Bryan Guinn, Chief Growth Officer at SBIR Advisors, tackles the moment every successful prototype hits: the government wants it, and nobody knows how to buy it. He argues that the government is good at finding innovation and has a transition problem, and that SBIR Phase III is often an authority agencies already hold. He walks through the three-word lineage test (derives, extends, completes), what Phase III can cover, the Title 15, Title 10, and FAR basis for how it handles competition, and how data rights carry forward. He grounds it in real awards, including a $25 million Air Force IDIQ and roughly $12.6 billion in Phase III work GSA has supported, along with a recent protest that shows the limits. He closes with a practical checklist for government and industry.

Thanks everyone. Excited to talk about this. This is a topic that is near and dear to my heart. I've been doing SBIRs for about the past eight, nine years now. I've won SBIR phase ones, phase twos, used fund extension programs and also leveraged phase threes as well. So I really want to start with a scenario that I think a lot of people in the room have experienced. If I want to say first, I don't actually think we have an innovation problem in the government. I think we have something else. We have a transition problem. There's a lot of innovative companies building technology, and I'll touch on that here shortly. And the government is actually pretty good at it. It becomes a transition that's difficult. Government finds a company with interesting technology. They fund them maybe through a SBIR, maybe through STTR. They build something.

We put it in front of the operators. We test it. It works. The program office wants it. The company thinks, "Hey, we did it. The government wants our product." And then somebody asks, "Okay, how do we buy it?" And then suddenly we're back at the beginning. Do we need what contract vehicle we use? Do we have to re-compete it? Do we need J&A? Can they get on an IDIQ? We need another prototype. Should we call another organization like DIU? The company just spent two years de-risking and discovered that proving the technology works and getting the government to buy it are two completely different things. We call this the valley of death, but I don't think the government has an innovation problem. We have SBIR, we have STTR, we have DIU, AFWERX, SpaceWERX, xTech, OTAs, CSOs, innovation hubs.

We're actually pretty good at finding innovation. We have a transition problem, and sometimes we don't need another acquisition authority to solve it.

Sometimes we need to use the one we already have.

Most people know about the first two phases of the SBIR program, SBIR phase one, SBIR phase two. Phase one proves feasibility. Phase two helps develop the prototype. And then there's phase three. Phase three usually gets shown as the third box on a SBIR lifecycle chart. If you want to forget that, because phase three is fundamentally different. Phase three is not another SBIR funding round. There's no pool of phase three SBIR money. Phase three is work that derives from, extends or completes prior SBIR - STTR work, but is funded by sources outside the SBIR/ STTR program. It can be R&D, it can be software, services, integration, testing, production, products, or combinations of those things.

Whether you're government or industry, I want you to remember three words today. Derives, extends, completes. Does the government's needs today derive from, extend, or complete work perform under the SBIR or STTR funding agreement? If it does, you may have a phase three. Now let's talk a little bit about what it is and what it's not, because I think this also gets confusing. Let's get rid of a few misconceptions. Phase three is not another SBIR proposal. You aren't waiting for a phase three topic to drop. Phase three uses non - SBIR/STTR funding. Now, phase three is not capped at a typical phase one or phase two value. The SBA policy directive says there is no limit on the number, the duration, the type, or the dollar value of phase three awards, and no limit on a lapsed time between phase one and phase two and phase threes or between phase three awards.

Phase three is not necessarily dependent on completing a phase two. The policy directive says a federal agency may enter into a phase two agreement at any time with either a phase one or phase two awardee, assuming the lineage test is met.

Phase three is not just R&D. We've talked about this. It can be products, production, services. It can be R&D or any combination of. Phase three is not necessarily limited to the agency that funded the original work. Any agency can potentially award a qualifying phase three. Phase three is not limited to a company that is still small. As long as you win the phase one, phase two award as a small business as you grow, which you will hopefully, that's the goal, you are still going to continue to maintain that eligibility. So a founder cannot walk into. Now I want to say something what phase three is not. It's not a magic sole source card, okay? A founder can't walk into a contracting office with an old SBIR award and say, "Hey, you have to buy whatever I'm selling." The requirement still has to have actual lineage to the SBIR STTR work that was done.

That's the guardrail.

