Executive Summary
The Secretary's Review of the Advanced Technology Program
Background--Advanced Technology Program Goals and Mechanisms
ATP Competitions
Goals
Goal: Greater State Role in Promoting Broad Participation in the
ATP
Goal: Maximizing Participation in the ATP by Small and
Medium-Sized Companies
Goal: Building Strong Links Between ATP and
Private-Sector Venture Capital
Goal: Achieving a Stable Program Budget
Goal: Additional Management Improvements
Goal: Promote Greater Participation and Diversity
in ATP
Appendix: Summary of the Responses to Federal Register Notice Requesting Public Comment
Budget
Large Company Participation
Relation to Private Capital
Geographic Distribution of Awards
Other Issues
In a statement to Congress in March of 1997, Secretary of Commerce William M. Daley announced a Department study of several issues raised by Members of Congress and others concerning the policies and procedures of the ATP. The study was designed to make recommendations for possible changes to improve the effectiveness of the program. It was based on comments received as part of a public announcement as well as on other available information.
Based on this study, Commerce Secretary Daley has decided to make several important changes to the operation and policies of the ATP. These changes strengthen the fundamental mission of the ATP: to work in partnership with industry to foster the development and broad dissemination of challenging, high-risk technologies that offer the potential for significant, broad-based economic benefits for the nation. They also ensure that the fundamental strengths of the ATP remain unchanged, especially the requirement that the ATP continue to be a wholly merit-driven program based on peer review.
The changes, which build upon the strengths of the ATP, will lead to a stronger and more viable program with wider participation and a greater diversity of partnerships.
Highlights of the principal changes are:
Most of the changes can be put into effect for future competitions. To the greatest extent possible, these changes will be made administratively. In addition, the Commerce Department will work closely with the Congress to make any changes where legislative action is required.
In addition to these changes, the study identifies a variety of program changes that extend the benefits of the ATP to a larger segment of the economy and improve private-sector and state input to ATP decision making.
In a statement to Congress on March 11, 1997*, Secretary of Commerce William M. Daley announced that he was directing the Department to study several issues raised by Members of Congress and others concerning the policies and procedures of the Advanced Technology Program (ATP). The study sought to build on the demonstrated effectiveness of the program and to make recommendations for possible improvements. The issues included:
The Department's Technology Administration was assigned to conduct the study. In preparing this report, the Technology Administration drew on a wide variety of information. For example, the several previous studies of the ATP were reviewed and a number of experts, ATP managers, participating companies, and other interested parties were consulted. In addition, to allow for broad public input, the Technology Administration solicited public comment over a period of 30 days through a notice in the Federal Register. The latter was distributed widely, having been made available over the World Wide Web and mailed to approximately 3,500 interested parties, including:
The Technology Administration received more than 80 responses to this notice, predominantly from individual firms (particularly small businesses) and professional and trade associations. Non-profit organizations, states, individuals, Members of Congress, federally funded R&D organizations, and universities also submitted responses. This report summarizes a synthesis of those comments together with existing reports, information, and commentaries on the ATP.
The Advanced Technology Program (ATP) of the U.S. Department of Commerce is a unique government-industry research partnership to make possible and accelerate the development of emerging and enabling technologies leading to revolutionary new products, industrial processes, and services for the world’s markets. These partnerships offer important economic benefits for the United States and will spawn the industries of the 21st century.
The paradigm for an ATP research project is:
Back to Table
of ContentsThe ATP conducts competitions to select R&D projects for support. Only project proposals submitted in response to a formal competition are considered. (Competitions are announced in Commerce Business Daily and by direct mail, among other channels.)
Projects are evaluated against a list of criteria, including:
ATP proposals are ranked by a Source Evaluation Board (SEB) convened for each competition. An SEB includes senior-level federal scientists, engineers, and managers as well as specialists with backgrounds in business and economics. Project proposals are evaluated in two separate reviews: a technical review, conducted by experts in the appropriate field, which considers the technical-related selection criteria, and a business review, conducted by experts in business planning and management, which considers the business-related selection criteria. Proposals rated the highest by these panels are evaluated by the full SEB, and the proposers of the most promising are invited to NIST for oral reviews. The final rankings of the SEB are used by the Source Selection Official, named by NIST for each competition, in making final selections.
