Current status is Committee on Small Business and Entrepreneurship. Hearings held.

119th CONGRESS

1st Session

S. 853

1. Short title; table of contents
2. Definitions
101. Enhancing small business success in the STTR program
102. Phase II strategic breakthrough funding
103. Implementation briefings
104. Fixed-price contracts
201. Encouraging new SBIR and STTR entrants
202. Combating discriminatory practices in the SBIR and STTR programs
301. Definition of open topics
302. Reducing administrative burden
401. Definition of foreign risk
402. Bolstering research security of SBIR and STTR awards
403. Strengthening the due diligence program to assess security risks
404. Strengthening agency recovery authority
405. Best practices on investor informational rights
406. GAO report
501. Streamlining transition and commercialization rate benchmarks
502. Improving direct to Phase II authorities
503. Improving SBIR-STTR data collection
504. Streamlining program administration
505. Extending SBIR and STTR authorization

1. Short title; table of contents

(a) Short title - This Act may be cited as the"Investing in National Next-Generation Opportunities for Venture Acceleration and Technological Excellence" or the "INNOVATE Act".

(b) Table of contents - The table of contents for this Act is as follows:

2. Definitions

In this Act, the terms Phase I, Phase II, Phase III, SBIR, and STTR have the meanings given those terms in section 9(e) of the Small Business Act (15 U.S.C. 638(e)).

101. Enhancing small business success in the STTR program

Section 9 of the Small Business Act (15 U.S.C. 638 et seq.) is amended—

(1) - in subsection (e)—

(A) - in paragraph (6)—

(i) - in subparagraph (A), by adding "and" at the end; and

(ii) - by striking subparagraphs (B) and (C) and inserting the following:

(B) - opportunities for follow-on funding in Phases II and III of the SBIR program;

(B) - in paragraph (7)—

(i) - by striking "40" and inserting "50"; and

(ii) - by striking "30" and inserting "20";

(2) - in subsection (f)(1)—

(A) - in subparagraph (H), by striking "and" at the end;

(B) - in subparagraph (I), by striking "and each fiscal year thereafter," and inserting "; and"; and

(J) - not less than 3.45 percent of such budget in fiscal year 2026 and every year thereafter,

(3) Purpose of STTR program - in subsection (n)—

(A) - in paragraph (1)(B)—

(i) - in clause (iv), by striking "and" at the end;

(ii) - in clause (v), by striking "and each fiscal year thereafter." and inserting "; and"; and

(iii) - by adding at the end the following:

(vi) - not less than 0.20 percent for fiscal year 2026 and each fiscal year thereafter.

(B) - by redesignating paragraphs (2) and (3) as paragraphs (3) and (4), respectively; and

(2) Purpose of STTR program

(A) In general - Each Federal agency shall use its STTR budget to fund small business concerns conducting fundamental, basic, or other scientific research that stands to benefit most from partnerships with eligible research institutions.

(B) DoD and NASA - The Department of Defense and the National Aeronautics and Space Administration shall use their STTR budget to solely fund research at technology readiness levels 1, 2, and 3.

102. Phase II strategic breakthrough funding

(a) In general - Section 9 of the Small Business Act (15 U.S.C. 638), as amended by this Act, is amended—

(1) - by redesignating subsection (y) as paragraph (3), adjusting the margins accordingly, and moving it so as to appear in subsection (ff) after paragraph (2);

(2) Strategic breakthrough allocation - in subsection (aa), by adding at the end the following:

(6) Strategic breakthrough allocation - The Department of Defense or its components shall not be required to receive a waiver from the Administrator to award a small business concern not more than $30,000,000 when using funds made available under a strategic breakthrough allocation.

