SBIR Phase II focuses on the development, demonstration, and delivery of your small business’ proposed innovation.

Phase II of the federal government’s Small Business Innovation Research (SBIR) Program continues the research and development (R&D) initiated in SBIR Phase I. Funding received in Phase II is based on the scientific, technical, and commercial potential of the proposed project. All SBIR grants are federally funded.

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The journey through the three phases of the government’s Small Business Innovation Research (SBIR) program is long and arduous, no matter which federal agency you’re courting for funds.

But when all your hard work pays off, and you receive your funding at the end of a phase, there’s nothing sweeter!

However, there’s no time to rest on your laurels. As soon as you make it through Phase I, it’s time to put your team into high gear and get to work on Phase II.

The second of three phases in your SBIR effort, Phase II sees the continuation of the research and development (R&D) you started in the first phase. It’s crucial that you press on with your efforts—don’t fall behind now when you’re so close to the finish line!

To help make this process as fruitful as possible, we’ve gathered the top 20 questions people ask about SBIR Phase II.

Table of Contents



  1. What Is SBIR Phase II?

Let’s start at the very foundation of SBIR Phase II, the basic definition.

In the second phase, your team takes the R&D that was initiated in phase I to the next level.

Phase II is the stage that truly gives life to your business, and more importantly, your technology. Phase II awards are given based on the results of the research and tests conducted in Phase I and are intended to fund the creation of an actual, workable prototype.

In the simplest terms, Phase II sees your innovative idea become an actual product.

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  1. How Much Funding is Awarded in SBIR Phase II?

The funds you receive in your Phase II award are based mainly on the results you achieved in Phase I and depend on which federal agency you’re working with.

It’s entirely possible that you could receive more than $1 million in a Phase II award, though the average is roughly around $920,000.

For example, the Department of Defense’s Navy awards funding that typically ranges from $500,000 to $1,700,000.

  1. How Long is Phase II of SBIR?

The SBIR Phase II award period typically lasts up to 24 months.

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  1. What are the Eligibility Requirements for SBIR Phase II?

First and foremost, only small businesses that have received an SBIR Phase I award are eligible for SBIR Phase II awards.

And while each federal agency might have different technical requirements for Phase II, the general requirements for eligibility mirror those of Phase I and are as follows:

  • The small business must operate in the U.S., outside of a small number of subcontractors or consultants.
  • The company must have fewer than 500 employees.
  • The company must be majority-owned by U.S. citizens.
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  1. How Does the Small Business Administration Define a “Small Business Concern” for the SBIR program?

As stated above, only small businesses can strive for an SBIR Phase II award. But what is a “small business concern?” The Small Business Administration (SBA) defines it as such:

  • Organized for-profit

  • Located in the U.S., operating primarily within the U.S., or makes a significant contribution to the U.S. economy through taxes or makes use of American products, materials, or labor.

  • Legally considered an individual proprietorship, partnership, limited liability company, corporation, joint venture, association, trust, or cooperative. If it is a joint venture, there can be no more than 49 percent participation by foreign business entities.

  • At least 51 percent owned and controlled by one or more individuals who are citizens of, or permanent resident aliens in, the U.S.

  • Has no more than 500 employees, including affiliates

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  1. What Federal Agencies Participate in SBIR Phase II?

The same 11 agencies that award funds in the first phase also participate in SBIR Phase II.

For contact information for each agency, check out our blog about SBIR Phase I.

 

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  1. Can a Small Business receive an SBIR Phase II Award from an Agency Other Than The One That Issued The Phase I Award?

Yes! Any small business that receives a Phase I award from one federal agency may receive a Phase II award from another agency.

This happens through a written determination that the topics of the awards are the same, and both agencies report the awards to the SBA.

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  1. Does SBIR Phase II Require a Commercialization Plan?

Yes! The SBIR Phase II award process requires a consideration of the proposal’s commercial potential. 

This includes the possibility to transition the technology to private sector applications, government applications, or government contractor applications.

Commercial potential in SBIR II may be demonstrated through:

  • The small business’ record of successfully commercializing other research.
  • Phase II funding commitments from the private sector or other non-SBIR funding sources.
  • General indicators of the commercial potential of the innovation.
  1. Can I Skip SBIR Phase I and Go Directly to Phase II?

No. The results of your SBIR Phase I work determine whether or not there will be a Phase II to continue your efforts. Only Phase I awardees are eligible for a Phase II award.

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  1. What is a “Direct-to-Phase II” SBIR Award?

Though you cannot “skip” Phase I and go directly to Phase II, if you already have a working prototype, there is a pathway known as “Direct-to-Phase II.”

This pathway is for small businesses that have already performed Phase I research through other funding sources. However, this is not available for the STTR program.

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  1. What is The “Fast-Track” Mechanism in SBIR Phase II?

