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Phase III Basics

Phase III Description

Description

Phase III efforts include products, services, Research/Research and Development (R/R&D) or any combination thereof, including testing and evaluation of products, services or technologies for use in technical or weapon systems.  Phase III refers to work that derives from, extends, or completes an effort made under prior SBIR/STTR funding agreements, but is funded by sources other than the SBIR/STTR program. Although no government SBIR/STTR set-aside funds are involved, Phase III funding can come from the government (e.g., 6.2 or 6.3 mission dollars) and/or private sector. This phase’s purpose is to transition a company’s SBIR/STTR effort into hardware or software products, processes or services that benefit the Air Force acquisition community or the private sector.

A key SBIR/STTR component is that, once a company has received a Phase I or II award, sole-source Phase III awards may be made to the company, since competition requirements were satisfied under Phase I and II.

Air Force SBIR/STTR program managers and deputy program managers play an influential role in the Air Force SBIR/STTR program in topic development, technical oversight of Phase I and Phase II projects and planning Phase III actions to help integrate a new technology into a Program of Record or other program.

The Phase III vehicle provides a powerful tool to address key affordability, innovation and other Air Force strategic asset objectives. Phase III, as discussed in the SBIR and STTR Policy Directives, aligns with many Air Force technology transition functions and meets Air Force mission needs, from research and services to production. Importantly, a Phase III contract may be awarded to a firm which has outgrown the small business size standard, to a novated awardee, or to a successor in interest, such as a large company that acquired the small business.

In the Phase III description: “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 following meanings apply:

  • “Derives from” is a broad test that refers to work that traces back to SBIR/STTR efforts performed under prior SBIR/STTR funding agreements;
  • “Extends” means the work can be for other applications not researched or performed in prior SBIR/STTR efforts; and
  • “Completes” means commercialization of the prior SBIR/STTR research into a commercial product or application.

Key Notes

  • Cannot be funded with SBIR or STTR dollars
  • Can be any type of contract, including a subcontract and may result from competition; and
  • Must be accorded SBIR data rights, according to the Small Business Administration (SBA): “A Phase III award is, by its nature, an SBIR award, has SBIR status and must be accorded SBIR data rights.”

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.”

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

The Under Secretary of Defense, Acquisition Technology and Logistics (USD)(AT&L) first issued guidance recommending acquisition program use of Phase III in December 2008, with the requirement appearing in DoDI 5000.02 in January 2015.

The following types of activities constitute SBIR/STTR Phase III work:

  • Commercial application (including testing and evaluation of products, services or technologies for use in technical or weapon systems) of SBIR/STTR-funded R/R&D financed by non-federal sources of capital;
  • SBIR/STTR-derived products or services intended for use by the Federal Government, funded by non-SBIR/STTR sources of federal funding; and
  • Continuation of SBIR/STTR R/R&D that has been competitively selected using peer review or merit-based selection procedures, funded by non-SBIR/STTR federal funding sources.

Phase III Contracts and SBIR/STTR Data Rights

DFARS 252.227-7018 describes the use of an assertions table to specifically identify intellectual property. This clause requires the small business contractor to identify its intellectual property assertions in an attachment to their proposal for any technical data or software to be furnished to the government with restrictions on use, release or disclosure. The assertions table identifies the data the contractor or subcontractor will furnish to the government with restrictions, the basis for assertion, the type of rights being asserted and who is making the assertion.

The DoDI 5000.02 (January 7, 2015) requires PMs to establish goals for applying SBIR and STTR technologies in programs of record and incentivize primes to meet those goals. For contracts with a value at or above $100 million, PMs will establish goals for the transition of Phase III technologies in subcontracting plans and require primes to report the number and dollar amount of Phase III SBIR or STTR contracts. At each milestone, the PM will provide a detailed plan for the use of SBIR/STTR technologies and associated planned funding profile (Phase I, II and III).

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