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Fostering American Innovation: Insights into SBIR and STTR Programs (House Small Business Committee hearing, February 26, 2025)

Summary

Transcript of the House Committee on Small Business hearing Fostering American Innovation: Insights into SBIR and STTR Programs, on February 26, 2025, published as Small Business Committee Document Number 119–003. Chairman Roger Williams and Ranking Member Nydia Velázquez gave opening statements. Witnesses were William Marinelli of Physical Science Inc., ML Mackey of Beacon Interactive Systems, Cyrus Miryekta of Ravelin US, and Jere Glover of the Small Business Technology Council. The appendix carries written questions from Representative LaLota to Miryekta and Marinelli with their responses, and a waiver request letter.

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“Fostering American Innovation: Insights into SBIR and STTR Programs (House Small Business Committee hearing, February 26, 2025).” Original at www.govinfo.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/fostering-american-innovation-insights-into-sbir-and-sttr-programs-hou-56e7a6e2d8/, SHA-256 d64b495b0080475b492b1d8c7b8b869518ddd5925eba8d96b309490f8a8bfc62.

Full text

                                                                       FOSTERING AMERICAN INNOVATION: INSIGHTS
                                                                            INTO SBIR AND STTR PROGRAMS


                                                                                                      HEARING
                                                                                                             BEFORE THE


                                                                            COMMITTEE ON SMALL BUSINESS
                                                                                   UNITED STATES
                                                                             HOUSE OF REPRESENTATIVES
                                                                                    ONE HUNDRED NINETEENTH CONGRESS
                                                                                                           FIRST SESSION


                                                                                                        HEARING HELD
                                                                                                       FEBRUARY 26, 2025




                                                                                    Small Business Committee Document Number 119–003
                                                                                      Available via the GPO Website: www.govinfo.gov




                                                                                               U.S. GOVERNMENT PUBLISHING OFFICE
                                                                        58–905                             WASHINGTON : 2026




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                                                                                        HOUSE COMMITTEE ON SMALL BUSINESS
                                                                                             ROGER WILLIAMS, Texas, Chairman
                                                                                                  PETE STAUBER, Minnesota
                                                                                                  DAN MEUSER, Pennsylvania
                                                                                                   BETH VAN DUYNE, Texas
                                                                                                      JAKE ELLZEY, Texas
                                                                                                    MARK ALFORD, Missouri
                                                                                                    NICK LALOTA, New York
                                                                                                  BRAD FINSTAD, Minnesota
                                                                                                     TONY WIED, Wisconsin
                                                                                               ROB BRESNAHAN, Pennsylvania
                                                                                                      BRIAN JACK, Georgia
                                                                                                   TROY DOWNING, Montana
                                                                                        KIMBERLYN KING-HINDS, Northern Marina Islands
                                                                                                   DEREK SCHMIDT, Kansas
                                                                                         NYDIA VELÁZQUEZ, New York, Ranking Member
                                                                                               MORGAN MCGARVEY, Kentucky
                                                                                                HILLARY SCHOLTEN, Michigan
                                                                                               LAMONICA MCIVER, New Jersey
                                                                                                   GIL CISNEROS, California
                                                                                                KELLY MORRISON, Minnesota
                                                                                                GEORGE LATIMER, New York
                                                                                                    DEREK TRAN, California
                                                                                                 LATEEFAH SIMON, California
                                                                                               JOHNNY OLSZEWSKI, Maryland
                                                                                                  HERB CONWAY, New Jersey
                                                                                            MAGGIE GOODLANDER, New Hampshire

                                                                                                LAUREN HOLMES, Majority Staff Director
                                                                                                 MELISSA JUNG, Minority Staff Director




                                                                                                                      (II)




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                                                                                                                CONTENTS
                                                                                                             OPENING STATEMENTS
                                                                                                                                                                                             Page
                                                                  Hon. Roger Williams ................................................................................................         1
                                                                  Hon. Nydia Velázquez .............................................................................................          3

                                                                                                                        WITNESSES
                                                                  Mr. William Marinelli, President and Chief Executive Officer, Physical
                                                                   Science Inc., Andover, MA ...................................................................................               8
                                                                  Ms. ML Mackey, Chief Executive Officer and Co-founder, Beacon Interactive
                                                                   Systems, Arlington, VA .......................................................................................             10
                                                                  Mr. Cyrus Miryekta, Chief Executive Officer, Ravelin, US, Fairfax, VA ...........                                           12
                                                                  Mr. Jere Glover, Executive Director, Small Business Technology Council,
                                                                   Annapolis, MD ......................................................................................................       13

                                                                                                                         APPENDIX
                                                                  Prepared Statements:
                                                                      Mr. William Marinelli, President and Chief Executive Officer, Physical
                                                                        Science Inc., Andover, MA ............................................................................                42
                                                                      Ms. ML Mackey, Chief Executive Officer and Co-founder, Beacon Inter-
                                                                        active Systems, Arlington, VA .....................................................................                   51
                                                                      Mr. Cyrus Miryekta, Chief Executive Officer, Ravelin US, Fairfax, VA .....                                              56
                                                                      Mr. Jere Glover, Executive Director, Small Business Technology Council,
                                                                        Annapolis, MD ...............................................................................................         63
                                                                  Questions and Answers for the Record:
                                                                      Question from Hon. LaLota to Mr. Miryekta and Response from Mr.
                                                                        Miryekta ........................................................................................................     81
                                                                      Question from Hon. LaLota to Mr. Marinelli and Response from Mr.
                                                                        Marinelli ........................................................................................................    83
                                                                  Additional Material for the Record:
                                                                      Waiver Request Letter .....................................................................................             84




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                                                                          FOSTERING AMERICAN INNOVATION:
                                                                       INSIGHTS INTO SBIR AND STTR PROGRAMS

                                                                                          WEDNESDAY, FEBRUARY 26, 2025

                                                                                           HOUSE OF REPRESENTATIVES,
                                                                                        COMMITTEE ON SMALL BUSINESS,
                                                                                                                  Washington, DC.
                                                                    The Committee met, pursuant to call, at 10:01 a.m., in Room
                                                                  2360, Rayburn House Office Building, Hon. Roger Williams [chair-
                                                                  man of the Committee] presiding.
                                                                    Present: Representatives Williams, Stauber, Meuser, Alford,
                                                                  LaLota, Finstad, Wied, Jack, Downing, King-Hinds, Velázquez,
                                                                  McGarvey, Scholten, Cisneros, Morrison, Latimer, Tran, Simon,
                                                                  Olszewski, and Goodlander.
                                                                    Also Present: Representatives Moolenaar and Krishnamoorthi.
                                                                    Chairman WILLIAMS. Before we begin, I will ask Mr. Stauber
                                                                  to open us in prayer.
                                                                    Mr. STAUBER. Dear Lord, thanks for this wonderful day that
                                                                  you have given us to provide wisdom to each and every one of us
                                                                  to live this day in your name. And we also pray for our families
                                                                  that are back home. We pray for their safety.
                                                                    We pray for our staff and for our colleagues on both sides of the
                                                                  aisle. As we work today on behalf of the American people, know
                                                                  that the United States of America is a great country when we work
                                                                  together.
                                                                    In your name we pray, Amen.
                                                                    Please join me in the pledge of allegiance.
                                                                    I pledge allegiance to the flag of the United States of America,
                                                                  and to the Republic for which it stands, one nation, under God, in-
                                                                  divisible, with liberty and justice for all.
                                                                    Chairman WILLIAMS. Good morning, everyone.
                                                                    And I now call the Committee on Small Business into order.
                                                                    Without objection, the Chair is authorized to declare a recess of
                                                                  the Committee at any time.
                                                                    And prior to opening statements, I ask unanimous consent to
                                                                  enter a letter into the record from the House Select Committee on
                                                                  the Chinese Communist Party requesting to waive on today’s hear-
                                                                  ing.
                                                                    Without objection, so ordered.
                                                                    Pursuant to the rules of the House and the rules of the Com-
                                                                  mittee, I ask unanimous consent that Members of the House Select
                                                                  Committee on the Chinese Communist Party be waived on to the
                                                                  Committee for the purpose of making an opening statement and
                                                                  asking questions.
                                                                    And without objection, that is so ordered.
                                                                                                                      (1)




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                                                                                                                      2

                                                                     I now recognize myself for my opening statement.
                                                                     I want to welcome everybody today to the hearing, Fostering
                                                                  American Innovation: Insights into SBIR and STTR Programs.
                                                                     I want to thank our witnesses today for being here. And many
                                                                  of you traveled a long way to get here, and we are 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. The ability to take an idea, develop it into
                                                                  a product, and bring it to the market drives innovation and eco-
                                                                  nomic growth, strengthening our nation’s competitiveness.
                                                                     For over four decades, the SBIR and the STTR programs have
                                                                  fueled American innovation by providing early stage funding to
                                                                  small businesses, allowing them to develop cutting-edge tech-
                                                                  nologies that strengthen our economy and support our military.
                                                                  From lifesaving medical advances to next-generation defense capa-
                                                                  bilities, these programs have empowered main street to turn ideas
                                                                  into reality for the government and the private sector.
                                                                     The SBIR and the STTR programs channel federal R&D dollars
                                                                  in phases to small business, enabling the development of innova-
                                                                  tive ideas that align with the 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 businesses propose innovative solutions to meet an
                                                                  agency’s mission.
                                                                     Prominent companies, including Qualcomm, 23andMe, and Bose,
                                                                  began as small businesses that leveraged the SBIR program to be-
                                                                  come 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
                                                                  while remaining free from foreign exploitation. In today’s hearing,
                                                                  we will examine these programs’ challenges and addresses and pro-
                                                                  pose unresolved solutions from the last reauthorization.
                                                                     SBIR and STTR have long supported American ingenuity, yet
                                                                  these vital programs still face growing threats. The CCP continues
                                                                  to exploit the SBIR and the STTR programs, siphoning taxpayer-
                                                                  funded research back to China. This undermines American
                                                                  innovators’ intellectual property rights and jeopardizes our nation’s
                                                                  national security.
                                                                     The due diligence program established in the last reauthorization
                                                                  continues to face limitations in effectively preventing CCP infiltra-
                                                                  tion. At the same time, small businesses participating in these pro-
                                                                  grams face significant barriers in transitioning from research to
                                                                  commercialization, 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 ulti-
                                                                  mately accomplish the program’s goal of fulfilling R&D needs.
                                                                     Ensuring these programs are awarded by merit after rigorous
                                                                  competition will continue driving the best innovations to the top.
                                                                  Innovators thrive in an environment where competition reigns su-




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                                                                                                                      3

                                                                  preme, where they are free from limitations or caps on their suc-
                                                                  cess.
                                                                     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, Ms. Velázquez.
                                                                     Ms. VELÁZQUEZ. Thank you, Mr. Chairman, for calling this
                                                                  hearing to discuss one of our most important priorities of the 119th
                                                                  Congress: reauthorization to 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 effec-
                                                                  tive engines for driving innovation. These programs channel just a
                                                                  small percentage of extramural R&D budgets into highly competi-
                                                                  tive awards that fuel cutting-edge discoveries, create new indus-
                                                                  tries, and drive economic growth.
                                                                     At just under $5 billion annually, these programs have had an
                                                                  outside impact on our economy, helping to launch companies like
                                                                  iRobot, Sonny Care, 23andMe, and Qualcomm. They have played a
                                                                  role in game-changing advances. From second-generation LASIK
                                                                  eye surgery to critical mineral recycling that reduces our depend-
                                                                  ence on foreign sources, to advancement that helps us investigate
                                                                  the inner workings of the human brain, to studying disorders like
                                                                  Alzheimer’s and Parkinson’s.
                                                                     More recently, an SBIR-backed company, Boom Aerospace, whose
                                                                  CEO testified in this room 3 years ago, conducted a test flight that
                                                                  broke the sound barrier over the Mojave Desert. With the help of
                                                                  SBIR and the private capital it has helped attract, our countries’
                                                                  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 that are not permanently authorized.
                                                                  If Congress fails to act before its expiration on September 30, a
                                                                  lapse in the program will have severe implications for American
                                                                  entrepreneurs. Even a short-term disruption would deliver a sub-
                                                                  stantial setback for America’s innovation pipeline.
                                                                     Meanwhile, China is aggressively investing in its own R&D eco-
                                                                  system. Just last month, the release of the DeepSeek AI model rat-
                                                                  tled global markets, exposing the complacency of the dominant U.S.
                                                                  firms that have grown too comfortable with their market power.
                                                                     The SBIR program is uniquely positioned to counter this stagna-
                                                                  tion, funding nimble, emerging businesses to challenge entrenched
                                                                  tech giants and restore competition 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, a bipar-
                                                                  tisan 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 permanent, giving
                                                                  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.




