On April 13th, 2026, President Trump signed the Small Business Innovation and Economic Security Act, which amends the Small Business Act (15 U.S.C. ch. 14A). The Act reauthorizes the Small Business Innovation Research (“SBIR”) and Small Business Technology Transfer (“STTR”) programs through September 30, 2031, while also creating new funding opportunities and enhancing applicant screening for national security risks.

The authorizations for the SBIR and STTR programs lapsed over six months ago (on September 30, 2025) resulting in a pause in new SBIR/STTR program awards. The Act authorizes agencies with remaining SBIR/STTR funds at the end of FY2026 to use those funds in FY2027. Below, we outline key elements of the Act.

Strategic Breakthrough Awards

The Act creates a new category of Phase II funding known as strategic breakthrough awards. Under the traditional SBIR/STTR model, Phase I awards fund feasibility research, Phase II awards support further research, development, and demonstration of the technology, and Phase III represents commercialization funded outside of SBIR/STTR. A well-documented funding gap exists between the end of Phase II and the subsequent investment needed to bring technology to Phase III, commonly known as the “Valley of Death.” The strategic breakthrough awards are designed to help bridge that gap.

Individual strategic breakthrough awards for small business concerns can reach up to $30 million, issued as a single award or a series of awards tied to production or development milestones. Performance under the award must be completed within four years, and agencies must complete contract awards within 90 days of receiving a proposal.

These awards are available to agencies whose annual required SBIR expenditures exceed $100 million. Expenditure for these awards may not exceed 0.5% of an agency’s overall yearly extramural research and development budget.

The Act establishes contractor eligibility requirements applicable to all federal agencies for strategic breakthrough awards. To be eligible, a contractor must:

  • Have received at least one prior Phase II SBIR/STTR award.
  • Secure matching funding equivalent to 100% of the award amount from new private capital, qualifying non-SBIR Phase I or Phase II government funding, or a combination of the two. These funds must be newly obtained in connection with the award.
  • Demonstrate that its product, process, or technology is an effective solution, as determined by market research.

In addition, the Act imposes further requirements specific to Department of Defense (“DoD”) strategic breakthrough awards:

  • A contractor must demonstrate that its product, process, or technology has reached sufficient maturity and must secure a commitment for inclusion of the technology in a program objective memorandum from a program acquisition executive or higher-ranked official within a DoD acquisition organization.
  • The product, process, or technology must respond to high-priority requirements or operational needs.
  • A minimum of 20% of the required matching funding must come from new DoD award sources outside of the SBIR/STTR Phase I and Phase II programs.

National Security Risks

The Act also expands the scope of national security and supply chain risk screening that agencies must conduct prior to making an SBIR/STTR award. In particular, agencies are prohibited from making awards to small businesses with certain foreign ties or other identified security concerns. As a result, contractors seeking SBIR/STTR funding should anticipate heightened national security and foreign entity risk screening and may want to proactively evaluate their relationships with foreign entities.

Limits on Proposal Submissions

The Act also requires agencies to establish limits on the number of Phase I and Phase II proposals that a small business can submit annually, beginning in FY 2027. Agencies must choose one of three limitation methods: a limit based on a fiscal year basis, on a solicitation basis, or on a topic basis. Under the Act, these limits must be established no later than 90 days after the start of FY2027.

Waivers are available for up to 5% of topics to address urgent needs, but agencies must submit a written justification to the agency Undersecretary overseeing the agency’s SBIR/STTR program office and the Small Business Administration (“SBA”) Administrator. The Undersecretary and SBA Administrator have 15 days within receipt of the waiver request to approve it. The agency must also provide written notification to the relevant Congressional committees within 30 days of the waiver being granted.

Conclusion

The Act represents a significant development for the SBIR/STTR ecosystem. As discussed above, it restores program authority after a disruptive six-month lapse and introduces new mechanisms intended to accelerate the transition of innovative technologies from development to deployment.

Small business contractors should take note of the new strategic breakthrough awards as a potential pathway for scaling proven technologies, while also preparing for the heightened national security screening that will accompany future SBIR/STTR applications. With agencies expected to begin implementing these provisions in the near term, contractors would be well-served to evaluate their eligibility, review their foreign entity relationships, and monitor agency-specific guidance as it is issued.