[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 853 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
1st Session
S. 853
To improve the SBIR and STTR programs under the Small Business Act, and
for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
March 5, 2025
Ms. Ernst introduced the following bill; which was read twice and
referred to the Committee on Small Business and Entrepreneurship
_______________________________________________________________________
A BILL
To improve the SBIR and STTR programs under the Small Business Act, and
for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 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:
Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
TITLE I--PROMOTING TRANSITION FOR BATTLE-READY TECHNOLOGIES
Sec. 101. Enhancing small business success in the STTR program.
Sec. 102. Phase II strategic breakthrough funding.
Sec. 103. Implementation briefings.
Sec. 104. Fixed-price contracts.
TITLE II--ENCOURAGING SMALL BUSINESS INNOVATION IN ALL OF AMERICA
Sec. 201. Encouraging new SBIR and STTR entrants.
Sec. 202. Combating discriminatory practices in the SBIR and STTR
programs.
TITLE III--STREAMLINING PARTICIPATION IN THE SBIR AND STTR PROGRAMS
Sec. 301. Definition of open topics.
Sec. 302. Reducing administrative burden.
TITLE IV--PROTECTING AMERICAN INNOVATION FROM ADVERSARIAL INFLUENCE
Sec. 401. Definition of foreign risk.
Sec. 402. Bolstering research security of SBIR and STTR awards.
Sec. 403. Strengthening the due diligence program to assess security
risks.
Sec. 404. Strengthening agency recovery authority.
Sec. 405. Best practices on investor informational rights.
Sec. 406. GAO report.
TITLE V--SIMPLIFYING SBIR-STTR COMMERCIALIZATION STANDARDS
Sec. 501. Streamlining transition and commercialization rate
benchmarks.
Sec. 502. Improving direct to Phase II authorities.
Sec. 503. Improving SBIR-STTR data collection.
Sec. 504. Streamlining program administration.
Sec. 505. Extending SBIR and STTR authorization.
SEC. 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)).
TITLE I--PROMOTING TRANSITION FOR BATTLE-READY TECHNOLOGIES
SEC. 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;''; and
(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
(C) by adding at the end the following:
``(J) not less than 3.45 percent of such budget in
fiscal year 2026 and every year thereafter,''; and
(3) 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
(C) by inserting after paragraph (1) the following:
``(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.''.
SEC. 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) 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 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
(C) in paragraph (3), as so redesignated--
(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 subparagraph (B), as so
redesignated--
(I) 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
``shall--
``(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.''; and
(III) 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) by striking subparagraphs (C), (D),
and (E), as so redesignated, and inserting the
following:
``(C) Funding parameters.--
``(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.''; and
(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)''.
SEC. 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.
SEC. 104. FIXED-PRICE CONTRACTS.
Section 9 of the Small Business Act (15 U.S.C. 638) is amended--
(1) 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.''; and
(2) 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.''.
TITLE II--ENCOURAGING SMALL BUSINESS INNOVATION IN ALL OF AMERICA
SEC. 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
(C) by inserting after subparagraph (A), the
following:
``(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;''; and
(2) 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.''.
SEC. 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
(C) by adding at the end the following:
``(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
(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''; and
(7) 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
(C) by adding at the end the following:
``(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.''.
TITLE III--STREAMLINING PARTICIPATION IN THE SBIR AND STTR PROGRAMS
SEC. 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''.
SEC. 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.''.
TITLE IV--PROTECTING AMERICAN INNOVATION FROM ADVERSARIAL INFLUENCE
SEC. 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).''.
SEC. 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));'';
(C) in paragraph (16), as so redesignated--
(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;''; and
(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--
``(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));'';
(C) in paragraph (20), as so redesignated--
(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 (20) the
following:
``(21) 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;''; and
(E) in paragraph (23), as so redesignated--
(i) in subparagraph (B), by striking
``(20)(A)'' and inserting ``(22)(A)''; and
(ii) in subparagraph (C), by striking
``(20)(B)'' and inserting ``(22)(B)''.
SEC. 403. STRENGTHENING THE DUE DILIGENCE PROGRAM TO ASSESS SECURITY
RISKS.
