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To understand what a Phase III is and its importance, you must first know the SBIR and STTR programs.

The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs are extremely competitive government funding initiatives that support research and development for qualified small businesses.  

If you are new to the SBIR and STTR programs, then think of a Phase III as the ultimate goal of both programs. This opportunity provides companies with the ability to have sole-source contracts, which means your proposal doesn’t have to compete against other companies’ proposals for a Phase III award. Both programs fund Phase I and Phase II contracts:

  • A Phase I is the entryway into this program with a lower, though still substantial funding amount of $50K, and a shorter period of performance (PoP) that is meant to gauge the feasibility of the technology.
  • A Phase II kicks it up a notch higher award amounts of $750K-$1.5M, two years PoP, and the expectation for taking the feasibility or idea of a project to a prototype or testing stage.  

What is a Phase III? 

This type of funding scales that prototype to a full-blown product within the Department of Defense. It doesn’t have a set award amount, meaning the contract can reach any dollar value—from tens of thousands to millions of dollars. It’s important to note that a company can only acquire this contract through a continuation of a SBIR or STTR effort.  

The purpose of a Phase III contract is to transition and scale a company’s SBIR effort into widespread use. Once a company has received either a Phase I or II award, they are immediately eligible for sole-source Phase III awards. This contract can be awarded at any point after award of a Phase I or Phase II contract. 

A Phase III is defined as “an award that derives from, extends, or completes prior SBIR effort and is funded with non-SBIR funds” ( To simplify, the work must “derive from” or be traced back to a previous SBIR/STTR effort and funding agreement. The “extends” portion refers to work that can go beyond what a previous effort contained. Phase III efforts include products, services, research/R&D, or any combination of these. A Phase III contract can be any type of contract, and the SBIR Policy Directive mandates that they be awarded without competition. 

Since a Phase III is sole-source, you avoid a lot of the hassle of the traditional acquisition process. Typically, timelines will be significantly shorter because multiple proposals don’t have to be evaluated, and you don’t have to compete to win – you just have to find someone with funds available who wants to buy your supplies or services. 

Why is a Phase III so important? 

Two words—Sole Source.

Think of it as a golden ticket. This type of award allows a small business to enter a contract with no competition. A sole-source contract would mean that your company is the one single supplier that can fulfill the needs stated by the end-user or customer.  

Additionally, companies can get SBIR Data Rights for the tech they develop under Phase I and/or Phase II. They keep those same data rights for a Phase III. After a sole-source contract, Data Rights are the most important part of this type of award, followed by a continuation of the protections their tech has received under the SBIR data rights earned during their Phase I/II effort. 

Many other benefits come with this prestigious contract, including:

  • An unlimited contract dollar amount
  • No competition requirements
  • No small business size or standards
  • Open possibilities for the contract vehicle, funding type, and even agency.

Ultimately, Phase III contracts can be a fantastic opportunity for small businesses, and you should work through the SBIR/STTR programs to pursue them.

To learn more about Phase IIIs or getting started in the SBIR/STTR programs, feel free to reach out to Long Capture, and let us show you how your small business can benefit from these opportunities.  


Here are several articles for additional benefits of phase IIIs: