How to buy AI without a competition.
SBIR Phase III is the least-used sole-source authority in federal contracting and the most generous. It has no dollar ceiling, no limit on the number of awards, and a statutory instruction to agencies to use it. This note explains what it is, what a file needs, and where it applies, in the language a contracting officer and a program office can both use.
Work that derives from, extends, or completes SBIR-funded technology.
The Small Business Innovation Research program funds Phase I feasibility and Phase II development with SBIR dollars. Phase III is everything after that: any work that derives from, extends, or completes the technology developed under those awards, funded with non-SBIR dollars, by any federal agency or any federal prime contractor. The statute, 15 U.S.C. 638(r), says agencies and primes shall issue Phase III awards to the SBIR awardee that developed the technology "to the greatest extent practicable," including sole-source awards. The SBA's SBIR and STTR Policy Directive adds that there is no limit on the number, duration, type, or dollar value of Phase III awards, and that competition requirements are satisfied by the original SBIR competition.
The FAR treats it as a statutory exception to full and open competition at FAR 6.302-5(b)(5). No justification and approval for other than full and open competition is required; the file cites the exception.
Three things, none of them a competition.
The Phase I and Phase II award numbers, the topic, and a short determination that the requirement derives from, extends, or completes that technology. The awardee supplies the lineage statement; the contracting officer makes the determination.
Phase III rights follow the technology. When the original awardee's business or intellectual property has been acquired, the successor-in-interest holds the rights; the executed asset purchase agreement is the document the file references.
DFARS 252.227-7018 governs SBIR data rights: the government's use of SBIR-developed technical data and software is limited for a protection period, which protects its own investment from being handed to a competitor. Privately funded enhancements carry their own assertions.
Phase III is funded with non-SBIR money: operations and maintenance, research and development, procurement, working capital. The awarding agency does not need to be the agency that funded Phase I or II, and a prime contractor may issue a Phase III subcontract.
Because nobody tells the contracting officer the technology qualifies.
Most SBIR-derived products are sold as if they were any other commercial item, and most program offices do not know which of their vendors' products carry Phase III lineage. The authority exists to keep the government from re-buying what it already paid to develop; it works only when the lineage is stated on the first page of the proposal and the market-research memo says the words "derives from, extends, or completes."
A practical test for a program office: ask the vendor for the Phase I and Phase II award numbers. If they exist and the requirement builds on that technology, the fastest path to award is already in the file.
Optimize is SBIR-derived technology.
Optimize derives from Air Force SBIR Phase I (2020) and Phase II (2021) awards under topic FX201-CSO1-0384, was awarded under Phase III authority in 2022, and has been licensed to a Department of the Air Force flying-training organization under a multi-year contract awarded directly to Federal AI in 2023. Federal AI holds the technology rights as successor-in-interest. Any agency or prime that wants the readiness decision layer, or work that extends it, including integration with a new system of record, can award it under 15 U.S.C. 638(r). The lineage statement and data rights assertions are supplied on request, same day. The other three paths, and the paste-ready market-research paragraph, are on how to buy; the Acquisition Path Finder drafts the memo.
Bring your contracting officer. We will bring the lineage.
Thirty minutes with a technical lead; the acquisition questions answered on day one, not day ninety.