SBIR and STTR Programs Renewed with New Foreign Risk Due Diligence Measures and Pilot Programs

By: Zohra Tejani , Joyce Tong Oelrich , Melissa Duffy , Sofia Chalat

On September 29, 2022, Congress passed the SBIR and STTR Extension Act of 2022, renewing the U.S. Small Business Administration’s (SBA) Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs for three years. 

Eleven participating federal agencies administer the SBIR and STTR programs, which provide competitive awards to small businesses for research and development and the resulting innovation’s commercialization. According to the SBA, the SBIR and STTR programs support more than $4 billion a year in federal research and developing funding.

Managing Foreign Risk

Notably, the Act adds a new due diligence program that evaluates and analyzes the “cybersecurity practices, patent analysis, employee analysis, and foreign ownership” of small businesses applying for SBIR or STTR awards for national security risks presented by foreign interests or ties. Other elements of the new foreign risk management efforts include:

  • Inter-Agency Cooperation. The SBA will collaborate and consult with the Committee on Foreign Investment in the United States (CFIUS) and the Office of Science and Technology Policy (OSTP).

  • Comprehensive Disclosures. Businesses will be required to disclose all business relationships and ties, joint ventures and financial arrangements before receiving a SBIR or STTR award.

  • Foreign Risk Assessments. Federal agencies will evaluate a business’s reported obligations or relationships and the connections of the small business’s employees to a foreign country, foreign person or foreign entity. Agencies will not grant a SBIR or STTR award if they determine that any foreign ties or affiliations present national security risks.

Other Program Changes

  • Increased Minimum Performance Standards for Experienced Firms. The Act increased the minimum performance standards for SBIR and STTR award recipients and further limits underperforming Phase I awardees from receiving additional Phase I and II awards. This section of the Act also introduced new Phase II sales and investments thresholds per each Phase II awarded to the business.

  • Program on Innovation Open Topics. The Department of Defense must establish at least one open topic announcement at each component of the agency per fiscal year. The Government Accountability Office (GAO) will also produce annual reports comparing open topics and conventional topics across all agencies that use open topic solicitations. These efforts are aimed at increasing the diversity of small businesses, types of technology and end users that benefit from SBIR and STTR awards.

  • Solicitation Prohibitions. SBIR/STTR agencies are now required to implement a multilevel review and approval process for solicitations. The Act also prohibits private entities from shaping solicitation eligibility requirements.

  • GAO Report on Subcontracting in SBIR and STTR Programs. The GAO will issue a report on subcontracting practices of SBIR and STTR award recipients. The report will be used to evaluate the subcontracting agreements and compliance with the Federal Funding Accountability and Transparency Act.

Key Takeaways for Companies:

  • Companies seeking SBIR or STTR awards at any phase can expect participating agencies to implement new due diligence programs within 270 days of the enactment date.

  • They should prepare for proposal submissions now by gathering information on a wide variety of foreign ties such as ownership, joint ventures, investments, foreign talent recruitment, intellectual property sales and commercial licensing.

  • While the Act currently lists countries of concern as China, North Korea, Russia and Iran, companies should expect a national security risk assessment similar to export controls and sanctions which would also view ties to Belarus, Burma/Myanmar, Venezuela and other targeted countries as higher risk.

  • Companies with, or seeking, 20 or more Phase I awards and 50 or more Phase II awards should maintain records of their sales and investments and be prepared to submit them as evidence of meeting the increased minimum performance standards.


Don’t have an account yet?