Ernst Backs Crackdown on Companies That Treat Innovation Grants as a Steady Government Paycheck

Read the release on Sen. Ernst's website HERE.

New SBA standard would require top research grant winners to earn most of their revenue from customers, not taxpayer-funded grants

WASHINGTON - A small group of companies has turned a federal program meant to launch new technology into a steady government paycheck. Senate Small Business Committee Chair Joni Ernst (R-Iowa) is backing a new Small Business Administration (SBA) proposal to change that.

The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs give small businesses federal research funding to develop new technologies, with the goal of turning them into products the military, other agencies, and private customers will buy. In a comment letter to the SBA, Ernst applauded its new commercialization benchmark, which requires companies that won more than 25 Phase II awards in the past five years to show that most of their revenue comes from sources other than SBIR and STTR. Small businesses that fail to meet the requirement would be prohibited from applying for new awards from any participating agency for one year.

"For too long, a select number of repeat winners have treated the SBIR and STTR programs as a steady income stream rather than a path to commercialize technology," wrote Chair Ernst. "The new commercialization standard rewards companies that convert research into customers and follow-on contracts that meet the mission, while limiting new seed awards to firms that have made SBIR grants their revenue model."

The problem, by the numbers:

1. Just 0.7 percent of participating companies won more than 21 percent of all SBIR and STTR awards from 2009 to 2019, according to an SSTI analysis.
2. At the Department of War, 16 of the top 25 SBIR recipients got at least half of their department contracting revenue from SBIR awards rather than follow-on contracts from FY2010 to FY2024, according to a recent review.
3. The current benchmark is hampered by incomplete data because firms don't consistently report their results, according to a 2026 GAO report.

Read the full letter HERE.

Background:

The SBA released the proposed benchmark in September. Section 9 of the Small Business Act (15 U.S.C. 638(qq)(2)) gives the SBA the authority and responsibility to set minimum performance standards for commercialization.

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