The DoD has developed two opportunities for SBIR and STTR projects that attract cash contributions from an outside investor for the Phase II effort:

• Fast Track
• Phase II Enhancement (or Phase II Plus in the Army and OSD)

Many small companies have found these programs to be an effective tool for leveraging their SBIR (or STTR) funds to obtain additional funds from outside investors. This is because a small company can offer an investor the opportunity to obtain a match of between $1 and $4 in DoD SBIR (or STTR) funds for every $1 the investor puts in.

"What Qualifies As Investment" contains DoD's official guidance on what types of relationships between a small company and an outside investor(s) in the company qualify as an investment under the SBIR and STTR Fast Track and Phase II Enhancement programs. It includes specific examples of company-investor relationships that we have been asked about and our official responses on whether these relationships qualify as an investment.

Fast Track and Phase II Enhancement are similar in that both encourage rapid transition of SBIR/STTR R&D into commercialization; however, there are a number of differences, such as Fast Track is initiated during phase I of the SBIR or STTR project and Phase II Enhancement is initiated during phase II, which are explained below. DoD Component programs may vary in their implementation of these two programs. Carefully review the eligibility requirements and limitations for the Component to which you are applying (also below).

Since October 1995, the Department's SBIR and STTR programs have featured a "Fast Track" process for SBIR/STTR projects that attract outside investors who will match phase II funding, in cash, contingent on the project's selection for phase II award. Projects that obtain such outside investments and thereby qualify for the Fast Track will (subject to qualifications described in the solicitation):

• Receive interim funding of $30,000 to $50,000 between phases I and II where applicable
• Be evaluated for phase II award under a separate, expedited process; and
• Be selected for phase II award provided they meet or exceed a threshold of "technically sufficient" and have substantially met their phase I technical goals.

Consistent with DoD policy, this process should prevent any significant gaps in funding between phases I and II for Fast Track projects.

To qualify for Fast Track --

Toward the end of a small company's phase I SBIR (or STTR) project, the company and the investor submit a Fast Track application through the DoD Submission Website at www.dodsbir.net/submission. For most Components, the application must be submitted within 150 days after the effective date of the SBIR (or STTR) phase I contract, except: (1) MDA which requires it within 120 days of phase I effective date; (2) DARPA which requires it no later than the last day of the 6th month of the phase I effort; and (3) CBD which requires it within 120 days of phase I effective date or by the CBD Phase II submission date whichever date is earlier. The Army will consider STTR Fast Track applications and proposals at any time during the year, but it is strongly recommended that they be submitted within seven months of Phase I contract award in order to maximize the likelihood of funds availability. The company is encouraged to discuss the application with its Phase I technical monitor; however, it need not wait for an invitation from the technical monitor to submit either a Fast Track application or a Fast Track Phase II proposal. The small business should contact its Phase I technical monitor for further instructions and guidance.

A Fast Track application package consists of the following items:

1. A completed Fast Track application form. The company and investor must:
   1. State that the outside investor will match both interim and Phase II SBIR funding, in cash, contingent on the company's selection for Phase II award. The matching rates needed to qualify for Fast Track are as follows:
      • For companies that have never received a Phase II SBIR award from DoD or any other federal agency, the minimum matching rate is 25 cents for every SBIR dollar. (For example, if such a company receives interim and Phase II SBIR funding that totals $750,000, it must obtain matching funds from the investor of $187,500.)
      • For all other companies, the minimum matching rate is 1 dollar for every SBIR dollar. (For example, if such a company receives interim and Phase II SBIR funding that totals $750,000, it must obtain matching funds from the investor of $750,000.)
   2. Certify that the outside funding proposed in the application qualifies as a "Fast Track investment," and the investor qualifies as an "outside investor," as defined in DoD Fast Track Guidance.
2. A letter from the outside investor to the company, submitted electronically on the DoD Submission Website either at the end of the Interim Statement of Work file OR by FAX to the number on the Fast Track submission page. The letter should contain:
   1. A commitment to match both interim and Phase II SBIR funding, in cash, contingent on the company's selection for Phase II award.
   2. A brief statement (less than one page) describing that portion of the effort that the investor will fund. The investor's funds may pay for additional research and development on the company's SBIR project or, alternatively, they may pay for other activities not included in the Phase II contract's statement of work, provided these activities further the development and/or commercialization of the technology (e.g., marketing).
   3. A brief statement (less than one page) describing (i) the investor's experience in evaluating companies' ability to successfully commercialize technology; and (ii) the investor's assessment of the market for this particular SBIR technology, and of the ability of the company to bring this technology to market.
3. A concise statement of work for the interim SBIR effort (less than four pages) and detailed cost proposal (less than one page), submitted electronically on the DoD Submission Website as a PDF file (other acceptable formats include MS Word, Word Perfect, RTF and Text). The cost proposal may be submitted using the on-line cost proposal form OR as part of the Interim Statement of Work file. If the company has already negotiated an interim effort (e.g., an "option") of $30,000 to $50,000 with DoD as part of its Phase I contract, it need only cite that section of its contract, and need not submit an additional statement of work and cost proposal. Note: The Air Force does not provide interim funding for Fast Track applications. The Fast Track Interim amount is not to exceed $30,000 for MDA, $40,000 for DARPA, and $50,000 for Army.

