SBIR Direct to Phase II: When to Skip Phase I and How to Make the Case

What Direct to Phase II Actually Means

Direct to Phase II (DP2 or D2P2) is an SBIR pathway that allows a small business to apply for Phase II funding without first completing a Phase I award under the same program. The premise is straightforward: if your company has already demonstrated the scientific and technical feasibility that Phase I is designed to establish — using non-SBIR funds — you should not be forced to repeat that work at government expense before accessing Phase II development funding.

Phase II awards typically range from $750,000 to $1.75 million over 24 months, depending on the agency and solicitation. By skipping Phase I, you eliminate the 6-to-12-month feasibility study, the gap between Phase I completion and Phase II award, and the overhead of managing a $150,000-$275,000 project whose results you have already produced. For companies with mature technology and clear government customers, Direct to Phase II can compress the SBIR timeline by 18 to 24 months.

The catch is that the feasibility burden does not disappear. It shifts entirely to you. Your proposal must contain a standalone feasibility documentation package that convinces reviewers your technology has already cleared the threshold that a Phase I project would establish. This documentation is the single most important element of a Direct to Phase II proposal, and it is where most unsuccessful applicants fall short.

Which Agencies Offer Direct to Phase II

Not every federal agency supports the Direct to Phase II pathway. Availability depends on congressional authorization, agency policy, and — in many cases — the specific solicitation cycle. The following agencies have historically offered D2P2, though the landscape shifted significantly when SBIR/STTR authorization lapsed on October 1, 2025.

Department of Defense

DoD is the most active Direct to Phase II participant across all its service branches. Each branch administers its own D2P2 topics.

Air Force (AFWERX): The Department of the Air Force runs one of the most accessible D2P2 programs through AFWERX. Open Topic D2P2 requires a signed Customer Memorandum from a DAF or Joint customer and end-user, confirming that the Air Force has a validated need for the proposed technology. Maximum awards are typically $1.25 million over 21 months. AFWERX D2P2 topics specifically target technology already available in the commercial market — they are not looking for laboratory innovations, but for proven products that can be adapted to military applications.

Navy: The Navy publishes D2P2 topics within its regular SBIR solicitations. Navy D2P2 proposals follow a similar structure to standard Phase II proposals but require the additional feasibility documentation volume. Phase II awards are typically $750,000 to $1.73 million.

Army: The Army's SBIR program offers D2P2 for companies that have direct customers and commercial sales. Army Phase II contracts run 12 to 18 months with awards up to $2 million. The Army frames D2P2 explicitly around commercial readiness — if your technology is already at TRL 4 or higher and you have paying customers, the Army wants you to skip Phase I and enter at the prototyping and demonstration level.

DARPA: DARPA includes D2P2 topics in its solicitations with specific page limits: 10 pages for feasibility documentation, 20 pages for the technical proposal, and 5 pages for the commercialization strategy. DARPA topics tend to be narrowly defined around advanced research objectives, making the feasibility case more technically demanding.

MDA and SOCOM: Both the Missile Defense Agency and Special Operations Command have published D2P2 topics. SOCOM has notably placed no minimum or maximum page limitation on the feasibility appendix, giving proposers latitude to present extensive evidence.

National Institutes of Health

NIH has offered Direct to Phase II through parent funding opportunity announcements across its 24 institutes and centers. The NIH mechanism uses activity code R44 (the same as standard SBIR Phase II) with a "Direct to Phase II" designation. NIH accepts Direct to Phase II applications regardless of the funding source for the proof-of-principle work — the feasibility can come from internal R&D, angel investment, other federal programs (non-SBIR), or commercial revenue.

NIH D2P2 applications must be submitted as new applications (not continuations of Phase I projects) and are reviewed by the same scientific study sections that evaluate standard Phase II proposals. The commercialization plan carries particular weight at NIH, where reviewers increasingly prioritize market impact alongside scientific merit.

Important note: NIH suspended all SBIR/STTR funding opportunity announcements effective October 1, 2025, when program authorization expired. As of March 2026, Congress has passed reauthorization legislation (S. 3971) through both the Senate and the House, and the bill awaits presidential signature. When the programs resume, expect NIH to reinstate D2P2 within its parent announcements, but monitor NOT-OD notices on the NIH Guide for the exact timeline.

