesses I would like
▶ 0:38:33to remind them for that oral testimony is restricted to 5 minutes in length if you go over 5 minutes you hear the gavel a little bit and you need to bring it uh bring it to a close if you see the light turn red in front of you it means your five minutes has concluded and you should wrap it up quickly also I'd like to add periodically you will see some of us moving in and out it's no reference no on your testimony or anything but some will have other placees got to be real quick and come back you may see the ranking member myself do that but we we will be back okay
▶ 0:39:03so that means nothing so I now recognize Mr Marinelli for his F minute remarks uh good morning chairman Williams ranking member of Velasquez and members of the House committee on small business it's an honor to testify here today on behalf of physical sciences Incorporated a small business headquartered in endover Massachusetts want to thank you for the opportunity to talk about our experience with the SBI program our company was founded in 1973 with a mission to develop Technical Solutions for National
▶ 0:39:33priorities in defense security energy environmental health care and Industrial markets the company is 100% owned by an employee stock ownership trust has no foreign ownership interest and takes active measures to prevent foreign technology transfer our company Embraces the key intent of the SB legislation to meet Federal research and development needs while identifying commercial appliations for those highly specialized Technologies four examples include one
▶ 0:40:03Advanced lithium ion battery technology to support two Navy programs of record where their operational requirements exceed commercial standards two reare Earth extraction from Kash to provide a secure domestic supply of these critical elements we developed and patented that technology under sbir and non sbir programs and funding for a $30 million pilot plant has now been awarded to Pennsylvania's winter Water Systems in conjunction with The Southern Company radiation
▶ 0:40:34detection technology to secure our bardies against trafficking in this threat the technology we manufacturer currently provides detection capability to several ports of Entry along the Southern United States as well as to federal state and local law enforcement agencies in the US the UK and select overseas locations and finally remote natural gas leak detection technology for use by the natural gas industry over 7,400 of those systems have been sold under license to psi
▶ 0:41:05I think the key point is that component technology funded by SBI awards from multiple agencies and facilitated by significant Investments by PSI in facilities and select capabilities was employed to meet these needs we have reported uh over $677 million in phase three academic uh economic activity to the about half of which is actual commercial sales from licensed technology by our partners only 5.8
▶ 0:41:35million do of those funds are formally listed as phase three Awards illustrating the erroneous and misleading conclusions that can be drawn by simplistic studies that report to capture the program's total economic activity looking at reauthorization we believe the primary SBI reauthorization challenges is to reduce barriers to entry and not restrict program participation reauthorization should reinforce five basic principles and I think you've heard
▶ 0:42:05some of them already today first merit-based awards Congress should maintain the competitive merit-based fundamentals of the program to ensure that the best technology is developed the GAO review of the program showed that there were no SB Mills and that the intent of the program is being met there should be no arbitrary award caps submission limits or forced graduation second agency discretion agencies should have the discretion to shape the program and Define merit consistent
▶ 0:42:35with their missions multi-award winners should not be penalized for some agency's lower rate of adoption and Commercial potential three improved communication agencies should improve the communication of their needs and opportunities across all topic types to enable companies to tailor their proposals to meet those specific needs improve Pro their potential for award and support subsequent technology transition four application simplification the largest barrier to
▶ 0:43:06participation in the program for new entrance is increased administrative burden and complexity of proposal submission per capita proposal submission rates from underserved regions of the country are some of the lowest in the program reflecting those barriers and finally permanent authorization the GAO identified investments in dedicated capability as key to receiving DOD Awards and to being viewed as a reliable supplier by our customers program permanency reduces the concern
▶ 0:43:36that those investments will be stranded at the next reauthorization without limiting the ability of Congress to make further adjustments to the program in conclusion uh there are many Pathways for commercial success the US government should be open to Innovation from all small business sources and not limit participation to certain Pathways doing so would undermine the ability to secure the very best technology for its priorities thank you very much gentleman he is back and uh Miss Macky
▶ 0:44:06you have five minutes chairman Willam excuse me chairman Williams ranking member Velasquez and distinguished members of the committee thank you for inviting me to speak today on the importance of the spr St programs my name is ml Mackey I'm the CEO of Beacon interactive systems a non-traditional and unconventional defense contractor delivering Innovative efficiency improving digital capabilities to our military services I'm here today in my capacity as the chair of the small business division of the National
▶ 0:44:36Defense industrial Association ndia I also serve on the executive committee of nd's national board of directors for over a hundred years ndia has provided a forum for government and Industry leaders to collaborate and address complex defense issues ndia and its Affiliates represent over 1,700 defense companies of all sizes and sectors the majority of which which are small business ndi has been a longstanding and vocal supporter of the sbir and sttr programs and regards these programs as some of the nation's most effective tools
▶ 0:45:07and bringing costeffective and valuable Innovations to the dod we appreciate your leadership and extending the programs through September 30th 2025 and we strongly endorse your efforts to further extend the programs before the current authorization expires the SB sttr programs facilitate and effectively streamline the participation of competitive Smalls businesses to work on agency specific research and development needs speeding Innovations and advanced capabilities to our war Fighters is critical to the dod's efforts to outpace the People's
▶ 0:45:37Republic of China and other potential competitors in this era of great power competition in my own personal experience as a CEO of Beacon interactive systems we found the SBI program to be a Gateway by which we could enter the defense Marketplace we have delivered multiple programs of record deployed systems across 200 plus ships submarines and carriers and multiple Shore based locations worldwide our digital products transform operations at the edge in one example alone early estimates predict our flight line platform will save an hour and a half per
▶ 0:46:07maintainer per shift this tremendous impact on operational capacity was critically nurtured with investment based on this positive experience and similar experiences from my colleagues in ndi small business division we offer the following three areas for review to enhance the spr sttr programs our first recommendation the SB St program should be permanently authorized these programs Inspire technical Innovation and inject a vital sense of Entrepreneurship into the defense Enterprise
▶ 0:46:37establishing them permanently is the next logical step SBI and sttr are an essential part of America's Innovative high-tech ecosystem and even the threat of a short-term disruption can severely affect smaller high-tech innovators the temporary nature of the current programs also does not signal stability to both the federal agencies who administer and the small businesses seeking to participate in these programs our second recommendation is to provide more support for phase three Awards and transition to commercialization
▶ 0:47:07in line with the cber policy directive uh SBI I always use the slang in line with the SB policy directive the government is required to the greatest extent practicable to award followon efforts to the SBI Investments already made in the capability this is both an efficient use of federal funding and a significant incentive for new entrance to the US defense industrial attracting and retaining new companies that can rapidly deliver Innovative Technologies and capabilities to the warf fighter is a critical element to building a modern diverse and resilient us defense industrial base
▶ 0:47:38the Technologies these companies deliver can also provide the decisive Advantage needed to deter or win a fight DOD acquisition programs should review prior spst projects and assess opportunities to utilize these Investments if the federal government already has access to an existing technology that is purpose-built meets the competitive threshold and addresses the requirement it should not expend additional funds to procure and then duplicate the same technology besides saving money this review would also save time as the dod can Leverage The agile authorities of SBR phase 3
▶ 0:48:08Contracting to acquire those Technologies and deliver to the war sooner it would be a disservice I think to my colleagues if I inadvertently contributed to the perceived spr issue of vendor luck here so I want to talk about how important it is that the spr policy directive says to the greatest extent practicable and if it's not practical tell us why document it so that we know we as the small businesses know how to improve and we as taxpayers know that you have looked for what you already have on the Shelf
▶ 0:48:39the recommendation third recommendation that we have is to increase agency oversight of implementation and agency employee accountability in my submitted written testimony we have fair amount of detail on what kind of training we think would help with that but in conclusion today I want to First applaud this committee for your vigilance in promoting small business friendly policies your work to defend deliberate and efficient approaches to include small business high-tech innovators in the US defense industrial base is a valuable proposition for the government and a direct enabler of innovation growth and and grth and growth
▶ 0:49:10I appreciate the opportunity to be here today and I welcome any of your questions lady y's back I now U recognize Mr Miron for his five minute remarks chairman Williams ranking member Velasquez distinguished members of the committee thank you for having me here today I'm here to discuss the Chinese Communist party's exploitation of American innovation with the focus on cber programs historically America has had three offset strategies and an offset strategy is a strategy
▶ 0:49:40to defeat a military peer should deterrence fail the first offset strategy was nuclear weapons 1949 Soviets test their first bomb we lose that edge almost as quickly as we got it the second offset strategy was net Warfare which we revealed to the world in Gulf storm in 91 where we Interlink landc and space forces for precision strikes if you read modern Chinese and Russian strategies today you'll see it's largely predicated on what they saw in 1991 fast forward to the president it's why Russian electronic warfare is so effective in the Ukraine they spent 40 years
▶ 0:50:10mastering in it asymmetrical capability the cber program has an outsized impact for the third offset strategy which is the rapid incorporation of innovation into the Department of Defense to defeat a a peer adversary innovators in in America are largely people in their late 20s early 30s known for their irreverence and informal apparel and they have become the Vanguard of our fight with the CCP I've had the honor of serving my country for 16 years first as a paratrooper