Now, let's talk about this a little bit because I think this comes up a lot. So Congress has already addressed the competition piece of this, right? If we look at Title 15, it tells federal agencies and federal prime contractors to the greatest extent practicable to consider a SBIR STTR award as satisfying applicable competition requirements. Then it directs them to issue without further justification phase three awards relating to the technology, including sole source awards to the SBIR - STTR recipient that developed the technology. Why? Because the competitive process didn't disappear. It happened earlier. Companies competed, the government evaluated them, the government selected an awardee, the government then spent months or even years testing and validating the technology. Phase three recognizes prior competition rather than automatically putting the technology back at the beginning of acquisition. That's the government side. Now, if you're industry, there's an equal important implication here. Your prior SBIR award is not just funding history. It creates an actual lineage. If your federal growth strategy is phase one, then phase two, then another SBIR, then another SBIR, you may be missing the most commercially important part of the program. The objective isn't becoming really good at winning SBIRs, like the SBIR mills. The objective is to transition that technology into mission use. Oh, sorry. So here's the actual different titles that we're going to talk through. So we talked about 15, so now let's talk about the next one. So contracting officers in the room are probably thinking interesting speech. Where's my FAR authority? Great question. For the DoD, the legal chain is especially clear. Title 10 is a statutory exception for acquisitions authorized or required by statute, and the current statute expressly includes a phase three award made pursuant to Title 15. It implements the authorized or required by statute exception and says full and open competition need not be provided when a statute expressly authorizes or requires the acquisition from a specified source or through another agency. So think of the stack this way, right? It's going to be first title 15, then you're going to have title 10, and then from there the FAR. So Title 15 is the competition and award framework.

Title 10 is the express DoD recognition of the phase three and then the FAR for implementing the competition authority. Then the agency supplements operationalize it. Now, Navy is actually a clean example of this. NMCARS requires that the contracting officer before awarding a SBIR sitter phase three contract to affirm in the business clearance memorandum that the phase three derives from, extends or completes prior phase one or phase two work, and that's authorized under Title 15. So it's not a loophole, it's a documented acquisition pathway that exists. All right, so what about J&A? Here's what I want to be precise because sole source does not mean no paperwork, and I think often industry thinks that's the case. That's not correct. The SBA policy directive says that if an agency deems a J&A necessary, it is sufficient for competition purposes to state that the project is a SBIR STTR phase three derived from extending or completing prior SBIR STTR work and is authorized under Title 15.

Further competition justification is not needed. GSA's current acquisition policy goes further on its own assisted acquisition services practice. Separate justifications for other than full and open competition are not required for phase three SBIR STTR awards, but agencies can and do have their own review, documentation, approval, and business clearance processes. So the practical message is not skip acquisition discipline, it's document the lineage, requirement, funding, pricing, responsibility and agency specific approvals and without pretending the government must re-compete the technology solely to satisfy competition statutes Congress has already addressed.

Now, let me switch sides of the room here a little bit. Founders here, production contract with DoD and immediately start thinking about intellectual property. Phase three does not inherently mean abandoning the SBIR STTR data rights framework. The DFARS addresses this, the SBIR STTR data rights for qualifying technical data and computer software under contracts and subcontracts that include phase three work. Under the current DFARS, the standard SBIR STTR data protection is 20 years from contract award unless the parties negotiate another period after that fact. So that does not mean that government gets no rights to anything. Data rights depend on what was developed, how it was funded, what gets delivered, how it was marked, but moving into phase three does not automatically erase SBIR STTR data protection rights.

So let's look a few examples that I wanted to share. So these are readily available. You can go out and find articles about this and this is kind of why I wanted to use these in particular. So let's leave regulations aside. Let's look at actual contracts. So in July 2023, the Marine Corps System Command awarded Hyperion Technology Group about a $10 million IDIQ for their scalable passive acoustic reporting and targeting nodes, Spartan. If you look at what the government was buying, it was production and delivery of systems, spares, technical manuals, new equipment training, logistics support, engineering services, and lifecycle support. So DoD's public contract announcement says the contract is a SBIR phase three effort derived from extending or completing prior phase one and two awards. It also says the contract was not competitively procured pursuant to Title 15 and at the transition we're talking about research, prototype production and lifecycle support.

So industry, your takeaway is your SBIR strategy shouldn't stop at how do I win the next R&D award? You should be asking who owns the operational requirement if this works and what funding buys it at scale.