Department of Energy

DOE has offered D2P2 intermittently, largely dependent on specific congressional authorization of the pilot program. The pilot originally expired in FY17, was reauthorized in August 2018 through the National Defense Authorization Act, and availability has fluctuated since. DOE's SBIR office manages awards through both grant and contract mechanisms, and D2P2 availability varies by program office (Office of Science, ARPA-E, etc.). Check DOE's SBIR landing page and current funding opportunity announcements for active D2P2 topics.

Department of Education (IES)

The Institute of Education Sciences has published D2P2 solicitations alongside its Phase IA and Phase IB announcements. Education D2P2 follows the standard model: demonstrate that Phase I-equivalent work has been completed using non-SBIR funds and apply directly for Phase II development funding.

The Feasibility Documentation Package

The feasibility documentation is a separate volume or appendix in your D2P2 proposal — distinct from the technical proposal — that establishes you have already accomplished what a Phase I project would have. This is where the proposal succeeds or fails. Reviewers will evaluate it specifically to determine whether the Phase I feasibility threshold has been met.

What Qualifies as Feasibility Evidence

Agencies consistently define acceptable feasibility evidence as technical reports, test data, prototype designs and models, and performance goals with measured results. The evidence must demonstrate that the core scientific or engineering question behind the technology has been answered: does the concept work?

Acceptable sources include:

• Internal R&D results. Lab testing, prototype iterations, performance benchmarks generated with company funds. This is the strongest category because it demonstrates company capability alongside technical feasibility.
• Commercial product data. Sales records, customer deployments, field performance data. If your technology is already generating revenue in a commercial context, that is powerful feasibility evidence — particularly for DoD topics that explicitly seek commercially available technology.
• Non-SBIR federal funding. Work performed under NIH R01s, NSF grants, DOE research contracts, or DARPA seedlings can substantiate feasibility, provided it was not funded by SBIR or STTR.
• University or research institution work. If the PI or founding team developed the underlying technology at an academic institution (pre-company formation), that work can serve as feasibility evidence. Include publications, patents, and data.
• Private investment-funded development. Angel, seed, or venture-funded development work is fully acceptable. Include milestone reports and technical summaries.

What Does Not Qualify

This is the critical constraint that trips up applicants: feasibility documentation must not be solely based on work performed under prior or ongoing federally funded SBIR or STTR awards. The entire purpose of D2P2 is to avoid duplicating SBIR-funded work. If your feasibility case relies on Phase I results from a different SBIR award — even from a different agency — you are undermining the foundational premise of the pathway and reviewers will reject the application.

The restriction applies to work that is "derived from" or "logically extends from" prior SBIR/STTR work. If your company received an SBIR Phase I to develop a sensor, and you are now proposing a D2P2 for a sensor platform that builds directly on that Phase I work, the application will not pass feasibility review. The D2P2 must represent a genuinely independent technical effort.

Structuring the Feasibility Document

Organize the feasibility documentation to mirror what a Phase I final report would contain. Reviewers are looking for the same type of evidence they would see in a successful Phase I close-out. Structure it as follows:

1. Problem Statement and Baseline. Define the technical challenge and the state of the art at the time you began your feasibility work. This frames the scope of what needed to be demonstrated.

2. Technical Approach. Describe the methods, experiments, designs, or prototypes you developed. Be specific about what you did, not what you plan to do. The feasibility document is retrospective.

3. Results and Data. Present quantitative results. Include test data, performance metrics, comparison to benchmarks, and statistical analysis where appropriate. Figures, tables, and graphs belong here. This section should constitute at least 40% of the feasibility document.

4. Feasibility Conclusions. State explicitly what the data demonstrates. Connect each result to a specific Phase I milestone or feasibility question from the topic description. If the topic lists three Phase I objectives, your conclusions should address each one with evidence.

5. Funding Sources. Identify the non-SBIR sources that funded the feasibility work. Reviewers need confirmation that no SBIR/STTR funds were used.

