Senate Democrats have blocked a bill introduced by Senator Joni Ernst (R-Iowa), chair of the Senate Committee on Small Business and Entrepreneurship, aimed at protecting critical defense technology from foreign espionage, particularly from China. The proposed legislation, known as the INNOVATE Act, sought to reauthorize and reform the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs.
Ernst highlighted concerns that American innovation developed through these programs is vulnerable to exploitation by foreign adversaries. She referenced recent incidents involving Chinese nationals accused of stealing agricultural technology in Iowa and a Navy sailor convicted for providing classified information to China.
During her remarks, Ernst stated: “I rise today to raise an alarming issue - the Chinese Communist Party is stealing sensitive intellectual property developed using your tax dollars.” She continued, “We are all too familiar with the threat of Chinese espionage.”
Ernst cited findings from her report released earlier this year indicating that hundreds of millions of dollars’ worth of technology funded through the Pentagon’s SBIR program are at risk. According to her report, in 2023 and 2024, 835 applications for SBIR-STTR funding were flagged for foreign risks, but only 303 were denied due to ties with adversaries. She noted inconsistencies in how government agencies address these risks: “Some agencies denied 100% of flagged applications, while other agencies only denied 1%! Even one case is too many.”
She explained that loopholes in current oversight allow some companies—referred to as “SBIR mills”—to receive a disproportionate share of funding without necessarily delivering meaningful results. Over the past decade, she said, just 25 companies received $2.3 billion in Pentagon SBIR awards—about 18% of total funding—while representing only 0.5% of recipients.
“Our men and women in uniform deserve the best, most innovative technology to protect themselves, defend our nation, and deter our adversaries,” Ernst said.
The INNOVATE Act would implement standardized foreign due diligence across federal agencies and introduce new award structures intended to support startups with strong commercialization potential. It also proposes strategic breakthrough awards up to $30 million at key federal agencies such as the Pentagon, Department of Energy (DOE), NASA, Health and Human Services (HHS), and National Science Foundation (NSF).
“Time is of the essence; the United States cannot and should not delay these reforms any longer,” Ernst said. “No more waste. No more giveaways to Beijing.”
The bill failed after Democrats objected during Senate proceedings.