(3) In general - in subsection (ff)—

(A) - in the subsection heading, by striking "and STTR" and inserting "Phase II";

(B) - in paragraph (1), by striking "or Phase II STTR award"; and

(i) - in the paragraph heading, by striking "Commercialization Readiness Program" and inserting "Strategic Breakthrough Awards";

(ii) - in subparagraph (A), as so redesignated—

(I) - in the first sentence, by striking "create and administer a "Commercialization Readiness Program"" and inserting "provide funding"; and

(II) - in the second sentence, by striking "create and administer a Commercialization Program under this subsection" and inserting "provide funding under this paragraph";

(iii) In general - in subparagraph (B), as so redesignated—

(I) In general - in the first sentence, by striking "In carrying out the Commercialization Readiness Program" and inserting the following:

(i) In general - In carrying out this paragraph

(II) - in clause (i), as so designated—

(aa) - by striking "shall identify" and inserting

(I) - identify

(bb) - in subclause (I), as so designated, by striking the period at the end and inserting a semicolon; and

(cc) - by adding at the end the following:

(II) - ensure, in collaboration with SBIR program managers of each component of the Department of Defense, that research programs identified under subclause (I) are analyzed within the programming and budgeting process as budget requests are developed; and

(III) - provide to the Committee on Small Business and Entrepreneurship of the Senate and the Committees on Small Business and Science, Space, and Technology of the House of Representatives information on the integration of SBIR and STTR awardees in budget rollouts for research, development, testing, and evaluation activities.

(III) Award - by adding at the end the following:

(ii) Award - Under this paragraph, a funding agreement may be awarded to a small business concern by the Department of Defense using funds made available under a strategic breakthrough allocation, as defined in subparagraph (C)(i).

(iv) Funding parameters - by striking subparagraphs (C), (D), and (E), as so redesignated, and inserting the following:

(i) Definition - In this subparagraph, the term strategic breakthrough allocation means a required expenditure amount for the Department of Defense within the SBIR allocation under subsection (f)(1) for fiscal year 2026 and every fiscal year thereafter of not less than 0.25 percent of the extramural budget for research or research and development designated for the Department of Defense.

(ii) Requirements - In the case of a Phase II agreement that is awarded to a small business concern by the Department of Defense using funds made available under a strategic breakthrough allocation, the following requirements shall apply:

(I) Award size and period of performance - The Department of Defense may award not more than 1 award of not more than $30,000,000 per small business concern, including its affiliates, spinouts, or subsidiaries, from the strategic breakthrough allocation with a period of performance of not more than 48 months.

(II) Small business concern requirements - The small business concern shall—

(aa) - have been awarded not less than 1 prior Phase II award under the SBIR program;

(bb) - demonstrate not less than 100 percent matching funds through new outside capital or amounts awarded by the Department of Defense under a program other than Phase I and II of the SBIR or STTR program as a result of an award using funds made available under a strategic breakthrough allocation;

(cc) - have been awarded not more than $50,000,000 in cumulative Department of Defense contracts or awards; and

(dd) - only be eligible for an award from the strategic breakthrough allocation if the product, process, or technology of the small business concern—

(AA) - meets a necessary level of readiness and has a commitment for inclusion in a program objective memorandum from an official with the rank of program executive officer or higher in an acquisition organization of the Department of Defense;

(BB) - is an effective solution, as determined by market research; and

(CC) - will meet high priority military requirements or operational needs of a military department through a successful transition and into the acquisition process.

(III) Deadline - The Department of Defense shall complete any contract awards using strategic breakthrough allocation funds not later than 90 days after receiving a proposal from a small business concern for the award.

(IV) Eligible activities - Eligible activities by a small business concern using strategic breakthrough allocation funds are—

(aa) - design for manufacturing;

(bb) - establishing manufacturing facilities, tooling, and supply chain capacity;

(cc) - buying raw materials or inventory;

(dd) - the integration of products with open interoperability standards;

(ee) - testing, evaluation, and certification of low-rate production units; and

(ff) - the purchase of production units and maintenance.

(V) Selection criteria - In making awards, the Department of Defense shall consider—

(aa) - the potential of the small business concern to—

(AA) - advance the national security capabilities of the United States;

(BB) - provide new technologies or processes, or new applications of existing technologies, that will enable new alternatives to existing programs;

(CC) - provide future cost savings; and

(DD) - enhance the lethality and efficiency of the United States military;

(bb) - whether a major system or customer in the Department of Defense has expressed intent to purchase and integrate technology from the small business concern into its operations; and

(cc) - such other criteria that the Department of Defense determines to be appropriate.