Section 9(vv)(2) of the Small Business Act (15 U.S.C. 638(vv)(2))
is amended--
(1) in subparagraph (B), by striking the period at the end
and inserting ``; and''; and
(2) by adding at the end the following:
``(C) examine any relationship of a small business
concern seeking an award to any entity or individual
included on the lists, as published on the date of the
closing of the solicitation, described under
subsections (g)(16)(D) and (o)(20)(D).''.
SEC. 404. STRENGTHENING AGENCY RECOVERY AUTHORITY.
Section 9 of the Small Business Act (15 U.S.C. 638), as amended by
this Act, is amended--
(1) in subsection (g)(18), as redesignated by section 402--
(A) in the matter preceding subparagraph (A), by
inserting ``, as adjusted for inflation according to
the Consumer Price Index published by the Bureau of
Labor Statistics,'' after ``amounts'';
(B) in subparagraph (A)--
(i) by inserting ``during the 10-year
period beginning on the date of the award, or
during a longer or indefinite period as
determined by the head of the awarding agency
as necessary for national security,'' before
``the small business concern''; and
(ii) by striking ``or'' at the end;
(C) in subparagraph (B)--
(i) by inserting ``during the 10-year
period beginning on the date of the award, or
during a longer or indefinite period as
determined by the head of the awarding agency
as necessary for national security,'' before
``there is a change''; and
(ii) by striking ``and'' at the end; and
(D) by adding at the end the following:
``(C) during the 5-year period beginning on the
date of the award, or during a longer or indefinite
period as determined by the head of the awarding agency
as necessary for national security, the small business
concern sells, leases, or provides (through joint
research, technological licensing, or otherwise)
intellectual property that was developed, wholly or in
part, using an SBIR award to a foreign entity or
individual unless the foreign entity or individual is
incorporated in or a citizen of a country that is a
member of the North Atlantic Treaty Organization or a
major non-NATO ally, as described under section 2321k
of title 22, United States Code; or
``(D) during the 10-year period beginning on the
date of the award, or during a longer or indefinite
period as determined by the head of the awarding agency
as necessary for national security, the small business
concern sells, leases, or provides (through joint
research, technological licensing, or otherwise)
intellectual property that was developed, wholly or in
part, using an SBIR award to an entity, government, or
individual in a foreign country of concern; and''; and
(2) in subsection (o)(22), as redesignated by section 402--
(A) in the matter preceding subparagraph (A), by
inserting ``, as adjusted for inflation according to
the Consumer Price Index published by the Bureau of
Labor Statistics,'' after ``amounts'';
(B) in subparagraph (A)--
(i) by inserting ``during the 10-year
period beginning on the date of the award, or
during a longer or indefinite period as
determined by the head of the awarding agency
as necessary for national security,'' before
``the small business concern''; and
(ii) by striking ``or'' at the end;
(C) in subparagraph (B)--
(i) by inserting ``during the 10-year
period beginning on the date of the award, or
during a longer or indefinite period as
determined by the head of the awarding agency
as necessary for national security,'' before
``there is a change''; and
(ii) by striking ``and'' at the end; and
(D) by adding at the end the following:
``(C) during the 5 year period beginning on the
date of the award, or during a longer or indefinite
period as determined by the head of the awarding agency
as necessary for national security, the small business
concern sells, leases, or provides (through joint
research, technological licensing, or otherwise)
intellectual property that was developed, wholly or in
part, using an STTR award to a foreign entity or
individual unless the foreign entity or individual is
incorporated in or a citizen of a country that is a
member of the North Atlantic Treaty Organization or a
major non-NATO ally, as described under section 2321k
of title 22, United States Code; or
``(D) during the 10-year period beginning on the
date of the award, or during a longer or indefinite
period as determined by the head of the awarding agency
as necessary for national security, the small business
concern sells, leases, or provides (through joint
research, technological licensing, or otherwise)
intellectual property that was developed, wholly or in
part, using an STTR award to an entity, government, or
individual in a foreign country of concern; and''.
SEC. 405. BEST PRACTICES ON INVESTOR INFORMATIONAL RIGHTS.
