SBIR Phase III Contracting Process

Step-by-step guide through the SBIR Phase III contracting process from requirements gathering to contract award, including the logical connection narrative.

This process consists of 5 major steps. It leverages statutory authority under 15 U.S.C. §638(r)(4) to streamline acquisition while maintaining compliance with applicable federal acquisition regulations.

Total process timeline: Typically 4–6 months from requirements gathering to contract award, depending on organizational review cycles and funding availability.

Step 1: Requirements Gathering

The program sponsor drafts a statement of need, scope statement, and requirements for a Performance Work Statement (PWS) in accordance with FAR 37.602. The PWS provides the foundation for the acquisition and should describe the services and desired outcomes.

Key Activities

1. Identify Mission Needs

• Define business problem or capability gap
• Articulate desired outcomes and performance objectives
• Identify stakeholders and users
• Establish success criteria

2. Develop Performance Work Statement

• Describe services required
• Define performance standards and metrics
• Specify deliverables and acceptance criteria
• Establish period of performance
• Identify Government responsibilities

3. Define Technical Requirements

• Specify technical capabilities needed
• Identify system integration requirements
• Define data requirements and formats
• Establish security and compliance requirements

4. Estimate Resources

• Develop preliminary cost estimate
• Identify funding sources
• Assess workforce implications
• Determine Government-furnished resources

Deliverables

• Complete Performance Work Statement per FAR 37.602
• Statement of Objectives (if applicable)
• Preliminary Cost Estimate
• Stakeholder Approval of requirements

Step 2: Establishing the SBIR Connection

A logical connection narrative documents how the proposed work relates to the contractor's prior SBIR funding using the "Derives from, Extends, or Completes" framework per SBA SBIR Policy Directive Section 4(c).

Phase III may apply when SBIR technology enables service delivery. The Government need not purchase the SBIR technology as a standalone product; rather, SBIR technology may serve as an integral component enabling contractor personnel to deliver professional services.

Purpose of Logical Connection Narrative

While SBIR Phase III awards are statutorily exempt from competition requirements, a comprehensive logical narrative serves critical due diligence functions:

• Creates a defensible administrative record
• Demonstrates informed acquisition planning
• Articulates how technology addresses agency requirements
• Documents nexus to prior Phase I/II work
• Confirms prudent use of resources

Illustrative Example: Logical Connection Narrative

The following PWS sections and logical connection narratives are illustrative examples only. Actual PWS content and section numbers will vary based on specific contract requirements.

Executive Summary

The contractor's Phase I-validated platform provides the technological foundation enabling employees to deliver professional services at the requisite quality and scale. This Phase III effort extends the Phase I SBIR technology by operationalizing and tailoring the platform's components to amplify workforce productivity across all Performance Work Statement tasks. The Government receives professional services — supply chain analysis, compliance monitoring, and field operations support — where SBIR-developed technology serves as an integral component enabling service delivery.

Example: PWS Section 3.2 — Supply Chain Risk Analysis & Logistics Optimization

Summary of Professional Services: The contractor will support supply chain risk assessment and logistics optimization functions, including vendor performance analysis, transportation route planning, inventory forecasting, disruption impact modeling, and strategic sourcing recommendations. This work requires analyzing complex interdependencies across multiple supply chains and data sources.

Connection to SBIR Technology: EXTENDS

The contractor's platform will extend Phase I technology to assist employees in managing supply chain analysis through:

1. Vendor Risk Scoring — The platform processes procurement data and external risk feeds to surface potential supplier disruptions, financial instability indicators, and performance trend analysis.
2. Route Optimization Analysis — The platform helps employees compare transportation options by extracting and normalizing cost, time, and reliability data across carriers and modes.
3. Inventory Forecasting — Employees leverage the platform's predictive analytics to anticipate demand fluctuations and recommend stocking level adjustments.
4. Disruption Modeling — The framework enables scenario planning for supply chain interruptions, quantifying impact on mission readiness and identifying mitigation strategies.

Example: PWS Section 3.3 — Regulatory Compliance & Quality Assurance Monitoring

Summary of Professional Services: The contractor will provide comprehensive compliance monitoring and quality assurance services including regulatory change tracking, audit preparation support, corrective action planning, standards adherence verification, and compliance reporting across multiple regulatory frameworks.

