Good News, in case you hadn’t heard, the SBIR (Small Business Innovation Research) and STTR (Small Business Technology Transfer) programs were reauthorized on April 13, 2026. This time, the reauthorization extends through September 30, 2031. The official title of the Act is the Small Business Innovation and Economic Security Act (SBIESA) (S. 3971 / Public Law 119-83). So, what does this mean for current and future program participants?

First, and for many companies that had submissions in the pipeline when the programs lapsed, agencies can roll their unspent funding from FY2026 into FY2027. It also means that agencies are eager to get projects rolling again. As you eagerly await your funding and respond to newly posted opportunities, there are some changes you need to know about.

Key Program Priorities

These small business programs have been about the commercialization of innovative technologies from the beginning. The SBIESA refined and focused on three primary areas:

• Commercialization Acceleration and Technology Transition (Phase III)
• National Security Protection Against Foreign Technology Transfer
• Program Efficiency and Access for Small Business (curbing grant mills)

These priorities work together to strengthen the program, more efficiently deploy funding to promising technology and innovations, and establish “fairness” standards to reduce or eliminate the impact of “SBIR mills.” [Note: Mills are companies that game the system to win dozens of awards and millions of dollars, and that focus on the money and not commercialization.]

Significant Changes

A Bridge Pathway Across the “Valley of Death”

Strategic Breakthrough Awards

One of the most important substantive updates is the creation of a Phase III Bridge Pathway called “Strategic Breakthrough Awards (SBAF).” These awards may be available from agencies that spend over $100 million annually on SBIR funding. SBAFs are explicitly designed to help bridge the “valley of death” between R&D and deployment.

Agency Participation

Agencies eligible to participate in SBAFs may allocate up to 0.5% of their extramural research and development funds to these awards. The list of eligible agencies generally includes those with extramural budgets exceeding $3 billion. These currently include:

• Department of War (DoW): Additional specific requirements have been established by DoW to participate in the program. These include:
  • Technology maturity (TRL around 6+)
  • Program Objective Memorandum commitment from a senior government official in acquisition.
  • High-priority operational needs in the DoW.
  • Ability to provide at least 20% matching funds from non-SBIR DoD sources.
• National Institutes of Health (HHS/NIH)
• Department of Energy
• National Science Foundation
• NASA
• Others that are eligible but have not yet announced intention: USDA, Department of Homeland Security.

National Security Oversight and Foreign Risk Assessment

The second change significantly increases the applicant burden on national security objectives and compliance. With an increased emphasis on stronger national security and foreign risk due diligence, small businesses will need to heighten their vigilance in screening employees, contractors, subcontractors, consultants, advisors, board members, and others before submitting proposals and throughout their operations.

Remember, the US Government and related parties are focused on preventing the direct, indirect, and transfer of technology to foreign adversaries and bad actors. The prevention of corporate espionage, foreign government espionage, and intellectual property theft is crucial to national security and commercialization potential.

Pre-Proposal and Proposal

Applicant organizations will want to ramp up their vendor and employee screening activities, processes, and procedures, including documentation of screening.  Small businesses will need to identify those explicitly barred from participation in programs and those that meet the criteria for exclusion. Companies will want formal questionnaires and other tools that gather background information on specific and related entities. Then check that information against specific watch lists, such as:

• Section 889 Prohibition List,
• Military End User List,
• Section 1260H Chinese military companies list, and
• Non-SDN Chinese Military-Industrial Complex Companies List.

Pre-award

As part of the pre-award process, agencies will perform security reviews of each applicant’s foreign:

• ownership, control, and influence (FOCI)
• affiliations,
• investments,
• licensing and joint venture agreements,
• cybersecurity practices, and
• any ties to foreign entities of concern: individuals, companies, governments, or organizations posing potential risks to US national security.

Award and Ongoing Monitoring and Reporting

The security oversight requirements are not a one-time thing. Monitoring your organization and other organizations you work with is a continuous process. Implement rules that require periodic updates to information, leverage AI and other technologies to monitor public postings about entities (individuals, companies, etc.), and use additional tools to ensure your organization maintains adequate oversight and compliance with FOCI and other security requirements.

