With an ongoing government shutdown and a lapse in funds for the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, the Pentagon has faced growing questions about whether contract activity would grind to a halt.
A newly disclosed memo from Emil Michael, the Pentagon’s undersecretary for research and engineering, provides a clear answer: ongoing and Phase III awards may proceed.
The clarification cuts through weeks of uncertainty following Congress’s failure to reauthorize the SBIR and STTR programs by the Oct. 1 deadline.
While the lapse prevents the Defense Department (DOD) – which the Trump Administration has rebranded as the Department of War – from issuing new solicitations or obligating new funds, it can continue using prior-year money for ongoing work and Phase III contracts that extend earlier projects.
“SBIR/STTR Phase III awards may continue to be issued, provided they derive from, extend, or logically complete work from [fiscal year] 2025 or prior SBIR/STTR efforts,” the memo states. The guidance also instructs military departments and defense agencies not to submit new research topics until reauthorization occurs.
The Defense Office for Small Business Innovation – which oversees the SBIR/STTR programs at DOD – echoed that message in a LinkedIn post, describing the situation as “a pause, not a termination.”
Current contracts remain valid, and companies already performing work may continue unless directed otherwise by their contracting officers. However, the department did urge small businesses to “stay ready” by refining capabilities and maintaining relationships with defense customers while awaiting the program’s renewal.
“The Department is strongly committed to the small business innovation ecosystem and will keep communicating openly with industry,” the post reads.
On Capitol Hill, lawmakers continue to press for reauthorization, warning that the lapse could “erode America’s innovation edge amid intensifying global competition.”
“We are disappointed that the Senate failed to extend the SBIR and STTR programs,” said House Committee on Small Business Chairman Roger Williams, R-Texas, Ranking Member Nydia M. Velázquez, D-N.Y., House Science, Space, and Technology Committee Chairman Brian Babin, R-Texas, and Ranking Member Zoe Lofgren, D-Calif., in a statement.
“A lapse creates uncertainty for innovators and risks slowing progress at a time when global competition is intensifying,” they said, adding, “Research could be delayed, innovation diminished, and America’s competitive edge on the world stage eroded.”
For the DOD in particular, the stakes are high.
In a separate analysis, Sen. Ed Markey, D-Mass., who had introduced legislation to permanently authorize the programs before the deadline, warned that the lapse would carry serious economic and security consequences. His office estimated that for the DOD alone, more than $1.6 billion in warfighter technology investments could be lost or postponed.
To address those concerns, another lawmaker is pushing new legislation aimed at reinforcing the Pentagon’s innovation pipeline. Rep. Ken Calvert, R-Calif., reintroduced the Defense Entrepreneurial Innovation Act earlier this month to strengthen how the Pentagon identifies and invests in small business technologies.
“The SBIR and STTR programs are vital to our innovation ecosystem,” Calvert said. “We can’t afford to let promising technologies fall through the cracks.”