the technology to DoD. This partnership stimulates out-of-the-box thinking at both the university and the company through mutual exposure to new ideas that might not naturally germinate in our respective environments, and we firmly believe that this partnership can stimulate the transition from basic research in the university environment into the commercial marketplace.

An added benefit for our company is the direct access to a proven source of professional talent, and we provide students working on STTR projects with employment opportunities in their chosen fields at their locations.

The STTR Program is a natural complement to the SBIR program in that it generally involves more basic research while still providing all the advantages and opportunities that come from the SBIR program.

And in closing, I would like to compliment the committee for its unwavering support of both the SBIR and STTR Programs. These programs are essential to give small businesses a realistic opportunity to compete in the defense marketplace, and I believe that without these two programs injection of small business innovation into the Department of Defense would be virtually impossible.

I do have a couple of recommendations that I would like to put forth.

Certainly the observation that these projects, which are administered very well by this bureaucracy, is generating thousands of competitive alternatives to incumbent positions and incumbent elements of our research community, and that is a very healthy things. We ought to do all we can to foster these competitive alternatives on an ongoing basis to be given consideration for incorporation into the mainstream marketplaces, both federal and commercial.

I do support an increase in the program. I think this program can handle an increase and continue to generate innovation. And I would like to thank the committee again for the opportunity to testify.

[Mr. Carroll's statement may be found in appendix.]

Mr. GRUCCI. Thank you all.

I am going to break with protocol, if I may, and I am going to allow the two ranking members, since they have a little bit more seniority on these two committees than I do, to offer the first rounds of questions, and we will start with Ranking Member Millender-McDonald, Ms. Millender-McDonald.

Ms. MILLENDER-MCDONALD. Well, thank you so much, Mr. Chairman. I suppose you should be here all the time because the chairman of the full committee does not do such a thing.

Mr. GRUCCI. Now, now.

Ms. MILLENDER-MCDONALD. I thank you all for coming and to express your interest in increase in funding for these programs. I have some questions as I have tried to go through this myriad of paperwork that we have up here, and I'll start with the Administrator, Mr. Swinton.

It has been noted that the STTR, along with the SBIR, together can really be the catalyst by which you can turn depressed areas into a more economically viable area. And given my area of Watts that I am trying desperately to bring to its feet, how can such a

statement like that be made, and how can you perhaps define how this can be done in an area such as Watts?

Mr. SWINTON. Congresswoman Millender-McDonald, the SBA has set forth on several different initiatives to try to reach out to a lot of the rural and low-to-moderate-income areas. One of the initiatives that we do have in place right now, is one that you mentioned earlier, the one that we have with the historically black colleges and universities

Ms. MILLENDER-MCDONALD. Yes.

Mr. SWINTON [continuing]. And small disadvantaged businesses. Through that initiative we have several agencies as co-sponsors with us on that. We have set out and trained over 75 historically black colleges and universities, and a little over 100 small disadvantaged businesses.

In those small disadvantaged businesses, we also included minority businesses as well as women-owned businesses. We have just recently provided four grants to minority institutions in several states to allow them to act as mentors in their states. And those particular institutions are located in rural or low-to-moderate-income areas. Those institutions are actually putting on seminars and conferences and inviting women-owned companies, minorityowned companies and small disadvantaged businesses.

Ms. MILLENDER-MCDONALD. Well, now, let me just ask you. Given the scenario that you have given to me, what type of technical assistance is given to those who you are entrusting to provide the type of service to the small businesses?

Mr. SWINTON. With those particular institutions, we have provided grants to the tune of $50,000 annually to provide the resources necessary to put on the conferences and the seminars. Those institutions also implemented what is known as a Phase Zero program for STTR and SBIR in their states. This is an annual competition using actual technology topic areas from one of the agency's solicitations prior to the actual opening of the solicitation. The institutions allow the companies in those areas to submit proposals to the institution. The institution then will evaluate those proposals, and based upon the content and the technical merit of those proposals, select as many as four or five of those proposals and make awards up to $1,000 to the small businesses. This will help them further develop or put finishing touches on those proposals so that those same proposals can then be submitted to an actual federal agency.

