SBIR Phase III Contracting Process
Complete step-by-step guide through the SBIR Phase III contracting process from requirements gathering to contract award, including integrated logical connection narrative.
This SBIR Phase III contracting process consists of 5 major steps and 2 important considerations. The process leverages statutory authority under 15 U.S.C. §638(r)(4) to streamline acquisition while maintaining compliance with all applicable federal acquisition regulations.
Total Process Timeline: Estimated 4-6 months from requirements gathering to contract award, depending on organizational review cycles and funding availability.
Step 1: Requirements Gathering
COMPLETEThe 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
- • Describes the work in terms of required results
- • Uses measurable performance standards
- • Specifies desired outcomes rather than methods
- • Enables contractor flexibility in approach
Step 2: Establishing the SBIR Connection
IN PROGRESSA 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.
Phase III defined as work that:
- • Derives from prior SBIR efforts
- • Extends prior SBIR efforts
- • Completes prior SBIR efforts
Scope: Phase III explicitly includes "products, production, services, or any combination thereof."
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 consistent with FAR Part 10 market research obligations.
Why Document the Connection?
- • Creates 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
🔗 INTEGRATED LOGICAL CONNECTION NARRATIVE
Illustrative Example
The following PWS sections and logical connection narratives are illustrative examples only, demonstrating how to document the relationship between SBIR technology and professional services. Actual PWS content and section numbers will vary based on specific contract requirements.
Executive Summary
Navaide's AI-Driven Decision Support Framework (AI-DDSF), validated under SBIR Phase I, provides the technological foundation enabling contractor employees to deliver professional services at requisite quality and scale.
This Phase III effort extends the Phase I SBIR technology by operationalizing and tailoring AI-DDSF components to amplify workforce productivity across all Performance Work Statement tasks.
The Government receives professional services—IT portfolio management, data analytics, policy analysis, and performance assessment—where SBIR-developed technology serves as an integral component enabling service delivery.
Example: PWS Section 3.2 - IT Portfolio Manager Support
Summary of Professional Services
Navaide will support IT portfolio management functions, including system analysis, policy development, funding certification processes, governance board support, Enterprise Architecture compliance, and technical documentation. This work requires managing complex relationships between systems across multiple authoritative data sources.
Connection to SBIR Technology: EXTENDS
The AI-DDSF will extend Phase I technology to assist Navaide employees in managing IT portfolios through:
1. Policy Compliance Analysis
The framework will process policy documents to surface relevant compliance requirements when preparing Annual System Review assessments, OEP certifications, and BEA alignment documentation. When developing IT roadmaps, the framework provides context on how NDAA legislative changes affect DoDI 5000.75 implementation requirements.
2. System Redundancy Analysis
AI-DDSF helps employees compare system capabilities by extracting and normalizing functional descriptions from acquisition databases. Knowledge-graph components reveal overlapping versus complementary functionality.
3. PMO Collaboration Support
Employees leverage AI-DDSF to quickly access mapped relationships between programs, systems, and applications, reducing time required to understand interdependencies.
4. Documentation Management
AI-DDSF maintains updated electronic libraries and enables semantic search for policy excerpts, helping validate compliance with regulatory obligations.
5. Financial Reconciliation
For IRBWG and OEP support, the framework helps identify budget discrepancies across PBIS-IT and other financial systems, accelerating funding certification.
| Task | Manual Approach | AI-DDSF Enhanced |
|---|---|---|
| Annual System Review | Hours reviewing policy docs manually | Minutes with AI-powered policy surfacing |
| System Redundancy Analysis | Days comparing spreadsheets | Hours with automated capability extraction |
| OEP Certification | Manual budget reconciliation | Automated discrepancy identification |
| BEA Compliance | Manual cross-referencing | Semantic search with instant retrieval |
Example: PWS Section 3.3 - Data Analytics and Business Intelligence
Summary of Professional Services
Navaide will provide comprehensive data analytics and business intelligence services including:
- • Data integration frameworks (ETL from FPDS, SAM.gov, Navy ERP, eSRS)
- • Standard reports (Monthly CDR, Quarterly Services Acquisition Reports, Annual Procurement Metrics)
- • Custom analytics models for ad hoc data calls
- • Subject matter expertise for Tableau, Power BI, QuickSight, Databricks, Qlik, ADVANA/Jupiter
- • Interactive dashboards presenting procurement insights and KPIs
- • Data science efforts (statistical analysis, predictive analysis, ML, AI)
- • Robotic process automation (UiPath, Microsoft Power Automate)
- • PACT migration from Excel to alternative platform
Connection to SBIR Technology: EXTENDS
The AI-DDSF will extend Phase I technology to transform how Navaide employees execute data analytics tasks at enterprise scale:
1. Automated Data Integration
Framework's data integration and knowledge graph components automate extraction, transformation, and correlation of procurement data from FPDS, SAM.gov, Navy ERP, eSRS. AI-DDSF pre-processes datasets to identify anomalies, flag compliance issues, and suggest analytical perspectives—reducing manual data preparation time from days to hours.
