Counsel Commentary: SBIR Phase III Eligibility Clarified

A recent Government Accountability Office (GAO) decision provides important guidance on when agencies may issue sole-source awards under the Small Business Innovation Research (SBIR) program. The ruling highlights how agencies can properly leverage SBIR Phase III authority while also underscoring the limits of contractor challenges.

In the protest of Digital Force Technologies, Inc., the GAO reviewed the Air Force’s decision to award a Phase III contract to Clear Align for a tactical security system. The protester argued the award was improper because the requirement did not derive from prior SBIR work, the proposed system contained mostly commercial products, and Clear Align was not the original SBIR contractor. GAO rejected those arguments and clarified how agencies and contractors should approach Phase III opportunities.

In his monthly Contract Management Magazine column, “SBIR Phase III Eligibility Clarified,” Rogers Joseph O’Donnell shareholder Stephen L. Bacon explains the decision and its implications. He notes that the ruling confirms Phase III eligibility depends on whether the contractor’s work builds upon prior SBIR efforts, that agencies may award Phase III contracts for larger systems incorporating SBIR-derived components, and that companies can qualify as successors-in-interest if intellectual property transfers are well-documented.

“A contractor’s eligibility for a Phase III award does not depend on how the agency writes its requirements,” Bacon writes. “Rather, the agency must reasonably determine that the contractor’s proposed solution builds upon its prior research and development efforts under the SBIR program.”

The piece appears in the magazine’s September issue (subscription required) and is the latest entry in Bacon’s monthly Counsel Commentary column. It is published by the National Contract Management Association and was used with permission.

Read Bacon’s latest Contract Management article here.