When will Congress Revisit the SBIR/ STTR Programs' Reauthorization?

Will Congress Revisit the SBIR/ STTR Reauthorization?

The timeline for the SBIR/ STTR programs to be reauthorized remains uncertain, with hopes pinned on action in January 2026 as part of an omnibus spending bill or standalone legislation. The programs failed to be included in the FY2026 National Defense Authorization Act (NDAA) that passed in December, which was historically the most likely legislative vehicle for reauthorization. The lapse in funding since 30 September 2025 is now making the Program unusable.

The issue stems from a standoff among the "Six Corners" leadership—the Republicans and Democrats from the House and Senate Small Business Committees and the House Science Committee. While five of the six supported a clean one-year extension (H.R. 5100), Senator Joni Ernst has blocked extensions without her proposed reforms in the INNOVATE Act, which includes controversial provisions like lifetime funding caps of $75 million per organization, we will go into detail to understand why she is opposed to the reauthorization of the SBIR/ STTR programs, but first, let’s see what is being proposed.

There are two competing bills that are under consideration:

• SBIR/ STTR Reauthorization Act of 2025 (S.1573/H.R.3169): Would make programs permanent and gradually increase funding allocations to 7% for SBIR and 1% for STTR.

• INNOVATE Act (S.853/H.R.4777): Proposes shorter reauthorization through 2028 with stricter limits and caps.

Impact on Phase I and Phase II Innovation

The impact is already being felt across the government innovation ecosystem:

New Awards Frozen: Federal agencies cannot issue new funding until Congress reauthorizes these programs, putting new solicitations and awards effectively on hold.

Existing Awards Continue: Awards made prior to September 30, 2025 are not impacted and continue under their existing terms.

Continuations at Risk: NIH has announced it will not issue noncompeting continuation awards for existing projects until the program is reauthorized, which affects Phase I awardees expecting to transition to Phase II.

Timeline Delays: Space Force acquisition officials have publicly warned that the lapse is already putting acquisition timelines at risk, with requests for proposals for critical technologies being delayed.

Cash Flow Disruptions: Small businesses in mid-stage development face uncertainty and potential cash flow gaps, particularly those that depend on SBIR/ STTR funding as a primary revenue source during the R&D phase.

How Agencies Are Seeking Innovation Without SBIR/ STTR

Agencies are taking different approaches during this lapse:

Administrative Continuity: Agencies like NASA are continuing nominal operations including administration of ongoing contracts and tracking Congressional reauthorization progress.

Solicitation Closures: NIH has expired all active SBIR and STTR Notices of Funding Opportunity (NOFOs) effective immediately, essentially shutting down new application intake.

Limited Alternatives: Without SBIR/ STTR authority, agencies have few alternatives for supporting early-stage small business innovation. The programs represent over $4 billion annually in small business R&D funding, and there's no comparable substitute mechanism currently available.

State Programs: Some states are stepping up. For example, North Carolina continues it’s One NC Small Business Program with $2 million available to complement federal SBIR/ STTR programs, though federal authorization is still needed for the matching grants component.

What Means Going Forward

The longer this lapse continues, the more severe the impact on the innovation pipeline. Small businesses that were counting on Phase I awards for proof-of-concept work or Phase II awards for development and commercialization are in limbo. The historical precedent from 2022, when Congress passed reauthorization on the day of expiration, suggests lawmakers recognize the program's importance, but political disagreements over reforms have created this unprecedented multi-month gap.

If you have active awards or pending applications, your best course of action is to contact your specific agency program officer directly for guidance on your situation, as each agency may handle the lapse slightly differently.

Factors Supporting Passage in January 2026

Must-Pass Legislation Vehicle: The next opportunity is an omnibus funding bill since government funding expires on January 30, 2026. This creates a deadline-driven opportunity where SBIR/ STTR could be attached to legislation that must pass to avoid another government shutdown.

