SBIR Reauthorization at Risk: What the Impending Deadline Means for Federal Contractors
With the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs set to expire on September 30, 2025, defense contractors and small businesses that power federal innovation are facing a critical moment. These programs have fueled billions in research and development, provided a steady pipeline of innovation for federal agencies, and opened the door for countless small firms to enter the contracting space. But as the reauthorization deadline nears, Congress remains divided on the path forward.
At Contracting Intelligence Group (CIG), we believe understanding these changes is vital. Whether you’re a seasoned SBIR awardee or a small business considering your first proposal, what happens in the next few weeks will directly shape opportunities in federal contracting.
Competing Visions for SBIR’s Future
The INNOVATE Act (Sen. Joni Ernst)
One proposal would make significant structural changes to the program:
• Reserves 2.5% of awards for streamlined projects capped at $40,000 for new applicants focusing on commercialization.
• Imposes a $75 million lifetime cap per company across all awards.
• Raises the SBIR set-aside from 3.2% to 3.45% starting in FY2026 for agencies with research budgets exceeding $100 million.
Establishes default fixed price contracts
Reforms the application process to make it easier for small contractors to apply
One time strategic breakthrough Phase II awards of up to $30M to scale the strongest tech
To mitigate adversary linked companies from exploiting the program
Supporters argue this approach modernizes SBIR, pushes more companies to transition out of reliance on repeat awards, and helps combat international competition, especially from China.
The SBIR/STTR Reauthorization Act of 2025 (Sen. Ed Markey & Rep. Nydia Velázquez)
This bill takes a very different stance:
• Calls for permanent reauthorization of SBIR/STTR.
• Prioritizes broadening participation, particularly for underserved and underrepresented groups.
• Maintains flexibility for small businesses that rely on multiple awards to scale their technologies.
Longtime program advocates warn that strict caps and small pilot-style awards risk weakening proven firms and stalling commercialization.
House Extension Bill (Rep. Roger Williams)
Meanwhile, the House has floated a more modest option: a one-year extension to prevent a funding lapse while debates continue.
What’s at Stake
For contractors, the uncertainty is real. A failure to reauthorize would freeze awards and stall ongoing projects. Even with reauthorization, the rules of the game may soon change:
• Caps on awards could affect long-standing SBIR participants.
• Streamlined micro-awards could open doors for first-time applicants.
• Permanent reauthorization would provide stability, but is far from guaranteed.
Defense industry leaders and organizations like the National Defense Industrial Association (NDIA) stress that the program has delivered an estimated 22:1 return on investment for the Department of Defense and must not be weakened.
What Contractors Should Do Now
At CIG, we see three key takeaways for our community:
1. Monitor Legislative Progress Closely
Keep an eye on whether SBIR reauthorization is attached to the National Defense Authorization Act (NDAA), which may be the most likely vehicle to move legislation forward.
2. Engage Policymakers and Advocacy Groups
Contractors should voice support for program stability, flexibility, and inclusivity. The outcome of this debate will determine how funding opportunities evolve in the next decade.
3. Prepare for Multiple Scenarios
• If the INNOVATE Act passes, contractors must adapt to caps and smaller, faster awards.
• If a short-term extension is approved, uncertainty will persist into 2026.
• If permanent reauthorization is secured, it could offer long-term stability for both emerging and established innovators.
Final Thoughts
As the September 30 deadline approaches, this debate is not just another round of congressional negotiations. It represents a pivotal moment for the innovation ecosystem that underpins our national defense and federal contracting.
At Contracting Intelligence Group, we are committed to equipping contractors with the insights they need to navigate uncertainty and seize opportunities. No matter which path Congress takes, staying informed and prepared will be the key to thriving in this shifting landscape.
