SBIR/STTR Programs Reauthorized After Six-Month Lapse

On April 13, 2026, President Trump signed the Small Business Innovation and Economic Security Act of 2026 (S. 3971) (the Act), extending the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs through September 30, 2031. The legislation cleared the U.S. Senate on March 3, 2026 and then was passed by the U.S. House of Representatives on March 17, 2026 after a six-month interruption in program authority that halted the issuance of new awards across federal agencies. The programs’ previous authorization expired on September 30, 2025.

The protracted reauthorization negotiations had left the programs’ future in limbo and resulted in a pause in new SBIR/STTR awards. Given this, the Act authorizes agencies that have SBIR/STTR funding remaining at the end of fiscal year 2026 to use those funds for SBIR/STTR programs in fiscal year 2027.

Strategic Breakthrough Awards

The Act establishes a new category of Phase II funding for “strategic breakthrough” awards for agencies whose annual required SBIR expenditures exceed $100 million. Strategic breakthrough award expenditures may not exceed 0.5% of an agency’s overall extramural research and development budget. The breakthrough awards appear to be another initiative, following efforts such as the AFWERX Strategic Funding Increase (STRATFI) and Tactical Funding Increase (TACFI) programs to help contractors navigate from the R&D/prototyping phase to SBIR Phase III commercialization, often called the “valley of death” given the sometimes significant challenges experienced by contractors attempting that leap.

Individual awards may reach up to $30 million, structured either as a single award or as a sequence of milestone-triggered payments, subject to a maximum performance period of 48 months. Agencies are required to execute contract awards within 90 days of proposal receipt.

Contractor eligibility requirements for strategic breakthrough awards (applicable to all agencies):

• Must hold at least one prior Phase I or Phase II award.
• Must secure matching funds equal to 100% of the award amount, drawn from new private capital, qualifying non-SBIR Phase I/II government funding, or a combination of such funds. The Act specifies that these funds must be newly obtained in connection with the strategic breakthrough award.
• Must support application with market research demonstrating that the proposed technology constitutes an effective solution to an identified need.

Additional requirements for U.S. Department of Defense (DoD) strategic breakthrough awards:

• Must establish that technology has reached sufficient maturity and must secure a commitment for inclusion in a program objective memorandum by a program acquisition executive or higher-ranked official within a DoD acquisition organization.
• Product, process, or technology must respond to high-priority operational requirements.
• A minimum of 20% of required matching funds must originate from new DoD sources outside of the SBIR/STTR Phase I and II programs.

National Security/Supply Chain Risk Screening

The Act increases the scope of the national security and supply chain due diligence that agencies must conduct on SBIR contractors before making an award. Agencies must still consider the contractor’s cybersecurity practices, patent analysis, employee analysis, and ownership/financial relationships, but agencies must also now examine whether an applicant, or any covered individual^[1], owner, or key personnel associated with the applicant, has any of the following:

• Any foreign affiliations with entities located in a country of concern.
• Investment ties to individuals or entities based in a country of concern.
• Technology licensing arrangements or joint venture relationships with parties in a country of concern.
• Other business relationships connecting covered individuals, owners, or key personnel to parties in a country of concern.

To the list of applicant categories excluded from participation, the Act adds entities appearing on designated federal watch lists (specifically, the Section 889 Prohibition List, the Military End User List, the 1260H Chinese military companies list, and the Non-SDN Chinese Military Industrial Complex Companies List).

Agencies also have broad discretion under the Act to deny any award where the agency determines an applicant presents a security risk sufficient to warrant denial under the enhanced diligence parameters. If an agency denies award based on security grounds, the agency must notify the applicant in writing and identify the basis for its determination. Companies whose applications are denied based on an identified security risk remain eligible for award in subsequent cycles.

Proposal Limits

Beginning in fiscal year 2027, federal agencies will set their own limits on the number of proposals that businesses can submit for Phase I and Phase II opportunities on a per-company, per-solicitation, or per-topic basis. This is intended to be a compromise to address concerns regarding “SBIR Mills,” which, in the view of certain legislators, obtained a disproportionate percentage of program awards without providing sufficient benefit to the government.

If a topic is time-sensitive and urgent to an agency’s mission, the agency can waive its own proposal limit on a topic-by-topic basis at the time of a solicitation announcement, but such waivers may not be granted for more than 5% of an agency’s overall SBIR/STTR program topics in any fiscal year.

The Act directs agencies to establish their proposal limits no later than 90 days before the start of fiscal year 2027 and each fiscal year thereafter.

Phase III Improvements

The Act requires the Small Business Administration (SBA) to update its policy directive to require SBA’s procurement center representatives to advocate for the “maximum practicable use and transition” to Phase III by means of Phase III awards to small business concerns. The Act also seeks to simplify the award process by requiring federal agencies, to the greatest extent practicable, to develop simplified and standardized procedures and model contracts for Phase I, Phase II, and Phase III awards, and to issue standardized solicitation and contract clauses providing guidance on what information companies may be expected to provide as part of market research or in proposals to establish eligibility for Phase III awards.

SBIR and STTR Data Reporting

The Act calls for the Federal Procurement Data System (FPDS) to be updated to include reporting on SBIR and STTR award classifications (e.g., phase, strategic breakthrough allocation) and references to relevant prior SBIR/STTR work for follow-on awards.