When “Derived From” Means “Game Over”: GAO Upholds DHS’s SBIR Phase III Sole-Source Award in Bode Cellmark
The Government Accountability Office’s decision in Bode Cellmark Forensics, Inc. d/b/a Bode Technology, B-423754; B-423754.2 (Nov. 21, 2025), offers an important window into how far agencies may go when using Small Business Innovation Research (SBIR) phase III authority to award noncompetitive contracts. The case arises from Immigration and Customs Enforcement’s effort to stand up a rapid DNA testing program to uncover fraudulent family relationship claims at the border, using both SBIR-derived technology and commercially available instruments, kits, and consumables.
ICE previously awarded SNA International phase I and phase II SBIR contracts to develop and operationalize a “reach-back” architecture: DNA RBSS software (DNAConnect), a support center, and accredited laboratory operations. When ICE later needed a fully implemented rapid DNA program, it turned to SNA for a sole-source SBIR phase III award with an estimated value of roughly $28.5 million. The contract required use of DNAConnect and the SBIR-developed support center, but also bundled in training, field support, and large quantities of commercial testing supplies.
Bode, a competitor, protested twice. In the first protest, ICE took voluntary corrective action and rewrote the statement of work to more explicitly tie the requirement to SNA’s SBIR efforts. In the second protest, Bode argued that ICE’s “real” requirement was simply for rapid DNA testing services and commodities, and that the post-corrective-action SOW’s references to DNAConnect and SBIR work were a pretext. Bode also argued that ICE exceeded its statutory authority because most of the contract value would flow to commercial machines and kits, not to the SBIR-developed software and support center.
GAO rejected these arguments. It began by emphasizing the broad discretion agencies enjoy under the SBIR statute and policy directive. Phase III work is defined only as that which “derives from, extends, or completes” prior SBIR efforts, and the statute encourages agencies to issue phase III awards “to the greatest extent practicable,” including on a sole-source basis, to the SBIR awardee that developed the technology. GAO’s core inquiry was therefore narrow: did ICE reasonably conclude that the requirement derived from, extended, or completed SNA’s SBIR work?
Looking to the revised SOW, GAO found that ICE’s “actual requirement” included mandatory use and further development of SBIR-originated elements: the DNAConnect software and the reach-back support center, including their manuals and operational framework. The presence of substantial commercial items in the solution did not defeat SBIR phase III status. Citing its earlier Digital Force decision, GAO reiterated that neither the statute nor the policy directive requires every component—or any particular percentage of contract value—to be SBIR-derived. So long as central elements of the work trace back to SBIR funding, agencies may use phase III authority to acquire integrated systems that incorporate commercial hardware, supplies, and services.
For federal contractors, the decision is significant on several levels. First, it confirms that SBIR phase III authority can support large, multi-component, operational solutions, not just narrow R&D follow-ons. Second, it underscores how powerful prior SBIR work can be in anchoring sole-source awards: once an agency documents a credible link between the requirement and prior SBIR efforts, GAO is unlikely to intervene. Third, for non-SBIR competitors, the opinion illustrates the uphill battle in challenging such awards. Protests that focus on the proportion of commercial content or on pre-corrective-action documents are unlikely to succeed if the final SOW and record show a reasonable SBIR linkage. Finally, for SBIR awardees, the case highlights the strategic value of designing phase I and II efforts with an eye toward future operational deployment, positioning their technologies as indispensable components of broader agency missions.
Disclaimer: This blog post is for informational and educational purposes only, does not constitute legal advice, and does not create an attorney–client relationship. Contractors should consult qualified counsel about their specific circumstances before taking action.