SBIR/STTR Program Finally Reauthorized

     More than six months into the Federal Government’s fiscal year, the SBIR/STTR Program has finally been reauthorized.  On April 13, President Trump signed into law the Small Business Innovation and Economic Security Act (the “SBIR Reauthorization Act”), which passed the U.S. Senate on March 3, 2026, and the House of Representatives on March 17, 2026.  Congress’ prior authorization of the SBIR/STTR Program lapsed - in what seems like a lifetime ago - on September 30, 2025, and the SBIR Reauthorization Act extends authorization of the SBIR/STTR Program until September 30, 2031.  The reauthorization legislation brings a number of important changes to the SBIR/STTR Program, several of which we outline below.

Strategic Breakthrough Awards

     Perhaps one of the most significant updates is the introduction of a new funding mechanism that enables federal agencies with more than $100 million in annual SBIR/STTR expenditures to make Strategic Breakthrough Awards.  Aimed at helping small businesses cross the “valley of death" – the period of time between early funding and commercial viability - a Strategic Breakthrough Award can be made to a Phase II awardee for up to $30M under a funding agreement with a maximum period of performance of no more than 4 years.   This is a significant increase over the limitation for other Phase II awards that  currently sits at approximately $2M.

     To be eligible for a Strategic Breakthrough Award, a small business must:

• Have been awarded at least one prior SBIR or STTR Phase II award
• Show that matching (100%) funds will come from private capital and/or non-SBIR government funding
• Demonstrate, based on market research, a technology that is an effective solution

     For DoD Strategic Breakthrough Awards, a small business has to meet additional requirements.  It must:

• Provide a product, process, or technology that meets a necessary level of readiness
• Have a commitment for inclusion in a program objective memorandum from a program acquisition executive
• Provide a product, process, or technology that will meet high priority requirements or operational needs of a military department
• Demonstrate that not less than 20% of required matching funds come from DoD non-SBIR/STTR funding

Prohibitions Against Companies That Present A Security Risk

     The SBIR Reauthorization Act also requires federal agencies to determine if a small business presents a security risk and prohibits them from making awards to small businesses that do including, among other companies, entities that are on (i) a Chinese forced labor list maintained by the Department of Homeland Security, (ii) the Department of Treasury’s list of Chinese military-industrial complex companies, (iii) lists of Chinese telecommunications and military companies maintained by the Department of Defense, and (iv) prohibited entity and military end user lists maintained by the Department of Commerce.

     Federal agencies are also directed to establish procedures, as appropriate for national security concerns, to notify companies when a determination has been made to deny an application for an SBIR award on the basis that they present a security risk. 

Agency By Agency Award Limitations (No Hard Cap On SBIR Mills)

      The SBIR Reauthorization Act also may be notable as much for what it does not contain as for what it does.  The issue of awards to so-called SBIR mills, defined broadly to include a select group of SBIR companies that disproportionately receive Phase I and Phase II funding, was a major sticking point in the reauthorization negotiations.  Nevertheless, lacking in the legislation is a hard, across-the-board, cap on awards to SBIR mills.  

      In a section sheepishly titled “Reducing Administrative Burdens,” the SBIR Reauthorization Act instead leaves it to each federal agency, and in particular the agency’s director for SBIR/STTR programs, to set a limit on the number of Phase I proposals and Phase II proposals that a small business can submit.  Beginning in fiscal year 2027, limits can be placed at the agency’s discretion on per fiscal year, per solicitation, or per topic basis.

      Agency directors may grant waivers on a topic-by-topic basis but must provide written justifications to the SBA Administrator and to agency undersecretaries overseeing SBIR programs for their approvals.

      Lastly, federal agencies may not grant waivers for more than 5 percent of their topics during any given fiscal year.  

Changes To TABA Funding 

     The SBIR Reauthorization Act also made significant changes to the Technical and Discretionary Business Assistance (TABA) available to SBIR/STTR companies.  As we discussed in prior article, under the SBIR/STTR Program, federal agencies are authorized to provide supplemental funding - above and beyond the amounts to be paid under SBIR/STTR awards - that small businesses can use to pay for certain business services.

     The SBIR Reauthorization Act increases the available TABA funding from $6500 per year to $6500 per project for Phase I awardees.  For Phase II awardees the current limit of $50,000 per project remains.  In addition, the SBIR Reauthorization Act states explicitly that the kind of business assistance that TABA funds can be used to pay for includes “cybersecurity assistance.”

     Lastly, before the SBIR Reauthorization Act, federal agencies typically required small businesses to obtain TABA services from vendors that were contracted by federal agencies.  Under the SBIR Reauthorization Act, small businesses can no longer be required to use agency-contracted vendors.  Small businesses, instead, may either contract vendors themselves or they may use TABA funds to hire new staff to perform the business services.

Streamlined Procedures

      The SBIR Reauthorization Act also attempts to encourage increased transitions of Phase I and Phase II developments to Phase III production and commercialization by instructing the SBA, generally, to modify the policy directives to advocate for the maximum use and transition of Phase I and II SBIR/STTR products, services, and technologies by means of Phase III awards to small businesses.

      The SBIR Reauthorization Act also instructs federal agencies to (i) develop simplified and standardized procedures and model contracts for Phase I, II, and III awards, and  (ii) issue standardized solicitations and contract clauses that provide clear guidance to small businesses  on the kind of information they should provide as part of their market research or in their proposals that establishes their eligibility for Phase III awards.

     The Amadeo Law Firm will monitor implementation of the SBIR Reauthorization Act by the SBA and federal agencies so look out for our updates in upcoming GovCon Bulletins, video blogs and webinars.