We also have provided rural outreach grants to 25 states through the Rural Outreach Grant Program. These states have entities within them that have also set out to include small businesses in low- to moderate-income areas to participate or to get more participation in the SBIR and STTR Programs.

Ms. MILLENDER-MCDONALD. You know, Ms. Goodnight spoke ofat least of the four, I think, conferences, I did not note it, I was trying to internalize some of it, that granted one, at least one goes to a rural state.

Mr. SWINTON. Yes.

Ms. MILLENDER-MCDONALD. How in the world are we ever going to bring rural community, inter-cities or anything else up if we can only have one throughout all of the rural states that we have, and

certainly the urban states, one of which I represent? It is not an urban state that I represent but I represent an urban and suburban district.

Ms. GOODNIGHT. The reference to the rural state was in regard to the three National SBIR conferences being held each year. At least one of these is held in a rural state.

We also participated in a multi-state outreach tour called SWIFT SBIR: Where Innovation Focuses Technology. We kicked off in Minnesota and then went to Wisconsin, Iowa, Nebraska, South Dakota, and North Dakota.

Ms. MILLENDER-MCDONALD. Well, I hope SWIFT is an acronym and not swiftness going through without anyone really gettingMs. GOODNIGHT. No, it's an acronym.

Ms. MILLENDER-MCDONALD. Any skills necessary to sustain itself.

Ms. GOODNIGHT. About eight program managers from the federal agencies traveled by bus, moving to a new state each day to brief in those states. Our main goal is to try and visit as many states. We have been to Montana. We have been to Oklahoma. We will continue working within those states who are interested in hosting a conference.

Ms. MILLENDER-MCDONALD. What is the prerequisite for a conference to be held in either one state or the other given urban, suburban and whatever? Do you have a set of criteria for urban and a different one for suburban and rural?

Ms. GOODNIGHT. Not at all. In fact, the national conferences that have been held in rural states, have attracted hundreds of potential applicants.

I can tell you that the conference that NIH is hosting on July 2nd and 3rd right there on the Bethesda campus already has 1,008 registrants, and they truly span the entire United States, all the way out to Alaska.

Ms. MILLENDER-MCDONALD. And I see-you are putting the light on me, Mr. Chairman.

Mr. Polansky did mention that there needs to be an increase in funding for the programs. I have written that someplace here.

If there is an increase because of the drop-off that, there was such a drop in 1998 and 1999 you mentioned, and yet with the combining of STTR and SBIR the numbers went up again.

Is this the type of wedded situation that has to be done for this to reach a pinnacle of success?

Mr. POLANSKY. Well, the increase in funding that I mentioned was to raise the award limit on a Phase II STTR from $500,000 to $750,000.

Ms. MILLENDER-MCDONALD. And I can see the legitimacy to that, yes.

I think it was the second person whose name yes, that you thought that the budget should be increased. Is that a recommendation you should be giving the President?

Mr. FOREMAN. No. I think somebody misheard me on that one. Ms. MILLENDER-MCDONALD. Oh.

Mr. FOREMAN. I am sorry. The administration position is no, the funding is to remain at

Ms. MILLENDER-MCDONALD. As it is.

Mr. FOREMAN [continuing]. The .15, as opposed to, I guess, the .3 that was proposed earlier, and this is basically connected to Secretary Rumsfeld's strategic review. Once we go through that, I am sure we will find out a little bit further along where we are.

I do not know that we have the data to support the trade-off, what are we going to get for the increased funding versus what are we going to lose for the flexibility to the program managers who work the various programs.

We do support the continuation of the STTR and we believe it has been a tremendous benefit to us.

Ms. MILLENDER-MCDONALD. So why not an increase?

Mr. FOREMAN. Well, again, I do not know that we have the data to support that it is going to give us

Ms. MILLENDER-MCDONALD. So we would have to wait for data in order to support the increase, and of course I can understand that.

But if we are

Mr. GRUCCI. With all due respect.

