SBIR Proposal Writing Basics

SBIR Proposal Writing Basics: Understanding DOD’s Mandatory Phase I Options

Gail & Jim Greenwood, Greenwood Consulting Group, Inc.

In past years, we have written about the Phase 1 options that exist in the SBIR programs of many of the Department of Defense (DOD) components. These options have changed recently, so we want to revisit this important issue as many of you contemplate submitting proposals to DOD’s FY13.2 solicitation.

First, despite what you might think the term “option” implies, they are a “required” part of your Phase 1 project and proposal to the Army, Navy, and DARPA. Therefore, your proposal on any FY13.2 topic from any of these DOD components MUST include an option. Note that the other DOD components participating in the FY13.2 solicitation, including MDA and Air Force, do not allow you to include an option in your proposed project.

Second, the option is defined as the set of tasks that you propose to accomplish between your Phase 1 “base project” and your Phase 2 project. It is a way to keep you working on this important effort between the time that you are given word that you have been selected for a Phase 2 DOD SBIR award, and when that Phase 2 contract is actually put into place. Note that the Phase 1 option, then, will not begin immediately after the Phase 1 base project is completed—this is commonly misunderstood by DOD SBIR proposers. The option helps lessen the funding gap between the Phase 1 base project and Phase 2, but you should still expect several months between the end of the Phase 1 base and the start of the Phase 1 option. Your thinking, and your Phase 1 project timeline, should reflect this.

Third, SBIR companies often make the mistake of thinking that they can continue to pursue proof of feasibility of their innovation in the option period. That doesn’t make any sense, in the context of what we just said about the Phase 1 option being exercised AFTER the DOD component decides to give you a Phase 2 contract: you won’t be considered for a Phase 2 award until (and unless) you have proven the feasibility of your innovation. Therefore, always structure your DOD Phase 1 proposal such that you will prove the feasibility of your innovation in the Phase 1 base project, and then use the Phase 1 option to begin pursuit of the Phase 2 R&D effort. Note that this means that your feasibility study will have to be downsized into a modest $70k or $80k that is typically allowed in a Phase 1 base project at DOD components that have Phase 1 options.

Finally, don’t forget to include the Phase 1 option as a separate budget in your cost proposal. The DOD online cost proposal form makes this easy to do: the columns in the center of the DOD form should be used for your cost estimate for the base Phase 1 effort, while the columns on the right side of the form are used for your Phase 1 option. Make note of the maximum amount you can ask for in the Phase 1 base and option portions of your project (they vary by DOD component), and make sure you don’t exceed those caps in your cost proposal.