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WASHINGTON – Dr. William Marinelli, President and Chief Executive Officer of Physical Sciences, Inc., testified before the House Committee on Small Business on how the federal government can more effectively leverage innovative companies and research universities to help solve the nation’s urgent technological challenges.
The public hearing, “Fostering American Innovation: Insights into SBIR/STTR Programs,” marked the beginning of the 119th Congress’ review to reauthorize the Small Business Innovation Research and Small Business Technology Transfer programs, known as “America’s seed fund,” the largest and most successful entrepreneurship programs first signed into law by President Ronald Reagan.
“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 business growth to ultimately accomplish the program’s goal of fulfilling R&D needs,” said Chairman Roger Williams (R-TX). “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 supreme, where they are free from limitations or caps on their success.”
PSI, an “Experienced Firm,” or Multiple Award Winner (MAW), has leveraged SBIR/STTR to transition a host of new technologies to the commercial market and government customers and has a long track record as a top “system innovator” for prime contractors and other large businesses.
The company is 100 percent owned by an Employee Stock Ownership Trust, has no foreign ownership interest, “and takes active measures to prevent foreign technology transfer,” Marinelli told the panel. “We exclusively employ U.S. Persons and have a rigorous internal program to define technology subject to International Traffic in Arms Regulations and Export Administration Regulations (ITAR/EAR) controls in order to eliminate technology transfer to foreign entities.”
PSI has developed and fielded advanced lithium-ion battery technology to support the U.S. Navy’s unmanned systems; new methods to extract critical rare Earth minerals from coal ash; detection systems that protect our borders from radiological, chemical and biological threats; and ophthalmic stabilization technology that has been sold in 24,000 systems, impacting almost everyone who has ever had an eye exam.
“PSI possesses an excellent commercialization track record, exceeding performance benchmarks that Congress has periodically implemented through the years, including in the last reauthorization,” Marinelli told the panel.
But many successful SBIR technologies are intended for “mission agencies” and do not easily scale to a large commercial enterprise. For these, SBIR funding is often required over multiple years to achieve a level of maturity suitable for insertion into larger, higher value military and homeland security platforms.
“We are not a single-technology company on a linear venture-capital driven trajectory,” Marinelli explained. “PSI focuses on innovating technologies that federal agencies, like the U.S. Department of Defense (DoD) and the service branches, need to meet critical mission objectives, for which no other stakeholders are positioned to deliver.”
He cited a 2024 National Academy of Sciences report on metrics for the DoD SBIR program that concluded “that higher-risk projects typically take longer to mature, which is another reason that SBIR programs tend to focus on smaller components within larger systems.”
Marinelli also highlighted that publicly available data does not fully account for technology transition that is not formally designated as a Phase III award.
“Over the time our company has participated in the program we have reported almost $677 million in Phase III economic activity to the SBA, almost $187M of which are direct and indirect sales to the U.S. government,” Marinelli testified. “Only $5.8M of those funds are formally listed as Phase III awards. The remaining $491M comprise direct and licensed sales of technology to commercial entities and allied foreign governments.”
“This data,” he added, “illustrates the erroneous and misleading conclusions that can be drawn by recent studies that purport to capture total economic activity in their analysis of the effectiveness of MAWs participating in the SBIR program.”
Marinelli recommended that the reauthorization of SBIR/STTR reinforce five basic principles:
- Merit-based Awards – Congress should maintain the competitive, merit-based fundamentals of the program to ensure the best technology is developed.
- Agency Discretion – Agencies should have discretion to shape the program and define merit consistent with their missions.
- 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 subsequent technology transition.
- Application Simplification – Simplify the 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.
- Permanent Authorization – Making the program permanent will allow companies to make investments in dedicated capabilities key to receiving DoD awards and to be viewed as a reliable supplier. It 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.
“There are many, many potential pathways for commercial success for small businesses – and the U.S. government should be open to innovation from all small business sources and not arbitrarily cap or limit participation,” Marinelli testified. “Doing so would undermine the ability of the federal government to secure the very best technology for its agency priorities.”
Read his full written testimony: https://docs.house.gov/meetings/SM/SM00/20250226/117926/HHRG-119-SM00-Wstate-MarinelliW-20250226-U1.pdf
Physical Sciences, Inc. headquartered in Andover, Massachusetts, develops electro-optical/infrared sensing systems and other technologies for the defense, homeland security, medical and energy sectors.