(D) Acquisition mechanism - The Department of Defense shall establish a mechanism, such as a major system, to provide small business concerns with direct access to program and requirements offices throughout the Department of Defense that may purchase technology from small business concerns under Phase III of the SBIR program of the Department of Defense.

(E) Operational needs - The Department of Defense shall allow services to provide operational needs statements directly to chiefs of requirements offices.

(v) - in subparagraph (F), as so redesignated—

(I) - by amending clause (i) to read as follows:

(i) - set a goal to substantively increase the number of Phase II SBIR contracts awarded by the Secretary that lead to technology transition into programs of record or fielded systems in fiscal year 2028 compared to fiscal year 2025; and

(II) - by striking clause (ii);

(III) - by redesignating clause (iii) as clause (ii); and

(IV) - in clause (ii), as so redesignated—

(aa) - in subclause (I), by adding "and" at the end;

(bb) - in subclause (II)—

(AA) - by striking "through the Commercialization Readiness Program" and inserting "under a strategic breakthrough allocation"; and

(BB) - by striking "; and" and inserting a period; and

(cc) - by striking subclause (III); and

(4) - by redesignating subsection (xx), entitled "Additional Provisions Relating to Solicitation Topics", as subsection (y), and moving it so as to appear after subsection (x).

(b) Technical and conforming amendments - Section 9 of the Small Business Act (15 U.S.C. 638), as amended by this Act, is amended—

(1) - in subsection (i)(1), by striking "subsection (y)" and inserting "subsection (ff)(3)";

(2) - in subsection (mm)(1)(D), by striking "subsection (y)" and inserting "subsection (ff)(3)"; and

(3) - in subsection (tt), by striking "(y)(6)(C)" and inserting "(ff)(3)(F)(ii)".

103. Implementation briefings

Not later than 60 days after the date of enactment of this Act, and on a recurrent basis until implementation is complete, the Secretary of Defense shall brief the Committee on Small Business and Entrepreneurship of the Senate and the Committee on Small Business and the Committee on Science, Space, and Technology of the House of Representatives on the implementation of paragraph (3) of section 9(ff) of the Small Business Act (15 U.S.C. 638(ff)), as added by section 102.

104. Fixed-price contracts

Section 9 of the Small Business Act (15 U.S.C. 638) is amended—

(1) Fixed-price contract - in subsection (f), by adding at the end the following:

(5) Fixed-price contract - Any funding agreement that is a contract made with expenditures allocated to the SBIR program under paragraph (1) shall be a firm-fixed-price contract (as defined in section 16.202 of the Federal Acquisition Regulation), unless, on a case-by-case basis, the head of the awarding Federal agency makes a written determination to utilize a different contract structure.

(2) Fixed-price contract - in subsection (n), as amended by section 101, by adding at the end the following:

(5) Fixed-price contract - Any funding agreement that is a contract made with expenditures allocated to the STTR program under paragraph (1) shall be a firm-fixed-price contract (as defined in section 16.202 of the Federal Acquisition Regulation), unless the head of the awarding Federal agency makes a written determination to utilize a different contract structure.

201. Encouraging new SBIR and STTR entrants

(a) In general

(1) Encouraging new SBIR and STTR entrants - Section 9(jj) of the Small Business Act (15 U.S.C. 638(jj)) is amended to read as follows:

(jj) Encouraging new SBIR and STTR entrants

(1) Optimizing SBIR and STTR funding - A small business concern, including its affiliates, spinouts, or subsidiaries, may not apply to a Phase I or Phase II solicitation under an SBIR or STTR program if the small business concern, including its affiliates, spinouts, or subsidiaries, has previously received over $75,000,000 in funding from SBIR or STTR Phase I and Phase II awards.

(2) Primary investigators - An individual may not concurrently serve as the primary investigator on more than 1 proposal to a single Phase I solicitation or a single Phase II solicitation.