▶ 0:50:41in Afghanistan and fuia Iraq I went to university on the Montgomery GI bill I infiltrated a closed career fair to join the intelligence Community I volunteered for an assignment in central California in 2014 when I realized DOD had no count Counter Intelligence support to its equities in Silicon Valley for nearly a decade I provided Counter Intelligence support to startups Fortune 50 companies fpga design houses and academic institutions I set up the Counter Intelligence programs at defense Innovation unit
▶ 0:51:11experimental at the time a works and space works for my impact US National Security I've been awarded an unprecedented nine National Intelligence Awards well I'm not here to talk about my government service this Legacy informs the company that I run today which is an advisory firm called Ravel in us we specialize in helping us innovators identify foreign ownership control and influence issues and then how to mitigate and or remove them the Chinese Communist party has also evolved in its tactics against the United States I've witnessed this over the
▶ 0:51:41last 12 years there's this misconception that cyber exploitation vastly outweighs human exploitation which couldn't be more wrong human collections the exploitation of our people and systems is far more ubiquitous than what we face in the Cyber realm the CCP will use real relationships curated over a decade I had I had one last week that was 10 years before they ever deployed Capital into the innovators company we will also see the CCP investors and their Affiliates investing in cber recipients who struggle to go from
▶ 0:52:11phase one to phase two there is a grooming process and it's like slow boiling the target there's no official signing up to become an asset it is a gradual process that occurs over time we also see American investors who are investing in genocide enabling Technologies in the weager uh against the weers in the xan Jang Province those same investors will be investing in Munitions innovators that have received siers on us soil when the Chinese
▶ 0:52:41Communist party wants an uh Innovative capability they'll often work through proxies sometimes that means Allied countries usually through US citizens um and when they have a capability that they want us to deny ourselves they will loudly deploy Chinese Communist Party Affiliated Capital knowing that our due diligence systems will find it we will identify it and we will not use the capability as a department it takes a nuanced eye to identify and to remove but you have essentially a poison pill of CCP
▶ 0:53:12investment in our systems this is not really the worst thing uh in fact if your adversary is forced to adjust their tactics and deal with your strategy that means you're having an impact and right now we are far ahead of them and we need to intensify our efforts the impact of the cber program vastly outweighs the dollar amount and it steers the industry the cber sitter extension act that went into effect in July of 23 has changed the American landscape not all of the due diligence
▶ 0:53:42teams that are required to do the folky due diligence are the same in fact you have one team that's better than all the other teams combined and still way out far ahead um but we cannot look at specific teams and say whether the program is working or not it's actually Quantified viable and we can figure that out we do have some recommendations for the committee I know I have a very cumbersome last name and I would encourage you to call me Cyrus the cers sitter uh program uh is critical to executing our third offset strategy which is to
▶ 0:54:12ensure American hedgemon in the 21st century I look forward to your questions thank you SARS and now Mr Glover you have your five minute opening remarks thank you Mr chairman ranking member of vasque as members of the committee it's an honor to be here today uh to talk about reauthorization of the SBI sdtr programs today I want to share with you a remarkable Congressional and government story 47 years ago this committee together with the
▶ 0:54:42Senate held joint hearings on small business and Innovation the committee found that small business was by far the most Innovative sector of the US economy creating two-thirds of all major major but that virtually none of the federal R&D dollars went to small business uh it was almost impossible for a small business to get government R&D contracts uh the Contracting officers are much more comfortable giving R&D
▶ 0:55:12contracts to large businesses even today the largest prime contractor at DOD receives 10 times more than the entire SB program in funding the small business committee asked Common Sense questions how can the government get better R&D by asking the most Innovative and entrepreneurial sector of the of America to do it and how can this make America stronger the answer was the SBR program and
▶ 0:55:43Congress enacted it to unleash the Ingenuity and drive of small business on America's technology challenges today the SBI program is the best government R&D program in the the world and one of the most significant pieces of legislation passed what have the results for the taxpayers investment inbi thousands of new Innovative firms and thousands of success stories including Technologies used today such as
▶ 0:56:13uh Bluetooth cell phones electric cameras GPS on a chip thousands of medical breakthroughs drones all solutions that small business created and took to the marketplace here are some of the highlights SB generates $2.50 for every dollar in in tax income at state and federal levels from every dollar at DOD and $368 for every dollar spent at the National Cancer Institute return on investment is 22
▶ 0:56:43to 33% for every SBI dollar depending on the agency over 2,000 SBI firms have been inquired injecting Innovations into larger companies 99 new drug approvals in the last 20 years 12% of all new drug approvals had companies had funding from the SP program 16% of the priority drugs 24,000 510k or
▶ 0:57:14pre-marketing approvals were had SBR involved 10% of all venture capital funds go to SB programs the SBA and agency website list literally hundreds of other s spr success stories the program focused on merit with agencies selecting the best Solutions keep quality high and competition tough only one in 20 proposals get to phase two in 2017 GSA began
▶ 0:57:44writing contracts for other agencies SB contracts this was a major breakthrough 5 years later GSA actions doubled the SBR phase three identified contracts from 1.5 billion to 3.5 billion their proposed ip3 program which could come is pending would make a great success story when we look at China today unfortunately China leads in 57
▶ 0:58:14of 64 critical Technologies us is even behind Europe Europe spends 20% uh on on its uh small businesses twice what the US spends Congress can take a number of actions to build on these successes One require better streamlining and simplification of the of the process keeping Merit based to ensure the program continues to fund the best research double theb program
▶ 0:58:45leveraging small businesses to provide Innovations to solve Federal challenges dod's section 809 panel recommend and the past Secretary of Defense recommended uh doubling the allocation restore the 174 tax deduction that's critical for not only SBR companies but all small businesses reverse the Slowdown of contracts and Grant selections and awards which may be fatal to many small firms
▶ 0:59:15Cash Flow kills startups make the SBI Pro program permanent and these actions will help America regain its leadership in the world of innovation thank you thank you Mr Glover uh we'll now move on to the member questions under the five minute rule I recognize myself for five minutes uh Dr Marinelli the sbir and sttr programs were created to support small business growth while helping
▶ 0:59:45federal agencies fulfill those needs my question is as a small business owner myself and yourself how important is it to ensure that s the sbir program remains merit-based as we talked about uh Mr chairman uh last September I had the uh privilege to visit four of the five Landing beaches at Normandy um sat on a German reinforcement uh and looked at the Omaha Beach I went to the uh American
▶ 1:00:15cemetery afterwards and happened to uh visit the grave of someone important to my wife's family it was truly a sobering experience uh Cyrus talked about the second offset uh that that battle was a force on force in Normandy uh we were able to kick uh Iraqi forces out of Kuwait in the week because of the second offset it's uh it's American Technology that uh is uh going to give us the third offset my uh
▶ 1:00:45my father actually fought in the Korean War as an artillery officer um we need to not have to fight those kinds of battles ever again we need to get the best technology from the best sources no matter where they are anywhere in the country to establish and maintain uh that uh third offset um otherwise we're going to wind up fighting these battles uh uh in a way that uh we don't want uh we want to be able to deter
▶ 1:01:16uh foreign forces from ever starting a fight like that and we want to make sure we can win it if it does start so I think it's uh it's very important for our nation security to make sure that Merit is driving technology uh into our armed forces and everywhere else in in the US government thank you uh Miss Mackey the VA the Valley of Death has been a challenge for small businesses in the SBR sttr programs this is a when an innovation moves from the R&D stage into production but small businesses lack access
▶ 1:01:46to Capital we've talked about that to commercialize their product in your written testimony you mentioned that the dod and other agencies should buy existing sbir sttr Technologies particular during phase three transition to commercialization so can you explain how the agencies could more effectively integrate SBI funded Innovations into the procurement process and how this might save both time and money in the development of new technologies thank you for the question I think we don't have to do new legislation I don't think we
▶ 1:02:16need to come up with how to do this we need to make sure that it gets done and we need to insert into the acquisition process the step of reviewing what do we have and to be fair there's a lot that we have so even a good due diligence of what we have available and documenting that that has happened we need to change Behavior and the acquisition programs so that they look for components that they can successfully insert into their larger programs I think this does what you were talking about in terms of bringing Innovation F forward
▶ 1:02:46and and making things faster it also helps address a lot of the adversarial impact that we have if you have a company that is developing good technology and you have have a reasonable path forward you're less likely to take Global investment that may have competitive interests okay I've got a limited amount of time and uh Cyrus as you know there's a growing concern that the CCP is leveraging various mechanisms such as Talent recruitment programs the US Patent system and Venture Capital Investments to access uh
▶ 1:03:16sensitive IP developed through SBI funded research so qu in your in your experience how is China specifically acquiring IP from the SBI funded small business and what are the primary methods you have observed uh being used to exploit these small businesses thank you Mr chairman so when it comes to venture capital we'll see investment post uh receipt of a sbir that's one of the methods uh another is working through US firms so it will be a us firm
▶ 1:03:47without linguistic or cultural ties to China they will mobilize them through money um we've seen this also with the uh Canadians where they will use a a Canadian um to be an investor but when you look at the Canadian LPS it all comes from one CCP fund and then that individual is trying to oust the CEO of a company and move that technology to China and this is all done it's bankrolled by the Chinese Communist party they did it once successfully with a