Also, in order to qualify for the Fast Track, the company:

1. Must submit its Phase II proposal within 180 days after the effective date of its Phase I contract, except (1) CBD which requires it by their annual Phase II proposal deadline; (2) OSD which requires it no later than 210 days after phase I effective date; and (3) DARPA which requires it before the last day of the 7th month of the phase I effort. The Army will consider STTR Fast Track applications and proposals at any time during the year, but it is strongly recommended that they be submitted within seven months of Phase I contract award in order to maximize the likelihood of funds availability.
2. Must submit its Phase I final report by the deadline specified in its Phase I contract, but not later than 210 days after the effective date of the contract (except for the Air Force, where it is not later than 270 days).
3. Must certify, within 45 days after being notified that it has been selected for Phase II award, that the entire amount of the matching funds from the outside investor has been transferred to the company.
   • For private sector investors, certification consists of a letter, signed by both the company and its outside investor, stating that "$______ in cash has been transferred to our company from our outside investor in accord with the SBIR Fast Track procedures." The letter must be sent to the DoD contracting office along with a copy of the company's bank statement showing the funds have been deposited. Before signing the certification letter, the company and investor should read the cautionary note at Section 3.8.
   • For government investors, the non-SBIR/non-STTR DoD program must provide a line of accounting within the 45 days that can be accessed immediately.

IMPORTANT: If the DoD contracting office does not receive, within the 45 days, this certification showing the transfer of funds, the company will be ineligible to compete for a Phase II award not only under the Fast Track but also under the regular Phase II competition, unless a specific written exception is granted by the Component's SBIR program manager.

Failure to meet these conditions in their entirety and within the time frames indicated will generally disqualify a company from participation in the SBIR Fast Track. Deviations from these conditions must be approved in writing by the contracting office.

Fast Track Phase II proposals. For projects that qualify for Fast Track, DoD will evaluate the Phase II proposals under a separate, expedited process in accordance with the Phase II evaluation criteria in Section 4.3 of the solicitation, and may select these proposals for Phase II award provided:

1. they meet or exceed criteria (a) and (b); and
2. the project has substantially met its Phase I technical goals and assuming budgetary and other programmatic factors are met Fast Track proposals, having attracted matching cash from an outside investor, presumptively meet criterion (c). Selection and award of a Fast Track proposal is not mandated and DoD retains the discretion not to select or fund any Fast Track proposal.

The DoD Component will notify each Fast Track company, generally within 10 weeks after of the completion of phase I, whether it has been selected for phase II award. Once notified, the company and investor must certify, within 45 days, that the entire amount of the matching funds from the outside investor has been transferred to the company.

Additional Reporting Requirement. In the company's final Phase II progress report, it must include a brief accounting (in the company's own format) of how the investor's funds were expended to support the project.

Since 2000, DoD Components have developed their own Phase II Enhancement policy to further encourage the transition of SBIR research into DoD acquisition programs as well as the private sector. Under this policy, the Component will provide a Phase II company with additional Phase II SBIR or STTR funding matching the investment funds the company obtains from non-SBIR/non-STTR sources such as DoD acquisition programs or the private sector. Phase II Enhancements (also called Phase II Plus) will

• Extend an existing Phase II contract for up to one year; and
• Match up to $500,000 of non-SBIR/non-STTR funds.

If selected for Enhancement, the funds from the outside investor must be transferred to the company before the SBIR/STTR-matching funds will be added to the Phase II contract. It is possible for a phase II project to receive additional SBIR/STTR funds from both Fast Track and Phase II Enhancement as long as the outside investment for Fast Track is separate and distinct from the outside investment for Phase II Enhancement.

To qualify for Phase II Enhancement -

During the Phase II effort, the small business must submit a Phase II Enhancement application through the DoD Submission Website at www.dodsbir.net/submission. See each Component's instructions below for details on their matching rates, funding limits, deadlines, and types of outside investors.