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                                                                     Second, we must expand the programs, allowing for greater agen-
                                                                  cy allocation over time and growing the volume of small business
                                                                  grants and contracts available. This will bring more 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 III of the program.
                                                                     Finally, we must continue protecting small business firms from
                                                                  foreign threats that seek to undermine our national security.
                                                                     These are just a few of many priorities we can consider.
                                                                     Thank you to all the witnesses for appearing before us today, and
                                                                  thank you to the Chair and Ranking Member of the Select Com-
                                                                  mittee on the Chinese Communist Party for joining us. I look for-
                                                                  ward to your testimony.
                                                                     I yield back.
                                                                     Chairman WILLIAMS. The gentlelady yields back.
                                                                     I now recognize the distinguished Chair of the House Select
                                                                  Committee on the Chinese Communist Party, Chairman John
                                                                  Moolenaar from the great State of Michigan, for his opening re-
                                                                  marks.
                                                                     Mr. MOOLENAAR. Thank you, Chairman Williams and Ranking
                                                                  Member Velázquez, for holding today’s hearing on the small busi-
                                                                  ness innovation research, as well as the small business technology
                                                                  transfer programs.
                                                                     And I want to thank you for allowing Raja Krishnamoorthi and
                                                                  I to waive on to this important meeting.
                                                                     The SBIR and STTR programs have long been instrumental in
                                                                  fostering American innovation, allowing small businesses to devel-
                                                                  opment cutting-edge technologies that serve both the public 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 pro-
                                                                  grams today, we must also acknowledge the serious threats they
                                                                  face; most notably, the Chinese Communist Party’s persistent ef-
                                                                  forts to exploit these programs for its own military and economic
                                                                  gain.
                                                                     China has systematically targeted American innovation using
                                                                  tactics like talent recruitment programs, state-sponsored invest-
                                                                  ments, and university partnerships to siphon off U.S. taxpayer-
                                                                  funded research. This is not just a matter of intellectual property
                                                                  theft. It is a direct national security risk.
                                                                     Some U.S. firms that have received SBIR awards have later
                                                                  partnered with CCP-linked entities or established Chinese subsidi-
                                                                  aries, effectively transferring sensitive technology into the hands of
                                                                  our foremost adversary.
                                                                     The CCP is actively seeking to integrate advanced U.S. research
                                                                  into its military modernization efforts, including through artificial
                                                                  intelligence, quantum computing, and next-generation defense
                                                                  technologies.
                                                                     As the September 30 reauthorization deadline approaches, we
                                                                  must close the gaps that allow China to take advantage of the
                                                                  SBIR and STTR programs. At the same time, we must not lose
                                                                  sight of the core mission of SBIR and STTR supporting American




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                                                                                                                      5

                                                                  small businesses. Instead of limiting opportunities for small busi-
                                                                  nesses, we should focus on strengthening safeguards against for-
                                                                  eign exploitation while preserving a merit-based system that re-
                                                                  wards innovation.
                                                                     The United States cannot afford to let China turn our most suc-
                                                                  cessful small business research and development program into a
                                                                  tool for its own strategic advancement. We must take decisive ac-
                                                                  tion to protect SBIR and STTR from CCP infiltration and ensure
                                                                  that taxpayer dollars are used to support American innovation, not
                                                                  our adversary’s.
                                                                     And I am confident that under Chairman Williams and Ranking
                                                                  Member Velázquez’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 innovation, strengthen our economic security
                                                                  and counterthreats posed by the Chinese Communist Party.
                                                                     And with that, Mr. Chairman, I yield back. Thank you.
                                                                     Chairman WILLIAMS. The gentleman yields back.
                                                                     And I now recognize the distinguished Ranking Member of the
                                                                  House Select Committee on the Chinese Communist Party, Rank-
                                                                  ing Member Raja Krishnamoorthi—but I know him better as the
                                                                  Raj—from the great State of Illinois for his opening remarks.
                                                                     Mr. KRISHNAMOORTHI. Well, thank you, Mr. Chairman.
                                                                     And by the way, when I first—on my first day of college, I intro-
                                                                  duced myself. I said, Hi, my name is Raja. And the person said,
                                                                  What part of Boston are you from, Roger?
                                                                     So in any case, wonderful to be with you. Thank you, Ranking
                                                                  Member Velázquez, my good friend. And, of course, my good friend
                                                                  and colleague and the leader of our Committee, Chairman John
                                                                  Moolenaar, thank you for your leadership.
                                                                     I want to take this opportunity to speak on the Small Business
                                                                  Committee about the SBIR and STTR programs. In full disclosure,
                                                                  as a former small business person, my former company actually
                                                                  benefited from SBIR programs.
                                                                     And I lived in the valley of death frequently. And so it is not a
                                                                  pleasant place to be. And SBIR, thanks to the work of this Com-
                                                                  mittee and this government, we were allowed to benefit from those
                                                                  programs, and we have developed technology for night vision, both
                                                                  for space and for military applications, and it is helping the
                                                                  warfighter today.
                                                                     For decades, these programs have served as the backbone of U.S.
                                                                  research and development, empowering small businesses by turn-
                                                                  ing new ideas into real technology. They have 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 have
                                                                  led to breakthrough technology, such as advanced prosthetics for
                                                                  wounded veterans, revolutionary medical imaging systems, and
                                                                  cutting-edge cybersecurity solutions.
                                                                     I want to say I echo the sentiments of Chairman Moolenaar. Our
                                                                  adversaries do know the strengths and weaknesses of our innova-
                                                                  tion ecosystem and, on occasion, they have taken advantage of it
                                                                  and targeted some of the beneficiaries of these SBIR and STTR
                                                                  programs for intellectual property theft.




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                                                                     One notable example was a U.S. company that was a former
                                                                  SBIR awardee that lost $1 billion in shareholder value and 700
                                                                  American jobs after an employee stole wind energy technology for
                                                                  a Chinese firm.
                                                                     As another anecdote, I should just mention, Chair and Ranking
                                                                  Member, when I was running this company in the private sector
                                                                  that I mentioned before, we were actually the victims of an at-
                                                                  tempted theft of intellectual property by 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 mitigate many of these threats. For example, the SBIR and
                                                                  STTR Extension Act of 2022 was an important step forward, re-
                                                                  quiring greater disclosure of foreign ties and participation in talent
                                                                  recruitment programs. These efforts have proven effective in in-
                                                                  creasing awareness and bolstering protections, but we cannot af-
                                                                  ford 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 heavily 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 dili-
                                                                  gence so that we can see the results we enacted back in 2022.
                                                                     Finally, and above all, we must recognize that federal funding for
                                                                  research and technology development is not just an investment in
                                                                  the present; it is a commitment to our nation’s future.
                                                                     And actually, Chairman Moolenaar and I just met with
                                                                  Condoleezza Rice yesterday of Stanford, who heads the Hoover In-
                                                                  stitution, who brought 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, supple-
                                                                  mented by these additional investments in SBIR and STTR, which
                                                                  build upon progress, the blue sky research, in the private and pub-
                                                                  lic sector.
                                                                     I just want to say thank you so much, Chairman Roger. And
                                                                  thank you, Chairwoman Velázquez and Chair John Moolenaar, for
                                                                  your leadership, your partnership, your collaboration. Together we
                                                                  are going to win this competition, this strategic competition against
                                                                  the CCP.
                                                                     Thank you, and I yield back.
                                                                     Chairman WILLIAMS. The gentleman yields back. Thank you
                                                                  for that.
                                                                     And I will now introduce our witnesses.
                                                                     Our first witness here with us today is Dr. Bill Marinelli. Dr.
                                                                  Marinelli is the president and CEO of Physical Sciences Inc., lo-
                                                                  cated in Andover, Massachusetts. Dr. Marinelli joined Physical
                                                                  Services Inc in 1983, and has been involved as a scientist and pro-
                                                                  gram manager in a diverse range of technical areas.
                                                                     In 2006, he was named executive vice president for defense sys-
                                                                  tems. In 2018, he became chief operating officer for the company
                                                                  and was named to the board of directors in 2021. Dr. Marinelli
                                                                  then assumed the title of president and CEO in 2022.




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                                                                     Dr. Marinelli has made numerous contributions in the fields of
                                                                  chemical kinetics, gas service interactions, space physics, and ad-
                                                                  vanced diagnostics.
                                                                     Dr. Marinelli received his MS and Ph.D. degrees in physical
                                                                  chemistry from the University of California at Berkley. He is also
                                                                  a graduate of Brown University where he earned a degree in chem-
                                                                  istry.
                                                                     I want to thank you for being with us today, and looking forward
                                                                  to your conversation.
                                                                     Our next witness here with us today is Ms. ML Mackey. Ms.
                                                                  Mackey is the CEO of Beacon Interactive Systems located in Wal-
                                                                  tham, Massachusetts. Ms. Mackey has co-founded Beacon Inter-
                                                                  active in 1994 and, along with her partner, has grown the business
                                                                  into a valued nontraditional defense contractor.
                                                                     And throughout her time, Ms. Mackey has won multiple awards,
                                                                  such as the WES Leadership Award, the Tibbetts Award, Small
                                                                  Business Executive of the Year, Small Business Advocate of the
                                                                  Year, and Champion of Small Business Innovation.
                                                                     Ms. Mackey serves as the ExCom of NDIA’s board and is the
                                                                  Chair of the Small Business Division. She is past Chair of NSBA
                                                                  and a current member of SBA’s innovation advisory committee and
                                                                  the National Academy of Sciences, Army S&T Roundtable.
                                                                     Ms. Mackey is a graduate of Lehigh University with a Bachelor’s
                                                                  of Science in Electrical Engineering.
                                                                     I want to thank you for being here also today.
                                                                     Our next witness here today is Mr. Cyrus Miryekta. Mr.
                                                                  Miryekta is the founder and CEO of Ravelin US, located in Fairfax,
                                                                  Virginia. Mr. Miryekta founded Ravelin in 2023 to serve as a stra-
                                                                  tegic consulting firm for the USG-inclined innovators. And prior to
                                                                  Ravelin, he was with the Air Force Office of Special Investigations
                                                                  and spearheaded the Department of Defense counterintelligence in
                                                                  Silicon Valley.
                                                                     He enlisted in the U.S. Army in 2000 and served as an airborne
                                                                  fire team leader in Afghanistan and in Iraq, where he was deco-
                                                                  rated for actions under fire and for saving a civilian from an IED.
                                                                     He serves as board member for the BlackStar Orbital and
                                                                  Tigercat Cyber, as well as board advisor for TerraSpace. He also
                                                                  has worked as a volunteer to set up medical clinics in rural Guate-
                                                                  mala where over 1,000 children have been treated a week.
                                                                     He holds a Master of Arts Degree in Statecraft and National Se-
                                                                  curity from the Institute of World Politics. He is also a graduate
                                                                  of the National Security Space Institute and California State Uni-
                                                                  versity where he received a bachelor degree in political science and
                                                                  government.
                                                                     I want to thank you for being with us today, and I am looking
                                                                  forward to all of the testimony.
                                                                     And I now recognize our Ranking Member from New York, Ms.
                                                                  Velázquez, to introduce our last witness appearing before us today.
                                                                     Ms. VELÁZQUEZ. Thank you, Mr. Chairman.
                                                                     Our final witness today is Mr. Jere Glover, the Executive Direc-
                                                                  tor 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 counsel to the
                                                                  House Small Business Committee, he directed and organized a set




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                                                                  of hearings on small business and innovation that laid the ground-
                                                                  work for the program in 1978. Throughout the law’s existence, he
                                                                  has been one of its most active supporters.
                                                                     Mr. Glover has a unique blend of public and private sector expe-
                                                                  rience. For more than 6 years, he was the federal government lead
                                                                  defender of small businesses in the regulatory process. In the pri-
                                                                  vate sector, he has been the CEO or principal of a biotech company
                                                                  and medical technology company and a group of medical clinics.
                                                                     He obtained his undergraduate and law degrees from the Univer-
                                                                  sity of Memphis and an L.L.M. in Administrative Law and Eco-
                                                                  nomic Regulation from George Washington University.
                                                                     Thank you, Jere. We look forward to your testimony.
                                                                     Thank you, Mr. Chairman.
                                                                     Chairman WILLIAMS. The gentlelady yields back.
                                                                     Before recognizing the witnesses, I would like to remind them
                                                                  that oral testimony is restricted to 5 minutes in length. If you go
                                                                  over 5 minutes, you will hear the gavel a little bit, and you need
                                                                  to bring it to a close. If you see the light turn red in front of you,
                                                                  it means your 5 minutes has concluded, and you should wrap it up
                                                                  quickly.
                                                                     Also, I would like to add, periodically, you will see some of us
                                                                  moving in and out. It is no reference on your testimony or any-
                                                                  thing, but some will have other places they have got to be real
                                                                  quick and come back. You may see the Ranking Member and my-
                                                                  self do that, but we will be back. Okay? So that means nothing.
                                                                     So I now recognize Mr. Marinelli for his 5-minute opening re-
                                                                  marks.

                                                                  STATEMENTS OF MR. BILL MARINELLI, PRESIDENT AND CEO,
                                                                   PHYSICAL SCIENCES INC.; MS. ML MACKEY, CEO AND CO-
                                                                   FOUNDER, BEACON INTERACTIVE SYSTEMS; MR. CYRUS
                                                                   MIRYEKTA, CEO, RAVELIN US; AND MR. JERE GLOVER, EXEC-
                                                                   UTIVE DIRECTOR, SMALL BUSINESS TECHNOLOGY COUNCIL

                                                                                       STATEMENT OF MR. BILL MARINELLI
                                                                    Mr. MARINELLI. Good morning, Chairman Williams, Ranking
                                                                  Member Velázquez, and Members of the House Committee on
                                                                  Small Business. It is an honor to testify here today on behalf of
                                                                  Physical Sciences Incorporated, a small business headquartered in
                                                                  Andover, Massachusetts. I want to thank you for the opportunity
                                                                  to talk about our experience with the SBIR program.
                                                                    Our company was founded in 1973, with a mission to develop
                                                                  technical solutions for national priorities in defense, security, en-
                                                                  ergy, environmental, healthcare, and industrial markets. The com-
                                                                  pany is 100 percent 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 SBIR legislation to
                                                                  meet federal research and development needs while identifying
                                                                  commercial applications for those highly specialized technologies.
                                                                  Four examples include: One, advanced Lithium-ion battery tech-
                                                                  nology to support two Navy programs of record where their oper-
                                                                  ational requirements exceed commercial standards.




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                                                                     Two, rare earth extraction from coal ash to provide a secure do-
                                                                  mestic supply of these critical elements. We developed and pat-
                                                                  ented that technology under SBIR and non-SBIR programs. And
                                                                  funding for a $30 million pilot plant has now been awarded to
                                                                  Pennsylvania’s Winner Water Systems in conjunction with the
                                                                  southern company.
                                                                     Radiation detection technology to secure our borders against traf-
                                                                  ficking in this threat. The technology we manufacture 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 U.S., the U.K., and select overseas lo-
                                                                  cations.
                                                                     And finally, remote natural gas leak detection technology devel-
                                                                  oped for use by the natural gas industry. Over 7,400 of those sys-
                                                                  tems have been sold under license to PSI.
                                                                     The key point is that component technology funded by SBIR
                                                                  awards from multiple agencies and facilitated by significant invest-
                                                                  ments by PSI and facilities and select capabilities was employed to
                                                                  meet these needs.
                                                                     We have reported over $677 million in Phase III academic—eco-
                                                                  nomic activity to the SBA, about half of which is actual commercial
                                                                  sales from licensed technology by our partners. Only $5.8 million
                                                                  of those funds are formally listed as Phase III awards, illustrating
                                                                  the erroneous and misleading conclusions that can be drawn by
                                                                  simplistic studies that purport to capture the program’s total eco-
                                                                  nomic activity.
                                                                     Looking at reauthorization, we believe the primary SBIR reau-
                                                                  thorization challenges is to reduce barriers to entry and not restrict
                                                                  program participation. Reauthorization should reinforce five basic
                                                                  principles, and I think you have heard some of them already today.
                                                                     First, merit-based awards. Congress should maintain the com-
                                                                  petitive 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 SBIR 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 to find merit consistent with their missions.
                                                                  Multi-award winners should not be penalized for some agencies’
                                                                  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 their potential for award, and support sub-
                                                                  sequent technology transition.
                                                                     Four, application simplification. The largest barrier to participa-
                                                                  tion in the program for new entrants 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 invest-
                                                                  ments and dedicated capabilities as key to receiving DOD awards
                                                                  and to being viewed as a reliable supplier by our customers.




