Commonly Asked Questions

Below are some CAQs and FAQs about sole source SBIR Phase III contracts. If we have missed any that you have found, please let us know.

Yes.

Yes.

See Defense Acquisition University (DAU):

Army SBIR/STTR Program Website

Small Business Administration

Yes.

Page 25, (1) Phase III work:

…Commercialization of its technology, except for a subcontract to a Federal contract that may be a Phase III.).

Page 27 (3) Competition Requirement. (5)

A subcontract to a Federally-funded prime contract may be a Phase III award.

Yes, per the SBA policy directives, a Phase III contract may be awarded to a firm that has outgrown the small business size standard, or to a novated awardee, or to a successor in interest, such as an acquiring company.

No, while a federal agency may enter into a Phase III SBIR agreement at any time with a Phase I awardee, no follow-on prohibition precludes the Phase III recipient from then submitting a proposal for the Phase II. The effort proposed must meet the intent of a Phase II and cannot duplicate the effort being performed under the Phase III.

The small business is primarily responsible for ensuring that its data rights are correctly reported and maintained. SBIR|STTR contractors should always ensure that any data or software delivered is correctly marked, IAW DFARS 252.227-7018, and maintain records sufficient to justify the validity of any restrictive markings on data, computer software, or computer software documentation delivered under the contract. Small businesses should assert data rights from previous SBIR|STTR efforts when proposing follow-on efforts. This incorporates such data rights into the new award, which will extend the data rights for five years under the new contract.

No. The Army SBIR/STTR Program Office does not approve Phase III contracts, though the program office should be informed of the procurement and may provide support. The contract must be correctly reported as Phase III in FPDS-NG, under the “Competition Information” category.

No, a Phase III contract could result from an unsolicited proposal, simplified acquisition announcement, an ordering process allowed under Indefinite Delivery/Indefinite Quantity (ID/IQ) contracts, multiple award contracts, or a non-competitive award. No J&A is required if the award is based on any competitive announcement (RFP, BAA, etc.). In all cases (competitive and non-competitive), the contract award must include the SBIR|STTR data rights clause.

Yes, the SBA policy directive indicates that a federal agency may enter into a third-phase agreement at any time with a Phase I or Phase II awardee.

Phase III monies can come from the government — except SBIR|STTR funds — and/or the private sector.

There are several steps SBIR|STTR awardees can implement in order to obtain a Phase III contract, including:

Note see also Forward Edge-AI's 8 step process here.

Because SBIR|STTR Phase III contracts are funded by other than SBIR|STTR funding, the Requirements Office (PEO/PM) shall utilize its supporting Army Contracting Command (ACC)/Mission and Installation Contracting Command (MICC) for support. If you have any questions regarding which ACC/MICC office supports your PEO/PM, please reach out to ACC via https://acc.army.mil/visitors/.

General Services Administration has the ability to award SBIR|STTR Phase III contracts for the Army. If your Requirements Office is interested in participating or partnering with GSA, please visit https://aas.gsa.gov/sbir/ or email [email protected].

GSA is also developing a dedicated Phase III SBIR Government Wide Acquisition Contract (GWAC) vehicle called Research, Innovations, Outcomes (RIO). More information is available here.

Any company or successor company (including a large business) that has received either a Phase I or II award. Competition requirements are satisfied under Phase I or II. A list of Forward Edge-AI's Phase I/II awards are available here.

“Work that derives from, extends or completes an effort made under prior SBIR/STTR funding agreements, but is funded by sources other than SBIR/STTR set-aside funding.”

The PWS should be generated from the PM and show how the work derives from, extend, or complete an effort made under prior SBIR|STTR (to determine the work is allowable). The Program Office should begin with the current Phase I or II Work Plan to define the requirement. The PR package should include the SOW, non SBIR/STRR funding, PoP, Type of funds, CDRLs, GFP/GFI/Base Support, data rights, DD254, ITAR, as required.

Once the PCO has a complete requirements package, a letter RFP should be issued to the contractor requesting a technical and cost proposal. Once received, the PE/PM would evaluate technical criteria (do not have standard criteria, Phase I/II criteria provided in DoD BAA or AF CSO). Costs would be reviewed against the proposed technical effort (FAR 15.404-1(d) & (e) to determine that the contractor has a clear understanding of the requirement, costs are consistent with various elements of the technical proposal and costs are realistic for the proposed technical approach and PoP. The PCO evaluates the proposed costs and negotiates any issues.

