In addition to SBIR Data Rights, Phase III status brings with it: 1) the right to sole-source contracts; 2) exemption from SBA size standards for a procurement; 3) no limits on the dollar size of a Phase III procurement; 4) “roll-over” or extension of SBIR Data protection periods under prior SBIR funding agreements; 5) a right to the Phase III mandate, by which the SBIR and STTR firm have a right to be awarded a future Phase III award to the greatest extent practicable; 6) the right to receive subcontracts for Phase III work on a sole-source basis; and 7) the ability to pursue research, research and development, services, products, production, or any combination of those under a Phase III. Let’s look closer at these rights one at a time.
The right to receive sole-source funding agreements is a key Phase III right.
This right is expressly provided in the SBIR/STTR Reauthorization Act of 2011as well in the SBA SBIR and STTR Policy Directives.
The right to sole-source contracts stems directly from the SBIR/STTR firm’s Data.
****The government is prohibited from disclosing SBIR Data to a private firm outside the government. ***
****Hence, the government cannot make an award to another firm for work or a product that the government cannot even describe to that other firm. ****
This nondisclosure obligation creates the imperative, the necessity, to deal only with the SBIR firm that developed the SBIR Data in the first place.
**Phase IIIs can also be for any dollar amount. There is no limit on Phase III awards, like there are on Phase Is ($150,000) or on Phase IIs ($1,000,000).***
SBIR firms have reportedly received Phase III awards in amounts of hundreds of millions of dollars because of this lack of a size limit on Phase III awards.
**Coupled with the right to receive sole-source awards, this would seem to represent an opportunity for federal agencies and officials to purchase SBIR technologies that are faster, better, cheaper than existing ways of doing things.***
One of the most important Phase III rights relates to what is known as the “roll-over” provision. That provision is set out in section 8 of the SBA SBIR Policy Directive. The provision allows for the extension of SBIR Data rights protection periods to four years from the end of the latest Phase III civilian award received, or five years after the end of the project in the latest military award received.
While this is good, the fact that the number of these extensions is unlimited is even better.
*** In effect, this roll-over provision can keep the SBIR Data Rights protection period in place indefinitely.***
*** This allows the SBIR firm not only to commercialize a product, but also to sell it for an adequate number of years to recoup its investment in the technology.***
***This also allows the SBIR firm to sell its technology or the SBIR firm itself to a buyer with an assurance that the valuable SBIR Data underlying the firm’s SBIR technology will not be disclosed anytime soon.***
This roll-over provision is one of the many reasons why SBIR firms sell for a premium value in the marketplace.
So one would think that the Phase III mandate would require federal agencies in every case to award SBIR technologies to SBIR firms. Such is not the case. Agencies sometimes wish to obtain the benefit of SBIR technologies without the restrictions that SBIR awards bring with them. That is why vigilance and an understanding of Phase IIIs is essential to preserving SBIR technologies and SBIR Data Rights.
***Phase III status can also apply to subcontracts. Subcontracts can be Phase IIIs and Phase IIIs can be subcontracts. This is important because the Department of Defense, NASA, the Department of Energy and other large agencies like to deal with large firms and insert SBIR technologies into their missions through large prime contractors. ***
While this is perfectly acceptable, many of the employees in these large firms are not fully aware of SBIR laws and regulations. They are not used to having their subcontracts restricted, or having the small firm subcontractor wield so many rights. This can lead to friction and trouble in the relationship. Nevertheless, most times the large firm’s employees can be provided with information about the small firm’s SBIR rights, and will accept them.
***Phase III activities are unlimited. They can be for research, research and development, services, products, production, or any combination of those.***
*** Thus, there are no limits on the type of products, services, or activities for which an agency can make use of a Phase III.***
This flexibility makes the Phase III an extremely useful tool for agency officials looking for faster, better, cheaper ways of accomplishing their missions.
Taken together, these Phase III rights are valuable not only to the SBIR firm, but to the government as well. More and more government officials are learning to incorporate SBIR and STTR technologies into their missions, making those missions more cost effective and efficient.
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