Summary: Comments were given on currently proposed legislation which would increase the use of small businesses in meeting Federal research and development needs by creating individual, agency-sponsored, small business innovation research programs (SBIR's) designed to foster innovation by small businesses. The contribution of small businesses to invention and innovation in this country has been significant, and GAO defined the environment in which such inventions and innovations occur. Three kinds of factors influence this environment: (1) broad economy-wide factors; (2) factors specific to individual industries; and (3) the characteristics of individual firms. In addition, there are three sets of conditions necessary, important, or desirable to foster innovation by small businesses. GAO provided criteria by which Congress might judge the extent to which proposed initiatives would enhance these conditions. Furthermore, GAO noted that the framework for SBIR's, provided by the currently proposed House and Senate bills, is sufficiently flexible to allow agencies to design small business innovation research programs capable of addressing a number of the conditions important in fostering small-business innovation. Aspects of funding and implementation of SBIR programs were also considered. GAO believes that the funding process should be more flexible than that which currently exists in the bills. As written, the bills require that Federal agencies meeting certain threshold criteria allocate a minimum percentage of research and development funds to an SBIR program, but GAO suggested that agencies with large research and development budgets could set funding levels through the normal budget process. The House and Senate versions of the bill vary regarding implementation strategies. GAO preferred the Senate version which designated monitoring and reporting duties to the Office of Science and Technology Policy rather than to the Small Business Administration which is designated in the House version. GAO believes the Senate version avoids duplication of responsibilities between agencies and separates oversight from operational responsibilities.