Bipartisan Support: Five of the six "Six Corners" congressional leaders (the key committee chairs and ranking members with jurisdiction) support at least a clean one-year extension through H.R. 5100. This represents broad bipartisan consensus that the programs should continue. Senator Joni Ernst is not against the SBIR/ STTR programs themselves; she's blocking a clean reauthorization because she believes the programs have serious flaws that must be fixed first. Her opinion for the opposition centers on two main concerns:

1. National Security and Chinese Espionage

Ernst argues that loopholes in the programs are being exploited by China and other foreign adversaries to steal sensitive technology funded by American taxpayers. Her research found troubling gaps in security:

• In 2023 and 2024, while 835 applications for SBIR/ STTR funding were flagged for having foreign risks, just 303 were denied for their ties to adversaries. The lack of consistent standards across agencies created huge disparities, NIH denied all 144 applications flagged for foreign ties, while NASA denied just one of 125 applications flagged for foreign ties.

• Most alarmingly to Ernst, six of the 25 largest recipients had clear links to China and still received nearly $180 million from the Pentagon in 2023 and 2024, after implementation of foreign ties due diligence.

Her INNOVATE Act would create consistent due diligence standards across all federal agencies, clearly define "foreign risk," establish eligibility rules for applicants with foreign ties, and give agencies "clawback authority" to recover funds from bad actors.

2. "SBIR Mills" Dominating the Program

Ernst contends that the program too often serves as a private, taxpayer funded ATM for a small number of companies called SBIR mills, and that in the past decade, 25 companies in the Pentagon's SBIR program, just 0.5% of overall award recipients received 18% of the funding.

She argues these companies have learned to game the system and produce nothing more than policy white papers despite many of their business models being largely dependent on taxpayer dollars. Her colorful critique: "I supposed we could fold them into paper airplanes."

Ernst's view is that the program has drifted from its original purpose of helping true American startups get off the ground and instead rewards grant writers who know how to work the system rather than innovators developing technologies that actually get deployed.

She proposed the INNOVATE Act that includes several reforms aimed at these problems:

• $75 million lifetime cap per organization (including subsidiaries) on combined Phase I/II funding.

• Limits on applications: PIs can only submit one application per solicitation; organizations limited to three applications per solicitation.

• New "Phase 1A" awards: Reserved 2.5% of SBIR funds for smaller $40,000 awards to new applicants with streamlined applications focused on commercialization potential.

• Stronger foreign risk standards across all agencies

• Three-year reauthorization (through 2028) rather than making the program permanent.

Critics argue that Ernst's concerns are overblown, her opinion is baseless, and her solutions would damage the program. Bob Smith, former director of the Navy's SBIR/ STTR programs, said the problem with commercialization is grounded in Defense Department and other federal agencies' processes rather than the companies themselves, and that agencies need to be held accountable for actually using SBIR technologies. Senator Ed Markey defended successful repeat winners, arguing that these programs work because of their merit-based competitive nature, and that kicking successful companies out would be like cutting your highest scorers after winning the NBA title.

The fundamental disagreement is whether the program has systemic problems requiring urgent reform, or whether Ernst is trying to fix problems that don't exist while risking harm to a successful program that has worked well for over 40 years. Ernst won't budge on requiring her reforms, while the other five "Six Corners" leaders believe the programs should continue operating while longer-term reforms are negotiated separately.

Industry Pressure: The economic impact is mounting over $4 billion annually in small business R&D funding is frozen, defense acquisition timelines are being disrupted, and the innovation pipeline is stalling. This creates political pressure for action.

Historical Precedent: Between 2009 and 2011, Congress passed 14 short-term extensions to keep SBIR/ STTR active during deliberations, showing that temporary fixes are common when long-term agreement proves elusive.