▶ 1:04:17uh a biotech company and now they were trying to do it with an aerospace company and so working through allies working through third party um trying to offc their hand because they know that we are looking for it and then also working through US citizens whether they're ethnically Chinese or otherwise I yield my time gentlemen us his time back and I now recognize the ranking member for five minutes of questions thank you Mr chairman and thank you for your testimony um Mr globber one of the most important
▶ 1:04:47legislative task of this committee this year is to reauthorize the sbir and sdtr programs why is it important to make this programs permanent because very briefly please yeah because every time this stop and start the government starts shutting down this delays whenever there's a delay in awarding a contract small businesses fail they simply don't have
▶ 1:05:17the cash flow to carry them over to the next one so every time this happens it it slows down the government makes the government efficient but it also gives small businesses sometimes the Valley of Death just gets so long they can't survive and so the Stop and starting is just very bad for the for the program thank you and to the panel yes or no do you agree that we should make SB s sttr permanent yes ma'am Miss Mark yes definitely
▶ 1:05:48yes ma'am yes thank you Mr globber in your your testimony you focus on the overwhelming success of the programs yet for many years they have only accounted for a sver of federal R&D funding is it time for Congress to consider significantly expand Agency allocations for the sbir and sdtr programs it is when we look at Europe they're doing
▶ 1:06:18twice as much as we are when we we look and they're getting ahead of us and in critical Technologies uh it's the most effective program going yes it it it's time to make it better and bigger and and more efficient thank you Miss Maki uh your company has been successful in transitioning early stage Technologies into programs of record at the Department of Defense as we focus on commercialization
▶ 1:06:49what can we do to improve the process for earlier stage awarde I I think for earlier stage awardees we could improve the process by specifically in the Department of Defense exposing them to actual War Fighters and getting the real feedback into what they're building I also think that we could change the process to add um the responsibility and the credit for transition to not only the small business but the extended government team that also has to work with them
▶ 1:07:19and and other industry Partners thank you um Mr Marinelli some of the firms in the SB programs have come under Fire for having lowered uh transition rates can you explain why it may not be beneficial uh to the dod to arbitrarily use transition rates to measure uh success so uh Congressman of Vasquez uh one of the things that uh
▶ 1:07:49we tend to work on is insertion of component technology into large platforms that take a decade to evolve and lasts for many years uh and uh that's a very slow process uh program managers are accepting a lot of risk to try and insert new technology into those programs uh and often they are budgeted years in the future uh with very strict requirements and so it's it's uh very difficult often to insert that technology we have to work very hard
▶ 1:08:19in order to do that and often it doesn't happen sometimes programs get canceled in Midstream and I think those are the issues it's just uh it's a it's a very hard business basically to be in thank you uh Mr Glover the sbir and sdtr programs have grown significantly over the years now accounting for nearly $5 billion in the federal budget yet at the same time the small business administration whose responsibility it is to administer
▶ 1:08:50the program has not seen a similar increase in funds can you explain why we should find ways to bring the SBA more funding for program Administration the SBR program is now one of the biggest programs administered SBA when it first started there were 17 employees in the SP overseeing sbir I think there's three now uh it it is in dire need of it
▶ 1:09:20can't do everything and it can't oversee and make sure the agencies do much more in phase three and follow on and provide that so it it it is critical that we bring it in Balance you look at some of the other programs at SBA they're much better staff some reason this has always sort of been a stepchild thank you thank you yeld B me y's back I now recognize Mr stabber from the great state of Minnesota for five minutes uh thank you uh chairman Williams
▶ 1:09:50and ranking member of Alaska for holding this important hearing today and thank you to our Witnesses uh for taking time to share your expertise uh to us you know the United States government relies on innovative solutions to meet Mission critical demands and small businesses play a pivotal role in that process many small businesses rely on the SBI and SD programs to bring their ideas from concept to reality strengthening our national security and creating high quality jobs we've heard from small businesses that while SBI
▶ 1:10:20funding is invaluable the path from research to commercial commercial ization remains difficult many companies struggle to secure private investment or navigate Federal procurement processes to bring their Innovations to Market if these small businesses cannot transition successfully we do risk losing key Technologies to bureaucratic hurdles or Worse foreign competitors Dr Marinelli your company has successfully navigated the sbir program
▶ 1:10:51what improvements would you like to see in the sbir program to ensure continued Innovation and commercialization so I think the most important thing that we can do for all companies involved is to improve communication of federal government's needs uh to the various performers that are uh performing on the program uh it's uh pretty critical there uh a lot of new entrance don't know what's happening and
▶ 1:11:21uh if they hear from program officers what's needed they can tailor their proposals in order to meet those programmed officers needs how do you hear that how do you get to the needs right now how do you how are you aware of the needs so uh earlier in my career uh used to be the acquisition organizations and uh and the S&T organizations would have briefings for industry The Joy program office for chem biod defense in ditra would and they would stand up and tell you here's what we need to acquire here's where the S&T focus is to do
▶ 1:11:52that that was enormously informative to me and actually I brought that back to our company it's one of the reasons we've grown I think we need to see more of that throughout the federal government to uh to let people know uh what is is needed by the organizations right thank you what are the most alarming threats to American innovation is a growing evidence that China is actively working to exploit SBI funded research we've seen reports of Chinese firms using Venture Capital Investments research Partnerships
▶ 1:12:22and talent recruitment programs to siphon technology developed with US taxpayer dollars just as representative Molinaro stated if we do not take stronger measures we risk unintentionally fueling China's military and economic Ambitions at the expense of our own National Security Mr mirat taka how is China leveraging Venture Capital investments in SBI are funded companies to gain access to sensitive technology and what steps can Congress
▶ 1:12:52do to prevent this by the virtue of uh innovators the way the companies are set up nothing is classified yet so it's very easy if a CCP Affiliated investor puts even a tiny amount of capital in not just as the investor themselves but even as one of the limited partners the fact that they have any affiliation or access to the company means that they can start collecting on the people in it and there was an example brought up by the ranking member of the committee
▶ 1:13:23on Chinese Communist Party earlier which which is American superconductor Corporation where exactly that happened all they needed was access to the company Personnel then it goes to a department in the pla that does Target packages finds out who has access who's the most vulnerable whose vices aren't in check and then they send pla 2 which is Chinese Communist James Bond they go in and they flip the Target and are able to extract what it is uh that they're looking for but by virtue of of just having access to the individuals some of the companies we see are targeted
▶ 1:13:53through Cold War era tactics break-ins and we mean like 11 cars are broken into seven laptops are stolen all for a new Energy company their Executives travel is all marked and prepared for when they arrive so it's everything from from grooming the target it's very pleasant to old style legal activity as president Trump says uh they're ripping us off and unacceptable the SBI sttr programs are critically are critical to ensuring small businesses Remain the driving
▶ 1:14:23force of American innovation however we must continue strengthening them by reducing bureaucratic barriers enhancing security protections and improving Pathways to commercialization this is about maintaining our Competitive Edge while safeguarding taxpayer Investments and I look forward to working with my colleagues to ensure these programs continue to serve America's best interest Mr Cher yield back gentlemen yields back on now recognize Mr McGarvey from the great state of Kentucky for five minutes thank you very much
▶ 1:14:53Mr chairman and and this is something that we've seen firsthand in my district for a long time uh I want to talk a second about my part of my district in Louisville called rubbertown and this really came from in in the war in World War II in the 1940s we noticed a severe lack of synthetic rubber available to our troops and and located massive uh factories in Louisville Kentucky where almost all of the synthetic rubber used during the war came from a small neighborhood right there on the Ohio River
▶ 1:15:23throughout that war we saw synthetic rubber nuclear fishion radar cryptography so many other technologies that were highly classified uh and classified advancements like those that came out of sbir and sttr programs today are much more difficult to patent due to their sensitive nature and we know exactly what we knew during World War II that we are in a strategic power competition with adversaries overseas in 2021 the US National Security Commission for artificial intelligence reported to Congress
▶ 1:15:54and the president that for the first time since World War III America's technological dominance the backbone of our economic and military power is under threat Miss Macky you stated that Innovation is critical to dod's efforts to outpace China and other near peer competitors but we also know that Contracting at DOD can be especially difficult for small businesses can Congress improve how the SBR program provides a pathway for small businesses into government or provides onramps to
▶ 1:16:25yeah I think I'd answer that with two statements the first is absolutely we can do more to make sure that there's a consistency and how we engage with component Tech insertion of innovation into the Contracting process the second piece that I'd put out is this whole infusion of capital excuse me is really important to high-tech innovators to small business startups I love this trusted Capital initiative we had for a while I think it's really important my my oldest is starting a business and as she is very
▶ 1:16:55interested in getting VC from American Capital it's not easy to figure out what's what so I think one of the things we can do is help with the Contracting and I think we can also help with the Department of Defense articulating who is trusted capital and how do you know how to engage with trusted capital and just on those Capital guidelines what would you recommend along that front specifically I would recommend a lot of the work that the sbaa and office of strategic Capital just finished around how do you identify uh investors that are American owned and
