Congress Plans to Update Small Business R&D Programs

With two federal programs that provide technology maturation grants to small businesses set to expire at the end of the fiscal year on Sept. 30, lawmakers have begun discussing potential reforms such as steps to increase their budgets, improve commercialization opportunities, and expand research security measures.

Congress created the Small Business Innovation Research (SBIR) program in 1982 and Small Business Technology Transfer (STTR) program in 1992 and they have since grown to allocate around $5 billion annually. Though broadly popular, the programs have only been renewed for a few years at a time, requiring Congress to actively extend them.

Protecting small business R&D from foreign exploitation, particularly by the Chinese government, was a central theme of a hearing held by the House Small Business Committee this week to kick off discussion of reform ideas. Committee Chair Roger Williams (R-TX) praised the SBIR and STTR programs but said that security measures added via their previous extension in 2022 are insufficient. He also said that small businesses participating in the programs lack access to capital and face significant barriers in transitioning from research to commercialization.

Ranking Member Nydia Velázquez (D-NY) described the programs as among the “most effective engines for driving innovation” administered by the federal government and called for Congress to make them permanent. She also proposed to increase the fraction of science agency budgets that are dedicated to the programs. Currently, agencies with extramural R&D budgets exceeding $100 million annually must allocate at least 3.2% of their budget to SBIR and agencies with extramural R&D budgets exceeding $1 billion must dedicate a least 0.45% to STTR.

Rep. John Moolenaar (R-MI), who chairs the House Select Committee on the CCP, also appeared at the hearing to warn that some U.S. companies funded by the programs “later partnered with CCP-linked entities or established Chinese subsidiaries, effectively transferring sensitive technology into the hands of our foremost adversary.”

Moolenaar and Williams sent letters to 11 federal agencies this week requesting they examine potential vulnerabilities of the SBIR and STTR programs. House Science Committee Chair Brian Babin (R-TX) also joined the letters.

In their letter to the National Science Foundation, the three representatives make a series of data requests, including the percentage of SBIR/STTR applications that are flagged annually for national security risks.

Democrats on the committees did not join the letters but they have expressed support for increasing security measures for the programs. “Our current system still relies heavily on self reporting from companies, which can lead to resource constraints for the government to verify these reports,” said House CCP Committee Ranking Member Raja Krishnamoorthi (D-IL) at the hearing. “We must continue to support resources for due diligence so that we can see the results we enacted back in 2022.”

Babin’s committee is holding a hearing on research security next Wednesday that may probe the subject further. The Senate Small Business and Entrepreneurship Committee will also discuss potential reforms to the programs during a hearing on March 5. Committee Chair Joni Ernst (R-IA) successfully pushed to add due diligence checks on businesses seeking support from the programs through the 2022 extension legislation.