U.S. Sen. Joni Ernst (R-IA) released a report that reveals the loopholes and a lack of a consistent due diligence standards for sensitive American intellectual property.
It also lays out the importance of passing Ernst’s INNOVATE Act to safeguard the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. These bills would enable small businesses to develop cutting-edge technology critical to America’s national security.
The report found that in 2023 and 2024, while 835 applications for SBIR-STTR funding were flagged for having foreign risks, just 303 were denied for their ties to adversaries. It stated that the lack of a standard due diligence process created a large discrepancy in denial rates across federal agencies.
Further, the National Institutes of Health (NIH) denied all 144 applications flagged for foreign ties.
However, the National Aeronautics and Space Administration (NASA) denied just one of the 125 applications flagged for foreign ties on the basis of that risk.
Ernst said the issue of malign foreign influence is especially concerning at so-called “SBIR mills” – which are a small number of companies that receive most of the SBIR-STTR funding. Moreover, six of the 25 largest recipients had clear links to China and still received nearly $180 million from the Pentagon in 2023 and 2024 — after implementation of foreign ties due diligence.
“This alarming report must serve as a wake-up call to Washington,” said Ernst, chair of the Senate Committee on Small Business and Entrepreneurship. “The SBIR-STTR programs provide a valuable pipeline of technology that we cannot allow China and other foreign adversaries to steal. 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. My INNOVATE Act creates strong and enforceable due diligence requirements across government to ensure that tax dollars are used to unleash the Golden Age in America and not subsidize research in Beijing.”
Ernst introduced the INNOVATE Act to reauthorize the SBIR-STTR programs with major reforms to cut red tape. This would make way for new applicants, eliminate corporate welfare for mills, and strengthen protections against China’s attempts to steal taxpayer-funded intellectual property. The bill will protect emerging American technology by closing loopholes, creating a consistent baseline for all federal agencies to evaluate foreign risks, and empowering agencies with claw back authority to target bad actors.