Lawyer Article

This article was published in the September 9 th edition of Southeast Tech Wire.

Most technology companies know that the Small Business Innovative Research ("SBIR") program requires federal agencies to set aside 2.5% of their budget for research and development contracts for small businesses. Many start-ups begin with several Phase I contracts or grants.

What many technology companies do not know is that after completing Phase I and Phase II agreements and/or growing beyond the 500 employee small business status for SBIR agreement, the Phase III SBIR offers many opportunities. The formal definition of the Phase III SBIR is:

Phase III is the period during which Phase II innovation moves from the laboratory into the marketplace. No SBIR funds support this phase. The small business must find funding in the private sector or other non-SBIR federal agency funding.

Importantly, the last phrase above says that while set-aside SBIR funds cannot be used in Phase III, other federal government funds can. Phase III is much more flexible than Phases I or II in the following ways:

• The small business size limits do not apply to Phase III awards.
• The requirement that the principal investigator is primarily employed by the SBIR contractor does not apply to Phase III.
• The Phase III award process is exempt from the standard public notice requirements.The Phase III award process is exempt from the standard competition requirements because the Phase I and Phase II competitions satisfy the requirements.
• There is no limit to the number, duration, type, or dollar value of Phase III awards made to a business concern.
• A federal agency may enter into a Phase III SBIR agreement at any time with a Phase I or Phase II awardee.
• There is no limit on the time that may elapse between a Phase I or Phase II award and the Phase III award, or between a Phase III award and a subsequent Phase III award
• Phase III SBIR may be for products, production, services, R&D, or any combination.
• If a Phase III SBIR award derives from or is a logical extension from the firm's work under prior SBIR funding agreements, then SBIR data rights apply (meaning the government agency can only use the data for internal purposes and not have other firms use it for government purposes for 4 or 5 years).
• The Phase I and II SBIR contractors have preference, including sole source awards for follow-on R&D or production and the agencies must justify why they continue on with other than the Phase I and II SBIR contractors.

The Phase III SBIR is a vehicle for a federal agency and contractor or grantee to continue work that both parties agree should be commercialized to benefit the public -- a win-win!