2. Dashboard Development Acceleration
For dashboard development in Tableau, Power BI, and Qlik, AI-DDSF recommends optimal visualizations, automatically generates data mappings, maintains data lineage documentation, and enables employees to quickly search historical reports for precedents.
3. Robotic Process Automation Enhancement
AI-DDSF enables employees to identify automation opportunities by analyzing workflow patterns, quantify manual effort, and design intelligent workflows that adapt to changing data structures.
4. Predictive Analytics Support
AI-DDSF's ML components assist in feature engineering, model selection, validation and performance monitoring, and explanation generation—extending Phase I technology from prototype to operational deployment.
| Deliverable | Manual Approach | AI-DDSF Enhanced |
|---|---|---|
| Monthly Contract Deficiency Report | 2-3 days data prep + analysis | Hours with automated data processing |
| Quarterly Bridge Contract Analysis | Week of manual reconciliation | 1-2 days with AI-powered correlation |
| Dashboard Development | Manual data mapping | Automated mapping with recommendations |
| RPA Workflow Design | Brittle fixed-logic workflows | Adaptive intelligent workflows |
| Predictive Models | Limited to simple regressions | Advanced ML with explainability |
Example: PWS Section 3.4 - Prototyping, Testing, and Evaluation
Summary of Professional Services
Navaide will support prototyping, testing, and evaluation of emerging technologies to enhance Navy acquisition processes. This includes identifying automation opportunities, conducting POC development, testing prototype solutions, evaluating COTS/GOTS solutions, assessing cybersecurity implications, and maintaining an innovation pipeline.
Connection to SBIR Technology: EXTENDS and DERIVES
Prototyping, testing, and evaluation will either extend or derive from the AI-DDSF SBIR Phase I:
EXTENDS: Testing and Evaluation Platform
Navaide employees will extend AI-DDSF technology to test and evaluate emerging technologies. The framework's modular architecture provides:
- • Rapid integration of new AI/ML capabilities for evaluation
- • Controlled testing environments with production-like data
- • Performance benchmarking against established baselines
- • Risk assessment using validated analytical methods
- • Comparative evaluation frameworks
DERIVES: New AI Tool Development
Navaide will develop new, derivative AI tools enhancing operational capabilities. These inherit core capabilities (data integration, knowledge graphs, security controls) while adding mission-specific innovations:
- • Advanced NLP tools for policy documents
- • Improved predictive models for contract performance
- • Enhanced risk identification algorithms
- • Novel data visualization approaches
- • Specialized domain-specific AI agents
Conclusion
This logical narrative demonstrates that every Performance Work Statement task derives from, extends, or completes the AI-Driven Decision Support Framework validated under SBIR Phase I.
Example PWS Section 3.2 (IT Portfolio Support) - SBIR technology extends Phase I by automating policy compliance analysis, system redundancy assessment, and financial reconciliation.
Example PWS Section 3.3 (Data Analytics) - SBIR technology extends Phase I by transforming data integration, dashboard development, RPA design, and predictive analytics at enterprise scale.
Example PWS Section 3.4 (Prototyping) - SBIR technology extends and derives by providing evaluation platform and enabling development of new derivative AI capabilities.
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 SBIR Phase III award to Navaide.
Step 3: Acquisition Planning and Market Research
UPCOMINGFAR 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.
Notably, 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
- • Address NMCARS Annex 20 requirements
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. Requirements Validation
- • Validate inherently governmental functions not assigned
- • Confirm no personal services relationship
- • Assess organizational conflicts of interest
- • Document safeguards
4. Contract Type Selection
- • Analyze appropriate contract type(s)
- • Justify cost-reimbursement if applicable
- • Develop contract structure (base + options)
- • Define CLINs and funding approach
- FAR 7.105 - Acquisition Planning (describes requirements, competition strategy, risks)
- FAR 6.302-5(a)(2)(i) - Authorized by Statute (SBIR Phase III authority)
- SBA Policy Directive Section 4(c)(3) - "Further justification is not needed"
Step 4: Request for Proposal Development
UPCOMINGThe contracting officer will determine the appropriate solicitation method based on the specific circumstances. Options may include a written RFP (most common), an oral RFP, or a response to an unsolicited proposal, per FAR 15.6.
