Defense tech firms to Congress: Don’t ruin SBIR

April 2025

The New England Innovation Alliance is sounding the alarm that legislation to reform the Small Business Innovation Research and Small Business Technology Transfer (SBIR/STTR) programs would erode the federal government’s ability to meet its unique technology needs and make it easier for China and other adversaries to steal sensitive U.S. technology.

In a statement for the record following a Senate Committee on Small Business and Entrepreneurship hearing on SBIR/STTR reauthorization held on March 5, the coalition of two dozen small high-tech companies also raised concerns that draft legislation from Sen. Joni Ernst calls for providing up to $30 million awards to venture-funded defense startups by substantially reducing research institution funding to universities under the STTR program.

A member of NEIA testified before the March 5 hearing, while two others appeared as witnesses at a hearing on SBIR/STTR reauthorization held by House Committee on Small Business on Feb. 26.

The alliance argued that the proposed INNOVATE Act would severely undermine the research goals of “mission agencies” with unique technology needs like the Department of Defense. The provisions include capping awards for proven innovators who regularly partner with leading research universities and requiring SBIR recipients to achieve large-scale commercialization – even though the military and law enforcement often have requirements that lack widespread commercial applications.

“NEIA members are not typically single-technology companies on a linear venture-capital driven trajectory,” the alliance stated. “They focus on innovating technologies that federal agencies, like the U.S. Department of Defense (DoD) and its service branches, need to meet critical mission objectives, for which no other stakeholders are positioned to deliver.”

Failing to recognize the SBIR-derived technologies that are regularly sold to other government contractors and integrated into more complicated systems and weapons platforms “devalues an important role played by small businesses” in the SBIR/STTR programs, they said.

“SBIR topics are also not exclusively about heroic entrepreneurs building a large new spacecraft, aircraft, or ship,” the alliance added. “They are much more often about creating significant innovative improvements to component capabilities that maintain the technological dominance of those platforms or reducing the cost of sustaining those platforms.”

Meanwhile, NEIA told the Senate committee that a variety of proposed measures intended to reward less mature startups, while penalizing experienced firms with a long track record of supporting national security, could exacerbate growing concerns about foreign adversaries pilfering national security secrets.

“New companies, with staff fresh from universities and with limited funding, do not have the resources to train employees in security procedures and develop information systems well protected against cyber-attacks. They need additional development funds and are thus vulnerable to foreign influence,” the companies asserted.

They cited a Navy study demonstrating that SBIR technology stolen by foreign entities were nearly entirely from very small companies. “This is a reality, and a risk factor, that could be exacerbated during the upcoming reauthorization process,” the alliance warned.

The collection of experienced SBIR firms outlined a series of principles to guide the reauthorization process:

• Merit-based Awards: “Congress should maintain the competitive, merit-based fundamentals of the program to ensure the best technology is developed to keep America as the world leader.”
• Application Simplification: “The largest barrier to participation in the program for new entrants is the increased administrative burden and complexity of proposal submission
• Improved Communication: “Agencies should be required to improve the communication of their needs and opportunities to small businesses across all topic types.”
• Agency Discretion: “Agencies should have discretion to shape the program and define merit consistent with their missions”; and
• Permanent Authorization: “Companies make investments based on an assessment of their ability to grow and recover that investment…Program permanency reduces the perception that those investments will be stranded at the next reauthorization without limiting the ability of Congress to make further adjustments to the program.”

“A goal during this program reauthorization,” the alliance concluded, “should be to reduce barriers to entry and broaden, not restrict, participation in the program.”

Read the full statement here.