A J&A is not required. The effort can be a sole source. There is no limit on the number, duration, type, or dollar value of Phase III awards made to contractors. There is no limit on the time that may elapse between a Phase I, Phase II or Phase III award. A Federal agency may enter into a Phase III SBIR agreement at any time with a Phase I or Phase II awardee. Small business size limits for Phase I and Phase II awards do not apply to Phase III awards.

Phase III work may be for products, production, services, R&D or any such combination. Per AFFARS 5319.201(c)(10), a DD2579 is not required. Solicitations of Phase I/II satisfies competition requirements. Per FAR 6.302-5 (see 10 U.S.C. 2304 (f)(6)), no J&A is required. PCO just needs to prepare a D&F for the file (with input from PE/PM) on how the Phase III "derives from/extends/completes" previous SBIR/STTR award. Synopsis of the proposed contract action is not required per FAR 5.202(a)(7) and synopsis of the SBIR contract award is not required per FAR 5.301(b)(2).

No.

You should work with your PM to determine what funding they intend to use. Phase III awards can be funded by Procurement, O&M, or any other type of agency funds appropriate for the effort. However, SBIR STRR funding is not provided for Phase III efforts. You would still need to receive a proposal with a cost estimate and determine the costs to be fair and reasonable. Your mission partner would also need to work with FM to send you certified funds.

*You will need to incorporate DFARS 252.227-7018 DEVIATION 2020-O0007, SBIR data rights (Recent change to 20 years).

Phase III SBIRs are not small business set asides. The government may choose to make it a set aside, but this not required. Also, Forward Edge-AI is not an 8(a), SDVOSB, HUBZone, WOSB, or ANC company. See https://www.fai.gov/periodic-table:

Phase III is work that derives from, extends, or logically concludes efforts performed under SBIR but is funded by sources other than the SBIR Program (e.g. Government program funds or private sector funding). The success of the Navy SBIR Program is measured by companies using Phase III to transition their SBIR efforts into products, tools or services that benefit the Navy acquisition community.
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One important strength of the SBIR program is that once a company has received a Phase I award, follow-on Phase III awards can be awarded in a non-competitive process since the competitive process took place under Phase I. Forward Edge-AI has additional information about Phase III SBIRs here.

Yes.

A small business concern for purposes of award of any funding agreement under the SBIR Program is one which, including its affiliates, has a number of employees not exceeding 500. [More information]

No. To be eligible for award of SBIR funding agreements, a small business concern has to meet the following qualifications:

No, but they can be subcontractors to a small business.

For Phase I, a minimum of two thirds of the research and/or analytical effort must be performed by the proposing firm, and for Phase II, a minimum of one-half of the research and/or analytical effort must be performed by the proposing firm. Note that there are not statutory minimums for a Phase III award.

During the Pre-release phase the companies can review the topics that most likely will be included in the announcement and contact topic authors to further discuss the topics with them. Once the announcement opens, no direct (oral or written) conversations with the topic authors are allowed.

Yes - per the SBA Policy Directives, a Phase III contract may be awarded to a firm that has outgrown the small business size standard, or to a novated awardee, or to a successor in interest such as an acquiring company. There are no NAICS code size limits applicable to Phase III, and no limits on company or contract size, contract duration, type/color of money or number of Phase III awards on a Topic. In cases of successor in interest or novation, an original awardee may be required to relinquish its rights and interests in an SBIR/STTR project in favor of another applicant as a condition for that applicant's eligibility to participate in the SBIR/STTR program for a particular project.

No, the prime contractor must be a small business. However, non-profit concerns (i.e. universities, federal funded research and development centers, or research institutions) are required participants as subcontractors on STTR awards and may be subcontractors on SBIR awards.

Yes - the SBA Policy Directive indicates that a Federal agency may enter into a third phase agreement at any time with a Phase I or Phase II awardee.

Yes, it may be possible to add non-SBIR/STTR funds to a Phase II contract to accomplish additional work. If the new work would significantly increase the value of the contract or is outside the scope of the tasks proposed under the competitive Phase II contract, a new contract would be more appropriate. A separate Phase III contract is preferred so that DON receives credit for the Phase III award.

Yes - if the dollar value of the Phase III effort is below the Simplified Acquisition Threshold or if the procurement meets the requirements of FAR 13.5 for commercial items, the simplified process may be utilized.