Agency Scope of Authority

In addition to debarment and other lists, the agencies have been given far-reaching authority to deny participation and awards based on a determined level of security risk. For instance, if an agency review’s findings on the applicant company collectively pose a significant security risk, the agency has the authority to take appropriate actions, including terminating existing awards, barring future participation, and other remedies. These remedies include:

• Administrative Actions
  • termination of award(s)
  • “clawback” or full repayment of all funds received
  • suspension
  • debarment
  • permanent exclusion from SBIR/STTR (and other funding)
• Civil Penalties
  • fines and damages under the False Claims Act imposed per false statement.
  • Program Fraud Civil Remedies Act: fines, etc.
• Criminal Penalties (for willful and knowing false statements or concealing facts in applications, reports, etc.)
  • False Statements:
    • Up to 5 years in prison
    • Fines up to $250,000 per violation
  • Additional charges:
    • Wire fraud,
    • Mail fraud,
    • Conspiracy, or
    • Fraud against the United States

The areas of additional charges carry a potential of 20+ years’ imprisonment and massive fines. These significant consequences are especially relevant if national security has been or is potentially impacted.

Implications

The increased review and enforcement of the foreign risk in 2025. Many companies were reviewed and found to have researchers and other employees associated with foreign entities and either directly involved in research or with access to information (IP, etc.) from foreign entities of concern. These companies received formal letters notifying them of their termination from funding programs and/or of existing project termination notices.

Limitations on Proposal Submissions

Historically, there have been companies (grant mills), as mentioned previously, focused on securing government funds, with little to no focus on the actual commercialization of technology and research. This lack of commercialization focus has reduced the impact of SBIR/STTR programs to the extent that these grant mills have received funds that could have been used to support organizations that focus on commercialization.

So, with the reauthorization, SBIESA requires that each agency, beginning in fiscal year 2027, establish mandatory limits on the number of submissions a small business concern (SBC) may make. The goal is to provide more opportunities to more small business concerns (SBC). The agency has discretion to set the limits based on:

• Quantity per fiscal year,
• Solicitation opportunity
• Solicitation topic.

Agencies will have the discretion to waive the limit for urgent/time-sensitive topics. However, waivers are limited to no more than 5% of topics per fiscal year.

More Technical and Business Assistance (TABA) Funding

SBIESA increased Phase I TABA funds to a maximum of $6,500 per project/award. It also raised the Phase II TABA fund to $50,000 per project/award. SBCs can use these funds to implement a robust compliance and business systems infrastructure.

Every SBCs should understand that while Phase I awards are fixed-price and fee-based, you are still required to have adequate business systems to ensure proper accounting, recordkeeping, security protocols, etc. SBCs should view their core business systems as a significant part of their commercialization process and invest appropriately.

TABA Allowable Activities

TABA funds allowable expenditures include, but are not limited to, the following:

• Commercialization assistance with product and service revenue generation (sales, go-to-market strategy, customer outreach, and more).
• Intellectual property protections, such as patent strategy, freedom-to-operate searches, and limited patent prosecution costs related to the project.
• Cybersecurity assistance (explicitly added/emphasized in the new law).
• Market research and/or validation (e.g., customer discovery, competitive analysis, market sizing).
• Development of regulatory plans (e.g., FDA, certifications).
• Development of manufacturing plans.
• Access to technical and business literature via online databases.
• Participation in I-Corps (or similar programs like NIH I-Corps).
• Hiring new staff, augmenting staff, or directing staff for training/activities consistent with the above goals.
• Foreign involvement screening and related compliance support.
• Other commercialization services: technical decision-making support, solving technical problems, minimizing risks, fundraising strategy, licensing advice, end-user interviews, etc.

SBCs have considerable flexibility in using TABA funds. However, they should be very strategic and prioritize meeting government compliance and business system requirements early in their participation in SBIR, STTR, other funding programs, and acquisition contracting.

From Commercialization Plans to Actions

SBIESA adds visibility and emphasis on commercialization and transition to Phase III. This renewed focus adds training requirements for government contracting officers and the acquisition workforce. The act aims to instill in government workers a mindset that encourages Phase III activities and greater use of Phase III awards (non-SBIR/STTR follow-on acquisition type contracts, etc.).

Additionally, SBIESA requires improved data collection, tracking, and public reporting on award outcomes and progression from Phase I to Phase II to Phase III. There is also an increased focus on reporting commercialization success (revenues generated from government-funded technology, etc.).  The mechanism for reporting to the government is the Company Commercialization Report (CCR). This report has mandatory filing requirements, including an application for a new Phase II and the closeout of a Phase II. There is also a recommended or voluntary requirement for annual updates for at least 5 years after a Phase II award ends.