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                                                                    Program permanency reduces the concern that those investments
                                                                  will be stranded at the next reauthorization without limiting the
                                                                  ability of Congress to make further adjustments to the program.
                                                                    In conclusion, there are many pathways for commercial success.
                                                                  The U.S. 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 tech-
                                                                  nology for its priorities.
                                                                    Thank you very much.
                                                                    Chairman WILLIAMS. The gentleman yields back.
                                                                    And, Ms. Mackey, you have 5 minutes.
                                                                                           STATEMENT OF MS. ML MACKEY
                                                                     Ms. MACKEY. Chairman Williams, Ranking Member Velázquez,
                                                                  and distinguished Members of the Committee, thank you for invit-
                                                                  ing me to speak today on the importance of the SBIR/STTR pro-
                                                                  grams. My name is ML Mackey. I am the CEO of Beacon Inter-
                                                                  active Systems, a nontraditional and unconventional defense con-
                                                                  tractor delivering innovative, efficiency-improving digital capabili-
                                                                  ties to our military services.
                                                                     I am here today in my capacity as the Chair of the Small Busi-
                                                                  ness Division of the National Defense Industrial Association,
                                                                  NDIA. I also serve on the executive committee of NDIA’s national
                                                                  board of directors.
                                                                     For over 100 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 compa-
                                                                  nies of all sizes and sectors, the majority of which are small busi-
                                                                  ness.
                                                                     NDIA has been a longstanding and vocal supporter of the SBIR
                                                                  and STTR programs and regards these programs as some of the na-
                                                                  tion’s most effective tools in bringing cost-effective and valuable in-
                                                                  novations to the DOD.
                                                                     We appreciate your leadership in extending the programs
                                                                  through September 30, 2025, and we strongly endorse your efforts
                                                                  to further extend the programs before the current authorization ex-
                                                                  pires.
                                                                     The SBIR/STTR programs facilitate and effectively streamline
                                                                  the participation of competitive small businesses to work on agen-
                                                                  cy-specific research and development needs.
                                                                     Speeding innovations and advanced capabilities to our
                                                                  warfighters is critical to the DOD’s efforts to outpace the People’s
                                                                  Republic of China and other potential competitors in this era of
                                                                  great power competition.
                                                                     In my own personal experience as the CEO of Beacon Interactive
                                                                  Systems, we found the SBIR 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, sub-
                                                                  marines, and carriers, and multiple shore-based locations world-
                                                                  wide. Our digital products transform operations at the edge.
                                                                     In one example alone, early estimates predict our flight line plat-
                                                                  form will save an hour and a half per maintainer, per shift. This
                                                                  tremendous impact on operational capacity was critically nurtured
                                                                  with SBIR investment.




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                                                                     Based on this positive experience and similar experiences from
                                                                  my colleagues in NDIA’s Small Business Division, we offer the fol-
                                                                  lowing three areas for review to enhance the SBIR/STTR programs.
                                                                     Our first recommendation. The SBIR/STTR program should be
                                                                  permanently authorized. These programs inspire technical innova-
                                                                  tion and inject a vital sense of entrepreneurship into the defense
                                                                  enterprise. Establishing them permanently is the next logical step.
                                                                  SBIR 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 them and the small businesses
                                                                  seeking to participate in these programs.
                                                                     Our second recommendation is to provide more support for Phase
                                                                  III awards and transition to commercialization. In line with the
                                                                  SBIR policy directive—SBIR. I always use the slang. In line with
                                                                  the SBIR policy directive, the government is required to the great-
                                                                  est extent practicable to award follow-on efforts to the SBIR invest-
                                                                  ments already made in the capability. This is both an efficient use
                                                                  of federal funding and a significant incentive for new entrants to
                                                                  the U.S. defense industrial base.
                                                                     Attracting and retaining new companies that can rapidly deliver
                                                                  innovative technologies and capabilities to the warfighter is a crit-
                                                                  ical element to building a modern, diverse, and resilient U.S. de-
                                                                  fense industrial base. The technologies these companies deliver can
                                                                  also provide the decisive advantage needed to deter or win a fight.
                                                                     DOD acquisition program should review prior SBIR/STTR
                                                                  projects and assess opportunities to utilize these investments. If
                                                                  the federal government already has access to an existing tech-
                                                                  nology 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 SBIR Phase III contracting to acquire those
                                                                  technologies and deliver to the warfighter sooner.
                                                                     It would be a disservice I think to my colleagues if I inadvert-
                                                                  ently contributed to the perceived SBIR issue of ‘‘vendor lock’’ here.
                                                                  So I want to talk about how important it is that the SBIR policy
                                                                  directive says ‘‘to the greatest extent practicable,’’ and if it is 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.
                                                                     The 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 U.S. defense industrial
                                                                  base is a valuable proposition for the government and a direct en-
                                                                  abler of innovation and growth.
                                                                     I appreciate the opportunity to be here today, and I welcome any
                                                                  of your questions.




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                                                                       Chairman WILLIAMS. The gentlelady yields back.
                                                                       I now recognize Mr. Miryekta for his 5-minute opening remarks.
                                                                                       STATEMENT OF MR. CYRUS MIRYEKTA
                                                                     Mr. MIRYEKTA. Chairman Williams, Ranking Member
                                                                  Velázquez, distinguished Members of the Committee, thank you for
                                                                  having me here today.
                                                                     I am here to discuss the Chinese Communist Party’s exploitation
                                                                  of American innovation with a focus on SBIR programs.
                                                                     Historically, America has had three offset strategies, and an off-
                                                                  set strategy is a strategy to defeat a military peer should deter-
                                                                  rence fail.
                                                                     The first offset strategic was nuclear weapons. In 1949, the Sovi-
                                                                  ets 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 1991, where we interlinked air, land,
                                                                  sea, and space forces for precision strikes. If you read modern Chi-
                                                                  nese and Russian strategies today, you will see it is largely predi-
                                                                  cated on what they saw in 1991. Fast-forward to the present, it is
                                                                  why Russia and electronic warfare is so effective in the Ukraine.
                                                                  They spent 40 years mastering its asymmetrical capability.
                                                                     The SBIR program has an outsized impact for the third offset
                                                                  strategy, which is the rapid incorporation of innovation into the De-
                                                                  partment of Defense to defeat a peer adversary.
                                                                     Innovators 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 have had the honor of serving my country for 16 years, first as
                                                                  a paratrooper in Afghanistan and Fallujah, Iraq. I went to univer-
                                                                  sity 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 counter-
                                                                  intelligence support to its equities in Silicon Valley.
                                                                     For nearly a decade, I provided counterintelligence support to
                                                                  startups, Fortune 50 companies, FPGA design houses, and aca-
                                                                  demic institutions. I set up the counterintelligence programs at De-
                                                                  fense Innovation Unit, experimental at the time, AFWERX and
                                                                  SPACEWERX. For my impact to U.S. national security, I have
                                                                  been awarded an unprecedented nine national intelligence awards.
                                                                     Although, I am not here to talk about my government service,
                                                                  this legacy informs the company that I run today, which is an advi-
                                                                  sory firm called Ravelin US. We specialize in helping U.S.
                                                                  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 have witnessed this over the last 12
                                                                  years. There is this misconception that cyber exploitation vastly
                                                                  outweighs HUMINT exploitation, which couldn’t be more wrong.
                                                                  HUMINT 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
                                                                  one last week that was 10 years before they ever deployed capital
                                                                  into the innovator’s company.




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                                                                     We will also see the CCP investors and their affiliates investing
                                                                  in SBIR recipients who struggle to go from Phase I to Phase II.
                                                                     There is a grooming process, and it is like slow-boiling the target.
                                                                  There is 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 against the Uyghurs in the Xinjiang prov-
                                                                  ince. Those same investors will be investing in munitions
                                                                  innovators that have received SBIRs on U.S. soil.
                                                                     When the Chinese Communist Party wants innovative capability,
                                                                  they will often work through proxies. Sometimes that means allied
                                                                  countries, usually through U.S. citizens. And when they have a ca-
                                                                  pability that they want us to deny ourselves, they will loudly de-
                                                                  ploy 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 yet, essentially, a poison pill of CCP in-
                                                                  vestment in our systems.
                                                                     This is not really the worst thing. In fact, if your adversary is
                                                                  forced to adjust their tactics and deal with your strategy, that
                                                                  means you are having an impact. And right now, we are far ahead
                                                                  of them, and we need to intensify our efforts.
                                                                     The impact of the SBIR program vastly outweighs the dollar
                                                                  amount and it steers the industry. The SBIR/STTR Extension Act
                                                                  that went into effect in July of 2023, has changed the American in-
                                                                  novative landscape.
                                                                     Not all of the due diligence teams that are required to do the
                                                                  FOCI due diligence are the same. In fact, you have one team that
                                                                  is better than all the other teams combined and still way out far
                                                                  ahead. But we cannot look at specific teams and say whether the
                                                                  program is working or not. It is actually quantifiable, 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 SBIR/STTR program is critical to executing our third offset
                                                                  strategy, which is to ensure American hegemony in the 21st cen-
                                                                  tury.
                                                                     I look forward to your questions.
                                                                     Chairman WILLIAMS. Thank you, Cyrus.
                                                                     And now, Mr. Glover, you have your 5-minute opening remarks.

                                                                                         STATEMENT OF MR. JERE GLOVER
                                                                     Mr. GLOVER. Thank you, Mr. Chairman, Ranking Member
                                                                  Velázquez, Members of the Committee. It is an honor to be here
                                                                  today to talk about reauthorization of the SBIR/STTR programs.
                                                                     Today, I want to share with you a remarkable congressional gov-
                                                                  ernment story. Forty-seven years ago, this Committee, together
                                                                  with the Senate, held joint hearings on small business and innova-
                                                                  tion. The Committee found that small business was, by far, the
                                                                  most innovative sector of the U.S. economy, creating two-thirds of
                                                                  all major inventions, but that virtually none of the federal R&D
                                                                  dollars went to small business.




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                                                                     It was almost impossible for a small business to get government
                                                                  R&D contracts. The contracting officers were much more com-
                                                                  fortable giving R&D contracts to large businesses. Even today, the
                                                                  largest prime contractor at DOD receives 10 times more than the
                                                                  entire SBIR program in funding.
                                                                     The Small Business Committee asked commonsense questions.
                                                                  How can the government get better R&D by asking the most inno-
                                                                  vative and entrepreneurial sector of America to do it? And how can
                                                                  this make America stronger? The answer was the SBIR program,
                                                                  and Congress enacted it to unleash the ingenuity and drive of
                                                                  small business on America’s technology challenges.
                                                                     Today, the SBIR program is the best government R&D program
                                                                  in the world and one of the most significant pieces of legislation
                                                                  ever passed.
                                                                     What are the results for the taxpayers in SBIR? Thousands of
                                                                  new innovative farms and thousands of success stories, including
                                                                  technologies used today, such as 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. SBIR generates $2.50 for every
                                                                  dollar in tax income at State and federal levels from every dollar
                                                                  at DOD, and $3,68 for every dollar spent at the National Cancer
                                                                  Institute. Return on investment is 22 to 33 percent for every SBIR
                                                                  dollar, depending on the agency.
                                                                     Over 2,000 SBIR firms have been acquired, injecting innovations
                                                                  into larger companies. Ninety-nine new drug approvals in the last
                                                                  20 years. Twelve percent of all new drug approvals companies had
                                                                  funding from the SBIR program. Sixteen percent of the priority
                                                                  drugs had approval. 200—24,000, 510(k)s or premarketing approv-
                                                                  als had SBIR involved. Ten percent of all venture capital funds go
                                                                  to SBIR programs. The SBA agency website lists hundreds of other
                                                                  SBIR success stories.
                                                                     The program focused on merit with agencies selecting the best
                                                                  solutions to keep quality high and competition tough. Only 1 in 20
                                                                  proposals get to Phase II.
                                                                     In 2017, GSA began writing contracts for other agencies, SBIR
                                                                  contracts. This was a major breakthrough. Five years later, GSA
                                                                  actions doubled the SBIR Phase III identified contracts from 1.5
                                                                  billion to 3.5 billion. Their proposed IP3 program, which is pending,
                                                                  would make a great success story.
                                                                     When we look at China today, unfortunately, China leads in 57
                                                                  of 64 critical technologies. U.S. is even behind Europe. Europe
                                                                  spends 20 percent on its small businesses, twice what the U.S.
                                                                  spends.
                                                                     Congress can take a number of actions to build on these suc-
                                                                  cesses. One, require better streamlining and simplification of the
                                                                  process, keeping merit-based to ensure the program continues to
                                                                  fund the best research, double the SBIR program, leveraging small
                                                                  businesses to provide innovations to solve federal challenges.
                                                                     DOD’s Section 809 panel and the past Secretary of Defense rec-
                                                                  ommended doubling the allocation. Restore the 174 tax deduction.
                                                                  That is critical for not only SBIR companies but all small innova-
                                                                  tive businesses. Reverse the slowdown of contracts and grant selec-




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                                                                  tions and awards, which may be fatal to many small firms. Cash
                                                                  flow kills startups.
                                                                     Make the SBIR program permanent, and these actions will help
                                                                  America regain its leadership in the world of innovation.
                                                                     Thank you.
                                                                     Chairman WILLIAMS. Thank you, Mr. Glover.
                                                                     We will now move on to the Member questions under the 5-
                                                                  minute rule.
                                                                     I recognize myself for 5 minutes.
                                                                     Dr. Marinelli, the SBIR and STTR programs were created to sup-
                                                                  port small business growth by helping federal agencies fulfill those
                                                                  needs. My question is, as a small business owner myself and your-
                                                                  self, how important is it to ensure that the SBIR program remains
                                                                  merit-based, as we talked about?
                                                                     Mr. MARINELLI. Mr. Chairman, last September, I had the privi-
                                                                  lege to visit four of the five landing beaches at Normandy, sat on
                                                                  a German reinforcement and looked at the Omaha Beach. I went
                                                                  to the American cemetery afterwards and happened to visit the
                                                                  grave of someone important to my wife’s family. It was truly a so-
                                                                  bering experience.
                                                                     Cyrus talked about the second offset. That battle was a force on
                                                                  force in Normandy. We were able to kick Iraqi forces out of Kuwait
                                                                  in a week because of the second offset.
                                                                     It is American technology that is going to give us the third offset.
                                                                     My father actually fought in the Korean war as an artillery offi-
                                                                  cer. 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 mat-
                                                                  ter where they are, anywhere in the country, to establish and
                                                                  maintain that third offset. Otherwise, we are going to wind up
                                                                  fighting these battles in a way that we don’t want. We want to be
                                                                  able to deter 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 is very important for our nation’s security to make
                                                                  sure that merit is driving technology into our Armed Forces and
                                                                  everywhere else in the U.S. Government.
                                                                     Chairman WILLIAMS. Thank you.
                                                                     Ms. Mackey, the valley of death has been a challenge for small
                                                                  businesses in the SBIR/STTR programs. This is when an innova-
                                                                  tion moves from the R&D stage into production. But small busi-
                                                                  nesses lack access to capital—we have talked about that—to com-
                                                                  mercialize their product.
                                                                     In your written testimony, you mentioned that the DOD and
                                                                  other agencies should buy existing SBIR/STTR technologies, par-
                                                                  ticularly during Phase III, transition to commercialization. So can
                                                                  you explain how the agencies could more effectively integrate
                                                                  SBIR-funded innovations into the procurement process and how
                                                                  this might save both time and money in the development of new
                                                                  technologies?
                                                                     Ms. MACKEY. Thank you for the question. I think we don’t have
                                                                  to do new legislation. I don’t think we need 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 is a lot that we have.




