Phase II strategic breakthrough funding

(a) In general Section 9 of the Small Business Act (15 U.S.C. 638) is amended— (1) in subsection (aa), by adding at the end the following: (6) Strategic breakthrough allocation Participating agencies with a budget for SBIR greater than $100,000,000 shall not be required to receive a waiver from the Administrator to award a small business concern not more than $30,000,000 when using funds made available under a strategic breakthrough allocation (as defined in subsection (ff)).; and (2) in subsection (ff)— (A) in the subsection heading, by striking and STTR and inserting Phase II; (B) in paragraph (1), by striking or Phase II STTR award; and (C) by adding at the end the following new paragraph: (3) Strategic breakthrough awards (A) Award Under this subparagraph, a funding agreement may be awarded to a small business concern by each participating agency using funds made available under a strategic breakthrough allocation, as defined in subparagraph (B). (B) Fund parameters (i) Strategic breakthrough allocation defined In this subparagraph, the term strategic breakthrough allocation means, with respect to a participating agency with a required expenditure under subsection (f)(1) in excess of $100,000,000, a required expenditure amount from the SBIR allocation under subsection (f)(1) of such agency of not less than 0.25 percent of the extramural budget for research or research and development designated for such agency for fiscal year 2026 and every fiscal year thereafter. (ii) Requirements In the case of a Phase II agreement that is awarded to a small business concern by a participating agency using funds made available under a strategic breakthrough allocation, the following requirements shall apply: (I) Award size and period of performance A participating agency may award from a strategic breakthrough allocation not more than $30,000,000 in aggregate to a small business concern, including its affiliates, spinouts, or subsidiaries based on reaching production or development milestone if the total period of performance of the project with respect to which such funds are awarded is not more than 48 months. (II) Small business concern requirements The small business concern shall— (aa) have been awarded not less than 1 prior Phase II award under the SBIR or STTR program; (bb) demonstrate not less than 100 percent matching funds from sources other than the Government or amounts awarded by participating agencies under a program other than Phase I and II of the SBIR or STTR program as a result of an award using funds made available under a strategic breakthrough allocation; (cc) is an effective solution, as determined by market research; and (dd) only be eligible for an award from the strategic breakthrough allocation if the product, process, or technology of the small business concern— (AA) meets a necessary level of readiness and has a commitment for inclusion in a program objective memorandum from an official with the rank of program executive officer or higher in an acquisition organization of the participating agency making such award; and (BB) will meet high priority requirements or operational needs of such participating agency through a successful transition and into the acquisition process. (III) Deadline Each participating agency shall complete any contract awards using strategic breakthrough allocation funds not later than 90 days after receiving a proposal from a small business concern for the award. (IV) Eligible activities Eligible activities by a small business concern using strategic breakthrough allocation funds are— (aa) design for manufacturing; (bb) establishing manufacturing facilities, tooling, and supply chain capacity; (cc) buying raw materials or inventory; (dd) the integration of products with open interoperability standards; (ee) testing, evaluation, and certification of low-rate production units; and (ff) the purchase of production units and maintenance. (V) Selection criteria In making awards using funds made available under a strategic breakthrough allocation, a participating agency shall consider— (aa) the potential of the small business concern to— (AA) advance the national security capabilities of the United States; and (BB) provide new technologies or processes, or new applications of existing technologies, that will enable new alternatives to existing programs; (bb) whether a customer in the participating agency has expressed an intent to purchase and integrate technology from the small business concern into its operations; and (cc) whether a particular technology area is undercapitalized by private investment. (C) Acquisition mechanism A participating agency shall establish a mechanism to provide small business concerns with direct access to program and requirements offices throughout the participating agency that may purchase technology from small business concerns under Phase III of the SBIR program. (D) Use of streamlined contracting mechanisms Each participating agency shall implement streamlined processes and requirements for submitting proposals and applying for awards using funds made available under a strategic breakthrough allocation.. (b) Commercialization readiness program Section 9(y) of the Small Business Act (15 U.S.C. 638(y)) is amended— (1) in paragraph (2)— (A) by striking shall identify and inserting the following: shall— (A) identify; (B) in subparagraph (A), as so designated— (i) by inserting, including small business concerns with an award from the strategic breakthrough allocation, before that have the potential; and (ii) by striking the period at the end and inserting a semicolon; and (C) by adding at the end the following: (B) ensure, in collaboration with SBIR program managers of each component, that research programs identified under subparagraph (A) are analyzed within the programming and budgeting process as budget requests are developed; and (C) provide to the Committee on Small Business and Entrepreneurship of the Senate and the Committees on Small Business and Science, Space, and Technology of the House of Representatives information on the integration of SBIR and STTR awardees in budget rollouts for research, development, testing, and evaluation activities.; (2) by striking paragraph (3) and redesignating paragraphs (4), (5), and (6) as paragraphs (3), (4), and (5), respectively; and (3) in paragraph (5), as so redesignated— (A) in the subparagraph heading, by striking and STTR; (B) in subparagraph (A)— (i) by inserting substantively before increase; (ii) by striking and the number of Phase II STTR contracts; and (iii) by inserting in fiscal year 2028 as compared to fiscal year 2025 before the semicolon at the end; (C) in subparagraph (B), by striking and at the end; (D) by redesignating subparagraph (C) as subparagraph (E); (E) by inserting after subparagraph (B) the following: (C) establish a mechanism to provide small business concerns with direct access to program and requirements offices that may purchase technology from the small business concern under Phase III of the SBIR program; (D) allow services to provide operational needs statements directly to chiefs of requirements offices; and; and (F) in subparagraph (E), as so redesignated, in clause (i) by striking and STTR contracts.