(3) Phase I size standard - A small business concern applying for a Phase I award may not have annual receipts (as defined in section 121.104 of title 13, Code of Federal Regulations, or any successor regulation) of more than $40,000,000 for the most recent fiscal year.

(2) Conforming amendment - Section 9(tt)(1)(A) of the Small Business Act (15 U.S.C. 638(tt)(1)(A)) by striking ", (jj)(6)".

(b) Phase 1A program - Section 9 of the Small Business Act (15 U.S.C. 638), as amended by this Act, is amended—

(1) - in subsection (e)(4)—

(A) - in subparagraph (A), by striking "subparagraph (B)" and inserting "subparagraph (C)";

(B) - by redesignating subparagraphs (B) and (C) as subparagraphs (C) and (D); and

(B) - a 1A phase for the same purposes as the first phase described under subparagraph (A) and intended to increase accessibility to the program for new entrants, with proposals submitted pursuant to only SBIR open topic announcements;

(2) Phase 1A awards - by amending subsection (pp) to read as follows:

(pp) Phase 1A awards

(1) Sense of Congress - It is the sense of Congress that—

(A) - Phase 1A funds will bring thousands of new small business concerns committed to commercialization of critical technologies into the SBIR program; and

(B) - in order for participating agencies to benefit from the full scope of American innovation and identify the most promising solutions to scale, Phase 1A awards should fund the strongest technologies in a topic area regardless of—

(i) - the location of the small business concern within the United States; or

(ii) - the educational background of the principal investigator.

(2) Authorization - The head of each agency with an SBIR program shall allocate not less than 2.5 percent of funding for the SBIR program of the agency to Phase 1A awards.

(3) Solicitation - A solicitation issued under this subsection shall be conducted as an open topic announcement, as defined in subsection (e).

(4) Eligibility - In order to be eligible for an award under this subsection, a small business concern, including its affiliates, spinouts, or subsidiaries, shall not have previously received an SBIR or STTR award.

(5) Proposal

(A) In general - A proposal submitted in response to a solicitation under this subsection shall consist of a report of no more than 2 pages in length and shall contain the criteria described in subparagraph (B).

(B) Criteria

(i) Identification of problem - The small business concern shall describe the problem that the proposal is intended to address for the awarding agency and any commercial customer.

(ii) Description of solution - The small business concern shall describe the proposed solution, including the technical basis for the solution to demonstrate how the solution would address the problem described in the proposal, including the level of maturity of the solution at the time of the proposal.

(iii) Impact of the solution - The small business concern shall describe how adoption of the proposed solution would produce potential time savings, cost savings, risk reduction, improvement of mission outcomes, or any other beneficial impact for the awarding agency and any commercial customer.

(iv) Differentiation - The small business concern shall—

(I) - identify the state of solutions in use at the time of the proposal to address the problem described in the proposal; and

(II) - explain how the proposed solution is a unique and novel solution.

(v) Commercialization strategy - The small business concern shall—

(I) - describe how the small business concern intends to fund the proposed solution; and

(II) - explain the market for the proposed solution, including the intended Government and commercial end users.

(6) Award limits

(A) Number of awards - A small business concern or principal investigator is eligible for not more than 1 Phase 1A award.

(B) Amount - An award made under this subsection shall be for not more than $40,000.

(7) Notification of selection or non-selection - Each agency shall notify each small business concern of the award decision of the agency on any proposal submitted by the small business concern not later than 90 days after the date on which the solicitation closes.

(8) Application for Phase II award

(A) Eligibility - A small business concern that receives a Phase 1A award shall be eligible to apply for a Phase II award.

(B) Use of funds - A small business concern may use funds from a Phase 1A award to develop a proposed solution in pursuit of a subsequent proposal for a Phase I award or a Phase II award.

