Phase II strategic breakthrough funding

(a) In general Section 9 of the Small Business Act (15 U.S.C. 638), as amended by this Act, is amended— (1) by redesignating subsection (y) as paragraph (3), adjusting the margins accordingly, and moving it so as to appear in subsection (ff) after paragraph (2); (2) in subsection (aa), by adding at the end the following: (6) Strategic breakthrough allocation The Department of Defense or its components 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.; (3) 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) in paragraph (3), as so redesignated— (i) in the paragraph heading, by striking Commercialization Readiness Program and inserting Strategic Breakthrough Awards; (ii) in subparagraph (A), as so redesignated— (I) in the first sentence, by striking create and administer a Commercialization Readiness Program and inserting provide funding; and (II) in the second sentence, by striking create and administer a Commercialization Program under this subsection and inserting provide funding under this paragraph; (iii) in subparagraph (B), as so redesignated— (I) in the first sentence, by striking In carrying out the Commercialization Readiness Program and inserting the following: (i) In general In carrying out this paragraph; (II) in clause (i), as so designated— (aa) by striking shall identify and inserting shall— (I) identify; (bb) in subclause (I), as so designated, by striking the period at the end and inserting a semicolon; and (cc) by adding at the end the following: (II) ensure, in collaboration with SBIR program managers of each component of the Department of Defense, that research programs identified under subclause (I) are analyzed within the programming and budgeting process as budget requests are developed; and (III) 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.; and (III) by adding at the end the following: (ii) Award Under this paragraph, a funding agreement may be awarded to a small business concern by the Department of Defense using funds made available under a strategic breakthrough allocation, as defined in subparagraph (C)(i).; (iv) by striking subparagraphs (C), (D), and (E), as so redesignated, and inserting the following: (C) Funding parameters (i) Definition In this subparagraph, the term strategic breakthrough allocation means a required expenditure amount for the Department of Defense within the SBIR allocation under subsection (f)(1) for fiscal year 2026 and every fiscal year thereafter of not less than 0.25 percent of the extramural budget for research or research and development designated for the Department of Defense. (ii) Requirements In the case of a Phase II agreement that is awarded to a small business concern by the Department of Defense using funds made available under a strategic breakthrough allocation, the following requirements shall apply: (I) Award size and period of performance The Department of Defense may award not more than 1 award of not more than $30,000,000 per small business concern, including its affiliates, spinouts, or subsidiaries, from the strategic breakthrough allocation with a period of performance of 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 program; (bb) demonstrate not less than 100 percent matching funds through new outside capital or amounts awarded by the Department of Defense 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) have been awarded not more than $50,000,000 in cumulative Department of Defense contracts or awards; 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 Department of Defense; (BB) is an effective solution, as determined by market research; and (CC) will meet high priority military requirements or operational needs of a military department through a successful transition and into the acquisition process. (III) Deadline The Department of Defense 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, the Department of Defense shall consider— (aa) the potential of the small business concern to— (AA) advance the national security capabilities of the United States; (BB) provide new technologies or processes, or new applications of existing technologies, that will enable new alternatives to existing programs; (CC) provide future cost savings; and (DD) enhance the lethality and efficiency of the United States military; (bb) whether a major system or customer in the Department of Defense has expressed intent to purchase and integrate technology from the small business concern into its operations; and (cc) such other criteria that the Department of Defense determines to be appropriate. (D) Acquisition mechanism The Department of Defense shall establish a mechanism, such as a major system, to provide small business concerns with direct access to program and requirements offices throughout the Department of Defense that may purchase technology from small business concerns under Phase III of the SBIR program of the Department of Defense. (E) Operational needs The Department of Defense shall allow services to provide operational needs statements directly to chiefs of requirements offices.; and (v) in subparagraph (F), as so redesignated— (I) by amending clause (i) to read as follows: (i) set a goal to substantively increase the number of Phase II SBIR contracts awarded by the Secretary that lead to technology transition into programs of record or fielded systems in fiscal year 2028 compared to fiscal year 2025; and; (II) by striking clause (ii); (III) by redesignating clause (iii) as clause (ii); and (IV) in clause (ii), as so redesignated— (aa) in subclause (I), by adding and at the end; (bb) in subclause (II)— (AA) by striking through the Commercialization Readiness Program and inserting under a strategic breakthrough allocation; and (BB) by striking; and and inserting a period; and (cc) by striking subclause (III); and (4) by redesignating subsection (xx), entitled Additional Provisions Relating to Solicitation Topics, as subsection (y), and moving it so as to appear after subsection (x). (b) Technical and conforming amendments Section 9 of the Small Business Act (15 U.S.C. 638), as amended by this Act, is amended— (1) in subsection (i)(1), by striking subsection (y) and inserting subsection (ff)(3); (2) in subsection (mm)(1)(D), by striking subsection (y) and inserting subsection (ff)(3); and (3) in subsection (tt), by striking (y)(6)(C) and inserting (ff)(3)(F)(ii).