A section of the INNOVATE Act, proposed by Senator Joni Ernst (R-Iowa), chair of the Senate Small Business and Entrepreneurship Committee, has received backing from the Pentagon. The legislation aims to reform the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs to protect American innovation from foreign risks, particularly those linked to China.
The Pentagon's support follows its review of a report by Ernst that found critical technology developed through these programs is vulnerable to exploitation by China. In a letter to Senator Ernst, Emil Michael, Pentagon Under Secretary for Research and Engineering and Chief Technology Officer, stated: “The Department understands any variance in due diligence results or award decisions across the DoD for a single small business concern can be confusing to the defense industrial base. To address these variances, the Department agrees that standardizing the definition of foreign risk would mitigate the discrepancies identified by this investigation. The Department is committed to working with your office on this important issue.”
Senator Ernst commented on the Pentagon’s position: “The Pentagon recognizes that the current state of the SBIR-STTR programs is falling short of its potential. Loopholes and a lack of a consistent due diligence standard across government are benefiting China on the taxpayer’s dime. The INNOVATE Act creates strong and enforceable due diligence requirements to ensure that tax dollars are used to unleash the Golden Age in America and not subsidize research in Beijing.”
Ernst’s report highlighted gaps in oversight within federal agencies managing SBIR-STTR funds. For example, while all 144 applications flagged for foreign ties were denied by the National Institutes of Health (NIH), NASA denied only one out of 125 such applications for similar reasons. Across all government agencies in 2023 and 2024, 835 SBIR-STTR funding applications were flagged for foreign risks but only 303 were denied based on their connections to adversarial nations.
A copy of Emil Michael's letter supporting reforms can be viewed online.
