Democrats Block Ernst Effort to Safeguard Critical Technology from Chinese Espionage

WASHINGTON - Democrats blocked Senate Committee on Small Business and Entrepreneurship Chair Joni Ernst's (R-Iowa) bill to safeguard critical defense technology from China, just days after the Pentagon agreed that American innovation produced through the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs is vulnerable to foreign espionage.

Ernst's INNOVATE Act reauthorizes the SBIR-STTR programs with major reforms to stand up to Beijing, protect American intellectual property, and put our warfighters first.

Click here to watch Ernst's remarks.

Click here to watch Ernst's response after Democrats blocked her effort.

Ernst's full remarks:

"I rise today to raise an alarming issue - the Chinese Communist Party is stealing sensitive intellectual property developed using your tax dollars.

"We are all too familiar with the threat of Chinese espionage.

"It wasn't too long ago Iowans raised the alarm on Chinese nationals digging up our seeds and stealing our agriculture technology.

"Just last month, a Navy sailor was convicted after China paid him in exchange for highly classified data about Navy ships.

"Unfortunately, this is just the tip of the iceberg.

"Loopholes in the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, which help develop critical technology supporting America's national security, are being exploited by China and other foreign adversaries to steal sensitive technology.

"Over 40 years ago, the SBIR program was established as America's seed fund to serve as an innovation pipeline to support our warfighters and maintain a technological edge.

"While the program has seen its fair share of successes, we must be honest that how it currently operates is benefiting China at the expense of our warfighters.

"This summer, I released a report exposing that hundreds of millions of dollars of technology, funded by your taxes through the Pentagon's SBIR program, are vulnerable to Chinese espionage.

"My report found that in 2023 and 2024, 835 applications for SBIR-STTR funding were flagged for having foreign risks.

"Yet, only 303 were denied for their ties to adversaries.

"Even worse, a lack of foreign due diligence standards across government has opened the door for exploitation.

"Some agencies denied 100% of flagged applications, while other agencies only denied 1%!

"Even one case is too many.

"I shared my report with the Pentagon and asked them to investigate further.

"The Pentagon agreed with me that there are significant threats to our national security that MUST be addressed.

"My INNOVATE Act does just that by implementing foreign due diligence standards across government to ensure we unleash the Golden Age in America instead of serving as a subsidy for Beijing.

"Another defect limiting the effectiveness of the SBIR program is the exploitation of the program by a small number of companies, often called SBIR mills.

"The program too often serves as a private, taxpayer-funded ATM for these select few businesses.

"In the past decade, 25 companies in the Pentagon's SBIR program-just 0.5% of overall award recipients- received 18% of the funding.

"That's over $2.3 billion, folks.

"A $92 million windfall for each.

"No wonder hardworking folks in Iowa have a hard time viewing these as truly 'small businesses.'

"Even worse, these so-called SBIR mills too often produce nothing more than policy white papers, despite many of their 'business models' being largely dependent on your taxpayer dollars.

"Folks, as a combat veteran let me tell you, a white paper is not supporting our warfighters.

"Our men and women in uniform deserve the best, most innovative technology to protect themselves, defend our nation, and deter our adversaries.

"But when it comes to protecting and defending us, what do these white papers provide?

"I supposed we could fold them into paper airplanes.

"I can't throw it on the floor of the Senate, but you get the drift.

"We need to strengthen the program to ensure SBIR serves a greater role than producing a paper army.

"The INNOVATE Act fixes these egregious misuses of taxpayer funds and ensures award dollars go to the best and brightest entrepreneurs, not grant writers who have learned how to game the system on the taxpayers' dime.

"My bill will reorient SBIR to its original purpose: providing merit-based support for American innovators.

"It course corrects the program back to helping true American startups get off the ground.

"It streamlines the proposal process and establishes a new Phase 1A award to attract new entrants with strong commercialization potential.

"Lastly, the INNOVATE Act allows new strategic breakthrough awards of up to $30 million at the Pentagon, DOE, NASA, HHS, and NSF.

"These awards, with required matching funds, will move our most promising technologies out of the lab and into production for our warfighters, scientists, and other medical professionals.

"Time is of the essence; the United States cannot and should not delay these reforms any longer.

"No more waste.

"No more giveaways to Beijing.

"Every dollar must advance innovation that keeps America strong and secure.

"We must act now to ensure maximum impact of every dollar invested, to secure our edge against our adversaries, and unleash a new Golden Age for America's small, resourceful innovators.

"Small businesses everywhere are excited about the INNOVATE Act and stand ready to deliver the technologies of tomorrow.

"Let's make that happen.

"I seek unanimous consent to pass the INNOVATE Act."

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