▶ 1:17:25intend to stay American-owned and I think probably Cyrus could give you some more specific examples on that but from an industry perspective as a small business owner that would be so helpful even as a mature business owner it would be helpful to me but as a startup it would be really helpful yeah because if you're starting up it's it's it's difficult to untangle all that yourself and then of course you can I'm just saying there's a few things you're thinking about right yeah just there's a few things going on just thank you I appreciate that a lot uh Mr Glover want to ask you a question the current Administration is targeting budget cuts for agencies like NIH and the NSF
▶ 1:17:56who host these SB programs would these Cuts make it possible to fund the necessary security advancements we need to combat the IP theft we're talking today yeah it it will be a significant problem we have led the world in Innovation because we've spent money on it but other countries are now spending more money proportionately than we are uh even France has a a program to to to fund
▶ 1:18:26transition Technologies uh we're getting left out and if we take a serious step back on that not only will health and safety be be a challenge but also our defenses will not not be as strong and sufficient research needs continuity it needs consistency and when you make it erratic and uncertain then you lose a generation of people who simply decide that the US is not the place to develop their technology we've gotot lot of people who've come to America to develop
▶ 1:18:57their technology and you just look around you you find them everywhere and that's we lose if we lose that leadership role it will be a long term and cutting things right now and making it erratic just delaying contracts for months when you don't have the cash flow we're going to lose companies and those companies won't come back no or they'll turn somewhere else to get the money yeah and I I think when you talk about us spending less uh that that's really important I would say also invest investing less because there is a return on
▶ 1:19:27investment for what we're talking about here Bo both in the economic impact it has in our country and of course on the Strategic importance that that it maintains over our adversaries um I am nearly out of time uh but I think I do want to point that that Innovation that investment Innovation is Paramount to our success as a nation uh and the sbir and St programs are core to that American innovation Mr chairman I yield back and uh now recognize Mr Alfred from the great state of Missouri for 5
▶ 1:19:57minutes thank you Mr chair uh thank you ranking member of vasqu for holding this important hearing today and thank you all for being here on your own time and own dime I appreciate you coming in uh today's hearing is focused on the sbir and sttr programs two of the most important public private partnership programs Congress authorizes these programs help small businesses Access Capital a vile issue that constrains growth additionally these programs spur Innovations and American Ingenuity is why our nation laps the world and new technologies and these programs are
▶ 1:20:27key pillar in supporting small businesses that create new products while these programs are important to American innovation the Chinese Communist party also finds it important for their great Innovation stealing the intellectual property of Americans according to a 2021 DOD study on SBI our programs nearly all cases show that communist China not the US is the ultimate beneficiary of DOD and other US Government research Investments with
▶ 1:20:57both sbir and SD's authorizations expiring in September of this year I look forward to working with my colleagues to make sure these programs remain pillars of American innovation want to start with you Cyrus thanks for being here and thank you for letting us call you Cyrus what Safeguard should this committee consider when reauthorizing this I know you all have said it needs to be a permanent reauthorization to make sure that the influence the Espionage and theft of intellectual property from the CCP is reduced
▶ 1:21:28or if we could eliminate it would be great um we've already just by Air Force and space force actions alone have changed the American innovation landscape they realize that if they have CCP Capital even Affiliated they will be prohibited from doing work with the Department until it's sanitized the other branches of service and every agency that gives uh or Awards sbirs and STS should have folky or foreign ownership control and influence due diligence team
▶ 1:21:58that is as effective as what the Air Force has most agencies haven't even started building a team and there are only really four and a half functional teams being generous for who is actually doing the vetting once the innovators realize this is a real hurdle to reaching US Government funding they will act immediately before they go to bed that night once they realize this is reality they will change on the dime innovators know how to Pivot and and they have to accept it as reality the cers sitter extension act has done that ndaa 23 has done that the
▶ 1:22:28committee on the Chinese Communist party has done that and they've made it real for our Innovation uh industry one of the issues though with the due diligence teams is they are required but no resources are provided that's like asking the agency to give me everybody who doesn't have something real going on and so this is a low priority Mission well I'm also honored to be on the Appropriations Committee I'm not on defense but uh uh I knew I do know that this is important and this investment if you're talking about resources to fund uh these uh programs that
▶ 1:22:58are going to root out uh this uh these things are actually hurting America hurting our Innovation and threatening our national security so uh I I'll be having a talk with the the chair of uh defense approaches uh Mr Calbert about this and and seeing what direction we could head uh right across the hall here I I want to talk with you a little bit more Cyrus about China its influence in our universities uh the University of Missouri Kansas City was just in my office this week they're trying to create a defense
▶ 1:23:29Corridor they have a a skiff even built on campus they're working with drone programs critical Min mineral uh processing uh trying to make the Kansas City area and down into my district really a defense Corridor uh H how should universities be looking now because the Chinese students are here uh how do they get here in the first place and then what safeguard should we put in place to make sure that Espionage is not taking place
▶ 1:23:59the Chinese student scholar associations are run out of the Chinese consulates all over the United States when Chinese students used to come to America in the 90s and early 2000s they would integrate with the US population they would have boyfriends and girlfriends who are American they would fall in love with America and they would go home with pro-american sentiments nowadays Chinese students are kept in these little thought ghettos managed by the Chinese student scholar associations they are given weekend activities where they're indoctrinated it's not far from Iran's besiege and how they do Grassroots
▶ 1:24:29indoctrination and we train them with the latest education and then we send them home no more American than when they arrive and they are members of families that have favorable status with the CCP if not CCP members outright correct they have to be in good standing to come here sir yes uh just a point of clarification Whitman Air Force Bas some of the B2 stealth bomber home of the B21 soon the Raider is 10.8 mil from the University of Central Missouri they have a small number five to six Chinese students uh they say it's not a threat but we have to be
▶ 1:25:00vigilant and aware uh without uh damaging the reputation of innocent people here to gain education thank you and I yel back chairman y's back I now recognize Mr cisos from the great state of California for five minutes thank you Mr chairman and uh thank you to all the witnesses for being here today um I'm going to get right to the questions uh Mr Glover political reported that 20 % of the SBA Workforce will be cut by Mr musk and and Doge um
▶ 1:25:30you who knows what other Cuts as far as Financial may come along that way as well uh this threatening firing and forcing uh resignations of dedicated civil servants at the SBA and cutting their budget are at any agency that admin administers sbir sttr programs help small businesses and how does it hurt the the programs overall I had the uh the privilege of working with vice president Gore's Reinventing government initiative in the Clinton Administration they
▶ 1:26:00cut 300,000 jobs but they did it very carefully and they looked at it very meticulously and took several years to do it and they did bring down the you know the the the the expenditures they did it carefully and wisely we didn't hear screams or shouts from the employees being have being unfair um uh terminating people with virtually no notice not allowing them to um plan run their
▶ 1:26:30future uh is is is is is a challenge we we we see cuts that without thinking about it when you cut R&D uh budgets you're going to end up getting less Innovation you're going to end up the the inventors are going to look somewhere else for money and and as I've been told they will look wherever they have they spent their whole life devel veloping this technology if they can't get the money in the United States they will get it somewhere else so it is a real
▶ 1:27:00challenge it is a real problem and it should be done carefully and precisely um along that line as well um there's a a company a small business that's doing some very Innovative stuff around solar panels and and making them more efficient um but the amounts that we're paying here I believe it's like 50,000 Phase 1 250,000 Phase 2 and then later on is just over a million dollars um they haven't really sought any of this funding
▶ 1:27:30to help them along the way because it's just not really sufficient enough and they've had to get outside funding uh in order to help them and to do the Innovation that they need to so is are these programs suited right are the amounts that we are paying right now are they sufficient enough is there things that we need to look at to increase them to innovate technology the amounts are 100 to 250,000 some agencies have gone below that uh like the Air Force but but everybody else is pretty much 100 to 250
▶ 1:28:01uh and the F funding can go up to $3 million uh if you do things right and even higher than that with SBA specific approval we look at the balance the situation of how do we fund do we give more at Phase ones and early own Awards and less phase twos and what we've had is the National Academy of Sciences looking at this program and they've looked at it to balance that and they say we've got balance about right that was four years ago I haven't looked we haven't looked at it recently but
▶ 1:28:31there is some flexibility so the agencies can go up or even down if they choose to but by and large it it it it's if we can get phase three working right like GSA did we added two billion dollar of phase just because you changed the procedure of how you did Contracting and they've got even better program on the Shelf we can make that huge difference and how that works all right thank you uh Miss McKay
▶ 1:29:01uh Congress gave the United States Special Operations Socom um a special Authority in 2001 2021 to do business to business transactions and FY 23 their average time to production uh decision from the initial uh topic enhancement to the award as follows as in phase three is developed from five years to 18 months now while soc's approach can't be used for all sbir programs how can we support agencies in moving Innovations
▶ 1:29:31through this process faster than the current timeline yeah that's a great example I love what so commented with that and I think that when we look at this we need to understand it's not the small business innovator it's not the high-tech company that's slowing things down it's the processes that we have in place I think a first step would be to approximate some of what we did with Socom as a pilot program within the other spr programs but it's not just within the spr program and this is the point that I think is important for us to think about it's within
