Login or signup
36

Small Business -- And The Nation -- Win A Very Big One

Advertisement

What is the most important piece of small business legislation yet enacted in our life-time? My vote goes to the Small Business Innovation Development Act, finally passed by Congress on June 29, 1982.

The bill's significance lies not in its substantive merits -- considerable as they are -- but in the congressional battle that preceded its passage. Small business's hard-won victory represents a landmark in its evolution into a significant political force. Here's what it accomplished:

1. Small business defeated a powerful, major coalition in a knockdown, drag-out fight. House members were forced to declare themselves in five separate roll-call votes. Those hardy enough to stick with the bill on all five votes bucked formidable opposition each time they cast their "aye."

2. Small business demonstrated it had the staying power for an eight-month, day in, day out battle against a coalition determined to weaken and derail the bill.

3. All the major small business groups remained united in support of a nationally desirable measure that would directly benefit only a tiny number of their members.

4. Small business rallied national support for the House Small Business Committee when a dangerously clever opposition strategy almost succeeded in pitting a coalition of other House committees against it.

5. Small business overcame a well-orchestrated press and public relations attack on it and the bill. The Washington Post, The Washington Monthly, The National Journal, The New York Times, The Los Angeles Times, The Sacramento Bee, and The Minneapolis Tribune, among others, all opposed it. Only INC., The San Jose Mercury, and The Boston Globe supported it.

6. Small business proved it could win a hard fight for a positive goal. In the past, it has been almost always impressively successful only in defending itself when under attack.

7. Small business held to its traditional biparttisan, ideologically wide middle ground, successfully resisting emotional appeals to both liberal and conservative supporters to abandon the bill.

8. Small business defeated an alliance of so-called iron triangles. These generally unbeatable coalitions are made up of career bureaucrats in a federal agency, lobbyists with a stake in that agency, and the congressional committee members and staffs assigned to the agency.

9. Small business built a political momentum for the bill over a 6 1/2-year period. Its tactics were flexible enough to span three Presidencies and to keep up with several complex shifts from Congress to the executive branch and back again.

10. At the conflict's climax, small business successfully negotiated those compromises that were reasonable and necessary and refused those that would have crippled the bill seriously.

That's significant. But the substance of the bill is hardly minor. As readers of INC. know (See July, August, September 1981; and February 1982), each federal agency that now spends more than $100 million annually on research and development will have to devise a competitive grant program for innovative small business. These programs will not represent any new governmental expenditure but will be drawn from already authorized R&D funds. The programs will be modeled on the successful one run for the past six years by the National Science Foundation. The only other agency with such a program is the Department of Defense, which made its first awards last December. In the first year, each agency must set aside for small businesses a tiny percentage of the funds it allocates for R&D outside the government (0.01% for Defense because of its huge total budget; 0.02% for the other agencies). The percentage increases each year until it reaches 1.25% for all agencies. If the bill is administered in good faith by the executive branch (by no means a sure thing), it will over five years provide about a billion dollars in R&D funds to our best small high-technology companies. In the first fiscal year beginning on October 1, 1982, $30 million to $50 million should be available.

With this bill's passage, high-technology entrepreneurs have, for the first time, been officially recognized as part of our national science base. As all of us know, their small companies have been an unacknowledged, if essential, part of that base right along. Until now, however, only the universities, and government and big company labs were acknowledged as national R&D contributors with a role in policymaking. Science policymakers in and out of government have intentionally fudged on the role of small business by burying it as part of "industry." The bill also marks the first time government will open the R&D system fully to small businesses in order to achieve national technological goals.

How did the going get so tough on legislation that had the endorsement of the President and sailed through the Senate without a single opposing vote?

A look at the bill's history can be instructive. Its forerunner was the small business set-aside rider Sen. Edward Kennedy (D-Mass.) and former Rep. Ken Hachler (D-W. Va.) put on the NSF authorization bill for 1976. The rider, which mandated that about $5.5 million of the NSF's R&D budget be spent on small business, passed both houses. In 1978, after a Small Business Association task force made recommendations to the President and Congress, Rep. Neal Smith (D-Iowa), then chairman of the House Small Business Cmmittee, Rep. Jerry Lewis (R-Calif.), Senator Kennedy, and others from both houses introduced early versions of the innovation bill.

In 1980 the White House Conference on Small Business gave the bill a shot in the arm by making its enactment one of 15 priority recommendations. After the 1980 elections, modified versions of the Smith and Kennedy measures were introduced in the present (97th) Congress. Sen. Warren Rudman (R-N.H.), a freshman, became the chief Senate sponsor. Joined by 84 of his colleagues, he won passage by a 90-0 vote. Equally important, he won the support of President Reagan, overcoming last-ditch efforts by some of the bureaucrats and White House palace guard to kill the bill. They were acting for powerful beneficiaries of existing policies, in and out of government.

