Paving the way for new ideas
Washington — Hungry, hard-driving small businesses are a powerful force for innovation. They provide most of America's new jobs and many of our new technologies. But the long road to success is fraught with danger: interest rates ready to snatch away cash reserves, development costs just waiting to grow faster than all predictions.
A bill now edging quietly through Congress would make that road a little easier to take. The Small Business Innovation Research Act, virtually assured of Senate passage, would require government agencies with major research and development (R & D) budgets to spend at least 1 percent of their cash on small businesses. Though the government-wide average is higher than that now, a congressional staffer estimates the bill would increase R & D spending on small business about $360 million.
Perhaps more important, it would create a forum where the little guy can show off bright ideas for meeting the government's research needs.
''The very small, high-technology business - that's who this bill will help, '' says a congressional staffer working on the issue. Research and development in the social sciences and humanities are specifically excluded in the bill.
The federal government pays for half of the research and development undertaken in the United States. About 3.5 percent of Uncle Sam's R & D budget goes to little business.
But, according to a study by MIT scientist David Birch, firms with 500 or fewer employees accounted for 87 percent of the new jobs created in the United States between 1969 and 1976. A National Science Foundation survey found small companies produce 24 times as many innovations per R & D dollar as large corporations.
''It is necessary for us to look at methods of giving small business its fair share of federal research and development dollars,'' said bill sponsor Sen. Warren Rudman (R) of New Hampshire, ''considering its proven ability to offer possibilities for the future of technological development.''
Based on a popular National Science Foundation program, the Act would create a Small Business Innovation Research system (SBIR), whereby a small firm with a bright idea would present it to the appropiate agency. If the idea looks like it could meet the agency's R & D objectives, the firm could be awarded up to $50, 000 for a feasibility study.
If the idea works, additional funds of up to $500,000 could be provided. Projects exciting the interest of private investors would be given special consideration. Commercial production would be financed with private funds, after the government's research need had been met - a point the bill's backers wave around as reflecting the administration's ideological bent.
Agencies with R & D budgets over $100 million would have to spend two-thirds of a percent of the money on SBIRs in 1982, three-fifths of a percent in 1983, and 1 percent thereafter, with a few exceptions.
Proponents claim SBIRs would only divert the flow of federal spending, not increase it. The Congressonal Budget Office, however, estimates the added paperwork would cost $68 million over the next five years. And the affected agencies are not exactly wild about the idea. They would prefer to retain discretion over how to spend their research money.
''It's an inefficient use of federal dollars,'' testifed Douglas Pewitt, of the Department of Energy's Office of Energy Research, in July.
At one time, the administration did not much care for the bill, either. But now the White House has changed its mind, and sent a letter of support to Senator Rudman.
The bill is due for a vote early next week. Considering 82 of the 100 senators are cosponsors, changes for passage appear good - though some insiders say it could be delayed by senators wanting to hang nongermane, ''Christmas tree'' amendments on the bill.
A House version, similar except for a 2 percent set-aside provision, is currently in the General Oversight Subcommittee of the Small Business Committee.