▶ 1:30:02that R&D world that funds it but it's also within the acquisition world that acquires it that does the follow-on testing so I think if we were to encourage Pilots of two groups working together more effectively the way Socom has the ability to to bundle that together you have um an ability to get something over the valley of death because there's someone to receive it on the other side and also to sort of build that bridge for you as you come over all right I yield back thank you gentlemen yelds back I now recognize Mr Muer
▶ 1:30:32from the great state of Pennsylvania for five minutes well I thank you very much Mr chairman and thank you to our Witnesses uh this is uh very informative and important hearing appreciate it very much you being here um so uh Dr Marinelli you discussed your company's development of technology to extract Rare Earth minerals critical components for satellites data center another technology super important uh from coal ash piles love that we got a little bit of coal ash up up in
▶ 1:31:02my my district to say the least uh we're working on it in in this same manner so the sbir program uh has assisted you in developing this technology and uh maybe you can expand on why you believe a um uh how it's helped you so this started out as a a little idea experiment um we started as a kind of Beaker scale laboratory type experiment to see if we could extract reare earth from Kash it turns out that technology is based on the same
▶ 1:31:32process that you used to extract uranium and plutonium was developed during the second world war we adapted it to this purpose uh we received SBI funding then to bring it to a larger scale and to work through some of the details of it uh and finally went to uh doe and and dod's ibass program um where we were able to get funding to build a pilot plan actually at uh winter Water Systems in Sharon Pennsylvania did they Sharon okay great they initially find you or did you find them
▶ 1:32:02uh we went out and found them uh but we and we we worked very closely with both DOD and doe in that proc the first time is easiest right because once you're once you're in once you have contact it's far easier the getting getting through is the most difficult part certainly but you've got to also show success just like with anything yes um and and then uh it turns out that Appalachian coal is actually rich in rare earth is one of the things that we we learned and and uh working with Senator Shelby before he retired uh we were able to get an appropriation to build the
▶ 1:32:32next scale plant uh down in Alabama okay good well uh contact me we got you know skookul County and we we got the best anthros site and we've got all these those rare Earths with within our our Ash So within our com Banks and got we're certainly willing Tove those that we're working on Excavating thanks um uh Mr Mera Mara um well first off thank for your service sir appreciate you very much um so from your
▶ 1:33:02experience uh your methods uh what your discussions on China uh very serious uh collecting sensitive uh IP uh from sbir funded small businesses um now this sounds like it's rampant it sounds like it's targeted sounds like they're targeting sbir potential businesses for the SB fund now it's $100 million right that's a lot of money but that's not enough to create
▶ 1:33:33a uh a whole Espionage ring uh is their main point not just accessing the money but also accessing the the mothership if you will uh that's that's doing the Contracting so uh to my knowledge no to my knowledge they're very focused on the innovators it's not the amount of money everybody is seeing in cber funded uh companies Us in uh investors Chinese investors the receipt of a cber tells the investor that there's a differentiator
▶ 1:34:03whatever it is it doesn't matter if they like the program or not but this is a company that somebody in the government vetted they believe it will be effective so it attracts both good and bad investment but that is for the technology itself and we'll see a lot of early stage funding where a CCP investor will try to get in at the preed stage diss their cash across the board so they can find or keep an eye on most of the industry and then you see what Rises up and that's what they'll focus on okay um
▶ 1:34:33we had a reauthorization 2023 uh maybe you could talk about some of the improvements did you like what was done uh particularly from a foreign adversary security standpoint or just from an access standpoint as well as uh it being better known by those who may benefit by this program uh this was a watershed event sir and and thank you for asking about it um it legitimized the mission for keeping CCP investment out of our equities
▶ 1:35:04it became real once it was codified and because we had two laws or another law and an executive order on top of it in in and it takes about two years for for the industry to accept it but as of February of 24 they weren't certain if this was a real requirement the denials became more publicized over the summer by December of 24 they our innovators are trying to get in front of it and make sure that they self- sanitize all right thank you very much I yield back Mr chairman thank you all gentleman he's back I now
▶ 1:35:34recognize Mr Tran from great state of California for five minutes thank you Mr chairman thank you uh thank you ranking member thank you and welcome to uh DC to our Witnesses uh Mr Glover in your testimony you rightly pointed out that America's basic science is a primary National strength but converting that that science to America American innovation and job faces increasing International competition unfortunately small businesses in SB sttr programs face the threat of the Chinese Communist Party
▶ 1:36:04stealing their intellectual property and claiming these technology uh technological innovations for themselves what role does sbir sttr program play in the American innovation ecosystem and how does the SB sttr program protect American innovation from issues like foreign ownership and patent St well we started off when when the founders created the SBR program we wanted to avoid having foreign countries benefit from this so we put requirements
▶ 1:36:34in the law that said it has to be a us company it has to be owned by US citizens 51% and it work has to be done in America well we thought we did enough well we did for probably 30 years but the last few years obviously the Chinese have outsmarted us and gone beyond that so it is it is a challenge um but again you you got to be careful not to Simply say no when anything happens up with and and and I think as Cyrus talked you you
▶ 1:37:04need to be able to fix the problems and we found some of the agencies do not tell the company what the problem is nor did they give it a chance to fix it the Department of Defense in their under secretary's memo made it very clear that you have to tell them what the problem is and give them a chance to fix it and unless you give them a chance to fix it that you're you're just shut shutting people down and they can never learn they can never get better so small business develops the technology study after study shows it it shows how great the SBR
▶ 1:37:35program is at developing it we've got to make sure that we do stop the foreign foreign um use of it it's not as common but the problem is it's in critical areas so like 99.9% of all sbrs are just fine but that one tenen of 1% may be giving away whole generations of of new techn critical next generation of something significant so it it's a real challenge thank you thank you for sharing that
▶ 1:38:06um Miss Macky uh DOD accounts for roughly half of the SBR sbir funding across the federal government but concerns have been raised that the application process is daunting for many new businesses working to break into the space in your experience is DoD doing anything to make this process easier for firsttime applicants I've seen that tremendous uptick in Outreach efforts for firsttime applicants I will tell you when we wrote our first proposal 20 years ago
▶ 1:38:36it was a lot easier to write that first proposal it was a lot easier to get started than it is now I think we really need to focus on have we overregulation I'm seeing better Outreach and I think there's plenty of work we could still do thank you uh Mr Glover back to you real quick uh the due diligence program to assess foreign risks has been successfully
▶ 1:39:06successful in identifying risks already but it can add another layer to an already complicated application process I'm a big proponent of streamlining the sbir and sttr programs while still protecting our research from foreign threats such as CCP so entrepreneurs can focus on building new Technologies and creating good paying jobs what changes can we make to enhance its Effectiveness without creating an over overly burdensome process for small businesses particularly new applicants as someone who still remembers the paperwork
▶ 1:39:36reduction act which was a big deal years ago and sort of been ignored uh in in in recent history uh it's a real Challenge and and the the first thing I think would be is quick and easy make model contracts and force every agency to say when you get an award here's your contract there's no reason they can't do that right now so that would simplify phase one it would take months out of this the cycle same thing for phase two same thing for phase three they do it with grants but
▶ 1:40:06they don't do it with contracts GSA proved that if you give a simple contract and you do it they they cut years out of the Contracting process for phase 3es and they got a program to do even more that hopefully gets finalized very soon but you you come up with some basic ideas but task the agencies to say tell us why there's there's a provision in the law that says report on standardization simplification DOD just ignored it um put some teeth
▶ 1:40:37in that make them do it but Force the agencies to come up with the solutions I can give you simple standard contracts with with the award that one saves time energy and effort The Proposal issue that's a challenge because you you you have to somehow tell people what you want thank thank you Mr Glover I truly appreciate it I yield back chairman gentleman yields back I now recognize Mr Downey from the great state of Montana for five minutes uh thank you uh Mr
▶ 1:41:07chairman and thank you all for um uh your testimony today uh first of all I'm I'm deeply concerned uh by China's ongoing efforts to exploit the sbir and the sttr programs to steal valuable us intellectual property and we need to protect these programs from subversion from our foreign adversaries uh I'm going to start out uh Mr Marika um thank you for being here today uh China weaponizes Talent recruitment programs like the Thousand talents
▶ 1:41:37plan to gain access to deeply sensitive information from American companies and research institutions um first can you give us an idea in your estimation of how effective these Talent recruitment programs have been you know and really how far they've Advanced China's technological capacity compared to ours yeah I've seen uh thank you for your question Congressman I've seen uh an individual that fled the PRC for having an active role during the
▶ 1:42:07tenan Square massacre in June 4th 1989 fast forward 30 years the united front work department has won him over and now despite the success he found in America he's helping the Chinese Communist Party from the United States they're highly effective at recruiting expats uh on us soil and in so what types of Technologies as China's Talent programs and IP theft efforts specifically targeted it's literally the same
▶ 1:42:37as the Air Force Space Force requirements it's you know new space capabilities new energy capabilities AI autonomy everything that we have as a priority is essentially seems to be mirrored by uh their priorities do you believe that uh that SB and TTR currently have the protocols in place needed for you know mitigating the impact of China's Talent recruitment uh strategy only uh Department of the Air Force they're the only ones capable thank you thank you for those answers uh I also want to discuss with you
