On March 3, 2026, the Senate took a major step toward reauthorizing the Small Business Innovation Research/Small Business Technology Transfer (“SBIR/STTR”) programs, by passing the Small Business Innovation and Economic Security Act (S. 3971). Known collectively as “America’s Seed Fund,” the SBIR and STTR programs provide small businesses with early-stage funding to commercialize their new technological innovations.
Notable Changes to SBIR/STTR
Only agencies with more than $100 million in annual SBIR obligations would be eligible to use this authority. For those agencies — which include the Departments of Defense, Energy, and Homeland Security, as well as the Environmental Protection Agency, and the National Aeronautics and Space Administration — Strategic Breakthrough Awards would be funded through a capped strategic breakthrough allocation, limited to 0.50% of the agency’s extramural R&D budget each fiscal year.
- have received at least one prior Phase II SBIR or STTR award;
- demonstrate 100% matching funds from new private capital, qualifying non‑SBIR government sources, or a combination of both (the statute specifies that matching funds must be new funding obtained as a result of the Strategic Breakthrough Award); and
- demonstrate through market research that its technology is an effective solution. We interpret this requirement as calling for credible, market‑based evidence that the technology addresses a clearly defined customer problem more effectively than existing alternatives, rather than merely demonstrating technical promise or feasibility.
Additional requirements would apply to Department of War (“DoW”) awards. DoW applicants must demonstrate that their technology is sufficiently mature, has a commitment for inclusion in a Program Objective Memorandum from a senior acquisition official, and addresses high priority operational needs. The matching funds requirement would also differ: at least 20% of required matching funds must come from new DoW funding outside of the SBIR/STTR Phase I or II programs.
In selecting awardees for a Strategic Breakthrough Award, agencies must prioritize national security impact, transition potential, customer demand, and undercapitalized technology areas, and are directed to use streamlined proposal and contracting processes to accelerate awards.
Enhanced Supply Chain Security Requirements. The reauthorization bill would significantly strengthen national security due diligence requirements for SBIR and STTR awards. In addition to the existing ban on awards to any small business concern owned by, or with related entities located in foreign countries of concern, the bill would bar awards to any small business concern with connections to entities appearing on specified federal watch lists, including the Section 889 Prohibition List, the Military End User List, the 1260H list of Chinese military companies, and the Non-SDN Chinese Military Industrial Complex Companies List. The bill also includes a broad catch-all authority permitting an agency to deny an award where the applicant “has a security risk that the Federal agency determines warrants a denial.”
In assessing national security risk, agencies would be required to consider a range of factors, including the applicant’s cybersecurity practices; patent portfolio; foreign ownership interests; and the affiliations or business relationships of covered individuals, owners, and key personnel with individuals or entities in a foreign country of concern.
STTR applicants, in particular, could face heightened scrutiny in light of these new requirements. The assessments for STTR applicants would necessarily extend to the applicant’s partner nonprofit research institution and cover individuals involved in the STTR partnership, making the assessment process more complex, creating a wider group of scrutinized affiliations and relationships, and exposing STTR applicants to greater risk of adverse finding.
Streamlined Administrative Processes. The reauthorization bill also includes a series of administrative changes intended to improve program efficiency, oversight, and data transparency within the SBIR/STTR programs.
Chiefly, the bill would require agencies to establish their own caps on the number of proposals a single applicant may submit in response to Phase I solicitations and certain Phase II solicitations. Agencies would retain broad discretion to set these limits on a per year, per solicitation, or per topic basis, reflecting a policy concern that high-volume proposal submissions by repeat applicants can strain agency review capacity and crowd out other competitors. To preserve flexibility for mission-critical needs, the bill would allow the Director of an agency’s SBIR or STTR program office — subject to approvals from the agency Under Secretary and the SBA Administrator along with Congressional notification — to grant limited waivers of these proposal caps for specific topics that are both time-sensitive and urgent to the agency’s mission. That waiver authority would be capped at no more than 5% of SBIR/STTR topics in any given fiscal year, balancing agencies’ need for agility against Congress’s concern that waivers not undermine the proposal-limiting framework.
The bill also directs agencies to provide additional training for contracting officers responsible for administering SBIR/STTR awards, addressing longstanding concerns about inconsistent implementation and limited familiarity with SBIR‑specific authorities within the acquisition workforce.
Finally, the legislation would enhance program transparency and data collection by requiring agencies to publicly report whether a new award is a direct‑to-Phase II or subsequent Phase II award, a Strategic Breakthrough Award, or a Phase III prime or subcontract award — a change intended to improve Congressional oversight, program evaluation, and stakeholder visibility into transition outcomes.
Legislative Status and Path Forward
It is important to note that the legislative process is not yet complete. Sustained advocacy by the DoW played a significant role in advancing the bill out of the Senate, but it must still be considered by the House, which is currently in recess through March 16. The House and Senate must pass identical legislation before a bill can be presented to the President for signature and enactment into law. As a result, any changes made by the House would require the bill’s return to the Senate for further passage — steps that would almost certainly result in additional delay. Another complicating factor: last Sunday, President Trump announced in a Truth Social post that he would not sign any new legislation until the SAVE America Act is passed.
Takeaways
Second, applicants should begin planning for the 100% matching‑funds requirement, particularly given the emphasis on new capital obtained as a result of a Strategic Breakthrough Award. Early engagement with private investors, non‑SBIR government programs, and even DoW program offices will be critical to meeting this threshold without delaying award execution.
Third, companies should candidly assess technology readiness and execution feasibility to ensure that any remaining work can realistically be completed within the 48‑month performance period for a Strategic Breakthrough Award. This is especially important for DoW‑focused applicants facing readiness and acquisition‑pathway requirements.
Companies that align early around transition readiness, capital strategy, and security diligence will be best positioned to compete under the reauthorized SBIR/STTR framework.