A Phase II Enhancement application package consists of the following items submitted through the DoD Submission website:

1. A completed Phase II Enhancement application form.
2. A letter from the outside investor, stating the amount the investor will provide in cash and that the investment is being made in response to the company's Phase II R&D effort, and that the entire amount of matching funds will be available for transfer within 45 days of the company's notification that it has been approved for a Phase II Enhancement. In addition, for investment from a government program, include a brief statement of how the resulting Phase II Enhancement technology will be integrated into the acquisition program's future activities. For investment from a private sector investor, include a brief statement of how the resulting technology or product will be commercialized. The letter should be submitted electronically on the DoD Submission Website either at the end of the Enhancement Statement of Work file OR by FAX to the number on the Enhancement submission page.
3. A concise statement of work for the Phase II Enhancement effort and detailed cost proposal (less than one page), submitted as a PDF file (other acceptable formats include MS Word, Word Perfect, RTF and Text which will be converted to PDF by the DoD Submission system). The cost proposal may be submitted using the on-line cost proposal form OR as part of the Enhancement Statement of Work file. See Component instructions for additional information required in the statement of work and/or cost proposal.

Army Phase II Plus Program

Due to the start of the Army's Commercialization Pilot Program (CPP), the Phase II PLUS program has been suspended indefinitely and new applications will not be considered.

Navy Phase II Enhancement Program

Since the Law (PL102-564) permits Phase III awards during Phase II work, the Navy may provide a one-to-four match, subject to availability, usually up to $250,000 of SBIR Phase II enhancement funds to Phase III funds, that the company obtains from a Navy Acquisition program office. The Phase III contract must be awarded before the Phase II enhancement funds are provided by modifying the existing Phase II contract. For more information on the Navy's Phase II Enhancement program, contact your SYSCOM representative (see POCs & Links at http://www.navysbir.com).

Air Force Phase II Enhancement Program

On active Phase II awards, the Air Force will select a limited number of Phase II awardees for the Enhancement Program to address new unforeseen technology barriers that were discovered during the Phase II work. If the Air Force Technical POC (TPOC) determines there is a technical barrier keeping the phase II from successfully meeting its original phase II proposal objective, the Enhancement will be initiated by the TPOC through discussions with the firm. In the Air Force program, the outside investment funding must be from a government source, usually the Air Force or other military service. The selected enhancements will extend the existing Phase II contract award for up to one year and the Air Force will match dollar-for-dollar up to $500,000 of non-SBIR government matching funds. Contact the local awarding organization SBIR Manager for more information (see Air Force SBIR/STTR Points of Contact at www.sbirsttrmall.com).

DARPA Phase II Enhancement Program

DARPA has implemented a Phase II Enhancement Policy to encourage the transition of SBIR research into DoD Systems or commercialization in the private sector. Under this policy, DARPA may provide a Phase II performer up to $200,000 (on a dollar-for-dollar basis) of additional SBIR funding if the Phase II contract is active and the performer can match the additional SBIR funds with non-SBIR funds from DoD, another Federal Agency, or the private sector. Generally, additional Phase II funds received from other government sources are applied to the existing Phase II contract, which may be extended for up to one year. Phase II Enhancements are subject to the availability of funds. For information on DARPA's Transition Support Pilot Program click here or contact DARPA.

MDA Phase II Transition Program

To encourage transition of SBIR projects into Ballistic Missile Defense Systems (BMDS), MDA's Phase II Transition Program will match up to $500,000 (on a one-for-one basis) to expand an existing Phase II contract that attracts investment funds from a DoD acquisition program, a non-SBIR/non-STTR government program or Private sector investments. The Phase II Transition Program allows for an existing Phase II SBIR contract to be extended for up to one year per Phase II Transition application, to perform additional research and development, in accordance with DoD policy. All applications are subject to review and availability of funding. For application instructions click here [PDF]. For more information on MDA's Phase II Transition program click here or contact MDA.

OSD Phase II Plus Program

The OSD SBIR Program has a Phase II Plus Program, which provides matching SBIR funds to expand an existing Phase II that attracts investment funds from a DoD acquisition program or Private sector investments. Phase II Plus allows for an existing Phase II OSD SBIR effort to be extended for up to one year to perform additional research and development. Phase II Plus matching funds will be provided on a one-for-one basis up to a maximum $500,000 of SBIR funds. All Phase II Plus awards are subject to acceptance, review, and selection of candidate projects, are subject to availability of funding, and successful negotiation and award of a Phase II Plus contract modification. For more information about OSD's Phase II Plus program, contact your Phase II contracting officer.

At this time, CBD, DTRA, and NGA do not utilize a Phase II Enhancement process.

Complete the on-line Fast Track Application or Phase II Enhancement Application package at http://www.dodsbir.net/submission/.

Verify all items in the application package, print out a hard copy for your records, and click the "Submit and Lock" icon to finish submission. No further changes will be allowed after the application package is submitted. Evaluation will not begin until the application has been locked.

If you have any questions, please contact the DoD SBIR/STTR Help Desk at 866-SBIRHLP (866-724-7457).