Next one let's look at is the Air Force. Again, in 2023, VentureScope, they got a $25 million fixed price IDIQ for Defense Accelerator as a platform for enterprise results. The DOD described it as a SBIR phase three award, extending the existing SBIR that supported the AFWERX refinery into a repeatable, scalable innovation accelerator platform. Individual orders could be valued up to $5 million. That's not a sensor or piece of hardware, it's a platform and services capability. Defining characteristics is not what the product looks like, it's the lineage. The Navy had one also in 2023. 2023 was an active year. The Navy awarded maritime applied physics a $9.87 million contract modification to an existing SBIR phase three contract for global advanced reconnaissraft. It's an unmanned aerial relay vehicles and related payloads. The DoD announcement says the award was tied to the Accelerate the Procurement and Fielding of Innovative Technologies program to expeditiously transition technology from development into production. DoD also states the contract was not competitively procured under Title 10, authorized or required by statute. And that is the acquisition motion in plain English, technology developed under SBIR, operational demand emerges, non - SBIR funding enters, and the acquisition moves forward toward fielding and production.

Now, this isn't an edge case. GSA does this, right? Now the scale point. GSA began providing phase three assisted acquisition support in FY18. Through the end of FY24, GSA reports approximately 112 contracts and 392 task orders totaling approximately 12.6 billion on behalf of DOD under the SBIR program. GSA also says it has made phase three awards on behalf of energy, veterans affairs, and health and human services. And GSA reported that its support was critical to helping the Navy achieve more than 1.1 billion in phase three contracts in FY23 alone. GSA's current SBIR sitter page says that assisted acquisition services predominantly awards and administers phase three contracts and provides a defined intake to award process. Its current average estimate is about 180 days from receipt of complete requirements package, not days, not magic, but a real institutional acquisition capability. So if your organization said we've never done one, that's okay.

Government has at scale.

Now let's talk about what it isn't because I think this is also another important piece of this, right? So remember when I said earlier, phase three isn't a magic sole source card. We have a very current example. In February of this year, G2 ops protested a DISA task order issued for NAVSEA cloud migration work. G2 ops tried to argue that the requirement depended on technology connected to its prior SBIR work and that the agency should have issued it a follow on phase three award. GAO denied the protest. The key point was that the agency was not pursuing production or further use of the specific technology G2 ops had developed under its prior SBIR award. The record did not establish that the new task order required use of that SBIR developed technology. That's the guardrail. Having a SBIR does not mean government owes you the next contract.

Technology lineage has to be real.

Having a SBIR does not mean government owes you the next contract. What we look at is the government takeaway is phase three is not a mechanism to manufacture a sole source rationale after choosing a vendor. Industry takeaways don't lead with I have sole source rights. Lead with a defensible lineage from prior funded work to today's requirement. Now if you're government, here's what I want you to do when you get back to the office. Think about one technology you've already tested, something operators want, something that worked, something you're now struggling to transition. And before automatically looking for another vehicle, another competition or another prototype ask, did this technology originate under SBIR or STTR? And don't start by asking your contracting officer, can we sole source these guys? Ask the better question is, does what we have today derive from, extend or complete the SBIR STTR work that was previously funded?

Find the prior award, find the original statement of work, establish the lineage, define today's requirements, identify the funding and bring contracting in early, then determine whether phase three actually fits. Because phase three isn't about bypassing the acquisition process. It's about starting the acquisition process from the right place. Now if your industry do almost the exact same thing from the other direction, pull your prior award, the topic, the original statement of work, what the government actually funded, the nap it against what your technology has become and the mission requirement your customer has today. Then you should be able to explain the entire argument on one page. Then what did government fund? Now what has the technology become? Mission, what does the customer need? Lineage. How does today's requirements derive from, extend or complete the prior effort? Don't walk into a contracting office and say, I have sole sorts rights.

Walk in making it easy for your government customer and contracting officer to understand why the phase three may apply. You still need demand, you still need a mission customer, you still need funding. Phase three doesn't create the opportunity. It can create the acquisition pathway.

So in closing, government spends an enormous amount of energy trying to move innovation faster. We create new organizations, new programs, new vehicles, new authorities, and many of them are valuable. But sometime we've already competed the company. We've already funded the technology. We've already tested the technology. We've already validated that it works. And now someone is sitting in a program office asking, "We know this works. How do we buy it?" And before you start over, ask did this start with SBIR? Because if the work you need today derives from, extends or completes that prior effort, you may already have the authority. Thank you very much for your time today.

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