Section 9(uu) of the Small Business Act (15 U.S.C. 638(uu)) is
amended to read as follows:
``(uu) Best Practices on Investor Informational Rights.--
``(1) In general.--The Administrator, in coordination with
the heads of all agencies with an SBIR program, the Director of
the White House Office of Science and Technology Policy, and
the Committee on Foreign Investment in the United States, shall
develop best practices to be shared with each recipient of an
SBIR or STTR award by the agency granting the award.
``(2) Contents.--The best practices developed under
paragraph (1) shall include recommendations for protecting the
proprietary technology and intellectual property of the small
business concern from being shared unintentionally to foreign
individuals and entities through informational rights of
limited partners in venture capital, hedge fund, or private
equity firms that have investments in SBIR or STTR
recipients.''.
SEC. 406. GAO REPORT.
Paragraph (4) of section 4(b) of the SBIR and STTR Extension Act of
2022 (Public Law 117-183; 136 Stat. 2194) is amended to read as
follows:
``(4) GAO report.--
``(A) In general.--Not later than 1 year after the
date of enactment of the INNOVATE Act, and annually
thereafter for 3 years, the Comptroller General of the
United States shall conduct a study and submit to the
Committee on Small Business and Entrepreneurship and
the Committee on Armed Services of the Senate and the
Committee on Small Business, the Committee on Armed
Services, and the Committee on Science, Space, and
Technology of the House of Representatives a report on
the implementation and best practices of the due
diligence programs established under section 9(vv) of
the Small Business Act (15 U.S.C. 638(vv)) across
Federal agencies required to establish an SBIR or STTR
program.
``(B) Study.--The study shall evaluate--
``(i) the effectiveness of each Federal
agency that participates in the SBIR program or
STTR program in identifying--
``(I) enhanced risk in
cybersecurity practices in SBIR and
STTR projects;
``(II) enhanced risk in patents,
including co-authorship with academics
in foreign countries of concern in SBIR
and STTR projects;
``(III) enhanced foreign influence
risk among employees of small business
concerns involved in SBIR and STTR
projects;
``(IV) foreign ownership of a small
business concern seeking an award,
including the financial ties and
obligations (which shall include
surety, equity, and debt obligations)
in SBIR and STTR projects; and
``(V) security risks among
applicants to the SBIR program or the
STTR program, including connections to
an entity, including any affiliates,
spinouts, or subsidiaries of the
entity, or individual on one or more of
the lists referenced in subsection
(g)(16)(D);
``(ii) by year, the number of proposals and
number of small business concerns with foreign
risks by each Federal agency that participates
in the SBIR program or STTR program, including
a delineation of how many of those small
business concerns have previously received an
award under the SBIR program or STTR program
and the nature of those foreign risks made by
each Federal agency; and
``(iii) the extent to which the Inspector
General and counterintelligence authorities of
each Federal agency that participates in the
SBIR or STTR program effectively conducts
investigations, audits, inspections, and
outreach relating to the due diligence program
to assess security risks in the SBIR or STTR
program.''.
TITLE V--SIMPLIFYING SBIR-STTR COMMERCIALIZATION STANDARDS
SEC. 501. STREAMLINING TRANSITION AND COMMERCIALIZATION RATE
BENCHMARKS.
Section 9(qq) of the Small Business Act (15 U.S.C. 638(qq)) is
amended--
(1) by amending paragraph (1)(A)(ii) to read as follows:
``(ii) for small business concerns that
received or receive more than 10 Phase I
awards, establish a minimum performance
standard with respect to the receipt of Phase
II awards that shall be a ratio of at least
0.25 for the number of Phase II awards received
as compared to the number of Phase I awards
received; and''; and
(2) in paragraph (3)--
(A) in subparagraph (A), by striking clauses (i)
and (ii) and inserting the following:
``(i) In general.--With respect to a small
business concern that received or receives more
than 25 Phase I awards, the minimum performance
standard shall be a ratio of at least 0.5 for
the number of Phase II awards received as
compared to the number of Phase I awards
received.