What to Track and Report

SBCs should track the following information by funded project, agency, and other relevant categories. Be sure to exclude from any R&D revenues. Your business should track:

• Actual cash/revenues from sales of products, technology, or non-R&D services related to the funded technology.
  • Third-party revenue, such as licensing revenue, etc.
  • Funding raised associated with funded technology
    • Private capital
    • Non-SBIR government sources
    • Other non-government funding
  • Government-designated Phase III SBAFs and acquisition contracts/awards
  • Patents and other outcomes that are derived from or associated with the funded technology (Note: Remember that government-funded IP must have a statement in the IP protection application that notes that the government funded the technology with specifics on agency, program, etc.)
  • Narratives on the commercialization process, activities, challenges, and/or mitigating factors that have delayed or prevented commercialization, etc.

Other Government Oversight and Administrative Improvements

Tracking Results for Public Reporting

The agencies are also being tasked to provide better identification of special award types in public databases. These award types and other information include:

• Strategic Breakthrough Awards
• Direct-to-Phase II
• Subsequent Phase II
• Phase III Prime Contract Awards
• Phase III Subcontract Awards
• Non-SBIR/STTR contracts or subcontracts using SBIR/STTR-funded technology (with linkage back to the originating SBIR/STTR award ID).

Procedures and Reporting Related to Program Efficiency

If you have ever done anything with the government (from the DMV to funding programs), you know that efficiency is rarely a performance metric. Recognizing this issue, SBIESA has instituted requirements for monitoring agency efficiency.

Limits and Waivers

For instance, each agency is required to report its proposal submission limits (discussed above) to the Senate Small Business Committee and the House Small Business & Science Committee within 30 days of setting or changing a limit. They must disclose the methodology and considerations used to establish the limits, projected historical impact of the implemented limit, and how many small businesses are impacted. If waivers are granted to the limit, each waiver requires a separate written notification to the designated committees within 30 days of issuance and must include justification.

Simplified and Standardized Procedures

Agency procedures must be developed and implemented for Phases I, II, and III. These procedures must include streamlined processes for proposal submission, selection, contract/award issuance, compliance, and audit within practicable limits. Further, the Small Business Administration (SBA) is also focusing on paperwork reduction while maintaining program integrity.

Model Contracts

SBIESA contains statutory requirements that all agencies create standardized, simplified model contracts for each program phase (I, II, and III). Furthermore, this is a pass-through requirement that extends to prime contractors when they manage SBIR/STTR subcontracts. SBIESA’s specific language under 15 U.S.C. § 638 is:

 “(C) develop simplified and standardized procedures and model contracts for Phase I, Phase II, and Phase III SBIR awards and report to the Administrator on actions taken by the Federal agency in support of these objectives; and

“(D) as applicable, issue standardized solicitation provisions and contract clauses that provide clear guidance on the information that small business concerns participating in SBIR or STTR programs can be expected to provide as part of market research or as part of a proposal by those small business concerns to establish eligibility for Phase III awards.”

Applicable Contract Elements

• Contract structure and clauses
  • Uniform data rights,
  • Intellectual property,
  • Payment schedules,
  • Reporting requirements,
  • Termination clauses, and
  • Other agency-specific requirements.
• Phase III Eligibility Only
  • Sole-source justification language
  • Technology transition language
  • Eligibility criteria for follow-on procurement
    • Market research
    • Proposal information
    • Other information

Don’t think these are on the wish list this time around. These requirements were immediately effective and have reporting requirements (to the SBA Administrator). Additionally, agencies are required to provide annual program updates.

The SBA is responsible for maintaining an up-to-date SBIR/STTR Policy Directive that encompasses guidance to agencies on template creation and other elements. Further, monitoring contract officer and procurement team training on the new contracts, Phase III efforts, and other changes will be ongoing. Templates, clauses, and other tools are expected to be available in FY2027 solicitations as agencies are currently developing them.

Bottom Line for Small Businesses

SBIESA reform has targeted the standardization and simplification of program elements to ensure clarity and consistency. It also shifts the program’s focus to increase mission impact, security, and accountability while preserving access to small-business funding. Furthermore, SBIESA is intended to improve small-business funding opportunities by enabling more businesses to compete through measures such as limits on awards.

By improving opportunities to scale R&D to true commercialization and real procurement, the future is bright for those companies that commit to meeting the requirements, including compliance and business systems.

By addressing the “Valley of Death” funding gap, expanding TABA funds to facilitate implementing adequate compliance and business systems, and focusing on true commercialization, SBIESA is going to be fairer, more efficient, and capable of delivering new technologies to the marketplace and the warfighter, while preserving the United States’ competitiveness, innovation, and technology.