Phase III SBIR Sole-Source Authority.
The definitive reference.

1. The statutory authority.

The Phase III sole-source authority rests on a three-layer regulatory stack:

• 15 U.S.C. § 638(r) — the SBIR statute. The relevant subsection authorizes federal agencies to issue Phase III awards on a sole-source basis to the small business concern that performed the prior Phase I or Phase II SBIR/STTR work, where the proposed work derives from, extends, or completes that earlier effort.
• The SBIR/STTR Policy Directive — issued by the SBA. It operationalizes the statute and requires every participating agency to make Phase III awards available without competition.
• Agency FAR supplements — DFARS for DoD, NFS for NASA, and equivalents. These implement the authority and provide agency-specific procedural guidance.

FAR 6.302-5 (the FAR provision that recognizes sole-source authorities required or authorized by statute) is the FAR-level link between Phase III and the broader federal acquisition framework. The Phase III sole-source authority does not rest on FAR Part 6 itself; it rests on the SBIR statute, which FAR 6.302-5 acknowledges.

2. The DEC test — derives, extends, or completes.

The statute does not allow any work to be called Phase III. The proposed work must derive from, extend, or complete the prior SBIR/STTR effort. Those three verbs define the scope of qualifying work:

• Derives from — the new work is a natural follow-on to the technology, components, or methods developed in Phase I/II.
• Extends — the new work builds on Phase I/II results, applying them to a new use case, environment, or scale.
• Completes — the new work finishes the commercialization of the Phase I/II technology, including production, integration, sustainment, or deployment.

The DEC statement is the document that establishes this nexus for the contract file. Without a defensible DEC statement, the Phase III authority is not properly invoked. A weak DEC is the most common reason a Phase III stalls in legal review.

3. Why no J&A is required.

The Justification & Approval (J&A) is the document required for FAR Part 6 sole-source awards. The Phase III sole-source authority lives outside FAR Part 6 — it is a statutory authority recognized by FAR 6.302-5. It does not require, and does not benefit from, a J&A. A short Determination & Findings (D&F) memorializing the contracting officer's invocation of the Phase III authority is the normal substitute.

Contracting officers who default to writing a J&A for Phase III invoke a framework with its own thresholds, review requirements, and procedural risk. The cleaner path is to invoke the SBIR Phase III authority directly. This is one of the most important things a Phase II awardee can know going into the conversation.

4. SBIR data rights in Phase III.

SBIR data rights carry forward from Phase I/II into Phase III. They are protected for 20 years from the date of the original SBIR/STTR award, under DFARS 252.227-7018 (for DoD work) and corresponding clauses at civilian agencies. During the 20-year protection period the government has a limited license — internal government use only — and cannot release the data to a competitor or use it to compete the awardee out of follow-on work.

A Phase III contract must include the appropriate SBIR data-rights clause. Substituting a standard FAR data-rights clause (e.g., FAR 52.227-14) erodes the protection. Marking discipline during Phase II is what protects the rights when Phase III delivery occurs. The 2024 final rule on DFARS 252.227-7018 clarified marking requirements and the scope of "SBIR data" but did not shorten the 20-year period.

5. Cross-agency Phase III awards.

Any federal agency can issue a Phase III award based on prior SBIR/STTR work funded by any other federal agency. The funding agency does not need to approve the award. The using agency invokes the Phase III authority on its own, based on the underlying SBIR effort. This is one of the most strategically valuable features of the Phase III pathway and one of the most underused.

6. Contract type and vehicle.

Phase III is independent of contract type. It can be awarded as Firm Fixed Price, Cost Plus Fixed Fee, Time and Materials, or any other contract type that fits the work. It can be a standalone contract, an IDIQ task order, a BPA call, or another vehicle structure. The Phase III sole-source authority applies regardless — what matters is the underlying nexus to the prior SBIR/STTR effort, not the contract architecture.

7. Funding sources for Phase III.

Phase III is not funded out of the SBIR/STTR set-aside. SBIR set-aside dollars are reserved for Phase I and Phase II. Phase III work is funded out of whatever non-SBIR appropriation the using customer has — O&M, RDT&E, procurement, working capital, or another category. Identifying which appropriation will fund the work, and when that appropriation becomes available, is a real part of preparing a Phase III award.

8. Time limits (or lack thereof).

There is no statutory time limit on when a Phase III award must be made. A Phase III can be awarded months after Phase II closes, or several years later. The only condition is that the proposed work still meets the DEC test against the prior SBIR/STTR effort. Time itself does not invalidate the authority.

9. Common misconceptions, side by side.

10. Frequently asked questions.