``(ii) Consequence of failure to meet
standard.--If the head of a Federal agency
determines that a small business concern is not
meeting the applicable increased minimum
performance standard established under clause
(i), such small business concern may not
participate in Phase I of the SBIR or STTR
program of that agency during the 1-year period
beginning on the date on which such
determination is made and the small business
concern may not receive more than 5 total Phase
I awards from that agency during each 1-year
period thereafter until the small business
concern surpasses the minimum performance
standard established under clause (i).''; and
(B) in subparagraph (B)--
(i) in clause (i), by striking subclauses
(I) and (II) and inserting the following:
``(I) with respect to a small
business concern, including its
affiliates, spinouts, and subsidiaries,
that has received more than 25 Phase II
awards over its lifetime, require the
sum of the annual receipts (as defined
in section 121.104 of title 13, Code of
Federal Regulations, or any successor
regulation) of the small business
concern from sources other than Phase I
or Phase II SBIR or STTR awards and
investments received by the small
business concern to at minimum exceed
the sum of the dollars awarded through
Phase I and Phase II awards since the
date of the first such award; and
``(II) with respect to a small
business concern, including its
affiliates, spinouts, and subsidiaries,
that receives more than 25 Phase II
awards over its lifetime, require a
minimum of 65 percent of the sum of the
annual receipts (as defined in section
121.104 of title 13, Code of Federal
Regulations, or any successor
regulation) of the small business
concern and investments received by the
small business concern during the 3
years preceding the most recent fiscal
year come from sources other than Phase
I or Phase II SBIR or STTR awards.'';
and
(ii) by amending clause (ii) to read as
follows:
``(ii) Consequence of failure to meet
standard.--If the head of a Federal agency
determines that a small business concern is not
meeting an applicable increased minimum
performance standard modified under clause (i),
the small business concern may not apply for
additional Phase I awards or Phase II awards
until the small business concern has received
enough annual receipts from sources other than
an SBIR or STTR program to surpass the minimum
performance standard established under clause
(i).''.
SEC. 502. IMPROVING DIRECT TO PHASE II AUTHORITIES.
Section 9(cc) of the Small Business Act (15 U.S.C. 638(cc)) is
amended to read as follows:
``(cc) Phase Flexibility.--
``(1) Awarding a phase ii award absent a phase i award.--
Each agency with an SBIR program may provide to a small
business concern an award under Phase II of the SBIR program
with respect to a project, without regard to whether the small
business concern was provided an award under Phase I of an SBIR
program with respect to such project, if the head of the agency
determines that the small business concern has completed the
determinations described in subsection (e)(4)(A) with respect
to such project despite not having been provided a Phase I
award.
``(2) Limitations on awards.--
``(A) In general.--Except as provided in
subparagraph (B), the head of each agency with an SBIR
program may award not more than 10 percent of the funds
allocated for the SBIR program of the agency in a given
fiscal year under the authority of this subsection.
``(B) National institutes of health and department
of defense.--The Director of the National Institutes of
Health may award not more than 30 percent of the funds
allocated for the SBIR program of the National
Institutes of Health in a given fiscal year and the
Secretary of Defense may award not more than 30 percent
of the funds allocated for the SBIR program of each
component in the Department of Defense in a given
fiscal year under the authority of this subsection.
``(C) Limit on eligibility for awards.--An agency
may not make an award under this subsection to a small
business concern, including its affiliates, spinouts,
and subsidiaries, that has received more than 25 Phase
II awards.
``(D) Limit on number of awards.--An agency may
make not more than 25 awards under this subsection to a
small business concern, including its affiliates,
spinouts, and subsidiaries.''.
SEC. 503. IMPROVING SBIR-STTR DATA COLLECTION.
(a) Additional Data Fields in SBIR Database.--Section 9(k)(1) of
the Small Business Act (15 U.S.C. 638(k)(1)) is amended--
(1) in subparagraph (E)(iv), by striking ``and'' at the
end;
(2) in subparagraph (F)(v), by striking the period at the
end and inserting ``; and''; and
(3) by adding at the end the following:
``(G) for each award granted, whether the award is
classified or designated as--
``(i) Phase 1A, under subsection (pp);
``(ii) direct to Phase II, under subsection
(cc);
``(iii) subsequent Phase II, under
subsection (bb)(1);
``(iv) strategic breakthrough award under
subsection (ff)(3);
``(v) Phase III prime contract award; or
``(vi) Phase III subcontract award.''.
