SBIR/STTR Reauthorization and the Cost of Inaction - December Recap
In November, I posted an article on “Why Re-authorizing the SBIR/STTR Program Is the Path to Improving It.” Consistent with much of Congress’s efforts in 2025, nothing happened by the end-of-year recess to reauthorize it.
The lack of action in December made the stakes unmistakable.
The short version
SBIR/STTR program funding lapsed after September 30, and the FY26 budget moved forward without an extension to the program. This confirmed, much like health care premiums, that inaction meant end users and awardees would carry the brunt of the failure.
The core tension remains unresolved: a clean extension versus broader reforms. But the message from December has shifted from back-burner rumblings to active concern that this is no longer a theoretical policy debate, but a live constraint on US innovation, commercialization, and national security.
Pressure has finally begun escalating after months of silence, amplified by the 45-day shutdown. By December, agencies were signaling real operational impact: new solicitations and awards stalled, NIH confirmed it could not issue non-competing continuations, and the defense sector reported security concerns. Recently, Senator Ed Markey and the Senate Small Business Committee have begun making noise and pushing publicly to reopen the programs.
There is a connection between the fight over health care premiums and the failure to reauthorize the SBIR program. Small business, often fueled through seed funding, is the backbone of the economy which drives improvements and innovation in health care.
As noted in my article, small business recipients are required to build the bridge as they are crossing it meaning they must evolve and continue working at the same time. Congress has failed to honor this principle by stopping funding to those businesses while arguing over process.
The longer version
December Action
December finally saw some noise around SBIR reauthorization.
“Markey: reopen the programs now.” Senate Small Business Committee Ranking Member Ed Markey publicly pressed for immediate action, tying the lapse to harming the innovation ecosystem and pointing to bipartisan House committee alignment.
“Business groups: urgency is growing.” NSBA and other advocacy groups amplified messaging that the lapse is disrupting a major small-business innovation pipeline.
“Defense impacts show up in real time.” Space and defense trade press reported operational concern that the impasse is already delaying national security innovation timelines.
“CRS: here are the issues Congress is stuck on.” Congressional Research Service (CRS) outlined the expiration (Sept. 30, 2025) and the major policy disputes in reauthorization in a December 15th report.
Key Issue
The key issue is relevant but not sufficient to block funding for hundreds of founders and billions of dollars in innovation.
The core policy fight remains a “clean extension” versus a “reform package.” A clean one-year extension cleared the House earlier, setting the stage for quick movement, but the Senate bottleneck remained, leaving reauthorization at an impasse going into the December recess.
As Congress returns in 2026 with healthcare back on the agenda, the question is whether SBIR/STTR gains urgency, or remains sidelined yet again.
How is the congressional healthcare debate related to SBIR reauthorization?
Health Care
The fundamental impact of congressional inaction is concrete and immediate, not theoretical. As of January 1, 2026, individuals are paying more for healthcare and innovators are operating with less support, not because of policy change, but because of policy inaction.
Individuals and families purchasing coverage through the ACA marketplaces face significantly higher monthly premiums, with many enrollees experiencing double-digit percentage increases. Those impacted are not on a political “side” – across the nation, they are a being priced out of health care coverage.
In real terms, this means coverage instability and coverage loss, shifts to less comprehensive and higher-deductible plans, and an increase in the underinsured and uninsured population. These shifts have costs to health outcomes and health care economics. The impact is broad, with those especially hard hit including self-employed workers, gig economy workers, founders, small businesses, and caregivers.
Putting those impacted in context.
Over 99% of all US businesses are classified as small businesses (< 500 employees)
Small businesses contribute nearly half of US GDP (roughly 44%)
46% of the workforce is employed by small businesses. This includes many sole proprietors, independent contractors, single-member LLCs, and freelancers
When Congress delays action, it is not a niche group absorbing the impact, it is nearly half of the US economy.
Health Innovation
Equally relevant, healthcare innovations (often seeded through the SBIR program) are critical to supporting resource-strapped parts of the healthcare system (from health deserts, to provider shortages, to preventive health). They are also committed to developing technologies that identify and treat disease faster, earlier, and more efficiently. They move innovation upstream toward prevention and early diagnosis or streamline existing processes to save time while improving outcomes. This funding includes:
$4.0 billion per year in total SBIR/STTR funding
Spread across 11 federal agenciesProgram Reform
This includes 4,000–5,000 awards per year across all phases
Awardees are predominantly early-stage startups, science- and tech-based, founder-led. They are often pre-revenue or not yet mature enough for private capital, and dependent upon the limited opportunities to establish feasibility and effectiveness through non-dilutive seed funding.
Program Reform
The desire for reform is not unfounded. The questions on the table should be considered in longer term reform, but should not stop funding in its tracks. Some of these issues include:
Addressing repeat winners / concentration of awards to ensure broader access for first-time and early-stage companies.
Adjusting funding caps and award sizes to better reflect current R&D costs, inflation, and the realities of entrepreneurship.
Refining eligibility and participation rules to balance access for truly small businesses.
Strengthen commercialization and accountability requirements to improve tracking and reduce administrative burden.
Evolution is essential for any business that intends to stay relevant, and Congress should be no exception. Businesses cannot stop working while future strategy is sorted out. Yet small business awardees are being forced to do exactly that, as congressional debate halts progress and funding.
For leadership deciding the fate of a small business innovation program, there has been a profound failure of innovative thinking.
There is a path to funding the reauthorization now and building a process over the full year to work through needed evolution and improvement. Companies continue working and evolving at the same time…and Congress has a responsibility to act in the same manner.
Call to action for Congress - Pass a clean SBIR/STTR extension now and set a clear timeline for reform. Innovation cannot wait while process is debated.