WASHINGTON ― A key U.S. lawmaker says he will oppose reauthorization of federal small business innovation grants favored by the Pentagon, raising doubts about how Congress will avert their expiration Sept. 30.

The Small Business Administration’s Innovation Research (SBIR) and Technology Transfer (STTR) awards, made jointly with a dozen federal agencies, are intended to help companies and research institutions develop promising technologies. The seed funding is prized by the Pentagon as it seeks to compete with China on innovation.

The total budget for the 40-year-old program ballooned to nearly $3.3 billion in 2019, with the Department of Defense accounting for the majority of the awards. Individual grants range from tens of thousands of dollars to more than $200,000.

Opposition to renewal comes chiefly from Sen. Rand Paul, the top Republican on the Senate Small Business and Entrepreneurship Committee. The Kentucky lawmaker will not support reauthorizing the programs as-is, arguing they lack protections against ties between the SBIR program awardees and China, according to a spokesperson.

Paul opposes companies whose business model is to generate SBIR-funded research but not to ever spin-off any small businesses from it, the spokesperson said.

“There are currently severe risks to national security when China continues to steal technology seeded by this program,” according to the spokesperson, who spoke on condition of anonymity. “Dr. Paul will not reauthorize this program without reforms to strengthen research security and stop abusive behavior by bad actors lining their pockets with taxpayer dollars at the expense of new small businesses with emerging technologies being able to access SBIR awards.”

Panel Chairman Sen. Ben Cardin, D-Md., said this week that negotiations with Paul are ongoing, and that there are several legislative avenues to pass a SBIR/STTR extension.

Pentagon officials have urged Congress not to let the programs lapse, which they say will hurt America’s technological dominance, military and economy. Undersecretary of Defense for Acquisition and Austainment William LaPlante and Undersecretary for Research and Engineering Heidi Shyu urged renewal in a June 3 letter to lawmakers.

“Failure to reauthorize the programs will result in approximately 1,200 warfighter needs not being addressed through innovative research and technology development,” they said. “In addition, any lapse could result in thousands of small businesses being forced to lay off workers, or drive them to other sources of funding, to include foreign investment.”

Shyu and LaPlante said they have been “fortifying security control to ensure that SBIR/STTR-funded technology is not transferred to adversary nations.”

SBIR has been extended and reauthorized several times since its initial enactment. In 2016, it and the STTR program were extended through Sept. 30, 2022, by the fiscal 2017 National Defense Authorization Act.

There are several possible avenues for SBIR/STTR reauthorization this year, including legislation to boost the country’s ability to compete with China technologically, Cardin said. The House version of the bill would reauthorize the programs.

Both chambers of Congress have passed their own versions of the bill, but time is running out before Congress’s summer recess, after which a focus on the midterm elections might complicate a compromise.

The 2023 NDAA and appropriations legislation are other potential vehicles.

“We have various options but we are very much committed to at least extending if not making permanent the SBIR/STTR programs,” Cardin said.

Joe Gould is senior Pentagon reporter for Defense News, covering the intersection of national security policy, politics and the defense industry.

Bryant Harris is the Congress reporter for Defense News. He has covered the intersection of U.S. foreign policy and national security in Washington since 2014. He previously wrote for Foreign Policy, Al-Monitor, Al Jazeera English and IPS News.

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