It is worth noting that SBIR Phase III awards are exempt from synopsis requirements per SBA Policy Directive Section 2(j)(4)(iii).
Solicitation Methods
- • Written RFP (most common for complex services)
- • Oral RFP (if appropriate for requirement)
- • Unsolicited Proposal Response (if applicable)
Synopsis Exemption
- • No SAM.gov Contract Opportunities posting required
- • Reduces acquisition timeline significantly
- • Per SBA Policy Directive Section 2(j)(4)(iii)
- • Document exemption in administrative record
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
UPCOMINGThe contract may be awarded using any appropriate contract or agreement types as determined by the contracting officer. SBA Policy Directive Section 4(c) establishes that there is no dollar limit, duration limit, or contract type restriction for Phase III awards.
The award 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 appropriate SBIR data rights provisions per DFARS 252.227-7018.
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)
Timeline Considerations
Schedule Factors: Award timing may be constrained by mission needs, funding availability, or incumbent contract expiration.
Streamlined Procedures: SBIR Phase III procedures (no formal J&A, no synopsis requirement) can accelerate the acquisition timeline compared to competitive procurements.
- • No dollar limit on Phase III awards
- • No duration limit on Phase III awards
- • No contract type restrictions
- • Must be funded with program funds (not SBIR set-aside funds)
Important Considerations
Consideration 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 (SBIR Phase III authority), such participation is generally unlikely to create organizational conflicts of interest, though the contracting officer retains discretion to make this determination.
Improved Requirements Definition
- • Contractor provides technical expertise on SBIR technology
- • Government gains better understanding of feasible approaches
- • PWS more accurately reflects technology integration
- • Reduces requirements-capability mismatch
Enhanced Efficiency
- • Fewer clarification questions during proposal phase
- • Reduced likelihood of post-award scope disputes
- • Better cost estimate alignment
- • Faster contract performance initiation
Technology Understanding
- • Government gains AI-DDSF familiarity
- • Informed deployment discussions
- • Better data rights appreciation
- • Enhanced post-award monitoring ability
Normally applies when contractor prepares specifications for competitive procurements, creating unfair competitive advantage.
SBIR Phase III Context: No competition exists (statutory sole-source), therefore no competitors to disadvantage. OCI concerns substantially reduced. However, contracting officer retains authority to limit collaboration or impose safeguards.
Consideration B: SBIR Data Rights
SBIR technical data and software developed under Phases I, II, or III receive enhanced protection under the SBIR statute, FAR, and DFARS. The Government receives limited rights during the 20-year protection period per SBA Policy Directive Section 8(b).
Government MAY (During Protection Period)
- ✓ Use data internally without restriction
- ✓ Modify for government use
- ✓ Reproduce for government use
- ✓ Disclose to government support contractors (with protection)
Government MAY NOT (During Protection)
- ✗ Release outside government without permission
- ✗ Use for competitive procurements
- ✗ Authorize third parties for commercial use
Not "Vendor Lock"
SBIR data rights should not be construed as "vendor lock." The protections are designed to protect contractor's intellectual property investment, enable private sector commercialization, incentivize small business innovation, and balance government needs with contractor rights.
Post-Protection Rights (After 20 Years)
Government obtains Government Purpose Rights (expanded rights):
- • Ability to release outside government for government purposes
- • Support for follow-on competitions
- • Long-term sustainment capability
Rights in Noncommercial Technical Data and Computer Software—Small Business Innovation Research (SBIR) Program
Implements statutory protections, defines government rights during and after 20-year protection period, specifies marking requirements.
Process Summary & Next Steps
| Step | Status | Key Milestone | Estimated Duration |
|---|---|---|---|
| Step 1: Requirements | ✅ Complete | PWS approved | 4-6 weeks |
| Step 2: SBIR Connection | 🔄 In Progress | Narrative documented | 2-3 weeks |
| Step 3: Acquisition Planning | 📅 Upcoming | ISTRAP approved | 4-6 weeks |
| Step 4: RFP Development | 📅 Upcoming | RFP issued | 3-4 weeks |
| Step 5: Contract Award | 📅 Upcoming | Contract executed | 4-6 weeks |
Critical Path Items (Schedule Drivers)
- 1. Acquisition plan approval (longest lead item)
- 2. Legal review of SBIR Phase III authority documentation
- 3. Funding availability and certification
- 4. Contractor proposal preparation and evaluation
Related Resources:
- Data Rights Guide - SBIR data rights comprehensive primer
- Legal Framework - Statutory authority and legal precedents
- Resources & Tools - Checklists, templates, glossary