Presently available in solicitations at various participating government agencies, the Fast-Track mechanism expedites the decision and award process for SBIR Phase II funding.

This is mainly for scientifically meritorious proposals with a high potential for commercialization. Fast-Track incorporates a submission and review process in which both Phase I and Phase II proposals are submitted and reviewed together.

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  1. What is the Difference Between Fast-Track and Direct-to-Phase II?

The primary difference between Fast-Track and Direct-to-Phase II applications is the timing of the Phase I project work. 

Phase I work is the first component of the project period in a Fast-Track. Direct-to-Phase II bypasses this step.

Instead, Direct-to-Phase II applicants must have performed the equivalent of Phase I research before applying.

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  1. What is SBIR Phase IIB?

When you renew your Phase II application for another round of funding, it’s known as SBIR Phase IIB. 

Offered at some federal agencies such as the Department of Health & Human Services or the Department of Defense, Phase IIB is mainly for R&D proposals that need a long time and more significant funds to get from theory to prototype.

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  1. What is the Difference between STTR and SBIR Phase II?

The significant difference between the SBIR and STTR Phase II is that the STTR requires the small business to forge a partnership with a nonprofit research institution to collaborate on R&D in Phase II.

In both SBIR and STTR, the award goes to the small business, which is the primary contractor or awardee, while the nonprofit research institution takes on the role of a subcontractor.

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  1. Can I switch from the SBIR or the STTR Programs after Receiving Phase I Funding?

Yes! SBIR and STTR applicants can switch programs when they arrive at Phase II or Phase IIB to any active and open SBIR or STTR solicitation.

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  1. How Do You Apply for SBIR Phase II?

Small businesses can submit an SBIR Phase II proposal anytime between six months and two years after the start date of their Phase I award.

If you don’t know the start date of your Phase I award, it can be found on your Phase I award letter.

Your team’s principal investigator must remain in contact with the appropriate government agency to stay up-to-date, as well as to inform the agency of any potential roadblocks.

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  1. Can I Change the Title of my Proposal Between SBIR Phase I and Phase?

Yes! You can submit an SBIR Phase II proposal with a different title than Phase I. Just be sure to include the Phase I award number on all documents you submit for review.

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  1. Who Decides SBIR Phase II Proposal Submission Dates?

Awardees must establish proposal submission dates for Phase II. However, federal agencies may negotiate mutually acceptable Phase II proposal submission dates with each awardee.

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  1. What is the SBIR’s Federal And State Technology (FAST) Partnership Program?

The FAST Partnership Program funds organizations with the expressed purpose of increasing the number of SBIR and STTR awards from women, socially/economically disadvantaged individuals, and small businesses in underrepresented areas (typically, rural states). 

This is accomplished through outreach, technical and business assistance, and financial support.  

Go to the FAST Partnership Program web portal to learn more about funding and check out a state-by-state listing of current FAST awardees.

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  1. What are the SBIR Phase II Accounting Requirements?

Once a small business is awarded an SBIR Phase II contract or grant, the federal government has much higher expectations regarding tracking time, costs, and the overall accounting system. 

Simply put: There’s a lot of money on the line during Phase II, so the government will scrutinize every dollar and cent. What’s more, many SBIR/STTR Phase II awards are cost-plus-fixed-fee (CPFF) instead of a firm-fixed-price (FFP)—this designation presents a greater risk to the federal government.

Along every step of the way in SBIR Phase II, the government must be assured that the small business possesses an accounting system that can calculate indirect rates, separate direct from indirect costs, and isolate unallowable costs from allowable ones. 

And finally, your accounting system must be able to report how much has been billed on a contract and how much is still yet to be billed.

For a small business already stretched thin working on R&D for their innovative idea and starting to think about commercial applications, keeping the accounting side straight and clear can be a formidable task. 

Team 80 steps in as your partner in this accounting process, taking on the workload while staying in constant contact with your team from the start of your journey, all the way to the realization of your goal.

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If you’ve been awarded an SBIR Phase II Grant learn more about Team 80’s SBIR and STTR Accounting Services. 


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Sarah Sinicki


Partner & Director of Business Development at Team 80 LLC

Sarah is a Colorado native and loves everything about our beautiful state. In her free time you can find her spending time with her husband, two kids and her Yorkie named Marley. She also enjoys paddle-boarding, riding her cruiser bike, and just hanging out with friends and family. Sarah is also an avid Colorado Avalanche fan, so if you ever want to talk about hockey, she’s your gal. As one of the Partners of Team 80, she certainly does have a passion for helping small businesses. She is able to apply her 20 years of experience to tailor an accounting solution for a business owner no matter what industry they might be in.

Been with Team 80: May 2008

Education
Metropolitan State University of Denver
Degree Name: BS
Field Of Study Accounting
Graduated: 1998

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