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                                                                     So even a good due diligence of what we have available and docu-
                                                                  menting that that has happened. We need to change behavior in
                                                                  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 bring-
                                                                  ing innovation forward and making things faster. It also helps ad-
                                                                  dress a lot of the adversarial impact that we have.
                                                                     If you have a company that is developing good technology, and
                                                                  you have a reasonable path forward, you are less likely to take
                                                                  global investment that may have competitive interest.
                                                                     Chairman WILLIAMS. Okay. I have got a limited amount of
                                                                  time.
                                                                     And, Cyrus, as you know, there is a growing concern that the
                                                                  CCP is leveraging various mechanisms, such as talent recruitment
                                                                  programs, the U.S. patent system, and venture capital investments
                                                                  to access sensitive IP developed through SBIR-funded research.
                                                                     In your experience, how is China specifically acquiring IP from
                                                                  the SBIR-funded small business? And what are the primary meth-
                                                                  ods you have observed being used to exploit these small busi-
                                                                  nesses?
                                                                     Mr. MIRYEKTA. Thank you, Mr. Chairman. So when it comes to
                                                                  venture capital, we see investment post-receipt of a SBIR. That is
                                                                  one of the methods. Another is working through U.S. firms. So it
                                                                  would be a U.S. firm without linguistic or cultural ties to China.
                                                                  They will mobilize them through money.
                                                                     We have seen this also with the Canadians where they will use
                                                                  a Canadian to be an investor, but when you look at the Canadian’s
                                                                  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 is bank rolled by the Chinese Communist
                                                                  Party. They did it once successfully with a biotech company, and
                                                                  now they were trying to do it with an aerospace company.
                                                                     And so working through allies, working through third parties
                                                                  trying to obfuscate their hand because they know that we are look-
                                                                  ing for it. And then also working through U.S. citizens, whether
                                                                  they are ethnically Chinese or otherwise.
                                                                     I yield my time.
                                                                     Chairman WILLIAMS. The gentleman yields his time back.
                                                                     And I now recognize the Ranking Member for 5 minutes of ques-
                                                                  tions.
                                                                     Ms. VELÁZQUEZ. Thank you, Mr. Chairman.
                                                                     Thank you for your testimony.
                                                                     Mr. Glover, one of the most important legislative tasks of this
                                                                  committee this year is to reauthorize the SBIR and STTR pro-
                                                                  grams. Why is it important to make these programs permanent?
                                                                  Very briefly, please.
                                                                     Mr. GLOVER. Because every time this stop and start, the gov-
                                                                  ernment starts shutting down, there are delays. Whenever there is
                                                                  a delay in awarding a contract, small businesses fail. They simply
                                                                  don’t have the cash flow to carry them over to the next one. So
                                                                  every time this happens, it slows down the government, makes the
                                                                  government less efficient. But it also gives small businesses—some-




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                                                                  times the valley of death just gets so long they can’t survive. And
                                                                  so this stop and starting is just very bad for the program.
                                                                     Ms. VELÁZQUEZ. Thank you.
                                                                     To the panel, yes or no, do you agree that we should make SBIR/
                                                                  STTR permanent?
                                                                     Mr. MARINELLI. Yes, ma’am.
                                                                     Ms. VELÁZQUEZ. Ms. Mackey?
                                                                     Ms. MACKEY. Yes, definitely.
                                                                     Ms. VELÁZQUEZ. Cyrus?
                                                                     Mr. MIRYEKTA. Yes, ma’am.
                                                                     Mr. GLOVER. Yes.
                                                                     Ms. VELÁZQUEZ. Thank you.
                                                                     Mr. Glover, in your testimony, you focus on the overwhelming
                                                                  success of the programs. Yet for many years they have only ac-
                                                                  counted for a sliver of federal R&D funding.
                                                                     Is it time for Congress to consider significantly expanding agency
                                                                  allocations for the SBIR and STTR programs?
                                                                     Mr. GLOVER. It is. When we look at Europe, they are doing
                                                                  twice as much as we are, and they are getting ahead of us in crit-
                                                                  ical technologies. It is the most effective program going. Yes, it is
                                                                  time to make it better and bigger and more efficient.
                                                                     Ms. VELÁZQUEZ. Thank you.
                                                                     Ms. Mackey, your company has been successful in transitioning
                                                                  early-stage technologies into programs of record at the Department
                                                                  of Defense. As we focus on prioritizing commercialization, what can
                                                                  we do to improve the process for earlier stage awardees?
                                                                     Ms. MACKEY. I think for earlier stage awardees we can improve
                                                                  the process by, specifically in the Department of Defense, exposing
                                                                  them to actual warfighters and getting the real feedback into what
                                                                  they are building.
                                                                     I also think that we could change the process to add the respon-
                                                                  sibility and the credit for transition to not only the small business
                                                                  but the extended government team that also has to work with
                                                                  them, and other industry partners.
                                                                     Ms. VELÁZQUEZ. Thank you.
                                                                     Mr. Marinelli, some of the firms in the SBIR programs have
                                                                  come under fire for having lower transition rates. Can you explain
                                                                  why it may not be beneficial to the DOD to arbitrarily use transi-
                                                                  tion rates to measure success?
                                                                     Mr. MARINELLI. So, Congresswoman Velázquez, one of the
                                                                  things that we tend to work on is insertion of component tech-
                                                                  nology into large platforms. It takes a decade to evolve and lasts
                                                                  for many years. And that is a very slow process.
                                                                     Program managers are accepting a lot of risk to try and insert
                                                                  new technology into those programs, and often they are budgeted
                                                                  years in the future with very strict requirements. And so it is very
                                                                  difficult often to insert that technology. We have to work very hard
                                                                  in order to do that, and often it doesn’t happen. Sometimes pro-
                                                                  grams get canceled in midstream. And I think those are the issues.
                                                                  It is just a very hard business, basically, to be in.
                                                                     Ms. VELÁZQUEZ. Thank you.
                                                                     Mr. Glover, the SBIR and STTR programs have grown signifi-
                                                                  cantly over the years, now accounting for nearly $5 billion in the
                                                                  federal budget. Yet, at the same time, the Small Business Adminis-




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                                                                  tration, whose responsibility it is to administrator the 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?
                                                                     Mr. GLOVER. The SBIR program is now one of the biggest pro-
                                                                  grams administered by SBA. When it first started, there were 17
                                                                  employees overseeing SBIR. I think there are three now. It is in
                                                                  dire need of—it can’t do everything and it can’t oversee and make
                                                                  sure the agencies do much more in Phase IIIs and follow on and
                                                                  provide that. So it is critical that we bring it in balance.
                                                                     You look at some of the other programs at SBA. They are much
                                                                  better staffed. For some reason this has always sort of been a step-
                                                                  child.
                                                                     Ms. VELÁZQUEZ. Thank you.
                                                                     Thank you. I yield back.
                                                                     Chairman WILLIAMS. The gentlelady yields back.
                                                                     I now recognize Mr. Stauber from the great State of Minnesota
                                                                  for 5 minutes.
                                                                     Mr. STAUBER. Thank you, Chairman Williams and Ranking
                                                                  Member Velázquez, for holding this important hearing today.
                                                                     And thank you to our witnesses for taking time to share your ex-
                                                                  pertise to us.
                                                                     You know, the United States Government relies on innovative so-
                                                                  lutions to meet mission critical demands, and small businesses play
                                                                  a pivotal role in that process.
                                                                     Many small businesses rely on the SBIR and STTR programs to
                                                                  bring their ideas from concept to reality, strengthening our na-
                                                                  tional security, and creating high-quality jobs.
                                                                     We have heard from small businesses that while SBIR funding
                                                                  is invaluable, the path from research to commercialization 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, for-
                                                                  eign competitors.
                                                                     Dr. Marinelli, your company has successfully navigated the SBIR
                                                                  program. What improvements would you like to see in the SBIR
                                                                  program to ensure continued innovation and successful commer-
                                                                  cialization?
                                                                     Mr. MARINELLI. Well, I think the most important thing that we
                                                                  can do for all companies involved is to improve communication of
                                                                  the federal government’s needs to the various performers that are
                                                                  performing on the program. It is pretty critical there.
                                                                     A lot of new entrants don’t know what is happening, and if they
                                                                  hear from program officers what is needed, they can tailor their
                                                                  proposals in order to meet those program officers’ needs.
                                                                     Mr. STAUBER. How do you get to the needs right now? How are
                                                                  you aware of the needs?
                                                                     Mr. MARINELLI. So earlier in my career, used to be the acquisi-
                                                                  tion organizations and the S&T organizations would have briefings
                                                                  for industry. The joint program officer for chem/bio defense and
                                                                  DITR would. And they would stand up and tell you, here is what
                                                                  we need to acquire. Here is where the S&T focus is to do that.




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                                                                     That was enormously informative to me, and, actually, I brought
                                                                  that back to our company. It is one of the reasons we have grown.
                                                                  I think we need to see more of that throughout the federal govern-
                                                                  ment to let people know what is needed by the organizations.
                                                                     Mr. STAUBER. Right. Thank you.
                                                                     One of the most alarming threats to American innovation is the
                                                                  growing evidence that China is actively working to exploit SBIR-
                                                                  funded research. We have seen reports of Chinese firms using ven-
                                                                  ture capital investments, research partnerships and talent recruit-
                                                                  ment programs to siphon technology developed with U.S. taxpayer
                                                                  dollars, just as Representative Moolenaar 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. Miryekta, how is China leveraging venture capital invest-
                                                                  ments and SBIR-funded companies to gain access to sensitive tech-
                                                                  nology? And what steps can Congress do to prevent this?
                                                                     Mr. MIRYEKTA. By the virtue of being innovators, the way that
                                                                  companies are set up, nothing is classified yet. So it is 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 on the Chinese Communist Party earlier, which
                                                                  is American Superconductor Corporation, where exactly that hap-
                                                                  pened. 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 is 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 that they are looking for.
                                                                     But by virtue of just having access to the individuals, some of the
                                                                  companies we see are targeted through Cold War era tactics,
                                                                  break-ins. And we mean like 11 cars are broken into, 7 laptops are
                                                                  stolen, all for one new energy company. Their executive’s travel is
                                                                  all marked and prepared for when they arrive.
                                                                     So it is everything from grooming the target, and it is very pleas-
                                                                  ant, to old-style illegal activity.
                                                                     Mr. STAUBER. As President Trump says, they are ripping us off,
                                                                  and it is unacceptable. The SBIR/STTR programs are critical to en-
                                                                  suring small businesses remain the driving force of American inno-
                                                                  vation.
                                                                     However, we must continue strengthening them by reducing bu-
                                                                  reaucratic barriers, enhancing security protections, and improving
                                                                  pathways to commercialization. This is about maintaining our com-
                                                                  petitive 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. Chair, I yield back.
                                                                     Chairman WILLIAMS. The gentleman yields back.
                                                                     I now recognize Mr. McGarvey from the great State of Kentucky
                                                                  for 5 minutes.
                                                                     Mr. MCGARVEY. Thank you very much, Mr. Chairman.




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                                                                     And this is something that we have seen firsthand in my district
                                                                  for a long time. I want to talk a second about 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 located massive 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. Throughout
                                                                  that war, we saw synthetic rubber, nuclear fission, radar, cryptog-
                                                                  raphy, so many other technologies that were highly classified. 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 U.S. National Security Commission for Artificial Intel-
                                                                  ligence reported to Congress and the President that, for the first
                                                                  time since World War II, America’s technological dominance, the
                                                                  backbone of our economic and military power, is under threat.
                                                                     Ms. Mackey, you stated that innovation is critical to DOD’s ef-
                                                                  forts 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 SBIR program
                                                                  provides a pathway for small businesses into government or pro-
                                                                  vides on-ramps to grow?
                                                                     Ms. MACKEY. Yeah. I think I would answer that with two state-
                                                                  ments. The first is absolutely, we can do more to make sure that
                                                                  there is a consistency in how we engage with component tech inser-
                                                                  tion of innovation and to the contracting process.
                                                                     The second piece that I would 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 is really important.
                                                                     My oldest is starting a business, and as she is very interested in
                                                                  getting VC from American Capital, it is not easy to figure out what
                                                                  is 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.
                                                                     Mr. MCGARVEY. And, just on those capital guidelines, what
                                                                  would you recommend along that front specifically?
                                                                     Ms. MACKEY. I would recommend a lot of the work that the
                                                                  SBA and Office of Strategic Capital just finished around how do
                                                                  you identify investors that are American-owned and intend 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.
                                                                     Mr. MCGARVEY. Because if you are starting up, it is—it is dif-
                                                                  ficult to untangle all that yourself and then, of course——
                                                                     Ms. MACKEY. I am just saying there is a few things you are
                                                                  thinking about, right?