Factors Working Against January Passage

Single Senator Blocking: Senator Joni Ernst remains opposed to extensions of any length without her changes reflected in the program. She's leveraging her position to force consideration of her INNOVATE Act reforms, which include controversial provisions that the other five leaders oppose. You might ask, why in the world does she have that much power? She is using the Power of Unanimous Consent of the Senate. Most matters reach the Senate floor through unanimous consent requests that the chamber proceed to their immediate consideration. The Senate relies heavily on these agreements to function efficiently, otherwise, every piece of business would require formal time-consuming procedures. A hold is placed when the Leader's office is notified that a Senator intends to object to a request for unanimous consent from the Senate to consider or pass a measure. When Ernst places a "hold" on SBIR/ STTR reauthorization, she's essentially telling Senate leadership "I will object if you try to bring this up by unanimous consent." The key is that no motion may be brought for consideration on the Senate floor without unanimous consent unless cloture is invoked on the motion. This creates a practical veto for a single senator because the alternative is very time-consuming. Holds can be overcome, but require time consuming procedures such as filing cloture, which is a motion to end debate that requires 60 votes. Leadership typically honors holds because fighting them consumes days of floor time that could be spent on other priorities. A senator's hold cannot stop the Senate from acting on something if senators use the institution's rules instead of unanimous consent to order their deliberations. So why don't they just override her? Senate leadership could file a cloture motion requiring 60 votes to proceed, force a "live" unanimous consent request on the floor where Ernst would have to personally object, or attach SBIR/STTR to pass legislation like the omnibus spending bill.

Senator Ernst can't literally block the bill forever by herself, she doesn't have that power. What she has is the ability to make passing it extremely inconvenient and time-consuming for Senate leadership. In a chamber where time is the most precious commodity and where leaders need cooperation from all members to function efficiently, that practical obstruction power is nearly as effective as a formal veto.

If leadership and 59 other senators were truly determined to pass SBIR/ STTR reauthorization despite Ernst's objections, they could do it through the cloture process. The fact that they haven't suggests either they don't have 60 votes, they're hoping to negotiate with Ernst, or they've decided their limited floor time is better spent on other priorities.

NDAA Already Passed Without It: The FY2026 NDAA historically the most likely legislative vehicle—passed both chambers in December without SBIR/ STTR reauthorization. This was the clearest path forward and it failed.

Competing Visions: The two competing bills have fundamentally different approaches. The SBIR/ STTR Reauthorization Act seeks permanent authorization with increased funding allocations, while the INNOVATE Act proposes shorter reauthorization with stricter limits and caps. Finding middle ground requires compromise that hasn't materialized yet.

Narrow Congressional Calendar: President Trump and Senate Majority Leader John Thune have yet to weigh in, making the timeline and direction of SBIR/ STTR reauthorization unclear. January's legislative calendar will be compressed with other priorities.

No Breakthrough Yet: Despite months of lapse, negotiations haven't yielded a compromise. If a breakthrough in negotiations occurs, it is possible SBIR/ STTR reauthorizations could pass as a stand-alone piece of legislation, but there's no indication such a breakthrough is imminent.

Conclusion

The most realistic scenario is that the SBIR/ STTR programs’ reauthorization gets attached to the omnibus appropriations package expected before January 30, 2026, likely as a short-term extension rather than a comprehensive reform. However, Senator Ernst's willingness to hold out for her preferred reforms creates genuine risk that the impasse continues into February or beyond.

If I had to estimate and had a crystal ball to see the future and provide probabilities for the reauthorization, there's perhaps a 45% - 55% chance of some form of reauthorization passing in January 2026, most likely a clean extension similar to H.R. 5100. This is not a promising probability but based on the facts and the trajectory of the lapse of funding as an overall for the Federal Government. The probability of a comprehensive long-term reauthorization with reforms in January is much lower, perhaps 15% - 25%. There's unfortunately a meaningful chance, based on the last lapse of appropriations, that the lapse continues past January as negotiations drag on or get pushed aside by other priorities.

The situation remains fluid and could shift quickly if leadership pressures Senator Ernst to accept a clean extension or if she negotiates a compromise that the other five corners can accept. We will have to wait and see how the Federal Government moves on this important bill to fund the SBIR/ STTR programs.