202. Combating discriminatory practices in the SBIR and STTR programs

Section 9 of the Small Business Act (15 U.S.C. 638), as amended by this Act, is amended—

(1) - in subsection (b)(7)(C), by striking "owned and controlled by women or by socially and economically disadvantaged individuals" and inserting "owned by individuals who reside in emerging States or rural areas";

(2) - in subsection (e)—

(A) - in paragraph (18), by striking "and" at the end;

(B) - in paragraph (19), by striking the period at the end and inserting a semicolon; and

(20) - the term emerging State means the 25 States with the fewest combined number of award recipients in the SBIR program and the STTR program that have received their first Phase I award in the previous 10 fiscal years;

(21) - the term rural area means a county or other political subdivision of a State that the Bureau of the Census has defined as mostly rural or completely rural in the most recent decennial census;

(3) - in subsection (g)(8)(A)—

(A) - by striking clause (iii);

(B) - by redesignating clauses (iv), (v), and (vi) as clauses (iii), (iv), and (v), respectively; and

(C) - in clause (iii), as so redesignated, by striking "a socially or economically disadvantaged individual or has a socially or economically disadvantaged individual" and inserting "an individual who resides in an emerging State or rural area or has an individual who resides in an emerging State or rural area";

(4) - in subsection (j)—

(A) - by adjusting the margins for paragraphs (2) and (3) 2 ems to the left; and

(B) - in paragraph (2)—

(i) - by striking subparagraph (F);

(ii) - by redesignating subparagraphs (G), (H), and (I) as subparagraphs (F), (G), and (H); and

(iii) - in subparagraph (H), as so redesignated, by striking "subparagraph (H)" and inserting "subparagraph (G)";

(5) - in subsection (k)(1)(F)—

(A) - by striking clause (ii);

(B) - by redesignating clauses (iii), (iv), and (v) as clauses (ii), (iii), and (iv), respectively; and

(C) - in clause (ii), as so redesignated, by striking "a socially or economically disadvantaged individual or has a socially or economically disadvantaged individual" and inserting "an individual who resides in an emerging State or rural area or has an individual who resides in an emerging State or rural area";

(6) - in subsection (o)(9)(A)—

(A) - by striking clause (iii);

(B) - by redesignating clauses (iv), (v), and (vi) as clauses (iii), (iv), and (v), respectively; and

(7) Eligibility - in subsection (mm)—

(A) - in paragraph (1)—

(i) - in the matter preceding subparagraph (A), by striking "and until September 30, 2025"; and

(ii) - in subparagraph (F), by striking "or abuse to ensure compliance" and inserting "abuse, or adversarial influence to ensure compliance";

(B) - in paragraph (2)(A), by striking "to carry out the policy directive required under subsection (j)(2)(F) and" and inserting "to increase the participation of States with respect to which a low level of SBIR awards have historically been awarded"; and

(7) Eligibility - For an agency to be eligible to utilize funds allocated to the SBIR program of that Federal agency under this subsection, the agency shall not—

(A) - consider the race, gender, or ethnicity of the principal investigator, founder, or key personnel of the small business concern applying for an SBIR or STTR award in an award decision under the SBIR or STTR program of the agency;

(B) - require or consider a statement or plan to promote diversity or equity as part of an application for an SBIR or STTR award under the SBIR or STTR program of the agency; or

(C) - offer supplemental funds to a recipient of an SBIR or STTR award based on the race, gender, or ethnicity of the principal investigator, founder, or key personnel of a small business concern.

301. Definition of open topics

Section 9(e) of the Small Business Act (15 U.S.C. 638(e)), as amended by section 202(2), is amended by adding at the end the following:

(22) - the term open topic announcement means a solicitation for SBIR or STTR proposals that—

(A) - is a generalized problem statement or broad technology area and does not contain any language requiring that the solutions that a small business concern proposes adhere to specific technological specifications; and

(B) - evaluates the ability of the solution proposed by the small business concern to meet the stated innovation need of the agency or Government end user; and

302. Reducing administrative burden

Section 9(jj) of the Small Business Act (15 U.S.C. 638(jj)), as amended by section 201(a)(1), is amended by adding at the end the following:

(4) Reducing administrative burden

(A) Limit on submissions to a solicitation - A small business concern, including its affiliates, spinouts, or subsidiaries, may not submit more than 3 proposals to a single Phase I solicitation or a single Phase II solicitation under subsection (cc).

