Of the 12 agencies running the Small Business Innovation Research and Small Business Technology Transfer programs, only one has made significant progress to prevent or limit foreign adversaries from taking advantage of the research and development funding.
New data from Sen. Joni Ernst (R-Iowa), chairwoman of the Small Business and Entrepreneurship Committee, shows that the National Institutes of Health both flagged and denied all applications that included companies or people from places like China and Russia.
Sen. Joni Ernst (R-Iowa) is the chairwoman of the Small Business and Entrepreneurship Committee. (AP Photo/J. Scott Applewhite)
“The SBIR-STTR programs provide a valuable pipeline of technology that we cannot allow China and other foreign adversaries to steal,” Ernst said in a release. “Most concerning is that a small group of companies receiving the lion’s share of funding are engaging in problematic business and research relationships with Communist Chinese Party agents.”
Ernst’s staff collected data from a dozen agencies in November 2024 asking them for their due diligence data based on a requirement in the 2022 SBIR-STTR Extension Act.
Congress included a provision, authored by Ernst, to require agencies to screen for possible foreign influence in these programs. The provision required agencies to assess the security risks of each small business application.
That data formed the basis for an investigation report, Critical American Technology Vulnerable to China, showing 10 agencies either didn’t flag applications or if they did, the overall number they denied was low relative to the number flagged.
The Homeland Security Department flagged and denied one application. The Energy Department did not respond to the request.
In 2023 and 2024, agencies identified 835 applications for SBIR-STTR funding. Of those, 303 — or 36% — were denied.
Additionally, the investigation looked at continuing concerns about “SBIR mills,” which companies that take advantage of the program to win several awards, but never end up commercializing the technology. Ernst’s staff says six of the largest 25 SBIR/STTR awardees at the Department of Defense have “clear links to countries like China and still received nearly $180 million in DoD awards in 2023 and 2024.”
SBIR mills have long been a concern in Congress. Sen. Rand Paul (R-Ky.), former ranking member of the Small Business Committee and now chairman of the Homeland Security and Governmental Affairs Committee, held up the SBIR/STTR reauthorization effort back in 2022 over his concerns.
He said at the time, 21% of the SBIR awards from 2009 to 2019 went to these “mills.” But experts and other data showed Paul’s concerns were overblown.
The new data from Ernst, however, is less about the number of firms winning SBIR/STTR awards and more about who is benefiting from them.
“A review of the 25 companies in DoD’s SBIR/STTR program with the most awards from 2010 to 2023 receiving 7,251 awards amounting to a total of $3.23 billion, all of which are considered a SBIR mill, showed many of these firms had troubling ties with foreign adversaries,” the report stated. “This evaluation revealed that at least 6 out of the top 25 SBIR mills had problematic relationships with foreign adversaries yet continued to receive awards even after implementation of due diligence requirements. In 2023 and 2024, these firms received 297 awards amounting to a total of $178.4 million.”
The data DoD provided to the committee says out of 522 applications flagged for possible risks of foreign adversarial involvement, 152 were denied (29%).
Data from NASA showed the agency flagged 125 applications, but denied just one due to foreign risks. NASA said it denied another 107 for technical reasons rather than concerns over foreign risks.
NIH, on the other hand, flagged and denied all 144 applications where foreign influence was a concern.
Other agencies — including the Department of Agriculture, the National Science Foundation, and the National Oceanic and Atmospheric Administration (NOAA) — flagged a small number and denied even fewer.
“Based on 11 congressional briefings that further outlined due diligence implementation, it became evident that there were inconsistencies in how agencies identify foreign ties risks and determine when an application should be denied,” the report stated. “Some agencies seem willing to approve an applicant with significant foreign ties risk when agency officials are determined to fund a certain technological capability, no matter the consequences.”
Ernst’s investigation comes as Congress must reauthorize the SBIR/STTR programs. The 2022 update expires on Sept. 30. Ernst’s Innovate Act would extend the programs another three years to 2028 and continue to press agencies to address concerns over SBIR mills and foreign influence on awards.
The bill would establish a more clear and consistent definition of foreign risk to include a foreign affiliation, technology licensing agreement, joint venture, contractual or financial obligation, investment agreement, research relationship or business relationship. It also would establish a cap of $75 million in SBIR/STTR Phase 1 and 2 awards per company, including subsidiaries.
In addition to Ernst’s bill, Sen. Ed Markey (D-Mass.) and Rep Nydia Velazquez (D-N.Y.), the ranking members of the Committees on Small Business, introduced in May the SBIR/STTR Reauthorization Act of 2025. Their bill would make the programs permanent, extend the due diligence program until 2030, and increase research funding to these firms.
Despite concerns about foreign influence and SBIR mills, experts say the program has been a success story over the last 40 years.
The Public Spend Forum found in a 2023 report that agencies made more than $3.7 billion in awards in 2023 up from approximately $2.8 billion in 2018. Additionally, agencies also expanded their investments in emerging areas like biotechnology and medical technology, and out of 10,000 companies, 40% self-identified as disadvantaged businesses.
The post SBIR/STTR awards remain vulnerable to foreign influence first appeared on Federal News Network.