In good economic times and bad, there is one constant in America: Small businesses are always in the forefront of economic activity, whether fueling a robust cycle or serving as a catalyst for economic recovery.
Any action that has the potential to diminish or weaken small businesses should be met with real concern, if not alarm.
Consider that in Michigan, there are approximately 820,244 small businesses employing nearly 2 million workers.
That is why our small businesses, and those across the country, should be reaching for the alarm bell in light of a piece of legislation moving through Congress.
The issue is House Bill H.R. 1425, “Creating Jobs Through Small Business Innovation Act of 2011.” It should be considered a direct threat to small businesses because, if passed, it would make fundamental and harmful changes to the Small Business Innovation Research Program.
Congress established SBIR in 1982, and it has been widely recognized as one of the most successful federal programs funding research and development for small technological businesses.
Of the $2.2 billion allocated annually by the SBIR program, nearly $1.2 billion is allotted to the Department of Defense, which then awards the money to small businesses based on the proven viability of their technologies.
The DoD relies on this local innovation from small businesses across the country to keep the U.S. military forces safe and the best equipped to fight terrorism and protect national security.
With its own SBIR program, the National Institutes of Health fund innovation in biotechnology, biomedical engineering and clinical applications.
SBIR programs at the Department of Energy, the National Science Foundation, NASA and the EPA fund innovation to meet their mission requirements.
With these contracts, small businesses can create cutting-edge technologies – and jobs. More than 80,000 patents have been delivered by SBIR firms, which employ 1.5 million people.
If the contracts are like plasma to these companies, one could say H.R. 1425 would cut off the blood flow.
· It would eliminate the current two-phase application system. The SBIR program is currently broken down into two main phases.
Phase one is set up to fund proposed research and experiments. During this phase, firms must prove that a concept is viable, not wasteful or fraudulent.
Phase two is set up to award larger sums of money to those projects that have proven viability and are further along in the development stage.
The proposed legislation will allow businesses to arbitrarily bypass phase one, thereby allowing many businesses without sound technology and innovation to skip directly to the second phase, incurring severe waste.
(It would subsidize multi-billion dollar Private Equity and Hedge Fund firms, allowing them to participate at the expense of Main Street inventors, dampening the prospects of many small businesses competing for contracts.
Companies backed by millions of investment dollars could decimate small start-ups with limited access to capital. Nearly half of all NIH SBIR funds could go to large, deep-pocketed companies.
The application process would no longer be on an equal playing field. With the number of small business applications already at an all-time high and the percentage receiving funding at an all-time low, small Main Street business contracts will be shifted away from true small company entrepreneurs to giant Wall Street corporations.
(It would move the SBIR program away from being a merit-based, competitive program awarding the small businesses with the best technology.
A key section of HR 1425 would punish the most successful small businesses, and would force agencies to pick the second or third best technology in some cases simply because the best technology was developed by a company with too many awards.
(The program would be extended only three years, to 2014. This is simply too short an extension period for proper evaluation of the program’s progress.
Just as small business owners play a vital role on the economic side in America, so, too, can they exert considerable influence in this matter by picking up the phone.
They should tell their representatives in Congress to vote to amend House Bill HR 1425 and pass a responsible, pro-small business bill, one that helps small businesses instead of one that subsidizes VCs and Investment Bankers.