On April 13, 2026, the Small Business Innovation and Economic Security Act (the Act) was signed into law, reauthorizing the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs through September 30, 2031. First and foremost, this ends the six-month program pause in new awards. But it also introduces several important changes aimed at improving the effectiveness of the SBIR program and at strengthening national security. Some of the key provisions are detailed here.

1. Strategic Breakthrough Awards: Helping Contractors Get from Phase II to Phase III

Historically, many SBIR companies have struggled to transition from Phase II R&D/Prototyping to Phase III commercialization. Strategic Breakthrough Awards are intended to increase the rate of success. Key features and requirements of these awards are:

• Funding: Agencies with over $100 million in annual SBIR obligations may award up to $30 million to a single small business.
• Duration: The performance period is limited to 48 months.
• Eligibility and Matching: Applicants must have at least one prior Phase II award and must provide 100 percent matching funds from private capital or non-SBIR government sources.
• U.S. Department of Defense (DoD) Requirements: For DoD projects, at least 20 percent of matching funds must be new DoD funding, and a senior official must commit to including the technology in a Program Objective Memorandum.

2. Increased National Security Review Requirements

The Act formalizes and standardizes due diligence to prevent foreign technology transfer, requiring an initial determination of whether an applicant presents a security risk prior to award. These measures are reflective of existing practices already utilized by SBIR agencies. Key aspects of diligence include:

• Broad Due Diligence: Agencies will scrutinize, among other things, foreign investment and licensing agreements, cybersecurity practices, and employee affiliations.
• Watchlist Screening: Applicants connected to specific entities—such as those on the Section 889 Prohibition List or the 1260H List—are barred from receiving awards.
• Limited Transparency: Due to the sensitive nature of these reviews, agencies may not always disclose the specific reasons for a rejection based on security risk assessments.

3. Reigning in SBIR Mills

Starting in fiscal year 2027, each agency must establish limits on the number of SBIR/STTR Phase I or Phase II proposals a single firm can submit, addressing the so-called “SBIR Mill” issue. Agencies will decide how to structure these limits, for example on a per-topic versus per-solicitation basis. Agencies may waive these caps for mission-critical, time-sensitive topics, but such waivers are limited to five percent of topics per fiscal year.

4. Phase III Enhancements

Phase III allows for sole-source, non-SBIR funded contracts for technology derived from prior SBIR awards, and the Act requires agencies should use this “to the greatest extent practicable.” The Act also requires the SBA establish training on Phase III awards for the acquisition workforce to increase their use and for the standardization of solicitation and contract clauses that will provide guidance on what information companies may be expected to provide as a part of market research or in proposals to establish eligibility for Phase III awards.

While the reauthorization restores vital funding and provides some new authorities, it also increases scrutiny of foreign connections and other program requirements. Potential applicants should pay close attention to the agency-specific guidance and implementation of the Act to optimize their chances of successfully obtaining future SBIR/STTR awards. If you have any questions about the Act, the SBIR/STTR program and eligibility, or any other government contracts matters, please contact Wilson Sonsini’s Government Contracts practice.