As most experts expected, Congress has passed the bill to reauthorize the SBIR and STTR programs until September 30, 2025. The bill is now headed for the White House, where the President is expected to sign it into law.
The reauthorized SBIR and STTR programs will include a few new features, but otherwise are unchanged. The legislation does not require changes to Phase III of the SBIR program. The new aspects of the programs are:
- Foreign Risk Management, Ongoing Reporting, and Agency Recovery: The reauthorization act introduces a new requirement to assess security risks in companies seeking a new SBIR/STTR award. Agencies will develop new due diligence regimes to assess “the cybersecurity practices, patent analysis, employee analysis, and foreign ownership of a small business concern seeking an award, including the financial ties and obligations (which shall include surety, equity, and debt obligations) of the small business concern and employees of the small business concern to a foreign country, foreign person, or foreign entity.” The legislation includes new requirements for prospective SBIR/STTR firms to disclose various potential ties to foreign countries, specifically “including the People’s Republic of China.” In connection with the perceived threat posed by foreign adversaries, the act requires an awardee “to regularly report” whether it has made any “material misstatement that the Federal agency determines poses a risk to national security” or has experienced “a change in ownership, change to entity structure, or other substantial change in circumstances of the small business concern that the Federal agency determines poses a risk to national security.” If the awarding agency determines one of these issues is present, the awardee may be required “to repay all amounts received from the Federal agency under the award.” The Departments of Defense, Energy, and Health and Human Services and the National Science Foundation must submit reports to Congress “assessing the adversarial military and foreign influences in the SBIR and STTR programs at the covered agency.”
- Program on Innovation Open Topics: The Department of Defense must establish “innovation open topic activities using the SBIR and STTR programs” to increase the transition of commercial technology to the Department, expand the small business nontraditional industrial base, increase commercialization derived from Department investments, and expand the ability of small businesses to propose new technology solutions to the Department. The GAO will issue annual reports comparing open topics and conventional topics under the SBIR and STTR programs. Open topics allow businesses more flexibility to proactively propose their own ideas rather than waiting for an agency to identify specific needs. This expansion follows on the GAO’s recent, positive assessment of the Air Force’s experiment with open topics.
- Increased Minimum Performance Standards for Experienced Firms: The act increases the minimum performance standards for awardees, and limits a subpar Phase I awardee’s ability to receive further Phase I and II awards. Firms receiving large numbers of Phase II awards will be subject to a threshold of aggregate sales and investments per each Phase II award it receives. This provision addresses concerns over abuse of the program by certain SBIR/STTR “mills” that are said to churn out proposals and collect awards without producing a sufficient return on investment. The act also requires the GAO to study the impact of firms that accumulated large numbers of awards (defined as “not less than 50 Phase II awards” over a ten-year period).
- Solicitation Development Safeguards: Agencies must develop more formal processes for approving new solicitation topics and ensuring competition. These processes must ensure “that no private individual or entity is shaping the requirements for eligibility for the solicitation topic after the selection of the solicitation topic, except that the Federal agency may amend the requirements to clarify the solicitation topic.”
- Subcontracting Study: The GAO will produce a report on the extent to which SBIR/STTR awardees are subcontracting requirements to other-than-small businesses and will analyze how those findings fit with the goals of the Small Business Act. This provision responds to a concern that some awardees are abusing the SBIR/STTR programs