6. PI and Team Contributions. Document that the work was substantially performed by the proposer and/or the principal investigator. D2P2 reviewers verify that the team submitting the proposal actually did the feasibility work — licensing someone else's technology and writing a D2P2 around it will not satisfy this requirement.

Page Limits by Agency

Page limits for feasibility documentation vary significantly:

Agency/Component	Feasibility Doc Limit	Technical Proposal Limit
DARPA	10 pages	20 pages
Air Force (AFWERX)	Per solicitation	Per solicitation
Navy	Per solicitation	Per solicitation
SOCOM	No minimum or maximum	Per solicitation
NIH	Per FOA (typically within R&D plan)	25 pages (research strategy)
Army	Per solicitation	Per solicitation

Always check the specific solicitation instructions. DoD service branches can set different limits for each solicitation cycle, and deviating from the stated limit — even by one page — can result in administrative rejection before review.

Direct to Phase II vs. Fast Track vs. Standard Path

Three pathways exist for reaching Phase II funding. Choosing the wrong one wastes time and proposal effort.

Standard Path (Phase I then Phase II)

Apply for Phase I ($150,000-$275,000 over 6-12 months). If awarded, complete Phase I work, then apply for Phase II ($750,000-$1.75M over 24 months). Total timeline from Phase I submission to Phase II award: typically 30 to 42 months. This is the right path when you have a concept that genuinely requires Phase I feasibility work — the idea is promising but the data does not exist yet.

Fast Track

Available at NIH and some other agencies, Fast Track allows simultaneous submission of Phase I and Phase II applications. Both are reviewed together. If Phase I is funded, Phase II funding follows without a competitive Phase II proposal. The advantage is reduced funding gaps. The disadvantage is lower success rates and the requirement to present a credible Phase II plan before generating Phase I data. Fast Track works best when your preliminary data is strong but does not yet constitute full feasibility — you have enough to propose Phase I and Phase II together with confidence.

Direct to Phase II

Skip Phase I entirely. Submit a Phase II-level proposal with a feasibility documentation package replacing the Phase I project. Total timeline from submission to award: 6 to 12 months. This is the right path when you have already completed the equivalent of Phase I work using non-SBIR funds and can document it convincingly.

Decision framework:

• No preliminary data, concept stage: Standard Phase I.
• Strong preliminary data, some feasibility gaps: Fast Track.
• Complete feasibility evidence from non-SBIR sources: Direct to Phase II.
• Prior SBIR Phase I completed on this technology: Standard Phase II (not D2P2).

When Direct to Phase II Is Strategic

D2P2 delivers the most value in specific situations. Understanding these scenarios prevents you from pursuing D2P2 when the standard path would be more competitive.

Commercial Technology Adapted for Government Use

You have a product generating revenue in the commercial market. A DoD service branch or civilian agency publishes a topic seeking the capability your product provides. You do not need $150,000 and six months to prove feasibility — your customers have already done that. This is the scenario AFWERX D2P2 is explicitly designed for, and it is the strongest possible D2P2 case.

University Spinout with Extensive Prior Research

The founding team developed the core technology through years of NIH- or NSF-funded academic research (non-SBIR). The company was formed to commercialize it. The scientific feasibility is well-documented in publications and patents. A D2P2 lets the spinout access Phase II development funding immediately rather than spending a year re-demonstrating what is already in the literature.

Privately Funded Startup at Prototype Stage

Angel or seed investors funded the technology through initial development. You have a working prototype with test data. The SBIR Phase II funding would advance the prototype to a fieldable system. D2P2 lets you access government development funding without the dilution or delay of repeating feasibility work that investor dollars already paid for.

Competitive Timing Pressure

A specific DoD program has an acquisition timeline that requires technology delivery within 36 months. The standard Phase I-to-Phase II path takes 30-42 months — too slow. D2P2 gets Phase II funding in your hands within 6-12 months, giving you 24+ months of funded development against the deadline.

When Direct to Phase II Is Risky

Marginal Feasibility Evidence

If your feasibility data is incomplete, ambiguous, or only partially addresses the topic's Phase I objectives, the D2P2 application will be scored harshly. Standard Phase I would let you generate the missing data under funding. D2P2 puts you in a position where reviewers judge your existing evidence against Phase I-level expectations with no opportunity to fill gaps during the review period.