Connection to SBIR Technology: EXTENDS

The contractor's platform extends Phase I technology to transform how employees execute compliance and quality tasks:

1. Automated Regulatory Tracking — The platform's document intelligence and knowledge graph components automate extraction, correlation, and impact assessment of regulatory changes from Federal Register, agency directives, and industry standards.
2. Audit Readiness Acceleration — The platform pre-processes compliance data to identify gaps, flag potential findings, and generate audit preparation checklists — reducing manual preparation from weeks to days.
3. Corrective Action Management — The platform tracks remediation activities, monitors deadlines, and generates status reports for leadership visibility.
4. Standards Cross-Referencing — The platform maps requirements across overlapping regulatory frameworks to identify redundant compliance activities and streamline reporting.

Example: PWS Section 3.4 — Field Operations Support & Maintenance Planning

Summary of Professional Services: The contractor will support field operations planning and maintenance scheduling including equipment readiness assessment, preventive maintenance optimization, parts inventory management, deployment logistics coordination, and operational after-action analysis.

Connection to SBIR Technology: EXTENDS and DERIVES

EXTENDS: The contractor's platform provides the analytical backbone for maintenance optimization — processing equipment sensor data, maintenance histories, and operational schedules to predict failures and recommend intervention timing.

DERIVES: New, derivative capabilities inherit core platform functions (data integration, predictive analytics, knowledge graphs) while adding mission-specific innovations: equipment-specific failure models, deployment readiness dashboards, and supply chain integration for parts forecasting.

Conclusion

This logical narrative demonstrates that every Performance Work Statement task derives from, extends, or completes the contractor's platform validated under SBIR Phase I. The combination of validated SBIR technology, comprehensive logical connection to Phase I work, and demonstration of professional services enabled by that technology creates a defensible administrative record supporting an SBIR Phase III award.

Step 3: Acquisition Planning and Market Research

FAR 7.105 acquisition planning requirements may be satisfied by documenting: (1) requirement validation, (2) SBIR Phase III as the acquisition strategy per 15 U.S.C. §638(r)(4) and FAR 6.302-5(a)(2)(i), and (3) market research confirming the SBIR awardee as the sole source for the SBIR technology.

SBA Policy Directive Section 4(c)(3) provides that "Further justification is not needed" — meaning no formal J&A is required.

1. Acquisition Plan Development

• Complete ISTRAP per FAR 7.105 requirements
• Document acquisition strategy (SBIR Phase III sole-source)
• Develop Independent Government Cost Estimate (IGCE)
• Identify funding sources and appropriations
• Establish acquisition milestones and schedule

2. Market Research

• Confirm SBIR Phase I award documentation
• Document SBIR data rights (DFARS 252.227-7018)
• Verify no alternative sources
• Document unique IP and capabilities
• Confirm small business status in SAM.gov

3. Contract Type Selection

• Analyze appropriate contract type(s)
• Justify cost-reimbursement if applicable
• Develop contract structure (base + options)
• Define CLINs and funding approach

Step 4: Request for Proposal Development

The contracting officer will determine the appropriate solicitation method. Options may include a written RFP (most common), an oral RFP, or response to an unsolicited proposal, per FAR 15.6. SBIR Phase III awards are exempt from synopsis requirements per SBA Policy Directive Section 2(j)(4)(iii).

SBIR-Specific Considerations

• Cite 15 U.S.C. §638(r)(4) as authority
• Include SBIR data rights provisions (DFARS 252.227-7018)
• Specify period of data rights protection (20 years)
• Define deliverables with appropriate rights assertions
• Clarify Government's intended use of SBIR technology

Step 5: Contract Award

SBA Policy Directive Section 4(c) establishes: no dollar limit, duration limit, or contract type restriction for Phase III awards. Must be funded with program funds rather than SBIR set-aside funds. Award documentation should cite 15 U.S.C. §638(r)(4) and include SBIR data rights provisions.

Pre-Award Activities

• Receive and evaluate contractor proposal
• Conduct technical evaluation
• Perform cost/price analysis
• Assess past performance
• Negotiate (if applicable)

Post-Award Actions

• Issue notice of award
• Conduct post-award orientation
• Designate COR
• Establish invoice procedures
• Initiate performance monitoring (QASP)

Important Considerations

A: Iterative Collaboration Generally Allowed

Requirements or RFP development may be conducted iteratively with the SBIR contractor if the contracting officer determines this approach is appropriate. Because the awardee is pre-determined by statute, such participation is generally unlikely to create organizational conflicts of interest, though the contracting officer retains discretion.

B: SBIR Data Rights

SBIR technical data and software developed under Phases I, II, or III receive enhanced protection. The Government receives limited rights during the 20-year protection period per SBA Policy Directive Section 8(b). For full coverage, see Foundations → Data Rights.

Process Summary

Critical Path Items: Acquisition plan approval (longest lead), legal review of SBIR Phase III authority, funding availability and certification, contractor proposal preparation.