NSBA/SBTC NEWS | Court Ruling Highlights Foreign Risk Compliance in Small Business SBIR/STTR Programs
- NSBA
- 2 days ago
- 2 min read
NSBA and our Small Business Technology Council (SBTC) continue urging Congress and the Administration to ensure clarity and certainty for small-business participants pursuing critical technology or research and development under SBIR/STTR programs.
JUNE 17, 2026 | Last month, the U.S. Court of Federal Claims issued a significant ruling that could have far-reaching implications for small businesses participating in the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs.
In Kayhan Space Corp. v. United States, the court upheld the Air Force's decision to deny an SBIR award based on national security concerns tied to the company's founders' historical connections to sanctioned entities in Iran.
The case centered on two co-founders who immigrated to the United States from Iran in 2005 and 2006. Although the relationships in question predated their immigration by decades, the Air Force determined that those historical ties to sanctioned Iranian organizations constituted a sufficient security concern to classify the company as "high risk." As a result, the agency rescinded the award despite the company's apparent technical qualifications.
Importantly, the court also noted that the company had not disclosed these historical connections during the proposal process. While the founders may have viewed the relationships as too remote or insignificant to warrant disclosure, the omission became a key factor in the government's risk assessment. The ruling reinforces a reality that many SBIR/STTR applicants are now confronting: under the enhanced due diligence and foreign risk review requirements enacted by Congress, agencies are scrutinizing ownership structures, foreign affiliations, and historical relationships more closely than ever before.
The ruling also demonstrates the limited legal recourse available once an agency makes a national security determination. The court afforded substantial deference to the Air Force's assessment, signaling that agencies will retain broad discretion when evaluating foreign risk concerns under the SBIR/STTR programs.
For a detailed legal analysis of the case and its implications for SBIR/STTR participants, see the National Law Review article here.
Learn more about SBTC and NSBA's work to ensure greater opportunities for small business in technology.
