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    Is there any written documentation/regulation/etc. to counter the assertion that an SBIR Phase III can run sole source indefinitely? If not, is there something saying the Government can make a follow-on contract a traditional acquisition without running afoul of SBIR Policy?


    Feedback provided after consultation with the Acting Director DoD SBIR/STTR Program Manager and the Small Business Administration.

    BLUF: The component should at a minimum review the firms assertion to determine if the solicitation requirements meet the definition of Phase III.

    Scenario: A component initiated a competitive solicitation, and subsequently a SBIR/STTR awardee notified the component or (DoD) that they believed the solicitation requirements necessitate a Phase III (sole-source) award to them because the requirements derive from, extends, or completes efforts made under a prior SBIR/STTR Funding Agreement. Furthermore, the firm chose not to participate in the competitive solicitation.

    Given the scenario I believe there are three items at play which should be addressed by the component:

    Determine if the solicitation requirements meet the definition of a Phase III. I believe the Component should determine if the referenced SBIR/STTR Funding agreements by the firm meet the definition of Phase III when compared to the solicitation requirement.

    Definition of Phase III (per the Policy Directive, section 4(c) - page 25): "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 programs."

    If the requirement is a Phase III, then competition is not required, and the Phase III should be made to the SBIR/STTR Awardee to the greatest extent practicable. This is relevant because the company is asserting that the requirement is a Phase III and because it is a Phase III they (were) are not required to compete for the solicitation.

    The SBIR authorizing legislation, 15 U.S.C. 638(r)(4), requires Federal agencies to the greatest extent practicable to issue, "without further justification, Phase III awards relating to technology, including sole source awards, to the SBIR and STTR award recipients that developed the technology."

    The special acquisition requirement (SBIR/STTR Policy Directive section 4(c)(7) - page 27) states that, "Agencies or their Government-owned, contractor-operated (GOCO) facilities, Federally-funded research and development centers (FFRDCs), or Government prime contractors that pursue R/R&D or production of technology developed under the SBIR/STTR program shall issue Phase III awards relating to the technology, including sole source awards, to the Awardee that developed the technology under an SBIR/STTR award, to the greatest extent practicable, consistent with an Agency's mission and optimal small business participation."

    If the requirement is determined to be a Phase III, then the Component must make a good faith effort to negotiate with the Awardees regarding performance of the work. and issue Phase III awards for the work [AND/OR document the file and provide a copy of the rationale for not making the Phase III award].

    If the requirement meets the Phase III definition and the Component does not intend to move forward with the Awardee, then they must notify SBA (Policy Directive) section 4(c)(7)(iv), p. 28-29), and include, at a minimum:

    A.        The steps the agency has taken to fulfill the special acquisition requirement (e.g. a good faith effort to make the award to the SBIR/STTR Awardee)

    B.        The reasons why a follow-on Funding Agreement with the SBIR/STTR Awardee is not practicable (e.g., SBIR/STTR Awardee was not willing or interested in the work, not capable of doing the work or functioning as a prime and subcontracting the work, or no longer in business).

    C.        The identity of the entity with which the agency intends to make an award to perform the research, development, or production; the type of Funding Agreement to be used; and the amounts of the agreement.

    The component should at a minimum make the initial determination and document its decision on if the requirement does or does not meet the definition of Phase III. This is a fundamental component of any potential inquiry SBA may have with an agency if the issue was raised directly to SBA. I will also note, not that I believe it currently applies to this scenario, that SBA is required to notify Congress of any instances where an agency pursued Phase III work with a business entity other than an awardee and SBA also has appeal rights, which if exercised can suspend work and delay the solicitation / award. These are also outlined in the Policy Directive, 4(c)(7)(iv)-(vii).

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