No, a Phase III contract could result from an unsolicited proposal, simplified acquisition solicitation, an ordering process allowed under IDIQ or multiple award contracts, or a non-competitive award. No J&A is required if the award is based on any competitive solicitation (RFP, BAA, etc.). In all cases (competitive or non-competitive), the contract award must include the SBIR/STTR data rights clause (DFARS 252.227-7018).

Yes, however, the use of options needs to be justified in accordance with FAR 17.205.

No, the DON SBIR/STTR Program Office does not approve Phase III contracts, though the SBIR/STTR Program Office should be informed of the procurement, and may provide advice and support. However, the contract must be correctly reported as a Phase III in FPDS-NG, under the "Competition Information" category.

The product must extend, derive from, or complete efforts developed under a previously awarded Phase I or Phase II funding agreement, described in Chapter III below. The SYSCOM SBIR/STTR Program Office for the topic/award for Phase I/II can assist you in determining whether or not the work is appropriate for Phase III. Examples from the Periodic Table of Acquisition Innovations:

Note also in a Bid Protest Decision, General Accountability Office (GAO) determined that the Government (technical and contracts) has broad discretion on determining what extends, derives, or completes a SBIR Phase I/II.

There is no statutory time limit for the issuance of a Phase III contract. However, under DFARS24 the DoD SBIR/STTR awardee retains exclusive data rights for only five years after the completion of the Phase II effort. After that period of time, it would be reasonable to question whether the technology is exclusive to the SBIR/STTR firm. Also, given the rapid pace of technological development in many industries, it is possible that SBIR/STTR technology that is more than five years old may no longer be the most advanced technology available.

As a general rule, the longer the period of time since the completion of the Phase II, the more carefully you should review the status of the technology and other products available in the open market. As a minimum guideline, if five years have passed since the completion of the Phase II effort, a market survey should be performed to ensure that other sources are not available. However, there are cases where the innovation was far ahead of the technology to implement it practically. Even if five years have passed, it should not be presumed that the SBIR/STTR is not a viable source.

Yes. There is no limit in the number of Phase III contracts awarded to the same firm.

Data rights issues will vary. In some cases, the Phase III contract will be for the procurement of a commercialized product. In that case, the data rights provisions used in commercial contracts would apply. (See FAR 12.211 for data rights provisions under commercial contracts.) The most recent Congressional reauthorization of the SBIR program includes provisions clarifying that Congress intends to have the special "Rights in Data - SBIR Program" clause at FAR 52.227-20 apply to all three phases of the program. The SBA addresses this in the revised SBIR Policy Directive and clearly indicates that SBIR data rights apply to Phase IIIs as well as the first two phases of the program. More information about SBIR Data Rights are available here.

No, use of a Phase III contract is not mandatory if you are aware of other firms with capabilities similar to the former SBIR/STTR contractor. If multiple sources are available for an item or if similar technologies are available on the open market, the Government's needs may best be met through a competitive procurement. In general, the longer the period of time since the completion of the Phase II, the greater the likelihood that the technology is no longer unique. If more than five years have passed since the completion of the Phase II, a market survey should be performed to determine if the same or similar technology is available from multiple sources. The contract file should be documented regarding market survey results.

Yes, because the competition for SBIR/STTR Phase I and Phase II awards satisfies any competition requirement of the Armed Services Procurement Act, the Federal Property and Administrative Services Act, and the Competition in Contracting Act. The Phase III award is made directly to the SBIR/STTR firm, but not made under the Sole Source provisions of part FAR 6. Therefore, an agency that wishes to fund an SBIR/STTR Phase III project is not required to conduct another competition in order to satisfy those statutory provisions. As such, in conducting actions relative to a Phase III SBIR award, in accordance with NMCARS 5206.302-5 (b), contracting officers may use the streamlined SBIR Phase III Justification & Approval template in Annex 13 of the NMCARS25.

Phase III provides an opportunity for a directed award, which will bypass formal solicitation, evaluation, and award procedures. While a protest may be filed against such an award, it challenges clear authority in the SBIR/STTR statute and Policy Directives. Many DON acquisition program offices have successfully used directed Phase III awards as an efficient and cost effective way to deliver innovative technologies. An unusual aspect of Phase III is that no size limits apply to the awardee, unlike Phase I and II. As a result, these directed award rights accrue to acquirers of SBIR/STTR firms, or firms that receive SBIR/STTR technology rights through novation.