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                                                                     Mr. MCGARVEY. There is a few things going on. Thank you. I
                                                                  appreciate that a lot.
                                                                     Mr. Glover, wanted to ask you a question. The current adminis-
                                                                  tration is targeting budget cuts for agencies like NIH and NSF,
                                                                  who host these SBIR programs.
                                                                     Would these cuts make it possible to fund the necessary security
                                                                  advancements we need to combat the IP theft we are talking about
                                                                  today?
                                                                     Mr. GLOVER. It will be a significant problem. We have led the
                                                                  world in innovation because we spent money on it. But other coun-
                                                                  tries are now spending more money proportionally than we are.
                                                                  Even France has a program to fund transition technologies.
                                                                     We are getting left out. And, if we take a serious step back on
                                                                  that, not only will health and safety be a challenge, but also our
                                                                  defenses will not be as strong and sufficient. Research needs con-
                                                                  tinuity. It needs consistency. And, when you make it erratic and
                                                                  uncertain, then you lose a generation of people who simply decide
                                                                  that the U.S. is not the place to develop their technology.
                                                                     We have got lots of people who come to America to develop their
                                                                  technology. And you just look around, you find them everywhere.
                                                                  And that is—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 are
                                                                  going to lose companies. And those companies won’t come back——
                                                                     Mr. MCGARVEY. No.
                                                                     Mr. GLOVER.—or they will turn somewhere else to get the
                                                                  money.
                                                                     Mr. MCGARVEY. Yeah. And I think when you talk about us
                                                                  spending less, that is really important. And I would say also invest-
                                                                  ing less. Because there is a return on investment for what we are
                                                                  talking about here both in the economic impact it has in our coun-
                                                                  try and, of course, on the strategic importance that it maintains
                                                                  over our adversaries.
                                                                     I am nearly out of time, but I think I do want to point out that
                                                                  innovation, that investment in innovation is paramount to our suc-
                                                                  cess as a nation. And the SBIR and STTR programs are core to
                                                                  that American innovation.
                                                                     Mr. Chairman, I yield back.
                                                                     Chairman WILLIAMS. Gentleman yields back.
                                                                     And I now recognize Mr. Alford from the great State of Missouri
                                                                  for 5 minutes.
                                                                     Mr. ALFORD. Thank you, Mr. Chair.
                                                                     Thank you, Ranking Member Velázquez, for holding this impor-
                                                                  tant hearing today, and thank you all for being here on your own
                                                                  time and own dime. I appreciate you coming in.
                                                                     Today’s hearing is focused on the SBIR and STTR programs, two
                                                                  of the most important public-private partnership programs Con-
                                                                  gress authorizes. These programs help small businesses access cap-
                                                                  ital, a vital issue that constrains growth. Additionally, these pro-
                                                                  grams spur innovations. And American ingenuity is why our nation
                                                                  laps the world in new technologies, and these programs are a key
                                                                  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 in-




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                                                                  novation, stealing the intellectual property of Americans. According
                                                                  to a 2021 DOD study on SBIR programs, nearly all cases show that
                                                                  Communist China, not the U.S., is the ultimate beneficiary of DOD
                                                                  and other U.S. Government research investments. With both SBIR
                                                                  and STTR’s authorizations expiring in September this year, I look
                                                                  forward to working with my colleagues to make sure these pro-
                                                                  grams remain pillars of innovation.
                                                                     I want to start with you, Cyrus. Thanks for being here, and
                                                                  thank you for letting us call you Cyrus.
                                                                     What safeguards should this Committee consider when reauthor-
                                                                  izing this? I know you all have said it needs to be a permanent re-
                                                                  authorization to make sure that the influence, the espionage, and
                                                                  theft of intellectual property from the CCP is reduced or, if we
                                                                  could eliminate it, would be great.
                                                                     Mr. MIRYEKTA. We have already, just by Air Force and Space
                                                                  Force’s actions alone, have changed the American innovation land-
                                                                  scape. They realize that if they have CCP capital even affiliated,
                                                                  they will be prohibited from doing work with the Department until
                                                                  it is sanitized.
                                                                     The other branches of service and every agency that gives or
                                                                  awards SBIRs and STTRs should have a FOCI, or Foreign Owner-
                                                                  ship, Control, and Influence, due diligence team that 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 func-
                                                                  tional teams being generous for who is actually doing the vetting.
                                                                     Once the innovators realize this is a real hurdle to reaching U.S.
                                                                  Government funding, they will act immediately before they go to
                                                                  bed that night. Once they realize this is reality, they will change
                                                                  on a dime. Innovators know how to pivot, and they have to accept
                                                                  it as reality.
                                                                     The SBIR STTR Extension Act has done that. NDAA-23 has done
                                                                  that. The Committee on the Chinese Communist Party has done
                                                                  that. And they have made it real for our innovation industry. One
                                                                  of the issues, though, with the due diligence teams is they are re-
                                                                  quired, but no resources are provided. That is like asking the agen-
                                                                  cy to give me everybody who doesn’t have something real going on.
                                                                  And so this is a low-priority mission.
                                                                     Mr. ALFORD. Well, I am also honored to be on the Appropria-
                                                                  tions Committee. I am not on Defense. But I do know that this is
                                                                  important, and this investment, if you are talking about resources,
                                                                  to fund these programs, are they going to root out this—these
                                                                  things are actually hurting America, hurting our innovation, and
                                                                  threatening our national security. So I will be having a talk with
                                                                  the Chair of Defense Approps, Mr. Calvert, about this and seeing
                                                                  what direction we could head right across the hall here.
                                                                     I want to talk with you a little bit more, Cyrus, about China, its
                                                                  influence in our universities. The University of Missouri-Kansas
                                                                  City was just in my office this week. They are trying to create a
                                                                  defense corridor. They have a SCIF even built on campus. They are
                                                                  working with drone programs, critical mineral processing, trying to
                                                                  make the Kansas City area and down into my district really a de-
                                                                  fense corridor.
                                                                     How should universities be looking now? Because the Chinese
                                                                  students are here. How do they get here in the first place, and then




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                                                                  what safeguards should we put in place to make sure that espio-
                                                                  nage is not taking place?
                                                                     Mr. MIRYEKTA. The 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 U.S. 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 are indoctrinated. It
                                                                  is not far from Iran’s Basij and how they do grassroots indoctrina-
                                                                  tion. And we train them with the latest education, and then we
                                                                  send them home no more American than when they arrived.
                                                                     Mr. ALFORD. And they are members of families that have favor-
                                                                  able status with the CCP, if not CCP members outright, correct?
                                                                     Mr. MIRYEKTA. They have to be in good standing to come here,
                                                                  sir.
                                                                     Mr. ALFORD. Yes. Just a point of clarification, Whiteman Air
                                                                  Force Base, home of the B-2 stealth bomber, home of the B-21 soon,
                                                                  the Raider, is 10.8 miles from the University of Central Missouri.
                                                                  They have a small number, five to six Chinese students. They say
                                                                  it is not a threat. But we have to be vigilant and aware without
                                                                  damaging the reputation of innocent people here to gain education.
                                                                     Thank you, and I yield back.
                                                                     Chairman WILLIAMS. The gentleman yields back.
                                                                     I now recognize Mr. Cisneros from the great State of California
                                                                  for 5 minutes.
                                                                     Mr. CISNEROS. Thank you, Mr. Chairman.
                                                                     And thank you to all the witnesses for being here today.
                                                                     I am going to get right to the questions. Mr. Glover, Politico re-
                                                                  ported that 20 percent of the SBA workforce will be cut by Mr.
                                                                  Musk and DOGE, and who knows what other cuts as far as finan-
                                                                  cial may come along that way as well.
                                                                     Does threatening firing and forcing resignations of dedicated civil
                                                                  servants at the SBA and cutting their budget—or at any agency
                                                                  that administers SBIR or STTR, programs help small businesses,
                                                                  and how does it hurt the programs overall?
                                                                     Mr. GLOVER. I had the privilege of working with Vice President
                                                                  Gore’s reinventing government initiative in the Clinton administra-
                                                                  tion. They cut 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 expenditures. They did it
                                                                  carefully and wisely. We didn’t hear screams or shouts from the
                                                                  employees being unfair.
                                                                     Terminating people with virtually no notice, not allowing them
                                                                  to plan, run their future is a challenge. We see cuts that—without
                                                                  thinking about it. When you cut R&D budgets, you are going to end
                                                                  up getting less innovation; you are going to end up—the inventors
                                                                  are going to look somewhere else for money.
                                                                     And, as I have been told, they will look wherever they have.
                                                                  They have spent their whole life developing this technology. If they




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                                                                  can’t get the money in the United States, they will get it some-
                                                                  where else.
                                                                    So it is a real challenge. It is a real problem. And it should be
                                                                  done carefully and precisely.
                                                                    Mr. CISNEROS. Along that line as well, there is a company and
                                                                  small business that is doing some very innovative stuff around
                                                                  solar panels and making them more efficient. But the amounts that
                                                                  we are paying here—I believe it is like 50,000, phase 1; 250,000,
                                                                  phase 2; and then 750,000 later on—it is just over a million dollars.
                                                                  They haven’t really sought any of this funding to help them along
                                                                  the way because it is just not really sufficient enough, and they
                                                                  have had to get outside funding in order to help them and to do
                                                                  the innovation that they need to.
                                                                    So 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 things to help them innovate tech-
                                                                  nology and keep out the——
                                                                    Mr. GLOVER. First of all, the amounts are 100- to 250,000.
                                                                  Some agencies have gone below that, like the Air Force. But every-
                                                                  body else is pretty much at 100 to 250. And the follow-on funding
                                                                  can go up to $3 million if you do things right and even higher than
                                                                  that with SBA-specific approval.
                                                                    We look at the balance of the situation of how do we fund—do
                                                                  we give more at phase 1s and early on awards and less phase 2s?
                                                                  And what we have had is the National Academy of Sciences looking
                                                                  at this program, and they have looked at it to balance that. And
                                                                  they say we have got the balance about right. That was 4 years
                                                                  ago. We haven’t looked at it recently, but there is some flexibility.
                                                                    So the agencies can go up or even down if they choose to. But,
                                                                  by and large, it is—if we can get phase 3 working right, like GSA
                                                                  did, we added $2 billion of phased—just because you change the
                                                                  procedure of how you did contracting. They have got an even better
                                                                  program on the shelf. We can make that huge difference in how
                                                                  that works.
                                                                    Mr. CISNEROS. All right. Thank you.
                                                                    Ms. Mackey, Congress gave the United States Special Operations
                                                                  Command, SOCOM, a special authority in 2021 to do business-to-
                                                                  business transactions, and in fiscal year 2023 their average time to
                                                                  production, decision from the initial topic enhancement to the
                                                                  award that follows as in phase 3, developed from 5 years to 18
                                                                  months.
                                                                    Now, while SOCOM’s approach can’t be used for all SBIR pro-
                                                                  grams, how can we support agencies in moving innovations
                                                                  through this process faster than the current average timeline?
                                                                    Ms. MACKEY. That is a great example. I love what SOCOM did
                                                                  with that. And I think that, when we look at this, we need to un-
                                                                  derstand it is not the small business innovator; it is not the high-
                                                                  tech company that is slowing things down. It is 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 SBIR programs.
                                                                  But it is not just within the SBIR program. And this is the point
                                                                  that I think is important for us to think with. It is within that




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                                                                  R&D world that funds it, but it is also within the acquisition world
                                                                  that acquires 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 bun-
                                                                  dle that together, you have an ability to get something over the val-
                                                                  ley of death because there is someone to receive it on the other side
                                                                  and also to sort of build that bridge for you as you come over.
                                                                    Mr. CISNEROS. All right. I yield back. Thank you.
                                                                    Chairman WILLIAMS. Gentleman yields back.
                                                                    I now recognize Mr. Meuser from the great State of Pennsylvania
                                                                  for 5 minutes.
                                                                    Mr. MEUSER. Thank you very much, Mr. Chairman.
                                                                    And thank you to our witnesses. This is a very informative and
                                                                  important hearing. Appreciate it very much, you being here.
                                                                    So, Dr. Marinelli, you discussed your company’s development of
                                                                  technology to extract rare earth minerals, critical components for
                                                                  satellites, data centers, and other technologies, super important
                                                                  from coal ash piles—love that. We got a little bit of coal ash up in
                                                                  my—my district, to say the least. We are working on it in this
                                                                  same manner.
                                                                    So the SBIR program has assisted you in developing this tech-
                                                                  nology, and maybe you can expand on why you believe a—how it
                                                                  has helped you.
                                                                    Mr. MARINELLI. So this started out as a little idea experiment.
                                                                  We started as a kind of beaker-scale laboratory-type experiment to
                                                                  see if we could extract rare earths from coal ash. It turns out that
                                                                  technology is based on the same process that you use to extract
                                                                  uranium and plutonium, was developed during the Second World
                                                                  War. We adapted it to this purpose.
                                                                    We received SBIR funding then to bring it to a larger scale and
                                                                  to work through some of the details of it and finally went to DOE
                                                                  and DOD’s IBAS program, where we were able to get funding to
                                                                  build a pilot plant actually at Winner Water systems in Sharon,
                                                                  Pennsylvania.
                                                                    Mr. MEUSER. In Sharon. Okay. Great.
                                                                    Mr. MARINELLI. Yeah, in Sharon.
                                                                    Mr. MEUSER. Did they find you, or did you find them?
                                                                    Mr. MARINELLI. We went out and found them, but—and we
                                                                  worked very closely with both DOD and DOE in that process.
                                                                    Mr. MEUSER. The first time is easiest, right, because once you
                                                                  are in, once you have contact, it is far easier; getting through is the
                                                                  most difficult part?
                                                                    Mr. MARINELLI. Certainly. But you have got to also show suc-
                                                                  cess.
                                                                    Mr. MEUSER. Just like with anything.
                                                                    Mr. MARINELLI. Yes. And then it turns out that Appalachian
                                                                  coal is actually rich in rare earths, is one of the things that we
                                                                  learned. And, working with Senator Shelby before he retired, we
                                                                  were able to get an appropriation to build the next scale plant
                                                                  down in Alabama.
                                                                    Mr. MEUSER. Okay. Good. Well, contact me. We have got
                                                                  Schuylkill County, and we got the best anthracite, and we have got
                                                                  all these rare earths within our ash, so—within our coal banks.
                                                                    Mr. MARINELLI. We are certainly willing to move forward——