(b) Improving FPDS Data Tracking.--
(1) In general.--The Administrator of General Services
shall update the Federal Procurement Data System described in
section 1122(a)(4) of title 41, United States Code, or any
successor system, to--
(A) require reporting on whether an award under the
SBIR or STTR program is classified or designated as--
(i) Phase 1A, under subsection (pp) of
section 9 of the Small Business Act (15 U.S.C.
638), as amended by this Act;
(ii) direct to Phase II, under subsection
(cc) of such section;
(iii) subsequent Phase II, under subsection
(bb)(1) of such section;
(iv) a strategic breakthrough award under
subsection (ff)(3) of such section;
(v) a Phase III prime contract award; or
(vi) a Phase III subcontract award;
(B) require reporting on whether a contract is
designated as a Phase III contract; and
(C) allow a Government contracting officer, when
recording a Phase II or Phase III contract following on
from work done by a small business concern during a
Phase I or Phase II award to reference an SBIR or STTR
contract identification number for relevant prior SBIR
or STTR work done.
(2) No new funds.--No additional funds are authorized to be
appropriated for the purpose of carrying out this subsection.
SEC. 504. STREAMLINING PROGRAM ADMINISTRATION.
Section 9 of the Small Business Act (15 U.S.C. 638), as amended by
this Act, is amended--
(1) in subsection (bb)(3), by inserting ``or another
component of the same Federal agency'' after ``another Federal
agency'';
(2) in subsection (gg)--
(A) in the heading, by striking ``Pilot Program''
and inserting ``Commercialization Readiness Program'';
(B) by striking ``pilot'' each place the term
appears;
(C) by striking paragraph (7);
(D) by redesignating paragraph (8) as paragraph
(7); and
(E) by amending paragraph (7), as so redesignated,
to read as follows:
``(7) Definition.--In this subsection, the term `covered
Federal agency'--
``(A) means a Federal agency participating in the
SBIR program or the STTR program; and
``(B) does not include the Department of
Defense.'';
(3) in subsection (hh)--
(A) by striking ``Funding.--'' and all that follows
through ``Federal agencies participating'' and
inserting ``Funding.--Federal agencies participating'';
and
(B) by striking paragraph (2);
(4) in subsection (ii)(2)(B)--
(A) in clause (ii), by adding ``and'' at the end;
(B) in clause (iii), by striking ``; and'' and
inserting a period; and
(C) by striking clause (iv);
(5) in subsection (qq)(3), by striking subparagraph (I);
(6) in subsection (vv)(3), by striking subparagraph (C);
(7) by redesignating subsection (yy) as subsection (xx);
(8) in subsection (xx), as so redesignated--
(A) in the subsection heading, by striking
``Pilot'';
(B) by striking ``STTR Program.--'' and all that
follows through ``Not later than'' and inserting ``STTR
Program.--Not later than'';
(C) by striking paragraph (2); and
(D) by striking ``pilot'';
(9) by redesignating subsection (zz) as subsection (yy);
and
(10) in subsection (yy), as so redesignated--
(A) in the subsection heading, by striking
``Pilot'';
(B) in paragraph (1)--
(i) in the paragraph heading, by striking
``Pilot'' and inserting ``Program'';
(ii) in subparagraph (B), by striking
``3.25'' and inserting ``3.50''; and
(iii) in subparagraph (C), by striking
``0.46'' and inserting ``0.21'';
(C) by striking paragraph (3); and
(D) by striking ``pilot'' each place the term
appears.
SEC. 505. EXTENDING SBIR AND STTR AUTHORIZATION.
Section 9 of the Small Business Act (15 U.S.C. 638), as amended by
this Act, is amended--
(1) in subsection (m), by striking ``2025'' and inserting
``2028''; and
(2) in subsection (n)(1)(A), by striking ``2025'' and
inserting ``2028''.
<all>