▶ 1:43:07the impact of China's rapidly developing AI capabilities and the threat that it poses on our research security we've obviously seen some pretty interesting things recently um to what degree have China's advancements in AI development bolstered their ability to subvert us research programs including sbir uh when it comes to the Chinese they spend billions on perception management and they're constantly overselling their capability
▶ 1:43:37however often times International actors become sympathetic to what the Chinese are broadcasting uh that doesn't mean that their AI is on par or that it's actually legitimate with the story that they've us well thank you very much uh you know clearly we need to do more to protect the Integrity of our federally funded uh research programs and as the small business committee uh Comm uh develops the reauthorization of sbir and sdtr you I I look forward to making research a sec
▶ 1:44:08research security a top priority for this legislation and so I I thank you and I yield back gentleman yields back uh now recognize Miss Scolton from the great state of Michigan for five minutes thank you Mr chairman and thank you excuse me um as I fend off the last bit uh of this winter cold um thank you so much for our Witnesses for joining us here today uh for this incredibly
▶ 1:44:39conversation um the SBI program has been truly instrumental in supporting small businesses that drive technological innovation um I wanted to read just a little bit uh about the economic impact here because that is essentially what we are talking about right how how what is the value of the dollars that we are investing in this critical program um economic analysis of the program has routinely demonstrated its outsize
▶ 1:45:09importance in generating Innovations and economic growth between 1996 and 2020 99 new drug approvals 12% of all new drugs approved were developed by sbir sttr terms another study found that SBI Phase 2 awards show a return on investments between $22 and $33 for every dollar invested it's incredible a study from the National Cancer Institute found that for every dollar invested
▶ 1:45:39it resulted in $1 in commercial sales throughout its lifetime $829 SBI firms have gone public 2,120 have been acquired finally 10% of all Capital Investments go to sbir firms I like those numbers Mr Glover the SB program uh is is a GameChanger and critical for our economy how can we ensure that this program continues to support cuttingedge research and
▶ 1:46:10development especially in areas that are critical for us competitiveness such as health and National Security one I think we simply need to to reauthorize it make it permanent put consistency into the program two I think we need to have uh the the program simplified and streamlined and I think the government GAO G GSA proved it can be done so making the other agencies do it something
▶ 1:46:40you can require in legislation and monitor and make sure happens and I think quite frankly the program needs to be a lot larger something that this efficient is still at the 3% hasn't been increased since 2011 um if you know you should reward something that works and and we have it in in what 13 years 14 years and I I I don't I don't see us going in that direction uh right now in fact uh we
▶ 1:47:10recently heard uh staff recently heard from an SB recipient who was unable to access funding during the federal funding freeze enacted by Donald Trump and Elon Musk several weeks ago luckily due to a court order Court intervention right the administration wanted to stop it but we needed the judicial branch to step in uh NSF reopened their funding portal can you explain how this type of uncertainty impacts SBI recipients the one the thing small business
▶ 1:47:40needs most is is cash and they need money and they go out of business when they don't have it and they don't have a they often mortgage their house to make their technology work and so when you shut off the spet you basically say this technology will die or it will get funded by somebody else and we all know have heard today how much China is out there looking for it and and it that that's only outside of the SBI program it was rampant this is by
▶ 1:48:10no means the only place their Chinese are looking so it's critical and it it and it's painful do you let somebody spend their whole life developing technology get it to a level and then they win and then say oh sorry we are not doing it today we're not and we don't know when we're doing it doesn't seem like the chainsaw approach is working uh as as intended in in this particular context uh National Security depends on us being
▶ 1:48:41a little bit more uh precise here um one more thing Mr Glover the tax cuts pass in Trump's first term actually increased taxes on research and development making companies um advertise their research expenditures over five years rather than all at once do you have any thoughts on how that has impacted sbir firms um who usually have no other form of income um it it it it either has bankrupt them or put in into a bankrupt
▶ 1:49:11in effect state where they may not file bankruptcy but they don't have any money to pay anything you don't have money to continue when you're faced with getting a a a million dollar Grant and you got to pay taxes is on a million dollars but you only used to be you know it was 20% now it's 100% we're having a conference with with a bunch of people on uh tomorrow afternoon with companies all over the country we there it has been a horrible situation I was told when it got passed oh don't worry it's so important
▶ 1:49:42there's no way it won't get extended well guess what Washington is Washington hasn't been extended thank you thank you so much uh sir I I really appreciate it uh as a champion of fiscal responsibility these programs uh are critical I yield back lady yields back and now recognize Mr finstead from the great state of Minnesota for five minutes thank you chairman Williams uh and thank you for holding this important hearing today and thank you to our Witnesses for being here with us uh the district I have the honor to represent in southern
▶ 1:50:12Minnesota is home to several Innovative companies that provide cuttingedge products for the Department of Defense I uh also serve on the house armed services committee and um am happy to uh be serving here on the small business committee as well and I've had the uh pleasure and the opportunity of touring many of these businesses in my district and seen the incredible work that they have done and that they are doing uh with the funding they received for the from the SB and the sttr uh programs so
▶ 1:50:42I'm looking forward to the opportunity to work with my colleagues here on this committee and our expert witnesses to improve these important programs that help Drive Innovation and economic development M across our nation and and my district so Dr uh Marinelli uh somebody who has had great success utilizing SB program with the Department of Defense um maybe just a simple question and you've touched on it a little bit but just maybe kind of cut through the chase here so what challenges do sbir applicants face in
▶ 1:51:12the process and what changes can we make to expand access for this program for entrepreneurs and small businesses across the country so uh typically in the sbir program you're looking at the companies trying to do technology push often uh in concert with the S&T program managers in the federal government and you've got on the other side acquisition pull uh people working off requirements and I think probably the most important thing to do uh is to get them
▶ 1:51:42working in closer concert so there's a technology handoff there uh you you've really got to drisk the technology to the point where someone who's got you know a build ion dollar technology platform is willing to accept the risk of bringing that new technology and that takes money and it takes time so I think trying to make that match earlier in the program uh will help both the acquisition programs and make the companies themselves be more successful and perhaps attract that investment well as we work as as we work
▶ 1:52:13as a committee on the armed services uh to to Really strengthen our defense industrial base it's now more important than ever that we make this process easier and more of an A to B than a A to B to C to D and throwing a couple pipe wrenches in the process and a stable full of lawyers so I appreciate your uh your advice there uh misss Mackey uh as past chair of the National Small Business Association how difficult again maybe kind of cut into the chase how difficult is
▶ 1:52:43it for small business owners to understand the government's hoops and pipe wrenches and uh all of it the that they have to go through and Contracting in the SB opportunity with the SB opportunities how can we make it easier for these businesses to pursue these opportunities boy I can't emphasize enough what it was like the first time when we won an SBI and someone came in to explain how the federal government works and you know I'm an electrical engineer my partner is at Harvard Business School grad we have some gray matter that and
▶ 1:53:13we were just like what is this system how does it work and every time you think you learn more there's something more to learn so here's what I will tell you from our experience that I think would be helpful others that when we were able to get technology through it was because of an extended team I mean the small business has to be good the technology has to be good but you have to have government counterparts that are as Bill pointed out willing to take the risk we as an ecosystem need to celebrate those government counterparts that are willing to take the risk and it's the acquisition folks and it's the test folks we also had industry
▶ 1:53:43Partners who are willing to help us understand the sort of mentor us not in a formal Mentor Protege relationship but in a so I think what we need to do is celebrate the extended team and I think we need to offer them the benefit of the work that they do to help make that move forward I I'd be happy to think of specific examples but that's in general what I think would be good no I appreciate that uh your lived experience through this process is very helpful to hear your story but also uh you know I want to continue this dialogue as we look at how we can improve uh
▶ 1:54:13the process and really you know again I come from a the armed services committee approach of how do we strengthen the defense industrial base and how do we get some of these small and midsize companies scattered throughout Rural America to have a seat at the table and speak the same language that that government speaks and and how do we uh make that easier not harder so thank you for your time and for being here and Mr chairman thank you and I yeld back gentlemen uh gentleman Yi back I now recognize Mr oeli from the great state of Maryland for five
▶ 1:54:44minutes thank you uh Mr chairman uh thank you to all of our Witnesses today uh for your time and your testimony uh think that um just want to re-emphasize my colleague um representative Scolton and her her point of Roi why these programs are so important so I look forward to working with uh chairman Williams uh ranking member of Vasquez and all my colleagues here to prioritize especially what you all I think have pointed out is providing that certainty um making making the program
▶ 1:55:14permanent or at least more permanent in particular in addition to some other uh changes so thank you all for your recommendations today um um you know we know these have real life impacts um I know I'm aware of at least two businesses in my district uh that are direct recipients of uh this program in sbir one of which is a woman-owned business in Baltimore County and so I'm interested in also the long-term success not only the program but also the diversification of those who are participating in the program
