Guide to Activating a Phase III Contract

You can activate a Phase III contract under the SBIR/STTR program based on a Phase I and/or a Phase II that you have been awarded. Phase III emphasizes commercialization, with the goal of transitioning developed technology for government or private sector use. There is NO SBIR or STTR money set aside for a Phase III contract. Phase III’s are funded by the purchasing agency.

Here’s a guide to streamline the process of activating Phase III:

1. Identify Phase III Potential: 
   • Assess Commercial and Government Applications: Ensure that the product or service developed during Phases I and II has a clear pathway for commercialization or application within the government.
   • Relate to Previous SBIR/STTR Work: Demonstrate how the Phase III effort builds upon or completes the technology, processes, or research initiated in your Phase I or Phase II.
   • Your Phase 3 can be with any Federal agency. It doesn’t haven’t to be with the same organization you received your Phase I or II with. Your Phase III rights also extend for a long time! They don’t expire! Even if you grow and are no longer a small business.
2. Prepare Documentation: 
   • Collaborate with the Government Program Manager (PM): The PM plays a crucial role in preparing the necessary requirements package.
   • Statement of Work (SOW) or Performance Work Statement (PWS): Clearly outline the work to be performed, deliverables, and project scope.
   • Contract Data Requirements List (CDRL): Define all data deliverables, including format, frequency, and requirements.
   • Security Requirements: If applicable, specify any security measures or clearance levels needed for the project.
   • Justification for Phase III: Link the activities and outcomes of Phase I/II directly to the proposed Phase III, emphasizing how it logically extends the prior work.
   • Agency-Specific Documentation: Provide any other documentation as required by the specific government agency overseeing the project.
3. Leverage Funding Flexibility: 
   • Identify Non-SBIR/STTR Funding Sources: Phase III contracts are funded from non-SBIR/STTR sources, you need to find your customer and they need to bring the government funding. 
   • No Additional Competition Required: Phase III contracts can be awarded non-competitively if they logically follow the work conducted in Phases I and II, expediting the procurement process.
4. Research Key Milestones:
   • Secure a Government Buyer or Partner: Identify a government agency or partner interested in your solution to champion and support your Phase III effort.
   • Develop a Commercialization Strategy: Formulate a strategy that clearly outlines the benefits and value of the technology or service to the government, addressing both immediate and long-term needs.
   • Finalize Contract Details: Work with the Contracting Officer to finalize the terms, pricing, deliverables, and timeline of the contract.
5. Maximize Flexibility and Opportunities 
   • Leverage Contractual Flexibility: Phase III contracts offer flexibility in terms of contract type (e.g., Firm-Fixed-Price, Cost-Plus), duration, and funding sources.
   • Eligibility for All Sizes of Businesses: Even companies that have outgrown the small business size standards remain eligible for Phase III contracts, providing an opportunity to pursue larger and more diverse opportunities.

What are the rules you should know? 

• SBIR|STTR Reauthorization Act: Section 5108(4) establishes special acquisition preference for SBIR|STTR, requiring federal agencies and federal prime contractors to issue Phase III awards to appropriate SBIR|STTR awardees “to the greatest extent practicable.”
• The SBIR|STTR Reauthorization Act of 2011 states Congress’ intent that Phase III awards be made to the SBIR|STTR firms that created the technology so that these small businesses can commercialize it. “Federal agencies, to the greatest extent practicable, shall issue Phase III awards to the SBIR|STTR awardee that developed the technology.”
• 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. 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 a result, in conducting actions relative to a Phase III SBIR|STTR award, it is sufficient to state for purposes of a J&A pursuant to FAR 6.302-5, that the project is an SBIR|STTR Phase III award that is derived from, extends, or completes efforts made under prior SBIR|STTR funding agreements and is authorized under 10 U.S. C 2034(b)(2) or 41 U.S. C. 3303(b).a

Can a Phase III contract start before the Phase II is finished?

• Yes, according to SBA guidelines, a federal agency can start a Phase III contract at any point, even if Phase II isn’t complete yet.

Conclusion 

By aligning your Phase III efforts with both the advancements made in previous phases and the specific needs of the government, you can effectively activate this critical commercialization phase. Proper documentation, a clear strategy, and the right partnerships are key to accelerating the transition of your technology into government use or the broader marketplace.