Ernst Unveils INNOVATE Act to Usher in Golden Age of American Innovation
WASHINGTON – Today, at the Senate Committee on Small Business and Entrepreneurship hearing on ushering in the Golden Age of American innovation, Chair Joni Ernst (R-Iowa) unveiled her Investing in National Next-Generation Opportunities for Venture Acceleration and Technological Excellence (INNOVATE) Act to reauthorize and reform the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs that enable small businesses to bring innovation to the defense industrial base.
Ernst detailed how her bill will cut red tape to make way for new applicants, eliminate corporate welfare for mills, and strengthen protections against China’s attempts to steal taxpayer-funded intellectual property.
Watch Chair Ernst’s full opening remarks here.
The SBIR-STTR programs allocate a portion of participating federal agencies’ research and development budgets to small businesses to accelerate their development of critical technologies. In 2022, Ernst led the SBIR and STTR Extension Act to reform and reauthorize the programs by establishing a new foreign ties vetting requirement and a new measurement of small businesses’ success in commercializing research, among other improvements.
The INNOVATE Act:
Eliminates small business welfare and reorients SBIR-STTR to its original purpose as merit-based seed funding for innovators by:
- Eliminating Diversity, Equity, and Inclusion (DEI) preferences in the award process and requiring businesses with dozens of awards to be commercially viable and not exclusively rely on SBIR awards as a source of perpetual revenue.
Accelerates innovation among new SBIR awardees across America by:
- Reserving 2.5% of the SBIR allocation for smaller, one-time $40,000 awards to new applicants with a shorter, streamlined application focused on the commercialization potential of their innovation.
Promotes transition for battle-ready SBIR-STTR technologies by:
- Empowering the Department of Defense (DoD) to scale the most-promising technologies to long-term contracts by using existing funds to establish targeted, larger-dollar awards to bridge the “valley of death.”
Closes loopholes and strengthens due diligence assessment of foreign risks by:
- Defining foreign risk to provide a consistent baseline for agencies’ evaluation of potential awardees, implementing a clear list of ties to foreign countries of concern that deem a small business ineligible for awards, and strengthening federal agencies’ ability to claw back award dollars if a small business exposes SBIR-STTR-funded intellectual property to adversarial influence.
Streamlines the bloated SBIR-STTR program operations by:
- Eliminating underperforming pilot programs and restricting the number of award proposals that a single company can offer annually.
Ernst’s full opening remarks:
“With its authorization expiring at the end of this fiscal year, today we turn our attention to the Small Business Innovation Research and Small Business Technology Transfer Programs, or SBIR-STTR. This program has effectively partnered federal agencies with private sector entrepreneurs to scale research and development projects aimed at addressing the pressing challenges of the day.
“While we’ve seen a measure of success over the years, through the committee’s oversight efforts, agency studies, and GAO reports, it is clear SBIR is in need of additional reforms to safeguard taxpayer funds and enable this program to meet its full potential.
“Despite the funding spanning 11 agencies and countless critical technology areas, SBIR has demonstrated an incredible potential to revitalize our small business industrial base and preserve America’s technological leadership. The cutting-edge technologies being generated are already serving to enhance competition, improve supply chains, and increase overall readiness.
“For these reasons, I am excited to announce that today I am introducing the ‘Investing in National Next-Generation Opportunities for Venture Acceleration and Technological Excellence’ or ‘INNOVATE’ Act, a bill to reauthorize and comprehensively reform the SBIR-STTR program.
“My legislation streamlines and simplifies existing processes, directs the funding toward projects based on merit, channels funding to help accelerate the most promising projects towards final stage commercialization, protects against waste and abuse, and introduces enhanced protections and accountability tools to prevent these new technologies from getting into the hands of our foreign adversaries.
“First, the INNOVATE Act reforms Phase I to provide new applicants with a simplified, two-page proposal process with smaller, one-time awards so that more innovators throughout the country can have access to this program, even if they can’t hire professional grant-writers. My bill also eliminates DEI preferences. These measures enable agencies to scout the best proposals based on substance from across the country. I am committed to ensuring open competition for innovators with traditionally lower engagement in the program.
“Second, my bill addresses the practice of ‘SBIR mills,’ where firms benefiting from their beltway connections and grant writing expertise have been able to collect an outsized portion of the funding, with fewer results to show for it.
“This problem was verified by both the GAO, the government accounting office, and the DoD’s Defense Industrial Board, which reported that the firms that got the most awards, were less productive in terms of commercialization, investments, and patents, than those who got fewer awards.
“To prevent the use of Phase I or II funding as a permanent source of revenue, my bill imposes a $75 million lifetime cap. It forces small businesses with dozens of awards to demonstrate commercial traction or follow-on contracts with non-SBIR dollars.
“Third, my bill empowers DoD to repurpose underutilized and overly regulated STTR Phase II funding to more efficiently scale the most promising technologies for long-term contracts for deployment through ‘strategic breakthrough awards.’ For these awards of up to $30 million, the bill limits eligibility to small businesses making clear progress towards commercialization and with an identified DoD end user. It also requires 100% matching funds to ensure that firms have skin in the game and aren’t just in it for corporate welfare. These reforms will enable more flexible use of SBIR funding to help bridge the ‘valley of death’ for the companies on the verge of success.
“Finally, my bill builds upon my longstanding work to safeguard these new SBIR technologies from being stolen by our adversaries. For years, China and other state actors have stolen intellectual property and proprietary secrets from American businesses and universities. That is why I championed the foreign ties due diligence program reforms in the 2022 reauthorization. But we have found that more needs to be done.
“That’s why my INNOVATE Act introduces a new definition of ‘foreign risk’ to create a stronger risk assessment baseline standard that must be applied consistently across all agencies. It implements a clear list of ties to foreign countries of concern that disqualify an applicant. And it empowers agencies with clear claw back authority if a small business exposes SBIR-funded products to adversarial influence post-award.
“By targeting SBIR funds to the very best inventors in the country.
“By cutting off the unserious applicants who are just after corporate welfare.
“By providing a boost to the best companies who need it to get over the final hurdles.
“And by better protecting our taxpayer-funded innovations from going directly to China, the SBIR-STTR program can expedite new technologies, increase economic opportunity, and attract investment back into our towns and cities – and help to usher in a new Golden Age of Innovation for America.
“I look forward to working with my colleagues to get this across the finish line. It’s up to us, the members of this committee, to work together to optimize this important program.
“I’d like to thank the witnesses for being here today and being willing to share their experience and expertise with us.”
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