▶ 1:55:45uh maybe uh perhaps Mr Marinelli um could you speak to us a little bit about enhancing the G graphic and uh demographic diversity of the program what can we do to bring in uh new applicants what's the most effective way in your mind to meet that goal so if you go back and look at the uh there was a 2014 uh National Academy study of the Department of Defense SBI our program and it showed that uh some of the underserved states in the program have some of the lowest
▶ 1:56:15per capita submission rates of proposals uh in the country and I think probably the most important thing to do in terms of divers participation is to get them introduced into the program make it easier for them to get in in some cases we we've seen as some of the states that have programs uh that help bring the program to uh uh small companies um are doing much better uh most of the uh new companies tend to form around universities and I think focusing on uh universities
▶ 1:56:45regardless of where they are uh is important in terms of kind of bringing them out and telling them here's a way for you to get funding uh under the uh sttr program we've sent I believe around $23 million in in uh funds to universities all over the country associated with that and I think that's another way to introduce them to the program is to show them the benefits of that funding and it also helps get the technology out as well as uh start to create that Workforce that
▶ 1:57:15you get on the defense side so I think all of those would be important things to do that's great I appreciate that anyone else want to M Macky so when we started in the space we didn't know anything about defense or federal and I had the bonus of being in Boston near companies like PSI that I could engage with and start to learn this piece what struck me as I worked through this ecosystem and a lot with the National Small Business Association and with ndi small business division small businesses help each other like there's this tremendous collegial Outreach that I
▶ 1:57:45watched a lot of the what people refer to as the coastal companies helping other small businesses I think we formalized that that would be tremendous I also think it's important that we help people that haven't submitted understand that they're valuable and that their experience would be valuable you don't recognize yourself as valuable or that you could even access this program that's great um I will yield back with that Mr chman thank you thank you all gentleman yields his time back uh I now recognize Miss goodlander from the great state of New Hampshire
▶ 1:58:15for five minutes thank you Mr chairman and really thank you to our Witnesses for being here today uh Dr Martinelli I wanted to begin with you I'm I'm very especially happy you're here um you know New Hampshire is home to psi facility and and wanted to give you the opportunity to talk a little bit more about the important work that you're doing in my home state so we uh we have a what we call the molecules to Motors program uh we started out with SB funded technology to create new propellants
▶ 1:58:45and new explosive materials and new components for that uh there's only so much you can do in a laboratory there are certain safety concerns associated with that and we needed to find a place where where we could scale up so to speak we actually identified a location in New Hampshire I'm not going to talk about where it is because of the kind of things that we do there uh but we've grown that now to a a 13 acre campus uh where we can both mix large quantities of of spe new propellants uh that will extend both the range and lethality of of
▶ 1:59:16uh us Weapons Systems uh we're about to invest $3 million in that facility uh in order to create all those special capabilities uh associated with with that uh conjunction with that we're going to invest about $6 million in our Massachusetts facility to start to create some of the non-explosive components that we then bring to New Hampshire so it's a very much a collaborative effort uh but it's also an extremely specialized capability uh we even have some large companies in the area
▶ 1:59:46that are coming to us saying can we use your facility because it's so hard to get into some of the government fac facilities to do that so I I think it's an important as an example of a specialized capability that only The Government Can fund uh and and we're happy to be bringing that to the area well thank you for that you know the the University of New Hampshire is home to the Foster program or the focus SB sttr teaching entrepreneurship and results program you know which has the basic mission of helping to guide
▶ 2:00:16small businesses through the sbir and sttr processes I I I I'd like to just ask our witnesses to speak a little bit more about how um these types of university-based programs uh have have been Force multipliers and really helped the SB and sttr programs and maybe starting with you Mr Glover the fast programs and Regional Outreach programs primarily with universities and Small Business Development Centers
▶ 2:00:47in many of the states they've done an excellent job uh but it's a challenge because quite frankly they don't have the culture in there and you will often find that thebr is the only real opportunity for a company in in certain areas certain rural areas uh have not States and know on that are not on the coast and it's a real Challenge and and we've seen them be successful and really do a great job but getting people to write proposals is critical issue because you can't win
▶ 2:01:17if you don't submit a proposal and the studies show that there's a direct relationship with a number of proposals submitted by state and the number of awards they win so I work a lot with the University of Massachusetts at LOL in their Outreach similar to the UNH Outreach and what I find really valuable there for spr companies is not only the Foster type of programs to teach you how to write a proposal but the depth of research and the the infrastructure
▶ 2:01:47that you can access to do different research pieces the other thing that I really like about what the umel system what they're doing with their Advanced research centers they're partnering with the industry so it's not just how do you get started how do you do the research but if I were to use a golf analogy my husband would be so happy I'm doing this if it's the swing through right it's where do you go well I guess I can't take that golf analogy any further I tried but but it's the swing through right and so I think it's universities and to Jerry's Point partnering also with industry for that that business model kind of
▶ 2:02:20understanding Dr martinell did you want to add anything sir I I mean I think uh one of the key things that we see is a lot of our new technology that that we bring into our company actually starts with the universities uh more often than not the the way we bring technology out of the universities is to actually hire the students um and then kind of the professors come along for the ride so I think it it's very critical uh some of our uuv programs we actually do with University of New Hampshire off the pier there we're working with one of the chemistry
▶ 2:02:50professors at unh uh on our energetics programs uh universities are critical here and we need to maintain their strength throughout uh this activity they're critical to the Future Workforce of the country well I appreciate that and I'm going to be fighting really hard for the critical funding and the certainty that we need for our small businesses and for our universities you mentioned the paperwork reduction act I just want to invite all of our Witnesses today any ideas you have about how to simplify and streamline these processes including
▶ 2:03:20the use uh for sbir uh of other transitional Authority really welcome all of your ideas uh because this is going to be critical to these programs really continuing to Leverage The the taxpayer dollars that they do in extraordinary ways so thank you I yield back Mr chairman gentle lady yields back now I recognize Miss Simon from the great state of California for her five minutes chair Williams I love it when you say the great state because I will remind you again it really
▶ 2:03:51is it's a lot warmer than DC sir in my eight weeks I want to thank you all for coming today and I just really had an a great time reading the materials and your testimony prior to this hearing and I like I believe everyone on this committee wants the United States to be first in Innovation there's no doubt about that um some of you may have heard because I keep talking about the amazing you crisper Lab at the University of California I visited last week and saw all these amazing students met
▶ 2:04:21our Nobel prizewinning professor and physician scientist at that lab they have proven they have cured sios cell anemia in one woman who will no longer have to spend nights away from her children spending tens of thousands of dollars every emergency room visit they are light speed ahead on finding treatments for ALS and really working with dementia patients to make their quality of life better this amazing lab with these brilliant young students
▶ 2:04:52really new lab technology it was sparkling and I think about ex Alexis and science Corp Alam county is an Innovation Hub where some of the most I will say brilliant folks in the world who yes are from the United States and some folks who have come across the world to study in our beautiful facilities to change the lives of folks I know this to be true I have told my story and I'll tell it every single day as a widow of a great man who died
▶ 2:05:22of cancer who was in a clinical trial Our Lives will forever be changed because we got a little bit of extra time because of great scientists who dedicated their lives to both the public sector and the sector I have a question and it might be a comment I am super concerned that in this moment maybe even right now there are folks who are being fired from the SBA there are folks who are being fired from doe
▶ 2:05:52in a Department Health how the hell are we going to facilitate more opportunity for innovators and researchers and folks who will literally change the world be it in 10 years they have an idea right now and if it is difficult in this moment to access small business Innovation research grants and resources and small business technology transfer resources if it's difficult now before the Slash and burning of staff
▶ 2:06:23and these critical departments who serve our innovators in small businesses we're talking about continuing resources for these folks well guess what if nobody answers the phone or no one's answering the inquiry on the website our folks are going to be left they're going to be left dry and as a result as a result of what is happening throughout the ad Administration we know if you talk to physician scientists if you talk to innovators if you talk to that
▶ 2:06:53young 26-year-old who's working at jentech working on a data model that I couldn't even fathom how complicated it was seeing it on a screen who's this close to that thing what's GNA happen children are going to die there's actually a family walking around the halls right now there's a young child who has a very rare disease very rare disease I'm hoping to meet them today the baby is about 3 years old waiting in for that next thing
▶ 2:07:24no one's answering the phone no one's reading the applications I cannot trust an AI algorithm to read an application that literally has the propensity and the opportunity to save a generation we got to do better I guess you know sir I I love all of your bios so inspired by your work thank you for your service may I could just pick and choose maybe Mr Glover and thank you so much for coming what's going to
▶ 2:07:54be what are the adverse effects of having low Staffing as again we're we're trying to push and we're talking about esta reestablishing resources for our innovators our scientists for our pharmaceutical Geniuses who are changing the way uh that for instance the elderly live out their last years and months if these folks can't get in touch with folks or there's decreased infrastructure what happens I I I don't know um and and uh