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                                                                     Mr. MEUSER.—those that we are working on excavating.
                                                                  Thanks.
                                                                     Mr. MARINELLI. Sure.
                                                                     Mr. MEUSER. Mr. Miryekta, first off, thank you for your service,
                                                                  sir. Appreciate you very much.
                                                                     So, from your experience, your methods, your discussions on
                                                                  China, very serious, collecting sensitive IP from SBIR-funded small
                                                                  businesses. Now, this sounds like it is rampant. It sounds like it
                                                                  is targeted; sounds like they are targeting SBIR potential busi-
                                                                  nesses or the SBIR fund.
                                                                     Now, it is $100 million, right? That is a lot of money, but that
                                                                  is not enough to create a whole espionage ring. Is their main point
                                                                  not just accessing the money but also accessing the mothership, if
                                                                  you will, that is doing the contracting?
                                                                     Mr. MIRYEKTA. So, to my knowledge, no. To my knowledge,
                                                                  they are very focused on the innovators. It is not the amount of
                                                                  money. Everybody is seeking SBIR-funded companies, U.S. inves-
                                                                  tors, Chinese investors.
                                                                     The receipt of a SBIR tells the investor that there is a
                                                                  differentiator, whatever it is. It doesn’t matter if they like the pro-
                                                                  gram or not, but this is a company that somebody in the govern-
                                                                  ment vetted. They believe it will be effective. So it attracts both
                                                                  good and bad investment. But that is for the technology itself. And
                                                                  we will see a lot of early-stage funding where a CCP investor will
                                                                  try to get in at the pre-seed stage, disseminate 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 is what they will focus
                                                                  on.
                                                                     Mr. MEUSER. Okay. We had Reauthorization 2023. Maybe you
                                                                  could talk about some of the improvements.
                                                                     Did you like what was done, particularly from a foreign adver-
                                                                  sary security standpoint or just from an access standpoint, as well
                                                                  as it being better known by those who may benefit by this pro-
                                                                  gram?
                                                                     Mr. MIRYEKTA. This was a watershed event, sir, and thank you
                                                                  for asking about it.
                                                                     It legitimized the mission for keeping CCP investment out of our
                                                                  equities. It became real once it was codified. And, because we had
                                                                  two laws or another law and an executive order on top of it, in—
                                                                  and it takes about 2 years for the industry to accept it. But, as of
                                                                  February of 2024, they weren’t certain if this was a real require-
                                                                  ment—the denials became more publicized over the summer.
                                                                     By December of 2024, they accepted it as reality and our
                                                                  innovators are trying to get in front of it and make sure that they
                                                                  self-sanitize.
                                                                     Mr. MEUSER. Thank you very much. I yield back, Mr. Chair-
                                                                  man. Thank you all.
                                                                     Chairman WILLIAMS. The gentleman yields back.
                                                                     I now recognize Mr. Tran from the great State of California for
                                                                  5 minutes.
                                                                     Mr. TRAN. Thank you, Mr. Chairman.
                                                                     Thank you, Ranking Member.
                                                                     Thank you and welcome to D.C. to our witnesses.




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                                                                     Mr. Glover, in your testimony, you rightly pointed out that Amer-
                                                                  ica’s basic science is a primary national strength, but converting
                                                                  that science to American innovation and jobs faces increasing inter-
                                                                  national competition. Unfortunately, small businesses in SBIR/
                                                                  STTR programs face the threat of the Chinese Communist Party
                                                                  stealing their intellectual property and claiming these technology—
                                                                  technological innovations for themselves.
                                                                     What role does SBIR/STTR program play in the American inno-
                                                                  vation ecosystem, and how does the SBIR/STTR program protect
                                                                  American innovation from issues like foreign ownership and patent
                                                                  theft?
                                                                     Mr. GLOVER. Well, we started off when the founders created the
                                                                  SBIR program, we wanted to avoid having foreign countries benefit
                                                                  from this. So we put requirements in the law that said it has to
                                                                  be a U.S. company; it has to be owned by U.S. citizens 51 percent;
                                                                  and the 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 out-
                                                                  smarted us and gone beyond that. So it is—it is a challenge.
                                                                     But, again, you have got to be careful not to simply say ‘‘no’’
                                                                  when anything comes up with, and I think as Cyrus talked—you
                                                                  need to be able to fix the problems. And we found some of the agen-
                                                                  cies do not tell the company what the problem is, nor do 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, you are just shutting people down, and they can
                                                                  never learn; they can never get better.
                                                                     So small business develops the technology. Study after study
                                                                  shows it—shows how great the SBIR program is at developing it.
                                                                  We have got to make sure that we do stop the foreign use of it.
                                                                  It is not as common, but the problem is it is in critical areas.
                                                                     So like 99.9 percent of all SBIRs are just fine. But that one-tenth
                                                                  of 1 percent may be giving away whole generations of new tech-
                                                                  nology—critical next generation of something significant. So it is a
                                                                  real challenge.
                                                                     Mr. TRAN. Thank you for sharing that.
                                                                     Ms. Mackey, DOD accounts for roughly half of the SBIR funding
                                                                  across the federal government, but concerns have been raised that
                                                                  the application process is daunting for many new businesses work-
                                                                  ing to break into the space.
                                                                     In your experience, is DOD doing anything to make this process
                                                                  easier for first-time applicants?
                                                                     Ms. MACKEY. I have seen a tremendous uptick in outreach ef-
                                                                  forts for first-time applicants. I will tell you, when we wrote our
                                                                  first proposal 20 years ago, it 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 overregulated that
                                                                  very first piece? All these issues notwithstanding, we need—we
                                                                  need to make a funnel that can attract new entrants into it.
                                                                     So I am seeing better outreach, and I think there is plenty of
                                                                  work we could still do.
                                                                     Mr. TRAN. Thank you.




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                                                                     Mr. Glover, back to you real quick. The due diligence program to
                                                                  assess foreign risks has been successful in identifying risks al-
                                                                  ready, but it can add another layer to an already complicated appli-
                                                                  cation process.
                                                                     I am a big proponent of streamlining the SBIR and STTR pro-
                                                                  grams 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 overly burdensome process for small businesses, par-
                                                                  ticularly new applicants?
                                                                     Mr. GLOVER. As someone who still remembers the Paperwork
                                                                  Reduction Act, which was a big deal years ago and sort of been ig-
                                                                  nored in recent history, it is a real challenge, and 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 is your
                                                                  contract.’’ There is no reason they can’t do that right now. So that
                                                                  would simplify phase 1. It would take months out of the cycle.
                                                                  Same thing for phase 2; same thing for phase 3.
                                                                     They do it with grants, but they don’t do it with contracts. GSA
                                                                  proved that, if you give a simple contract, you do it—they cut years
                                                                  out of the contracting process for phase 3s. And they got a program
                                                                  to do even more that hopefully gets finalized very soon.
                                                                     But you come up with some basic ideas, but task the agencies to
                                                                  say, tell us why—there is a provision in the law that says report
                                                                  and standardization, simplification. DOD just ignored it. Put some
                                                                  teeth in that and make them do it, but force the agencies to come
                                                                  up with the solutions.
                                                                     I can give you simple standard contracts with the award; that
                                                                  one saves time, energy, and effort. The proposal issue, that is a
                                                                  challenge because you have to somehow tell people what you want.
                                                                     Mr. TRAN. Thank you, Mr. Glover. I truly appreciate it.
                                                                     I yield back, Chairman.
                                                                     Chairman WILLIAMS. Gentleman yields back.
                                                                     I now recognize Mr. Downing from the great State of Montana
                                                                  for 5 minutes.
                                                                     Mr. DOWNING. Thank you, Mr. Chairman, and thank you all
                                                                  for your testimony today.
                                                                     First of all, I am deeply concerned by China’s ongoing efforts to
                                                                  exploit the SBIR and the STTR programs to steal valuable U.S. in-
                                                                  tellectual property, and we need to protect these programs from
                                                                  subversion from our foreign adversaries.
                                                                     I am going to start out, Mr. Miryekta, thank you for being here
                                                                  today. China weaponizes talent recruitment programs like the
                                                                  Thousand Talents Plan to gain access to deeply sensitive informa-
                                                                  tion from American companies and research institutions.
                                                                     First, can you give us an idea in your estimation of how effective
                                                                  these talent recruitment programs have been and really how far
                                                                  they have advanced China’s technological capacity compared to
                                                                  ours?
                                                                     Mr. MIRYEKTA. Yeah. I have seen—thank you for your ques-
                                                                  tion, Congressman.
                                                                     I have seen an individual that fled the PRC for having an active
                                                                  role during the Tiananmen Square Massacre on June 4, 1989. Fast




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                                                                  forward 30 years, the United Front Work Department has won him
                                                                  over, and now, despite the success he found in America, he is help-
                                                                  ing the Chinese Communist Party from the United States. They
                                                                  are highly effective at recruiting expats on U.S. soil and in Europe.
                                                                     Mr. DOWNING. So what types of technologies has China’s talent
                                                                  programs and IP theft efforts specifically targeted?
                                                                     Mr. MIRYEKTA. It is literally the same as the Air Force/Space
                                                                  Force requirements. It is—you know, new space capabilities, new
                                                                  energy capabilities, AI, autonomy, everything that we have as a
                                                                  priority is essentially seems to be mirrored by their priorities.
                                                                     Mr. DOWNING. Do you believe that SBIR and STTR currently
                                                                  have the protocols in place needed for mitigating the impact of Chi-
                                                                  na’s talent recruitment strategy?
                                                                     Mr. MIRYEKTA. Only Department of the Air Force. They are the
                                                                  only ones capable.
                                                                     Mr. DOWNING. Thank you. Thank you for those answers.
                                                                     I also want to discuss with you the impact of China’s rapidly de-
                                                                  veloping AI capabilities and the threat that it poses on our re-
                                                                  search security. We have, obviously, seen some pretty interesting
                                                                  things recently.
                                                                     To what degree have China’s advancements in AI development
                                                                  bolstered their ability to subvert U.S. research programs, including
                                                                  SBIR?
                                                                     Mr. MIRYEKTA. When it comes to the Chinese, they spend bil-
                                                                  lions on perception management, and they are constantly over-
                                                                  selling their capability. However, oftentimes, international actors
                                                                  become sympathetic to what the Chinese are broadcasting. That
                                                                  doesn’t mean that their AI is on par or that it is actually legitimate
                                                                  with the story that they have given us.
                                                                     Mr. DOWNING. Well, thank you very much.
                                                                     Clearly, we need to do more to protect the integrity of our feder-
                                                                  ally funded research programs. And, as the Small Business Com-
                                                                  mittee develops the reauthorization of SBIR and STTR, I look for-
                                                                  ward to making research security a top priority for this legislation.
                                                                     And so I thank you, and I yield back.
                                                                     Chairman WILLIAMS. The gentleman yields back.
                                                                     I now recognize Ms. Scholten from the great State of Michigan
                                                                  for 5 minutes.
                                                                     Ms. SCHOLTEN. Thank you, Mr. Chairman. And thank you—ex-
                                                                  cuse me—as I fend off the last bit of this winter cold. Thank you
                                                                  so much for our witnesses for joining us here today for this incred-
                                                                  ibly important conversation.
                                                                     The SBIR program has been truly instrumental in supporting
                                                                  small businesses that drive technological innovation. I wanted to
                                                                  read just a little bit about the economic impact here because that
                                                                  is essentially what we are talking about, right?
                                                                     How—what is the value of the dollars that we are investing in
                                                                  this critical program? Economic analysis of the program has rou-
                                                                  tinely demonstrated its outsized importance in generating innova-
                                                                  tions and economic growth. Between 1996 and 2020, 99 new drug
                                                                  approvals, 12 percent of all new drugs approved, were developed by
                                                                  SBIR/STTR firms.




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                                                                     Another study found the SBIR phase 2 awards show return on
                                                                  investments between $22 and $33 for every dollar invested. It is in-
                                                                  credible.
                                                                     A study from the National Cancer Institute found that, for every
                                                                  dollar invested, it resulted in $11 in commercial sales. Throughout
                                                                  its lifetime, 829 SBI firms have gone public, and 2,120 have been
                                                                  acquired.
                                                                     Finally, 10 percent of all venture capital investments go to SBIR
                                                                  firms. I like those numbers.
                                                                     Mr. Glover, the SBIR program is a game changer and critical for
                                                                  our economy. How can we ensure that this program continues to
                                                                  support cutting-edge research and development, especially in areas
                                                                  that are critical for U.S. competitiveness, such as health and na-
                                                                  tional security?
                                                                     Mr. GLOVER. One, I think we simply need to reauthorize it,
                                                                  make it permanent, put the consistency into the program. Two, I
                                                                  think we need to have the program simplified and streamlined, and
                                                                  I think the government—GSA proved it can be done. So make the
                                                                  other agencies do it, something you can require in legislation and
                                                                  monitor and make sure that happens.
                                                                     And I think, quite frankly, the program needs to be a lot larger.
                                                                  Something this efficient is still at the 3 percent, hasn’t been in-
                                                                  creased since 2011. You know, you should reward something that
                                                                  works, and we haven’t in, what, 13 years, 14 years.
                                                                     Ms. SCHOLTEN. And I don’t see us going in that direction right
                                                                  now. In fact, we have recently heard—staff recently heard from an
                                                                  SBIR recipient, who was unable to access funding during the fed-
                                                                  eral funding freeze enacted by Donald Trump and Elon Musk sev-
                                                                  eral weeks ago. Luckily, due to a court order, court intervention—
                                                                  right?—the administration wanted to stop it, but we needed the ju-
                                                                  dicial branch to step in—NSF reopened their funding portal.
                                                                     Can you explain how this type of uncertainty impacts SBIR re-
                                                                  cipients?
                                                                     Mr. GLOVER. The one—the thing small business needs most is
                                                                  cash, and they need money, and they go out of business when they
                                                                  don’t have it. And they don’t have—they often mortgage their
                                                                  house to make their technology work. So, when you shut off the
                                                                  spigot, 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 that is only—outside
                                                                  of the SBIR program, it was rampant. This is by no means the only
                                                                  place the Chinese are looking.
                                                                     So it is critical, and it is painful to let somebody spend their
                                                                  whole life developing technology, get it to a level, and then they
                                                                  win. And then say, ‘‘Oops, sorry, we are not doing it today, and we
                                                                  don’t know when we are doing it.’’
                                                                     Ms. SCHOLTEN. Doesn’t seem like the chainsaw approach is
                                                                  working as intended in this particular context. National security
                                                                  depends on us being a little bit more precise here.
                                                                     One more thing, Mr. Glover. The tax cuts passed in Trump’s first
                                                                  term actually increased taxes on research and development, mak-
                                                                  ing companies amortize their research expenditures over 5 years
                                                                  rather than all at once.