Feasibility Evidence from Adjacent SBIR Work

If your non-SBIR feasibility work is closely related to a prior SBIR award — even if technically independent — reviewers may question whether the D2P2 evidence was "derived from" SBIR-funded work. The burden of proof is on you, and the gray area is wide. If there is any risk of conflation, the standard path is safer.

First-Time SBIR Applicants

D2P2 proposals are evaluated as Phase II proposals, which means reviewers expect Phase II-level sophistication in the technical plan, commercialization strategy, project management, and cost justification. Companies without prior SBIR experience often underestimate the depth required. A Phase I award builds institutional knowledge about SBIR proposal expectations and agency relationships that directly improves Phase II competitiveness.

Weak Customer or End-User Relationships

For DoD D2P2 — particularly AFWERX Open Topic — a signed Customer Memorandum is required. If you do not have an established relationship with a military end-user who will sign that memorandum, D2P2 is not the right entry point. Build the relationship first, potentially through Phase I engagement with a program office.

Writing the D2P2 Technical Proposal

The technical proposal for a D2P2 submission follows Phase II conventions. You are proposing a full development program, not a feasibility study. The work plan should demonstrate what you will accomplish with Phase II funding, building on the feasibility already established.

Connecting Feasibility to the Development Plan

The most effective D2P2 proposals create an explicit bridge between the feasibility documentation and the proposed Phase II work. In the opening section of your technical proposal, summarize the key feasibility findings (referencing the feasibility appendix) and identify the specific development gaps that Phase II funding will address. Reviewers should see a clear logical chain: feasibility evidence demonstrates X, Phase II work will advance X to Y, and Y represents a capability the government needs.

Addressing the Topic Point by Point

Every SBIR topic — whether Phase I or D2P2 — lists specific objectives and requirements. Your proposal must address each one explicitly. Do not assume reviewers will infer connections between your capability and the topic requirements. Map your development plan to the topic language, using the same terminology. If the topic says "demonstrate real-time processing at 10 Gbps," your proposal should include a milestone that says "demonstrate real-time processing at 10 Gbps" and describe how you will achieve it.

Commercialization Strategy

D2P2 proposals require a commercialization section that is more developed than a typical Phase I commercialization plan. You are applying for Phase II funding, and reviewers expect a credible path from Phase II deliverables to Phase III procurement, licensing, or sales. For DoD proposals, describe the acquisition program your technology supports, the military end-users who will adopt it, and any existing relationships with program offices. Letters of support from potential government or commercial customers substantially strengthen this section.

The DoD Company Commercialization Report (CCR) is required for D2P2 submissions. The CCR documents your company's history of transitioning SBIR-funded technologies to Phase III. First-time SBIR applicants will have an empty CCR — this is acceptable but means the commercialization strategy narrative must work harder.

Budget and Cost Justification

D2P2 budgets follow Phase II conventions. Labor, materials, travel, subcontracts, indirect costs, and profit (for contracts) must be itemized and justified. Common mistakes include budgeting for feasibility work that should already be complete (reviewers will flag this as inconsistent with the D2P2 premise), underestimating labor rates for senior technical staff, and failing to account for government-required milestones like design reviews or demonstrations.

Budget ceilings vary by agency but generally fall between $750,000 and $1.75 million. SBA has approved an above-cap topics list that allows select projects to exceed the standard $1.5 million Phase II ceiling, but only for specific pre-approved topics.

The SBIR Reauthorization Context

The SBIR and STTR programs expired on October 1, 2025, halting new solicitations and awards across all agencies. For nearly five months, approximately $6 billion in annual SBIR/STTR funding was frozen, affecting roughly 4,000 small businesses per year.