While the Senate was acting, a bipartisan group, made up of some of the members of the House Small Business Committee, prepared to move the legislation through their chamber. On the Democratic side, Rep. John LaFalce (D-N.Y.), former Small Business Committee chairman Smith, the new chairman, Parren Mitchell (D-Md.), and Berkley Bedell (D-Iowa) took the lead.On the Republican side, small business stalwarts such as Rep. Joseph McDade (R-Pa.) and Rep. J. William Stanton (R-Ohio) led the fight. By fall, about 200 members were sponsors of the bill. It appeared the bill would whistle through the House, go through a House/Senate conference committee, return to both houses for quick final passage, and land on the desk of a friendly President to be signed into law in jig time.

It didn't happen that way. A five-sided coalition had created a juggernaut of opposition. Members of the academic, medical, and scientific communities that received federal R&D funds were old allies. Seventy-six organizations, representing these communities, weighed in against the bill with a barrage of mail, telephone calls, and between-session visits. Their links with the fourth side of the coalition, the R&D procurement staff of the various federal agencies, was also an old one. There, civil servants had already successfully stalled the SBIR program through the Carter years so they could keep allocating "their" funds the way they saw fit.Finally, one business group out of the nation's approximately 16,000 trade associations joined the opposition -- the American Electronic Association.

The House Small Business Committee expected opposition from these long-standing beneficiaries of existing policies. To placate them, for example, it wrote specific assurances into the bill -- as had the Senate committee -- that the tiny set-asides for small business could not be taken disproportionately from basic science funds. Further efforts at compromise, particularly with university groups, proved fruitless. Small business veterans knew a firestorm of opposition was forming. By the time the second session of the 97th Congress opened in January, it was clear the bill's rapid progress was over.

The opposition campaign was adroitly managed. A formidable series of procedural barriers to the bill's passage was built. For example, bureaucrats from the National Institutes of Health alerted university presidents and medical school administrators to the "threat." Both then turned to the third side of their iron triangle, their numerous allies in the congressional committees and staffs controlling medical research funds. Six committee chairmen, with the backing of their respective bureaucratic and lobbyist pals, asked for -- and got -- "sequential referral." Sequential referral is a congressional tactic that can delay indefinitely a measure that has the support of a majority of the House and even the party leaderships.It works like this: A committee chairperson will claim a measure falls within the committee's jurisdiction. The committee has, he or she says, the right to consider it and report it out. The Parliamentarian then refers the bill "in sequence" to each committee that claims to have jurisdiction. Rarely do more than two or three committees get into the act, but by the time they're through, the session may well be over and the measure dead.

Since the legislation dealt with R&D in many agencies, in theory every committee in the House could ask for referral. Unless the House leadership supported the right of the Small Business Committee to get to the floor quickly, the bill would die with the end of the 97th Congress. But, Speaker Thomas P. O'Neill (D-Mass.) insisted, the matter of sequential referral was entirely up to the House Parliamentarian. The six committees began to hold hearings, and neither they nor their staffs were gentle with small business witnesses. These witnesses were given, grudgingly, their chance to testify at the end of the day. More frequently than not, by design, they spoke before empty chairs or to one or two especially sympathetic members.

The opposition would have been happy to achieve either of two goals: crippling the bill with amendments or delaying full debate until the session was over.

Another opposition tactic was to manipulate the iron triangles into mutually beneficial alliances. A typical scenario would go something like this: "If you guys in Energy and Commerce who want to exempt the health agencies from the bill will support those in Armed Services who want to exempt the military, they'll support you. We can gradually gut the entire bill by exempting every major agency." As a third tactic, the coalition hammered away at the liberals and conservatives. Platoons of crybabies in white coats wailed to the liberals that the bill would complete "Reagan's budgetary attack on health, science, and education." On the other side, opponents whispered to conservatives that the bill meant, after all, that old devil, "set-asides."

The coalition also had a few more arrows in its quiver. One tactic, for example, was using the personal physicians of members of Congress. At least two New England small business supporters were lobbied this way. Each was asked by his own doctor to "show some gratitude for what the miracles of modern medicine have done for you. Give us at least one vote on one amendment." Each one did.

As the opposition strategy became clearer, so did small business's conviction that it could not afford either a loss or a draw. The stakes were now higher than the bill itself. If the small business constituency did not go to bat for its own Small Business Committee, it would be viewed as weak, cowardly, irresponsible, or worse, inept. Small business would lose the hard-won gains it had achieved over the past two years. Individuals and association staffers began to meet more frequently with people on the Hill and with one another. The tempo picked up as the sequential referral strategy unfolded.

Small business won. The final vote was 353-57, with 25 not voting, a tally representing a smashing victory. Or was it? All four efforts to weaken the bill with amendments failed. But if every member of the House who voted for one of these amendments had also voted against the bill, it would have been defeated!

The individuals and groups who came through for small business deserve your respect, your thanks, and your future support. If you were one of the thousands who helped them in this fight, you've helped not only yourself, but the nation. If you weren't involved, there will be other times and other fights. Plan not to miss any more.

Last updated: Sep 1, 1982




Register on Inc.com today to get full access to:
All articles  |  Magazine archives | Comment and share features
EMAIL
PASSWORD
EMAIL
FIRST NAME
LAST NAME
EMAIL
PASSWORD

Or sign up using: