How to Prepare a DOT SBIR Phase II Proposal

Introduction

If you’ve successfully completed a DOT SBIR Phase I project, you’re now in a position to pursue Phase II—the most substantial step in developing your innovation into a deployable solution. But to win a Phase II award, your proposal must do more than continue the work you started. It must convince DOT reviewers that your concept has real-world potential, and that you have the technical and commercial plan to make it happen.

This guide walks you through exactly how to build that case. From referencing your Phase I results to developing a credible budget and commercialization plan, we’ll cover what DOT looks for—and how you can stand out.

Who can apply? Only businesses that received a DOT Phase I contract—and continue to meet SBIR small business eligibility—can submit a Phase II proposal. If you didn’t participate in DOT Phase I, you won’t be eligible.

Understanding the DOT Phase II Proposal Process

DOT SBIR Phase II proposals aren’t open calls—you must be invited to apply. Typically, this invitation arrives near the end of your Phase I project. It includes key submission details such as deadlines, technical content requirements, and formatting rules. Treat this invitation as your blueprint; it’s tailored to your specific topic and must be followed exactly.

What DOT Looks For

A successful Phase II proposal must show clear progress from Phase I. Reviewers want to see:

What you accomplished in Phase I (with data or demonstrable results)
A technically sound plan to complete development
Clear evidence that the technology could meet DOT or broader market needs

Unlike Phase I, which tests feasibility, Phase II is a full-scale R&D effort. Your proposal should reflect that scale—DOT expects significantly more detail, especially in your technical plan and commercialization strategy.

Key Eligibility and Funding Rules

To remain eligible:

Your company must still qualify as a small business under SBIR rules
At least 50% of the work (by cost) must be done by your business
All work must be performed in the U.S. (with limited exceptions)
The Principal Investigator must be primarily employed by your firm

Funding typically ranges up to $1.5 million, with a project period of 24 months. The exact cap depends on your topic area and will be stated in your Phase II invitation.

Eligibility Reminder
Only DOT Phase I awardees invited to submit are eligible for Phase II. You cannot skip Phase I or apply independently.

Build from Your Phase I Final Report

Your Phase I Final Report isn’t just a deliverable—it’s the foundation of your Phase II proposal. DOT reviewers will read it, and your application must clearly build on its findings. The strongest proposals show a seamless progression: feasibility demonstrated in Phase I leads directly to the R&D plan in Phase II.

How Phase I Results Anchor Phase II

Use your report to highlight what you proved:

Did you build a prototype?
Did your test data show technical feasibility?
Did you identify any performance limitations or technical hurdles?

Phase II isn’t about starting fresh. It’s about solving the next set of challenges based on what you already learned.

Best Practices for Referencing Phase I

A proven way to demonstrate continuity is to include a short section in your proposal titled “Phase I Results and Lessons Learned.” This isn’t just a recap—it should explain how your Phase I outcomes justify the scope and direction of your Phase II.

Also reference specific data or achievements: performance metrics, proof-of-concept results, or stakeholder feedback gathered during Phase I. These give your application credibility and provide the technical rationale for Phase II.

Best Practice
Misalignment with your Phase I report is one of the most common reasons DOT rejects Phase II proposals. Make the bridge between phases explicit.

Developing a Strong Technical Work Plan

The Technical Work Plan is the core of your DOT Phase II proposal. It must present a clear, step-by-step approach to complete your innovation’s development. DOT reviewers want to see not only what you plan to do, but also that you’ve thought through how, when, and with what resources you’ll do it.

Define Technical Objectives

Start with clear, measurable goals that build on Phase I. For example: “Achieve a detection sensitivity of X within 6 months,” or “Scale software for use in a 500-vehicle pilot.” These should reflect the next logical step from your earlier work.

Detail Tasks and Methods

Break down the work into specific tasks: design, prototyping, testing, data analysis, etc. For each task, explain what you’ll do, how you’ll do it, and in what order. Describe the technical approach and tools or facilities you’ll use.

Set Milestones and Timeline

Use a quarterly schedule to lay out key milestones and deliverables. For example, Month 6: Alpha prototype complete; Month 18: Final report submitted. Your timeline must be realistic and reflect your staffing and budget.

Address Technical Risks

Identify major risks and explain how you’ll manage them. If there’s uncertainty in a critical method, propose a fallback. Showing that you’ve planned for contingencies builds reviewer confidence.

Align with Team and Budget

For each major task, note who will perform it and what resources it requires. The work plan must match the budget—if you describe a costly testing phase, the associated costs should appear in your financials.

By the time reviewers finish this section, they should have a clear picture of how your Phase II project will unfold—and trust that your team is equipped to carry it out.

Crafting a Compelling Commercialization Plan

DOT weighs commercial potential heavily in Phase II decisions. Your proposal must show that your technology can become a real product or service—one that addresses a clear need in the transportation sector or broader market.

Key Elements to Include

Product or Solution Description: Clearly state what the end result of Phase II will be. What form will your innovation take—a prototype, software platform, sensor system?
Market and Customer Segments: Identify who needs your solution. Be specific: state DOT offices, state agencies, freight carriers, OEMs, or transit providers.
Value Proposition: Explain what makes your solution better. Is it faster, cheaper, safer, more scalable? Be honest but confident.

What counts as “commercial interest” evidence?

Letters from potential customers or strategic partners, pilot program interest from DOT agencies, or investor commitments are all valid. Even informal emails expressing future interest can help.

Strategy and Timeline

Outline how you’ll bring the product to market after Phase II. Will you seek private funding? License the technology? Sell directly to DOT? Be clear about the path—even if some pieces are still in progress.

If your company has in-house capabilities (like manufacturing or a sales team), highlight them. Otherwise, name specific partners you plan to work with.

Commercialization History (if applicable)

DOT requires a Company Commercialization Report if you’ve had prior SBIR awards. Be honest about past outcomes. If you’ve commercialized before, show the results. If not, focus on your team’s relevant experience and why this time is different.

Preparing the Budget and Cost Justification

A well-prepared budget is essential to your Phase II proposal. DOT will evaluate whether your costs are reasonable, justified, and aligned with your work plan. Poor budgeting is a frequent reason for proposal rejection—even if the technical content is strong.

Understand the Cost Categories

DOT typically provides a cost proposal template (often Excel-based) that you must use. Common budget categories include:

Labor: List roles, hours, and rates for each team member.
Fringe Benefits: Health insurance, retirement contributions, etc.
Overhead and Indirect Costs: Apply your approved rates or justify your estimates.
Materials and Supplies: Include only project-specific items—no general office costs.
Equipment: Only if essential and properly justified.
Travel: Only for project-related travel, e.g., field tests or DOT meetings.
Subcontracts: Allowed up to 50% of total project cost.
Profit/Fee: Allowed, but must be clearly stated.

Budget Warning
Exceeding the DOT-specified funding ceiling or failing to justify indirect cost rates can disqualify your proposal. Review the invitation guidance carefully.

Align Budget to Work Plan

Every budgeted cost must have a clear purpose in your work plan. If you budget for prototype materials, those tasks should be called out in your technical section. DOT reviewers expect internal consistency—and they will notice if it’s missing.

Also double-check your staffing levels. A Principal Investigator budgeted at 5% over 24 months is unlikely to be seen as credible. Make sure personnel time matches the complexity and needs of the project.

Supporting Documentation

DOT may request backup for certain cost items—especially indirect rates and equipment. If you don’t have audited rates, you can propose provisional ones, but be ready to defend them with internal data or comparable rates from similar firms.

Final Tips Before Submission

Once your proposal is complete, take time to review it thoroughly. Even the strongest technical plans can falter due to inconsistencies, formatting mistakes, or overlooked submission requirements.

Review for Internal Consistency

Check that your objectives, tasks, budget, and timeline all align. If your commercialization plan mentions a target market that doesn’t match your Phase I application, that’s a red flag. Reviewers are looking for coherence as much as innovation.

Follow DOT Formatting Rules

DOT’s Phase II instructions are detailed—and strict. Be sure to:

Follow page limits (e.g., 25 pages for the technical volume)
Use required font sizes and margins
Place documents in the correct appendices
Submit all required forms (budget, commercialization report, certifications)

Refer to your Phase II invitation for the latest specifics—these rules can change slightly from year to year.

Pro Tip
Submit at least 48 hours before the deadline to avoid last-minute system errors or upload failures.

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