By Howard Greco
Chair & Executive Director, American Defense Innovation Foundation (ADF)
SBIR and STTR aren’t “nice-to-have” programs. For many early-stage innovators—especially those building defense-relevant, dual-use technologies—they are the difference between hiring an engineer and issuing a layoff, between delivering a prototype and shelving it, between staying in the defense market and walking away.
As Chair and Executive Director of the American Defense Innovation Foundation (ADF), a Texas nonprofit organized for charitable and educational purposes, our mission is to strengthen America’s defense innovation ecosystem by educating the public, supporting research, and developing the next generation of innovators who advance national security through ethical, effective, and enduring technological innovation.
From that vantage point, the current SBIR/STTR lapse is more than a Washington process story—it’s an avoidable, self-inflicted wound to America’s defense innovation pipeline.
How we got here: a clean extension existed—and still died in the Senate
The House passed H.R. 5100, a clean one-year extension of SBIR/STTR authority. Congress didn’t act in time for the Senate to adopt it, and the programs lapsed starting October 1, 2025.
On September 30, 2025, Senator Ed Markey went to the Senate floor and sought unanimous consent to pass H.R. 5100. Senator Joni Ernst asked to modify the request to include her amendment; Markey objected; Ernst then objected to the original request, stopping the bill.
The result: with no reauthorization, agencies have been forced to pause new SBIR and STTR solicitations and awards (while existing awards can continue).
That procedural reality matters because it explains why a “99–1” dynamic can exist in practice: under unanimous consent, one objection is enough.
The real dispute: “reopen first” vs “rewrite first”
No serious stakeholder claims SBIR/STTR is perfect. The live argument is about sequencing:
- Reopen first, reform next (the “clean extension” approach championed by Markey and many in the small business community).
- Rewrite first, then reopen (the posture associated with Ernst’s INNOVATE Act reform package).
Senator Ernst has argued that “SBIR mills” and foreign-risk concerns justify major reforms, including a $75 million lifetime cap on Phase I/II awards and a new “strategic breakthrough” transition program (up to $30M) tied to DoD end users and matching funds.
Those are legitimate policy topics to debate. But the damage comes from using a lapse—real-world disruption to thousands of small businesses—as the negotiating tactic.
What we learned from December meetings in Washington
In December, an experienced SBIR advisor and a government-relations professional traveled to Washington to try to break the impasse and met separately with:
- House Small Business Committee staff
- Senator Ernst’s team
- Senator Markey’s team
The advisor later provided ADF a detailed recap (shared here in summary form because he requested not to be quoted directly and sought to avoid the appearance of bias given his professional role).
Several points from that recap deserve attention:
- House staff described the House as having already “done its job” by passing the extension and suggested the next move was in the Senate. They also indicated there had been little or no productive back-and-forth among the key Senate principals since September.
- Ernst’s team indicated they were prepared to negotiate and raised concerns about repeat award winners and foreign technology theft risk. But, critically, according to the recap, they also conveyed that if Eric Blatt and the Alliance for Commercial Technology in Government could be persuaded to stop treating INNOVATE-style reforms as the “price of reopening” SBIR/STTR, Senator Ernst would be prepared to move with the Senate and pass a clean reauthorization in the current form.
- Markey’s team offered a sharply different account—saying Ernst’s team had refused to talk and that no compromise had been presented. They also pointed to the same outside stakeholder: “The Alliance,” describing it as a central driver of the standoff.
You can debate who had the better recollection or which staff account is more complete. But the throughline is hard to ignore: Multiple offices independently pointed to the Alliance for Commercial Technology in Government as a major influence in this fight.
Why does the Alliance matter so much?
Let’s be precise about what can and cannot be true.
A private association does not place a Senate hold. Senators do.
But Washington influence rarely shows up as an official “hold.” Influence shows up as:
- shaping the narrative (“the startup community demands X”)
- providing political cover (“we represent the innovators you want to help”)
- defining what a key committee chair feels she must demand to satisfy “the stakeholders.”
On the record, the Alliance has endorsed that exact posture: it urged that SBIR be reauthorized with reforms included in INNOVATE, not reopened first and reformed later.
And the Alliance has been clear that one of its top priorities is a formal transition mechanism. In its endorsement letter, it calls out “Strategic Breakthrough awards”—effectively a formalized Phase III transition program.
In other words: the Alliance is not merely commenting on this debate; it is advocating for a specific rewrite that would reshape how SBIR money flows and how companies “graduate.”
The part small businesses can’t afford: tolerance for a prolonged lapse
Here is where the small business community should demand clarity.
In an interview with Breaking Defense, Alliance chairman Warren Katz described a split in the Alliance’s constituency: some would accept any deal to reopen SBIR immediately, while others would “take the hit for a year” if that’s what it took to eliminate SBIR mills.
In a LinkedIn post around the lapse, Katz went even further—suggesting the expiration might “perhaps [be] for the best” if it forced certain repeat winners to commercialize or exit.
Read that again: “take the hit for a year.”
Which companies can “take the hit”? Typically, it’s not the smallest ones—especially not first-time awardees, founders outside the Beltway, or the engineers and program managers trying to build dual-use capability while navigating procurement timelines.
A caution on “SBIR mills”: don’t let the cure create new problems
ADF’s position is not “no reforms.” Many of Ernst’s reform themes—foreign risk mitigation, stronger transition pathways, and broader entry for new innovators—are the right conversation.
But we should also be honest: some anti-mill mechanisms can backfire. Experienced SBIR practitioners warn that blunt caps can be gamed through affiliates or corporate structuring, multiplying proposal volume rather than reducing it. They also argue that the real bottleneck often isn’t “mills” alone, but topic design and transition pathways—how agencies write topics, how they select winners, and how they move technologies into Phase III procurement.
This is precisely why reopening and reform should be decoupled: you need program continuity to do evidence-based policymaking, not policymaking under a shutdown deadline.
Negotiations are accelerating—but the damage is already done
The good news is that credible public sources indicate negotiations have recently moved faster:
- Senator Markey circulated compromise text in December, and Senator Ernst responded with a counterproposal in early January.
- According to the National Small Business Association (NSBA), the proposals differ sharply, including on foreign-risk tightening and structural mechanisms for controlling “mill” behavior.
- One approach now being discussed—described publicly by Eric Blatt—is to direct agencies to set an annual proposal submission limit for a company and its affiliates, rather than relying on a commercialization benchmark fight in statute.
These are meaningful steps. But they do not erase the core issue:
Four months of lapse (and counting) means real small businesses have already absorbed the cost of leverage politics.
My ask to Congress—and to every group claiming to speak for small business
- Reopen SBIR/STTR immediately—via H.R. 5100, a clean stopgap, or a near-term reauthorization attached to a moving vehicle.
- Run reforms on a clear clock with public metrics—new entrant participation, foreign-risk screening outcomes, and Phase III transition rates—so the debate is evidence-based, not narrative-based.
- Demand accountability from influential stakeholders. If an association insists “reform first” while its own leadership signals tolerance for a prolonged lapse, lawmakers and the defense community should ask: who is that strategy protecting, and who is it sacrificing?
At a time when DoD modernization priorities—from contested logistics to ISR to cyber and autonomy—demand rapid iteration and resilient supply chains, America should not be freezing one of the few scalable on-ramps for small defense innovators.
SBIR/STTR is not a bargaining chip. It is an engine. And we are stalling it—voluntarily.
Author note (for editors): This piece draws on public legislative records and public statements cited above, and on a December meeting recap provided to ADF by a participant who requested not to be quoted directly due to professional involvement.