As of March 2026, Congress has passed the Small Business Innovation and Economic Security Act (S. 3971) through both the Senate (March 3) and the House (March 17, by a 345-41 vote). The bill reauthorizes SBIR/STTR through September 30, 2031, and includes several reforms relevant to D2P2 applicants:

• Strategic Breakthrough Funding: A new award category designed to scale promising technologies beyond early-stage development, requiring matching investments and agency commitment.
• Application limits: Agencies must place annual limits on applications to ensure fair access for smaller firms.
• Enhanced due diligence: Strengthened safeguards to prevent awards from benefiting foreign adversaries.

Once the bill receives presidential signature and agencies reinstate solicitations, expect D2P2 topics to resume — potentially with updated requirements reflecting the new provisions. Monitor agency SBIR portals and sbir.gov for the first post-reauthorization solicitation cycles.

Submission Mechanics

DoD: Defense SBIR/STTR Innovation Portal (DSIP)

All DoD D2P2 proposals — Army, Navy, Air Force, DARPA, MDA, SOCOM — must be submitted through the Defense SBIR/STTR Innovation Portal (DSIP) at dodsbirsttr.mil. Proposals submitted by any other means are disregarded. Registration requires a DUNS number (now UEI), SAM.gov registration, and DSIP account creation. Start registration at least 30 days before submission — SAM.gov processing alone can take two to three weeks.

NIH: eRA Commons and Grants.gov

NIH D2P2 applications are submitted through Grants.gov using the standard SF424 (R&R) forms and uploaded through eRA Commons. The application must reference the correct parent funding opportunity announcement that permits Direct to Phase II submissions. Submit as a "New" application, not a "Renewal."

Performance Benchmarks

Companies with multiple prior SBIR/STTR awards must meet SBA performance benchmark requirements to remain eligible for new Phase I or Direct to Phase II awards. The benchmarks measure Phase I-to-Phase II transition rates and commercialization outcomes. Check your company's benchmark status at sbir.gov before investing proposal preparation effort — failing the benchmark makes you ineligible regardless of proposal quality.

Frequently Asked Questions

Can I use results from a Phase I SBIR awarded by a different agency as my D2P2 feasibility evidence?

No. The restriction applies to all federally funded SBIR and STTR work, regardless of which agency made the award. Your feasibility documentation must be based on work funded by non-SBIR/STTR sources. The regulation specifically states that feasibility documentation "must not be solely based on work performed under prior or ongoing Federally-funded SBIR or STTR work" and cannot "logically extend from" such work.

What if my feasibility evidence combines SBIR-funded and privately funded work?

This is a gray area that creates risk. If SBIR-funded work is a component of your feasibility case but the core evidence comes from independently funded efforts, some agencies may accept it. However, the safest position is to ensure that the D2P2 feasibility documentation stands entirely on non-SBIR work. If reviewers suspect the feasibility case depends on prior SBIR results, they can reject the application on eligibility grounds.

How do D2P2 success rates compare to standard Phase II applications?

Precise D2P2 success rates are not published separately by most agencies. The general Phase II success rate across agencies is approximately 30-36%. D2P2 applications are reviewed against the same criteria as standard Phase II proposals, with the additional hurdle of the feasibility documentation review. Anecdotally, well-prepared D2P2 proposals from companies with strong commercial traction tend to perform well, while D2P2 proposals with thin feasibility evidence perform worse than standard Phase II applications from companies that completed Phase I.

Is Direct to Phase II available for STTR as well as SBIR?

This depends on the agency and solicitation. DoD has offered D2P2 for both SBIR and STTR topics. NIH has historically limited Direct to Phase II to SBIR only. Always verify eligibility in the specific funding opportunity announcement — do not assume SBIR D2P2 availability extends to STTR for the same topic.

What happens if my company has never received an SBIR award — can I still apply for D2P2?

Yes. There is no requirement that D2P2 applicants have prior SBIR awards. In fact, D2P2 is specifically designed for companies whose feasibility work was funded outside the SBIR program. However, first-time applicants should recognize that D2P2 proposals are evaluated as Phase II proposals with Phase II-level expectations for technical maturity, project management, and commercialization planning. The absence of a CCR track record means your narrative must compensate with strong evidence of commercial traction and technology readiness.

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Granted helps small businesses find the right SBIR opportunities — including Direct to Phase II topics — and build proposals that match agency expectations from day one.