Direct to Phase II: the bypass nobody teaches

The pathway most first-time firms miss

Most SBIR discussion assumes Phase I first. Phase I is the introductory award — $150-250K, 6 months, feasibility study. But many firms arrive at SBIR having already done the feasibility work: a prototype built for a commercial customer, a Kaggle competition that demonstrated the core approach, a research paper the founder wrote at a prior employer. For those firms, Phase I is a step backward. Direct to Phase II (DP2) is the pathway Congress built to let them skip it.

1. Step 1 — Confirm technical feasibility evidence: Direct to Phase II requires demonstrated feasibility — typically from a Phase I result, prior SBIR, or university research. Document it explicitly.
2. Step 2 — Check agency eligibility: Not all agencies offer Direct to Phase II. DoD, NIH, DoE, and NSF all have different program rules. Confirm availability before building the proposal.
3. Step 3 — Submit a Phase I-equivalent section: Even without doing Phase I, the proposal must include a Phase I summary describing how feasibility was established.
4. Step 4 — Expect a higher bar: Reviewers are more skeptical of D2 submissions because they skip the low-risk Phase I. Commercialization must be particularly strong.

DP2 lets a firm submit directly to a Phase II opportunity without having won a Phase I, provided they can document prior work equivalent to a Phase I effort. The evidence burden is meaningful — you have to show that the feasibility is already demonstrated — but for firms that qualify, DP2 converts 6 months of $150K-$250K work into an immediate $1M-$2M Phase II.

Which agencies offer DP2

Agency	DP2 status	Notes
DoD (most components)	Supported	Army, Navy, Air Force, DARPA, and others regularly run DP2 topics. Check specific topic designation.
NIH	Supported (Fast-Track or DP2 variants)	Institute-specific. NIH's Fast-Track and Phase IIB structures overlap with DP2 intent.
DOE	Supported	Topic-specific.
NSF	Limited	NSF generally requires Phase I first, with exceptions for firms with prior NSF SBIR or equivalent.
NASA	Limited	DP2 pathways exist but are less common.
Other civilian	Varies	DHS, DOT, USDA, and others have variable DP2 availability.

Eligibility — the evidence burden

To qualify for DP2, the firm must document Phase-I-equivalent work. What counts as equivalent varies by agency, but the common requirements are:

The strongest DP2 cases are firms with a commercial prototype deployed at a customer, a published research result with working code, or a prior federal contract that covered Phase-I-equivalent scope (e.g., a Rapid Innovation Fund or OTA effort).

Founder prior work as the basis

For a newly formed firm (Precision Delivery Federal LLC was formed March 2026), corporate prior work is thin by definition. The basis for DP2 can be founder prior work at a prior employer, if documented carefully. "The PI led delivery of a production ML anomaly detection system at Harmonia Holdings for a federal health agency, serving 300+ partner organizations. That system demonstrates the feasibility of the approach proposed here, with the adaptation for Army maintenance data being the Phase II scope." This kind of framing can satisfy the DP2 evidence burden at most DoD components, as long as the founder's prior work is well-documented and the scope alignment is clear.

What it cannot do is claim the prior employer's corporate experience as the firm's. The PI brings the prior experience; the new firm brings the execution capability going forward. Reviewers understand and accept this framing when it is honest.

The DP2 proposal structure

A DP2 proposal is essentially a Phase II proposal plus a "feasibility documentation" section that takes the place of the Phase I final report. The feasibility section should:

• Describe the prior work in technical detail sufficient for a reviewer to assess equivalence.
• Identify the funding source and ownership of the prior work.
• Identify what was learned and what remains unresolved (the remaining unresolved pieces are what Phase II will address).
• Include supporting artifacts: paper, code repository, demo video, customer reference.

This section is typically 3-5 pages and is the make-or-break for DP2. A reviewer who does not finish this section convinced that Phase I is already done will not award DP2.

When DP2 is the right move

• You have a deployed prototype. DP2 is the right call.
• You have a published paper with open-source code. DP2 is feasible.
• You have a prior federal contract covering equivalent scope. DP2 is the right call.
• You have a commercial customer using the technology in production. DP2 is the right call.
• You have an idea and some design work. Phase I is the right call.
• You have a working demo but no production deployment. Depends on the topic and agency — worth trying DP2 for DoD, probably Phase I for civilian.

Timeline and process

DP2 solicitations often run on the same cycle as Phase II solicitations. Submission window, page limits, and review process are similar to Phase II. Review time is comparable (4-8 months from submission to award at most agencies). The difference is on the front end — you do not spend the 6 months of Phase I execution before getting to the $1M+ award.

Risks

DP2 has two meaningful risks. First, the application process is more demanding because you are writing a Phase II proposal without having delivered a Phase I that establishes your ability to execute. The proposal must stand alone as a credible Phase II pitch. Second, if the feasibility documentation is not accepted as equivalent to Phase I, the proposal is simply rejected — there is usually no fallback to being considered for Phase I.

Frequently asked questions