No, you can conduct a competition using a performance-based specification and not using the SBIR/STTR Technical Data Package to predefine a specific implementation. A build-to-print award is not allowed unless agreed to by the SBIR/STTR company within five years or can be open after five years upon completion of the project. One can develop a second source for production competition by paying the SBIR/STTR company to qualify a second source similar to what has been done by a large business, to keep prices low or to ensure a surge production capacity. Creative methods for introducing competition include selecting a second source and paying the SBIR/STTR company to qualify them, and having the SBIR/STTR company find and qualify a second source and then compete between the SBIR/STTR and the second source in 50-50 or 60-40 splits based on price and performance.

No, any type of contract can be used. The contracting officer makes the final determination regarding selection/negotiation of contract type.

Treat the company like any poor performing contractor: document the problem and terminate the contract if not resolved. CPARs applies to Phase III contracts. Cost, schedule, and performance are all measures applied to SBIR/STTR contracts. In the event of contract termination or follow on award to another company, SBA should be notified and a justification provided, following a procedure detailed in the aforementioned Policy Directives. See Forward Edge-AI's CPAR.

Phase III monies can come from the government - any color of money except SBIR/STTR funds -- and/or the private sector.

Phase III candidacy is rooted in statute language: "Federal agencies, to the greatest extent practicable, shall issue Phase III awards to the SBIR/STTR awardee that developed the technology."27 Although an SBIR/STTR awardee is eligible for contract work that "derives from, extends, or completes prior SBIR effort and is funded with non-SBIR funds" - if that firm developed the subject SBIR/STTR technology - there is no right to a contract. Rather, that firm's Phase III eligibility imposes an obligation to engage in a J&A process whereby a DON KO, supported by the PM, determines whether the SBIR firm is 1) available to perform the requirement and 2) capable of doing so. The pre/post-business clearances for negotiation with an SBIR/STTR firm should contain a documented assessment, based on price comparisons, past performance and related evidence of competency needed to support a Phase III contract.28 Although an SBIR/STTR awardee may request Phase III preference prior to or after an RFP, RFI or BAA has been issued, it is the KO's responsibility to determine Phase III status and execute contracts, with full documentation.

In one conceptual Phase III assessment scenario, the first step is to determine if the work that the SBIR/STTR firm would do to achieve a solicitation's requirement set meets the Phase III definition. If it does, the second step is to evaluate whether the firm could meet all or part of the requirement set. It is possible to split the requirement if the SBIR/STTR firm can only complete a portion, but that may not be an acceptable approach. (If it's determined that a single contract is needed and the SBIR/STTR firm is not proposing an approach that would meet the entire requirement, such as teaming or subcontracting, a KO would move forward with the open solicitation and notify bidders of the SBIR/STTR firm's capability as a potential subcontractor.)

The third step is to determine whether the firm has the capability to perform the work. (It would not need to have the capability prior to award, but would need to be able to show how it would develop that capability.)

The KO should evaluate whether the proposal is competitive through rate comparisons, reviewing past performance, and executing market assessments. If the proposal meets required performance parameters, it can be approved. A solicitation to receive other bids for comparison could be published, but this should be a last resort and the KO must be extremely careful not to release any SBIR/STTR protected data. If it is determined that the requirement is not a Phase III, or that the firm is not available or capable, that would end a SBIR/STTR firm's assertion of Phase III rights. All of this must be clearly documented in the DON SBIR/STTR Program Managers Database and the Federal Procurement Data System (FPDS-Next Generation).

Finally, agencies are required to report to SBA all instances in which an agency pursues research, development, or production of a technology developed by an SBIR awardee, with a business concern or entity other than the one that developed the SBIR technology.

Normally, the government requires a full competition for the issuance of any federal funds. However, the sole source provision enables small businesses to directly sell the product or solution they developed with Small Business Innovation Research (SBIR) or Small Business Technology Transfer Research (STTR) funding to any governmental agency. If the product or solution meets the government’s needs and the agency wants to purchase the technology, the small business does not have to compete for the contract with other vendors in the open market. Instead, the government agency works internally with their acquisition experts to negotiate a contract agreement with the small business. In this way, the small business can be the sole bidder for any business opportunity, which does not have to be formally issued in FedBizOpps.gov.

The legal provision cited below can be found within each NIH SBIR or STTR solicitation, listed under the second paragraph of "Section I. Funding Opportunity Description" in "Part 2. Full Text of Announcement."

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