▶ 2:08:25you know we hope things always get better we're we're optimistic and and we hope things get better um but I I don't have an answer for you yeah well I appreciate all of you here and the work that you're doing and I yield back thank you so much for being here and I look forward to working with you all as we move forward and try to figure this thing out for our people thank you y back gentle lady yields back I now recognize Mr Jack from the great state of Georgia for five minutes well thank you Mr chairman and thank thank you to each witness for being here today innovation has long been
▶ 2:08:55the driving force behind America's Global Leadership whether in technology medicine or defense yet in an era of rapidly advancing Technologies and increasing Global competition we must continue to Foster an environment where American businesses particularly small businesses across each and every one of our congressional districts can Thrive um thanks to the chairman I serve as the chairman of the subcommittee on Innovation entrepreneurship and Workforce and I look forward to working with each and every one of you going forward uh to help strengthen the environment in which
▶ 2:09:25our small businesses can Thrive but um I I'd like to first start with Dr Marinelli if I could um I know you've had an opportunity a few times here today to to talk about a few suggestions but specifically the administrative complexity of applying to sbir and sttr programs favors those in my opinion with strong networks of Prior participants in your testimony you highlighted some great opportunities for the programs to increase participation and if you could just take a moment yet again to reiterate your suggestions and reducing the barriers
▶ 2:09:56to competing for these programs so I I think as as ml spoke uh you know I I my career started with the program 40 years ago and it was a much simpler process then the solicitations were simpler The Proposal formats were fairly common uh today I don't handle these directly anymore but it's bewildering to look at the different types of solicitations to different formats you need to respond to we get messaging all the time about changes in the
▶ 2:10:26solicitations that make it difficult for our staff to understand and we're a very experienced firm it makes it difficult for us to understand sometimes how to respond uh to some of these solicitations I can't imagine what it's like right now for a small company coming in uh we have unbelievable it requirements on ourselves these days uh we get uh a lot of uh attention to that uh I can't imagine a small firm being able to do many of the certifications
▶ 2:10:56anymore that would be required to continue on in the program very long so I I think there does need to be some recognition that there are people who aren't like us who H don't have that experience and and kind of a toned down version of the application process that would enable them to put their ideas forward I think that's probably very important wonderful thank you and uh Cyrus because as you noted we're not going to pronounce your last name after the initial um application my understanding
▶ 2:11:26is that small businesses need more support and transitioning through the multiple phases of the application process and a common Trend we're seeing of China's success in stealing American Technology comes from closing the funding Gap and directly supporting the scale up through small business investment given the challenges of private sector investment and long-term technology development within the US how can sbir be modified to help small businesses small manufacturers better overcome the capital crunch between phase two and three
▶ 2:11:56yeah if there's an increase in the dollar amount um I know a lot of innovators will not even bother applying for cbers because they believe the dollar amount is too low I think if it was moved up uh probably to to 2 million you would get a lot more buyin and some of the innovators believe that okay we will succeed commercially before we ever come back to the government and try to sell a service contract because the cber process is too cumbersome uh for them to apply wonderful I appreciate that I'm just going to close uh Mr chairman
▶ 2:12:27by uh noting something that I think does impact small business r large but we talk about the regulatory environment and some of these regulations that have been foed upon small businesses and previous administrations have had a deletar impact to their ability to to succeed and and tomorrow uh our house is going to uh vote on a congressional review act resolution led by my good friend Gary Palmer and uh myself and it's to repeal a regulation and rule that would affect a company in my congressional district it's um about tankless
▶ 2:12:57water heaters I know all my colleagues are tired of me uh saying it but uh just to share with and I I'll ask a closing question there was a regulation and a rule imposed on the noncondensing tankless water heater industry which just so happens to be completely manufactured in my congressional district that we're seeking to repeal tomorrow in our legislative body so if I can close close out with you uh ml it's it's not Germaine to the testimony today but when it comes to the regulatory environment could you just offer 30 seconds about what we as a small business committee can do to help improve the regulatory
▶ 2:13:27environment in which small businesses operate today I think I have a quick short answer for you I would recommend that you speak to the National Small Business Association they have a committee that focuses on regulatory buring on environmental and and would be directly related to this I think the and I say that because I think the best way you can come up with making it easier easier is ask the small businesses and nsba can give you that voice I think you need to ask across the board but I'd start with them I applaud the chairman for consistently providing us an opportunity to engage with small businesses and hear directly from yall I appreciate that recommendation
▶ 2:13:57I thank each and every one of you for taking the time to come up today to share with us some ideas to to better improve the environment in which you all Thrive thank you gent Neil's back I now recognize Dr Kelly Morrison from the great state of Minnesota for five minutes thank you Mr chair thank you for holding this hearing and thank you so much to our Witnesses for being here today sorry I'm all the way now down on the other end of the times it's great to see so much bipartisan consensus about the important role that sbir and sttr programs play in supporting American
▶ 2:14:28innovation thanks for taking the time to testify um Mr Glover in your testimony you mentioned that one of the strengths of the sbir and sttr programs is in its investment and Innovation across the country providing funds to small businesses and all 50 states my own home state of Minnesota has received nearly 3,000 Awards uh since the program began in 1982 ranging from Investments and unmanned ground robotic systems for DOD surveillance and reconnaissance to robotic greenhouse gas monitoring
▶ 2:14:58to measure the impacts of climate smart F farming practices to reducing energy usage of wearable devices through sleep science and formed algorithms demon demonstrating I think that great ideas and scientific breakthroughs can come from anywhere Mr gber could you elaborate on why it's important for the SBA to promote Innovation across the country how can we enhance the geographic and demographic diversity of program participants and how would increasing that diversity of applicants impact the
▶ 2:15:28competitiveness of the sbir and sttr programs SBA has been reaching out to try to do that and they have bus tours where they go to underserved States and try to get uh uh work with the universities work with those to do Outreach uh I I I think that that you know more needs to be done and we we have have to be careful because if we allow Venture Capital to be the selection criteria although it's illegal what we find is
▶ 2:15:59Awards some of the jumbo Awards especially just going to to a very few States so we've got to wait make sure that we don't let Venture Capital be the deciding factor of who who wins an award if they have you know matching money that was always prohibited because matching money meant the states in the middle of the country didn't have anybody to match with so we got to be careful about that and and and how that selection criteria goes uh we we looked at the super jumbo Awards and we found out
▶ 2:16:29that U out of$ 13 billion of venture capital some 7 billion before the awards 6 billion after 11 billion of that went to one state California so we got to be careful because obviously selecting those companies indirectly meant that it went to primarily one state and that was just not a good idea so we've got a make sure that we we look at that we don't want to choose B based on anything but Merit not Geographic because we don't want to get the
▶ 2:16:59second best technology for our war Fighters or for healthcare but we need do need to be um sensitive to that issue and and thank you for the question thank thank you for that answer um in the Army and DOD in general female casualties have a significantly lower survival rate than mail casualties um architecture technology Inc is an engineering company headquartered in my district that provides solutions to complex
▶ 2:17:29system problems last year it was granted an SBI award to address the gender survivability Gap by developing augmented reality that provides gender specific medical training to soldiers um Miss Macky I appreciate your testimony on how an SB and sttr programs have enabled small businesses to work in coordination with the federal government to provide Inu it and advancements in the defense sector could you speak to the SB and st's program's ability to address specific challenges or address issues
▶ 2:18:00for overlooked populations such as women in the military so I think I'd answer that in two ways the first is some years ago the Navy asked me to help them do some Outreach to underserved communities women and and ethnic and they said so EML you're a woman's CEO like how how would we have found you and I go well not the way you're looking and mostly because I wouldn't have recognized myself or our skill set is applicable to the dod so I'm sort of overgeneralizing to make a point
▶ 2:18:30so I help them figure out how to do Outreach outside of the Beltway and to different organizations but you have to give examples of how you're meaningful I think it would be the second point I'd make is I think it's really interesting on the geographic diversity to be thoughtful to how much Ingenuity we have in the center of the country I I work a lot in sustainment capabilities with the Department of Defense so figuring out how to make equipment continue to run to have longer remaining useful life to I I just feel like there's a lot of good
▶ 2:19:00ideas that might be on our Farms that those folks wouldn't think of themselves as technologists it might be interesting to consider how do we put the experienced companies that know how to write cber proposals together with some of the subject matter expertise to address maybe there's a program or some thoughtfulness we can do that really helps share and and network that kind of collaboration I love that answer thank you how how do you think permanently authorizing the sbir and sttr programs help ensure that small businesses can continue to bring cost effective and valuable
▶ 2:19:31Innovation to the Department of Defense General 's time is up thank you Mr chair thank you she yields back for being here for your testimony and and for appearing and sharing yourself with us uh without objection members have five legislative days submit additional materials and written questions from the witnesses to the chair which will be forwarded to the witness and I will say I hope you see that we there is some bipartisanship in this town and in this building
▶ 2:20:01and we're working on a lot of things together in this committee so I ask the witnesses to please respond promptly and if there's no further bsiness with without objection the committee is adjourned e