What is Phase I of the DoD SBIR Program?

The DoD SBIR program is structured in three phases, each with distinct objectives and funding levels. Phase I marks the initial entry point for startups and small businesses to participate in the SBIR program. The focus of Phase I is to evaluate the scientific, technical, and commercial merit and feasibility of innovative ideas that align with the needs outlined in DoD SBIR solicitations. 

DoD SBIR Phase I awards support laboratory experiments, prototype development, field testing, and other activities required to help determine if a proposed solution is scientifically valid and commercially viable. The Phase I contract period is generally 6 months long, providing a tight timeframe to conduct this proof-of-concept work. Phase I awards are typically around $150,000.

While Phase I focuses on evaluating feasibility, it sets the stage for conducting further research and development (R&D) in follow-on phases if the effort is successful. Therefore, Phase I acts as a critical gatekeeper and screening mechanism for the DoD SBIR program. Only the most promising technologies will advance beyond the initial feasibility analysis and prototyping conducted in Phase I.

The DoD accepts SBIR proposals on a set schedule, with pre-release, open, and close dates for each solicitation topic. Before the application window opens, the DoD issues a Broad Agency Announcement (BAA) that provides crucial information like a program description, schedule, eligibility requirements, evaluation criteria, and specific technology focus areas. 

Startups should carefully review the open topics in the BAA and identify ones where they can propose innovative solutions that align with their capabilities. It is critical to connect the proposed research and development directly to the problem or need described in the topic. Proposals that fail to adequately address the topic description are unlikely to move forward.

When the application window opens, eligible companies can submit their Phase I proposal package through SBIR.gov. This includes:

• Technical Volume: A 25-page section detailing your proposed R&D, including objectives, work plan, personnel, facilities and equipment, commercialization strategy, etc.
• Cost Volume: Provides detailed budget breakdown including labor, overhead, materials, travel, and profit or fee. 
• Company Commercialization Report: Information on your company’s history and track record of commercializing prior SBIR research

By the solicitation close date, the entire proposal must adhere to DoD formatting requirements. Startups must take care to comply with all guidelines or risk having their proposal rejected before evaluation.

Proposal Requirements

The core of the Phase I proposal package is the Technical Volume, where applicants describe what R&D they intend to accomplish, why they are qualified to conduct it, and how it will commercially benefit both the company and the DoD. Here are key components of the Technical Volume:

• Technical Objectives: Succinctly state the specific objectives of Phase I R&D and what questions the work aims to answer.
• Work Plan: A Detailed description of the methods, tasks, evaluations, and milestones required to accomplish the technical objectives
• Related R&D: Demonstrate familiarity with state-of-the-art and explain how your solution goes beyond existing capabilities. 
• Key Personnel: Highlight technical capabilities of the project team, including principal investigator, engineers, developers, etc.
• Facilities and Equipment: Describe available facilities and major equipment your company will utilize during Phase I.

The Cost Volume provides a detailed budget that justifies all expenses required to execute the proposed Technical Volume work plan. Budget categories include:

• Direct Labor Costs: Hourly or monthly rates and hours for technical team personnel 
• Overhead Costs: Indirect business expenses like rent, utilities, and supplies
• General and Administrative Costs: Management, accounting, legal, and other G&A costs
• Profit: Capped at 7% of total costs 
• Total Cost: All costs and profit, which generally may not exceed $150,000.

DoD SBIR proposals are evaluated based on three key factors to identify the most promising technologies for funding:

1. Scientific/Technical Merit and Feasibility The Proposal demonstrates an innovative technical approach with reasonable methodology for achieving objectives. 
2. Qualifications of the Technical Team: Personnel have the necessary expertise and experience to successfully execute the proposed work.
3. Ability to Commercialize: The Company demonstrates the capability to commercialize results in military and/or private sector markets.

In addition, proposed costs must be appropriate and realistic for the technical scope and offer good value to the DoD.

Phase I Deliverables

If awarded a DoD SBIR Phase I contract, companies are obligated to deliver a final technical report within 15 days of project completion. This report documents the methodology, key findings, results, and conclusions of the feasibility study. Startups also must submit economic impact reports that describe how the award positively affected their technological and competitive capabilities.

Transitioning from Phase I to Phase II

Completion of Phase I is a prerequisite to being eligible for a Phase II award but does not guarantee Phase II funding. Companies must submit a new Phase II proposal near the end of their Phase I project, which will undergo an evaluation process similar to Phase I. Phase II continues the R&D effort from Phase I through prototype development, testing, and refinement.

SBIR Phase I: A Springboard for Startup Success

Early-stage funding allows startups to transform innovative ideas into functional prototypes and viable products. However, finding financing before revenue and customers materialize is notoriously challenging. The DoD's SBIR program offers a crucial mechanism for startups focusing on the defense and government markets to secure non-dilutive capital during this precarious phase.

This post provided an in-depth overview of Phase I of the DoD SBIR program, from eligibility requirements to deliverables. While highly competitive, Phase I represents a tremendous opportunity for eligible startups. By utilizing SBIR Phase I awards to establish scientific and technical merit, startups can validate their innovations while building momentum and capabilities for follow-on development and commercialization activities.