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                                                                     Do you have any thoughts on how that has impacted SBIR firms
                                                                  who usually have no other form of income?
                                                                     Mr. GLOVER. It either has bankrupt them or put an end to a
                                                                  bankrupt in effect state, where they may not file bankruptcy, but
                                                                  they don’t have any money to pay anything and don’t have money
                                                                  to continue. When you are faced with getting a million dollar grant
                                                                  and you got to pay taxes on a million dollars, but you only—used
                                                                  to be, you know, it was 20 percent. Now it is 100 percent.
                                                                     We are having a conference with a bunch of people on tomorrow
                                                                  afternoon with companies all over the country. It has been a hor-
                                                                  rible situation.
                                                                     I was told when it got passed, ‘‘Oh, don’t worry; it is so impor-
                                                                  tant; there is no way it won’t get extended.’’ Well, guess what?
                                                                  Washington is Washington. Hasn’t been extended.
                                                                     Ms. SCHOLTEN. Thank you. Thank you so much, sir. I really
                                                                  appreciate it. As a champion of fiscal responsibility, these programs
                                                                  are critical.
                                                                     I yield back.
                                                                     Chairman WILLIAMS. The lady yields back.
                                                                     I now recognize Mr. Finstad from the great State of Minnesota
                                                                  for 5 minutes.
                                                                     Mr. FINSTAD. Thank you, Chairman Williams, and thank you
                                                                  for holding this important hearing today, and thank you to our wit-
                                                                  nesses for being here with us.
                                                                     The district I have the honor to represent in southern Minnesota
                                                                  is home to several innovative companies that provide cutting-edge
                                                                  products for the Department of Defense. I also serve on the House
                                                                  Armed Services Committee and am happy to be serving here on the
                                                                  Small Business Committee as well.
                                                                     I have had the 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 with the funding they re-
                                                                  ceive from the SBIR and the STTR programs. So I am looking for-
                                                                  ward 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
                                                                  across our nation and my district.
                                                                     So, Dr. Marinelli, as somebody who has had great success uti-
                                                                  lizing the SBIR program with the Department of Defense, maybe
                                                                  just a simple question—and you have touched on it a little bit, but
                                                                  just maybe kind of cut through the chase here.
                                                                     So what challenges do SBIR applicants face in the process, and
                                                                  what changes can we make to expand access for this program for
                                                                  entrepreneurs and small businesses across the country?
                                                                     Mr. MARINELLI. So, typically, in the SBIR program, you are
                                                                  looking at the companies trying to do technology push often in con-
                                                                  cert with the S&T program managers and the federal government.
                                                                  And you have got on the other side acquisition pull, people working
                                                                  off requirements.
                                                                     And I think probably the most important thing to do is to get
                                                                  them working in closer concert, so there is a technology handoff
                                                                  there. You have really got to derisk the technology to the point
                                                                  where someone who has got, you know, a billion dollar technology




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                                                                  platform is willing to accept the risk of bringing that new tech-
                                                                  nology in. That takes money, and it takes time.
                                                                     So I think trying to make that match earlier in the program will
                                                                  help both the acquisition programs and make the companies them-
                                                                  selves be more successful and perhaps attract that investment.
                                                                     Mr. FINSTAD. Well, as we work as a Committee on the Armed
                                                                  Services to really strengthen our defense industrial base, it is now
                                                                  more important than ever that we make this process easier and
                                                                  more of an A to B than an A to B to C to D and throw in a couple
                                                                  pipe wrenches in the process and a stable full of lawyers. So I ap-
                                                                  preciate your—your advice there.
                                                                     Mr. MARINELLI. Thank you.
                                                                     Mr. FINSTAD. Ms. Mackey, as past Chair of the National Small
                                                                  Business Association, how difficult—again, maybe kind of cutting
                                                                  to the chase.
                                                                     How difficult is it for small business owners to understand the
                                                                  government’s hoops and pipe wrenches and all of it that they have
                                                                  to go through in contracting and the SBIR—with the SBIR oppor-
                                                                  tunities? How can we make it easier for these businesses to pursue
                                                                  these opportunities?
                                                                     Ms. MACKEY. Boy, I can’t emphasize enough what it was like
                                                                  the first time when we won an SBIR and someone came in to ex-
                                                                  plain how the federal government works. You know, I am an elec-
                                                                  trical engineering. My partner is a Harvard Business School grad.
                                                                  We have some gray matter that—and we were just like, ‘‘What is
                                                                  this system? How does it work?’’ And every time you think you
                                                                  learn more, there is something more to learn.
                                                                     So here is what I will tell you from our experience that I think
                                                                  would be helpful to others: 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 coun-
                                                                  terparts that are willing to take the risk. And it is the acquisition
                                                                  folks, and it is the test folks. We also had industry partners who
                                                                  are willing to help us understand, sort of mentor us; not in a for-
                                                                  mal 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 would be happy to think of specific examples, but that is in
                                                                  general what I think would be good.
                                                                     Mr. FINSTAD. No. I appreciate that. Your lived experience
                                                                  through this process is very helpful to hear your story, but also I
                                                                  want to continue this dialogue as we look at how we can improve
                                                                  the 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
                                                                  mid-sized companies scattered throughout rural America to have a
                                                                  seat at the table and speak the same language that government
                                                                  speaks, and how do we make that easier, not harder.
                                                                     So thank you for your time and for being here. Mr. Chairman,
                                                                  thank you. And I yield back.




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                                                                     Chairman WILLIAMS. The gentleman yields back.
                                                                     I now recognize Mr. Olszewski from the great State of Maryland
                                                                  for 5 minutes.
                                                                     Mr. OLSZEWSKI. Thank you, Mr. Chairman.
                                                                     Thank you to all of our witnesses today for your time and your
                                                                  testimony.
                                                                     I think that—just want to reemphasize my colleague, Represent-
                                                                  ative Scholten, and her point of ROI and why these programs are
                                                                  so important. So I look forward to working with Chairman Wil-
                                                                  liams, Ranking Member Velázquez, and all my colleagues here to
                                                                  prioritize, especially what you all, I think, have pointed out is pro-
                                                                  viding that certainty, making the program permanent or at least
                                                                  more permanent in particular in addition to some other changes.
                                                                  So thank you all for your recommendations today.
                                                                     You know, we know these have real-life impacts. I am aware of
                                                                  at least two businesses in my district that are direct recipients of
                                                                  this program and SBIR, one of which is a woman-owned business
                                                                  in Baltimore County. And so I am interested in also the long-term
                                                                  success, not only of the program but also the diversification of
                                                                  those who are participating in the program.
                                                                     Maybe, perhaps Mr. Marinelli, could you speak to us a little bit
                                                                  about enhancing the geographic and demographic diversity of the
                                                                  program? What can we do to bring in new applicants? What is the
                                                                  most effective way in your mind to meet that goal?
                                                                     Mr. MARINELLI. So, if you go back and look at the—there was
                                                                  a 2014 National Academy study of the Department of Defense
                                                                  SBIR program, and it showed that some of the underserved States
                                                                  in the program have some of the lowest per capita submission rates
                                                                  of proposals in the country. And I think probably the most impor-
                                                                  tant thing to do in terms of diversifying participation is to get them
                                                                  introduced into the program, make it easier for them to get in.
                                                                     In some cases, we have seen some of the States that have pro-
                                                                  grams that helped bring the program to small companies are doing
                                                                  much better. Most of the new companies tend to form around uni-
                                                                  versities, and I think focusing on universities, regardless of where
                                                                  they are, is important in terms of kind of bringing them out and
                                                                  telling them, ‘‘Here is a way for you to get funding.’’
                                                                     Under the STTR program, we have sent, I believe, around $23
                                                                  million in funds to universities all over the country associated with
                                                                  that. And I think that is another way to introduce them to the pro-
                                                                  gram is to show them the benefits of that funding, and it also helps
                                                                  get the technology out, as well as start to create that workforce
                                                                  that you get on the defense side. So I think all of those would be
                                                                  important things to do.
                                                                     Mr. OLSZEWSKI. That is great. I appreciate that. Anyone else
                                                                  want to—Ms. Mackey?
                                                                     Ms. MACKEY. 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, you know, 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’s small
                                                                  business division, small businesses help each other. Like, there is
                                                                  this tremendous collegial outreach that I watched a lot of—what




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                                                                  people refer to as the coastal companies helping other small busi-
                                                                  nesses. And I think if we formalize that, that would be tremendous.
                                                                     I also think it is important that we help people that haven’t sub-
                                                                  mitted to understand that they are valuable and that their experi-
                                                                  ence would be valuable. You don’t recognize yourself as valuable or
                                                                  that you could even access this program.
                                                                     Mr. OLSZEWSKI. That is great.
                                                                     I will yield back with that, Mr. Chairman. Thank you.
                                                                     Chairman WILLIAMS. Gentleman yields his time back.
                                                                     I now recognize Ms. Goodlander from the great State of New
                                                                  Hampshire for 5 minutes.
                                                                     Ms. GOODLANDER. Thank you, Mr. Chairman. And, really,
                                                                  thank you to our witnesses for being here today.
                                                                     Dr. Marinelli, I wanted to begin with you. I am very—especially
                                                                  happy you are here. You know, New Hampshire is home to PSI fa-
                                                                  cility, and I wanted to give you the opportunity to talk a little bit
                                                                  more about the important work that you are doing in my home
                                                                  State.
                                                                     Mr. MARINELLI. So we have what we call the molecules to mo-
                                                                  tors program. We started out with SBIR-funded technology to cre-
                                                                  ate new propellants and new explosive materials and new compo-
                                                                  nents for that. There is 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 we could scale up, so to speak.
                                                                     We actually identified a location in New Hampshire. I am not
                                                                  going to talk about where it is because of the kind of things that
                                                                  we do there. But we have grown that now to a 13-acre campus
                                                                  where we can both mix large quantities of new propellants that
                                                                  will extend both the range and lethality of U.S. weapons system.
                                                                  We are about to invest $3 million in that facility in order to create
                                                                  all of those special capabilities associated with that.
                                                                     In conjunction with that, we are 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
                                                                  is very much a collaborative effort. But it is also an extremely spe-
                                                                  cialized capability.
                                                                     We even have some large companies in the area that are coming
                                                                  to us saying, ‘‘Can we use your facility,’’ because it is so hard to
                                                                  get into some of the government facilities to do that.
                                                                     So I think it is important. It is an example of a specialized capa-
                                                                  bility that only the government can fund, and we are happy to be
                                                                  bringing that to the area.
                                                                     Ms. GOODLANDER. Well, thank you for that. You know, the
                                                                  University of New Hampshire is home to the FOSTER program
                                                                  where the FOcused SBIR/STTR Teaching Entrepreneurship and
                                                                  Results Program, you know, which has the basic mission of helping
                                                                  to guide small businesses through the SBIR and STTR processes.
                                                                     I would like to just ask our witnesses to speak a little bit more
                                                                  about how these types of university-based programs have been
                                                                  force multipliers and really helped the SBIR and STTR programs.
                                                                  Maybe starting with you, Mr. Glover.
                                                                     Mr. GLOVER. The vast programs and regional outreach pro-
                                                                  grams primarily with universities and small business development
                                                                  centers in many of the States, they have done an excellent job. But




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                                                                  it is a challenge because, quite frankly, they don’t have the culture
                                                                  in there. And you will often find that SBIR is the only real oppor-
                                                                  tunity for a company in certain areas—certain rural areas have not
                                                                  States that are not on the coast, and it is a real challenge.
                                                                     And we have seen them be successful and really do a great job.
                                                                  But getting people to write proposals is a critical issue because you
                                                                  can’t win if you don’t submit a proposal. And the studies show that
                                                                  there is a direct relationship with the number of proposals sub-
                                                                  mitted by a State and the number of awards they win.
                                                                     Ms. MACKEY. So I work a lot with the University of Massachu-
                                                                  setts at Lowell and their outreach similar to the UNH outreach.
                                                                  And what I find really valuable there for SBIR companies is not
                                                                  only the FOSTER type of programs to teach you how to write a
                                                                  proposal, but the depth of research and the infrastructure that you
                                                                  can access to do different research pieces.
                                                                     The other thing that I really like about what the U-Mass system,
                                                                  what they are doing with their advanced research centers, they are
                                                                  partnering with the industry. So it is not just how do you get start-
                                                                  ed, how do you do the research, but if I were to use a golf anal-
                                                                  ogy—my husband would be so happy I am doing this—it is the
                                                                  swing through. Right? It is where do you—well, I guess I can’t take
                                                                  that golf analogy any further. I tried. But it is the swing through,
                                                                  right?
                                                                     And so I think it is universities. And to Jere’s point, partnering
                                                                  also with industry for that business model kind of understanding.
                                                                     Ms. GOODLANDER. Dr. Marinelli, did you want to add any-
                                                                  thing?
                                                                     Mr. MARINELLI. I mean, I think one of the key things that we
                                                                  see is a lot of our new technology that we bring into our company
                                                                  actually starts with the universities. More often than not, the way
                                                                  we bring technology out of the universities is to actually hire the
                                                                  students, and then kind of the professors come along for the ride.
                                                                  So I think it is very critical.
                                                                     Some of our UUV programs, we actually do with the University
                                                                  of New Hampshire off the pier there. We are working with one of
                                                                  the chemistry professors at UNH on our energetics programs. Uni-
                                                                  versities are critical here, and we need to maintain their strength
                                                                  throughout this activity. They are critical to the future workforce
                                                                  of the country.
                                                                     Ms. GOODLANDER. Well, I appreciate that, and I am 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 in-
                                                                  vite all of our witnesses today, any ideas you have about how to
                                                                  simplify and streamline these processes, including the use for SBIR
                                                                  of other transitional authority, really welcome all of your ideas be-
                                                                  cause this is going to be critical to these programs, really, con-
                                                                  tinuing to leverage the taxpayer dollars that they do in extraor-
                                                                  dinary ways. So thank you.
                                                                     I yield back, Mr. Chairman.
                                                                     Chairman WILLIAMS. The gentlelady yields back.
                                                                     I now recognize Ms. Simon from the great State of California for
                                                                  her 5 minutes.