Ms. MILLENDER-MCDONALD. Mr. Chairman, I know you are and I am just going to say with

Mr. GRUCCI. The gentlelady's time has expired.

Ms. MILLENDER-MCDONALD [continuing]. All of us trying to really move small businesses, there is such a critical need for us to increase funding and increase technological skills.

Thank you so much, Mr. Chairman.

Mr. GRUCCI. Thank you. I appreciate you yielding.
We will now hear from Ranking Member Udall.

Mr. UDALL. Thank you, Mr. Chairman.

I guess my first question is for Dr. Polansky. What specific outreach is Energy doing to reach small businesses in rural areas?

Mr. POLANSKY. We participate in the national conferences along with other federal agencies. In addition, we also participate in a few regional and some very localized conferences that are brought to our attention.

Mr. UDALL. Does Energy assist with funding on any specific outreach initiatives with the SBA?

Mr. POLANSKY. We do not.

Mr. UDALL. Does Energy work with our national laboratories to conduct outreach initiatives?

Mr. POLANSKY. Yes, we do. The degree of outreach depends on the mission of the laboratory, for example, whether it is a science laboratory or more of an engineering-oriented laboratory. In general, our laboratories have extensive outreach programs. For example the Sandia National Laboratory in Albuquerque, New Mexico has an active small business outreach program and has made numerous connections with small businesses.

Mr. UDALL. Do you think that might explain more the grants going to Albuquerque, those figures that I used earlier?

I have Los Alamos in my district. It is-I do not think it would be considered engineering. It is more science, and yet we have not had the kind of success, I guess, that Albuquerque area has had on these STTR grants.

Do you think-is it the management at the top of the institution? I mean, what would be your thoughts on that?

Mr. POLANSKY. I think there are several, several aspects that may contribute to that. One, frankly, could be the location of the laboratory in Los Alamos versus Albuquerque, and the types of small businesses that are located near the laboratory. The mission of the laboratory at Los Alamos has more of a science flavor to it than Sandia in Albuquerque, and so I think that is probably another factor as well.

Mr. UDALL. But it would seem, since this is-this program is suited to do this kind of transfer. If the department people and the laboratory people work together, you could move that forward, would you not think?

Mr. POLANSKY. Yes, I would think so.

Mr. UDALL. Yes. Thank you, Doctor, very much.

This question is for Mr. Swinton. How many STTR awards have been made to firms located in hub zones?

Mr. SWINTON. Unfortunately, Congressman Udall, I do not have that statistic with me today, but I will be more than happy to provide it to you at a later time.

Mr. UDALL. Yes. My state has a number of those hub zones and so I would be interested

Mr. SWINTON. Okay.

Mr. UDALL [continuing]. In looking at that.

And I am going to yield back my time at this point, Mr. Chair

man.

Mr. GRUCCI. Thank you, sir.

We will now go to Representative Bill Shuster from Pennsylvania.

Mr. SHUSTER. Thank you, Mr. Chairman.

First, thanks for all the witnesses coming today and spending your time with us, educating us, especially me being a relatively new, new member of Congress.

But first, I have a request. Is it possible to get a list in Pennsylvania, the institutions-educational institutions that you work with now and a list of the businesses that you were dealing with? Mr. SWINTON. Yes. I can provide that data to you.

Mr. SHUSTER. Thank you.

And I think this program is an excellent program for small businesses. I did not hear any concrete evidence of the success, some I heard, but does the SBA, do you track that? Do we know how many products have been successfully taken to market over the term of the program?

Mr. SWINTON. We do have some statistics. There is a comprehensive study that has just been completed by the General Accounting Office that I understand is going to be released tomorrow that will have more data on it, but we do have some success stories and some numbers on the STTR Program.

Mr. SHUSTER. And also I would be interested, if you track new businesses, start-up businesses that you-do you track that?

Mr. SWINTON. Yes, we do.

Mr. SHUSTER. So you could tell us what new businesses or startups versus existing businesses that are

Mr. SWINTON. We can probably provide you the data on the companies that are new to the SBIR and they would be new to the STTR Program, like first-time companies. We would have to do a