(B) Limit on submissions in a single year - A small business concern, including its affiliates, spinouts, or subsidiaries, may not submit more than a combined total of 25 proposals to Phase I solicitations or Phase II solicitations under subsection (cc) published by a single agency, including the components of the agency, in a single fiscal year.

401. Definition of foreign risk

Section 9(e) of the Small Business Act (15 U.S.C. 638(e)), as amended by section 301, is amended by adding at the end the following:

(23) - the term foreign risk means, in the past 10 years, any foreign affiliation, technology licensing agreement, joint venture, contractual or financial obligation (pending or otherwise), investment agreement, research relationship (including co-authorship), or business relationship between—

(A) - a small business concern (including all subsidiaries, spinouts, and affiliates) submitting a proposal for an SBIR or STTR program, and covered individuals, owners, or other key personnel of the small business concern; and

(B) - an individual, research institution, business entity, government, or government-owned entity in a foreign country of concern that is disclosed, as required under subsection (g) or subsection (o), or otherwise identified in the due diligence process, as required under subsection (vv).

402. Bolstering research security of SBIR and STTR awards

Section 9 of the Small Business Act (15 U.S.C. 638), as amended by this Act, is amended—

(1) - in subsection (g)—

(A) - by redesignating paragraphs (15), (16), and (17) as paragraphs (16), (18) and (19), respectively;

(B) - by inserting after paragraph (14) the following:

(15) - evaluate whether a small business concern presents a risk to national security for any reason, through measures including—

(A) - the due diligence process required under subsection (vv);

(B) - disclosures submitted under this subsection; or

(C) - coordination with the Inspector General of the agency or the intelligence community (as defined under section 3 of the National Security Act of 1947 (50 U.S.C. 3003));

(i) - by striking subparagraph (B);

(ii) - by striking "that—" and all that follows through "the small business concern submitting" and inserting "that the small business concern submitting";

(iii) - by redesignating clauses (i), (ii), and (iii) as subparagraphs (A), (B), and (C), respectively, and adjusting the margins accordingly;

(iv) - in subparagraph (B), as so redesignated, by striking "or" at the end;

(v) - in subparagraph (C), as so redesignated, by striking "and" at the end; and

(vi) - by adding at the end the following:

(D) - has a foreign risk connecting the small business concern to an entity, including any affiliates, spinouts, or subsidiaries of the entity, or individual on one or more of the following lists:

(i) - the UFLPA Entity List maintained by the Department of Homeland Security;

(ii) - the Non-SDN Chinese Military-Industrial Complex Companies List of the Office of Foreign Assets Control maintained by the Department of the Treasury;

(iii) - the Section 889 Prohibition List established under section 889 of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (Public Law 115–232) and maintained by the Department of Defense;

(iv) - the list of Chinese Military companies required under section 1260H of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021 (Public Law 116–283) and maintained by the Department of Defense;

(v) - the Military End User List maintained by the Bureau of Industry and Security of the Department of Commerce;

(vi) - the Entity List maintained by the Bureau of Industry and Security of the Department of Commerce;

(vii) - the List of Equipment and Services maintained by the Federal Communications Commission; and

(viii) - the Withhold Release Orders and Findings List maintained by U.S. Customs and Border Protection;

(E) - has a foreign risk with a primary source that is classified; or

(F) - has a foreign risk or another national security risk not listed in statute or regulatory guidance that an agency determines warrants a denial;

(D) - by inserting after paragraph (16), as so redesignated, the following:

(17) - not, and any personnel of the Federal agency including technical points of contact shall not, communicate to an applicant prior to formal notification of an award decision that an application was denied due to a foreign risk;

(E) - in paragraph (19), as so redesignated—

(i) - in subparagraph (B), by striking "(16)(A)" and inserting "(18)(A)"; and

(ii) - in subparagraph (C), by striking "(16)(B)" and inserting "(18)(B)"; and

(2) - in subsection (o)—

(A) - by redesignating paragraphs (19), (20), and (21) as paragraphs (20), (22) and (23), respectively;

(B) - by inserting after paragraph (18) the following:

(19) - evaluate whether a small business concern presents a risk to national security for any reason, through measures including—