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                                                                     Ms. SIMON. Chair Williams, I love it when you say the great
                                                                  State because I will remind you again, it really is. It is a lot warm-
                                                                  er than D.C., sir, in my 8 weeks.
                                                                     I want to thank you all for coming today, and I just really had
                                                                  a great time reading the materials and your testimony prior to this
                                                                  hearing. I, like I believe everyone on this Committee, wants the
                                                                  United States to be first in innovation. There is no doubt about
                                                                  that.
                                                                     Some of you may have heard, because I keep talking about the
                                                                  amazing CRISPR lab at the University of California. I visited last
                                                                  week and saw all these amazing students, met our Nobel prize-win-
                                                                  ning professor and physician scientist at that lab. They have prov-
                                                                  en—they have cured sickle 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, really
                                                                  new lab technology; it was sparkling.
                                                                     And I think about Exelixis and Science Corp., Alameda 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 fa-
                                                                  cilities to change the lives of folks. I know this to be true.
                                                                     I have told my story, and I will tell it every single day as a
                                                                  widow of a great man who died of 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 private sector.
                                                                     I have a question, and it might be a comment. I am super con-
                                                                  cerned 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 and our Department of 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 re-
                                                                  search grants and resources and small business technology transfer
                                                                  resources, if it is difficult now before the slashing and burning of
                                                                  staff in these critical departments who serve our innovators and
                                                                  small businesses—we are talking about continuing resources for
                                                                  these folks. Well, guess what? If nobody answers the phone or no
                                                                  one is answering the inquiry on the website, our folks are going to
                                                                  be left—they are going to be left dry.
                                                                     And, as a result—as a result of what is happening throughout
                                                                  the administration, we know if you talk to physician scientists, if
                                                                  you talk to innovators, if you talk to that young 26-year-old who
                                                                  is working at Genentech working on a data model that I couldn’t
                                                                  even fathom how complicated it was seeing it on a screen, who is
                                                                  this close to that thing, what is going to happen? Children are
                                                                  going to die.
                                                                     There is actually a family walking around the halls right now,
                                                                  there is a young child who has a very rare disease, very rare dis-




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                                                                  ease. I am hoping to meet them today. The baby is about 3 years
                                                                  old. Waiting for that next thing.
                                                                     No one is answering the phone. No one is reading the applica-
                                                                  tions. I cannot trust an AI algorithm to read an application that
                                                                  literally has the propensity and the opportunity to save a genera-
                                                                  tion. We got to do better.
                                                                     I guess, you know, sir, I love all of your bios, so inspired by your
                                                                  work; thank you for your service. I can just pick and choose.
                                                                  Maybe, Mr. Glover, and thank you so much for coming.
                                                                     What is going to be—what are the adverse effects of having low
                                                                  staffing as, again, we are trying to push and we are talking about
                                                                  re-establishing resources for our innovators, our scientists, for our
                                                                  pharmaceutical geniuses who are changing the way that, for in-
                                                                  stance, the elderly live out their last years and months. If these
                                                                  folks can’t get in touch with folks or there is decreased infrastruc-
                                                                  ture, what happens?
                                                                     Mr. GLOVER. I don’t know. And, you know, we hope things al-
                                                                  ways get better. We are optimistic, and we hope things get better,
                                                                  but I don’t have an answer for you.
                                                                     Ms. SIMON. Yeah. Well, I appreciate all of you here and the
                                                                  work that you are 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 fig-
                                                                  ure this thing out for our people. Thank you.
                                                                     I yield back.
                                                                     Chairman WILLIAMS. The gentlelady yields back.
                                                                     I now recognize Mr. Jack from the great State of Georgia for 5
                                                                  minutes.
                                                                     Mr. JACK. Well, thank you, Mr. Chairman, and thank you to
                                                                  each witness for being here today.
                                                                     Innovation has long been the driving force behind America’s glob-
                                                                  al leadership, whether in technology, medicine, or defense. Yet, in
                                                                  an era of rapidly advancing technologies and increasing global com-
                                                                  petition, we must continue to foster an environment where Amer-
                                                                  ican businesses, particularly small businesses, across each and
                                                                  every one of our congressional districts can thrive.
                                                                     Thanks to the Chairman. I serve as the Chairman of the Sub-
                                                                  committee on Innovation, Entrepreneurship, and Workforce, and I
                                                                  look forward to working with each and every one of you going for-
                                                                  ward to help strengthen the environment in which our small busi-
                                                                  nesses can thrive.
                                                                     But I would like to first start with Dr. Marinelli, if I could. I
                                                                  know you have had an opportunity a few times here today to talk
                                                                  about a few suggestions. But, specifically, the administrative com-
                                                                  plexity of applying to SBIR and STTR programs favors those, in my
                                                                  opinion, with strong networks or 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 to competing for these programs.
                                                                     Mr. MARINELLI. So I think, as ML spoke, you know, I—my ca-
                                                                  reer 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. Today—I don’t handle these directly




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                                                                  anymore, but it is bewildering to look at the different types of so-
                                                                  licitations, the different formats you need to respond to.
                                                                     We get messaging all the time about changes in the solicitations
                                                                  that make it difficult for our staff to understand. And we are a very
                                                                  experienced firm. It makes it difficult for us to understand some-
                                                                  times how to respond to some of these solicitations. I can’t imagine
                                                                  what it is like right now for a small company coming in.
                                                                     We have unbelievable IT requirements on ourselves these days.
                                                                  We get a lot of attention to that. I can’t imagine a small firm being
                                                                  able to do many of the certifications anymore that would be re-
                                                                  quired to continue on in the program very long.
                                                                     So I think there does need to be some recognition that there are
                                                                  people who aren’t like us, who don’t have that experience, and kind
                                                                  of a toned-down version of the application process that would en-
                                                                  able them to put their ideas forward. I think that is probably very
                                                                  important.
                                                                     Mr. JACK. Wonderful. Thank you.
                                                                     And, to Cyrus, because, as you noted, we are not going to pro-
                                                                  nounce your last name, after the initial application, my under-
                                                                  standing is that small businesses need more support in
                                                                  transitioning through the multiple phases of the application proc-
                                                                  ess. And a common trend we are seeing of China’s success in steal-
                                                                  ing American technology comes from closing the funding gap and
                                                                  directly supporting the scale-up through small business invest-
                                                                  ment.
                                                                     Given the challenges of private sector investment and long-term
                                                                  technology development within the U.S., how can SBIR be modified
                                                                  to help small businesses, small manufacturers better overcome the
                                                                  capital crunch between phase 2 and 3?
                                                                     Mr. MIRYEKTA. If there is an increase in the dollar amount, I
                                                                  know a lot of innovators will not even bother applying for SBIRs
                                                                  because they believe the dollar amount is too low. I think, if it was
                                                                  moved up probably to 2 million, you would get a lot more buy-in.
                                                                     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 SBIR process is too cum-
                                                                  bersome for them to apply.
                                                                     Mr. JACK. Wonderful. I appreciate that.
                                                                     I am just going to close, Mr. Chairman, by noting something that
                                                                  I think does impact small business writ large. But we talk about
                                                                  the regulatory environment, and some of these regulations that
                                                                  have been foisted upon small businesses in previous administra-
                                                                  tions have had a deleterious impact to their ability to succeed.
                                                                     And, tomorrow, our House is going to vote on a Congressional
                                                                  Review Act resolution led by my good friend Gary Palmer and my-
                                                                  self. And it is to repeal a regulation and rule that would affect a
                                                                  company in my congressional district. It is about tankless water
                                                                  heaters. I know my colleagues are tired of me saying it.
                                                                     But, just to share it with—and I will 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 com-
                                                                  pletely manufactured in my congressional district, that we are
                                                                  seeking to repeal tomorrow in our legislative body.




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                                                                     So, if I can close out with you, ML, it is not germane to the testi-
                                                                  mony 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 environment in
                                                                  which small businesses operate today?
                                                                     Ms. MACKEY. 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 bur-
                                                                  den on environmental and would be directly related to this.
                                                                     And I say that because I think the best way you can come up
                                                                  with making this easier is ask the small businesses, and NSBA can
                                                                  give you that voice. I think you need to ask across the board, but
                                                                  I would start with them.
                                                                     Mr. JACK. Well, I applaud the Chairman for consistently pro-
                                                                  viding us an opportunity to engage with small businesses and hear
                                                                  directly from you all. I appreciate that recommendation.
                                                                     And I thank each and every one of you for taking the time to
                                                                  come up today to share with us some ideas to better improve the
                                                                  environment in which you all thrive.
                                                                     Thank you.
                                                                     Chairman WILLIAMS. The gentleman yields back.
                                                                     I now recognize Dr. Kelly Morrison from the great State of Min-
                                                                  nesota for 5 minutes.
                                                                     Ms. MORRISON. Thank you, Mr. Chair. Thank you for holding
                                                                  this hearing.
                                                                     And thank you so much to our witnesses for being here today.
                                                                  Sorry I am all the way now down on the other end.
                                                                     It is great to see so much bipartisan consensus about the impor-
                                                                  tant role that SBIR and STTR programs play in supporting Amer-
                                                                  ican innovation.
                                                                     Thanks for taking the time to testify.
                                                                     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
                                                                  in all 50 States.
                                                                     My own home State of Minnesota has received nearly 3,000
                                                                  awards since the program began in 1982, ranging from investments
                                                                  in unmanned ground robotic systems for DOD surveillance and re-
                                                                  cognizance to robotic greenhouse gas monitoring to measure the
                                                                  impacts of climate smart farming practices, to reducing energy
                                                                  usage, and wearable devices through sleep science, informed algo-
                                                                  rithms, demonstrating, I think, that great ideas and scientific
                                                                  breakthroughs can come from anywhere.
                                                                     Mr. Glover, could you elaborate on why it is important for the
                                                                  SBA to promote innovation across the country? How can we en-
                                                                  hance the geographic and demographic diversity of program partici-
                                                                  pants? And how would increasing that diversity of applicants im-
                                                                  pact the competitiveness of the SBIR and STTR programs?
                                                                     Mr. GLOVER. 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—work with the universities, work with those that do out-
                                                                  reach.
                                                                     I think that, you know, more needs to be done, and we have to
                                                                  be careful because, if we allow venture capital to be the selection




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                                                                  criteria, although it is illegal, what we find is awards—and some
                                                                  of the jumbo awards especially—just going to a very few States.
                                                                     So we have got to make sure that we don’t let venture capital
                                                                  be the deciding factor of who wins an award. If they have, you
                                                                  know, matching money, that was always prohibited because match-
                                                                  ing money meant the States in the middle of the country didn’t
                                                                  have anybody to match with. So we have got to be careful about
                                                                  that and how that selection criteria goes.
                                                                     We looked at the super jumbo awards, and we found out that,
                                                                  out of $13 billion of venture capital, some 7 billion before the
                                                                  awards, 6 billion after, 11 billion of that went to one State: Cali-
                                                                  fornia.
                                                                     So we have 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 have got to make sure
                                                                  that we look at that.
                                                                     We don’t want to choose based on anything but merit. Not geo-
                                                                  graphic because we don’t want to get the second best technology for
                                                                  our warfighters or for healthcare, but we do need to be sensitive
                                                                  to that issue.
                                                                     And thank you for the question.
                                                                     Ms. MORRISON. Thank you for that answer.
                                                                     In the Army, and DOD in general, female casualties have a sig-
                                                                  nificantly lower survival rate than male casualties. Architecture
                                                                  Technology, Inc., is an engineering company headquartered in my
                                                                  district that provides solutions to complex system problems.
                                                                     Last year, it was granted an SBIR award to address the gender
                                                                  survivability gap by developing augmented reality that provides
                                                                  gender-specific medical training to soldiers.
                                                                     Ms. Mackey, I appreciate your testimony on how SBIR and STTR
                                                                  programs have enabled small businesses to work in coordination
                                                                  with the federal government to provide ingenuity and advance-
                                                                  ments in the defense sector.
                                                                     Could you speak to the SBIR and STTR programs’ ability to ad-
                                                                  dress specific challenges or address issues for overlooked popu-
                                                                  lations, such as women in the military?
                                                                     Ms. MACKEY. So I think I would 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 ethnic. And they
                                                                  said, so, ‘‘We, being a woman CEO, how would we have found you?’’
                                                                  And I go, ‘‘Well, not the ways you are looking.’’
                                                                     And mostly because I wouldn’t have recognized myself where our
                                                                  skill set is applicable to the DOD. So I am sort of over generalizing
                                                                  to make a point.
                                                                     So I helped them figure out how to do outreach outside of the
                                                                  beltway and to different organizations, but you have to give exam-
                                                                  ples of how you are meaningful.
                                                                     The second point I would make is I think it is really interesting
                                                                  on the geographic diversity to be thoughtful to how much ingenuity
                                                                  we have in the center of the country.
                                                                     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 just feel like there is a




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                                                                  lot of good ideas 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 experi-
                                                                  enced companies that know how to write SBIR proposals together
                                                                  with some of the subject-matter expertise to address maybe there
                                                                  is a program or some thoughtfulness we can do that really helps
                                                                  share and network that kind of collaboration.
                                                                    Ms. MORRISON. I love that answer. Thank you.
                                                                    How do you think permanently authorizing the SBIR and STTR
                                                                  programs help ensure that small businesses can continue to bring
                                                                  cost-effective and valuable innovation to the Department of De-
                                                                  fense?
                                                                    Chairman WILLIAMS. The gentlelady’s time is up.
                                                                    Ms. MORRISON. Thank you, Mr. Chair.
                                                                    Chairman WILLIAMS. Thank you.
                                                                    She yields back.
                                                                    I would like to thank all the witnesses today for being here, for
                                                                  your testimony, and for appearing and sharing yourself with us.
                                                                    Without objection, Members have 5 legislative days to submit ad-
                                                                  ditional materials and written questions from the witnesses to the
                                                                  Chair, which will be forwarded to the witness.
                                                                    Now, I will say I hope you see there is some bipartisanship in
                                                                  this town and in this building, and we are working on a lot of
                                                                  things together in this Committee.
                                                                    So I ask the witnesses to please respond promptly.
                                                                    And, if there is no further business, without objection, the Com-
                                                                  mittee is adjourned.
                                                                    [Whereupon, at 12:05 p.m., the Committee was adjourned.]




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                                                                                                           APPENDIX




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