Beginning in 1994, the ATP began augmenting its general competitions, open to all areas of technology, with focused program areas--multiyear efforts targeted at specific, well-defined technology and business goals. Often, these involve the parallel development of a suite of interlocking R&D projects. By managing groups of projects that complement and reinforce each other, the ATP reaps the benefits of synergy and, in the long run, can have a stronger impact on U.S. technology and the economy.
Focused programs are developed in response to specific suggestions received from industry and academia in the form of white papers. The proposals outline a specific technology area and describe the potential for U.S. economic benefit, the technical ideas available to be exploited, the strength of industry commitment to the work, and the reasons why ATP funding is necessary to achieve well-defined research and business goals.
More than 1,000 white papers have been received to date, reflecting industry’s strong interest and participation in the ATP. Within a focused program, the ATP holds special competitions open only to project proposals that would advance the goals of the specific program. Specific projects are selected through the normal ATP competitive review process.
Additional details of ATP policies and procedures are discussed in the individual issues studied for this report.
Status. ATP award selections are wholly based on merit, using a procedure that evaluates both the technical and business merits of each proposal. As a result, the distribution of ATP funding correlates strongly with those regions of the country with particularly heavy concentrations of companies that emphasize research and development, for example the “Silicon Valley” region of California and the research strongholds of the Northeast and Great Lakes regions. Some less populated regions with comparatively small industrial bases have received no significant assistance from national research and development initiatives, such as the ATP. One consequence of this is that those regions that may be most in need of technology-driven economic growth are those which have received the least support from the ATP. This is a classic “chicken and egg” problem.
One possible solution is the Experimental Program to Stimulate Competitive Technology (EPSCoT), proposed by the Technology Administration in the FY 1998 budget, which would foster the development of the indigenous technology assets of states that are traditionally under-represented in federal R&D funding. This program is part of the recently created U.S. Innovation Partnership, an effort led by the White House Office of Science and Technology Policy, the Department of Commerce and the National Governors Association to improve state-federal technology partnerships. It would give competitive, cost-shared, merit-based awards to state or local governments, regional organizations, or others to create or build upon a state’s unique technology infrastructure to achieve long-term systemic changes in the regional R&D environment and the ability of organizations to participate in national R&D initiatives.
Analysis. The Technology Administration received very strong opposition to any approach that would modify basic ATP procedures to aid regions which are currently under-represented. The merit-based ATP selection process is admired widely by industry and seen as an essential feature of the program. Any change that skews awards based on issues such as geographic distribution would be seen as a fundamental abandonment of the merit principle.
However, comments received as part of this study reinforce ATP managers’ recognition that the states could play an important role in catalyzing and facilitating ATP projects--particularly cooperative research ventures--through state-sponsored entities such as business "incubators" or other business- and technology-support programs. Such state-supported organizations could be an important source of high-quality ATP proposals, working to bring together and coordinate the efforts of regional firms in ATP joint ventures. Equally as important, state business-support organizations could provide important assistance to small and mid-sized firms, after the completion of the ATP project, in developing and marketing the results. (ATP support does not cover the product-development phase.) Such assistance strongly advances the ATP goal of rapid introduction and diffusion of new technology.
The concept of a federal program to assist the states in developing strong R&D bases has some support, but the ATP is not seen as an appropriate mechanism for this. The proposed EPSCoT, which would be entirely separate from the ATP, could help develop the R&D base in such regions.
Changes
1. The ATP will encourage state participation in ATP awards through state-sponsored business and technology support programs, both in organizing and facilitating joint research projects and in supporting post-ATP-project development and commercialization of new technologies.
The ATP will seek to establish stronger ties with state technology development offices. The legal issues will be researched to determine if a change to the ATP rule is required to permit state-sponsored organizations to lead ATP joint-venture projects.
2. The Department will pursue the proposed EPSCoT to strengthen the technology and R&D infrastructure of those regions that are currently lacking strong technology bases.
Status. The legislation that created the ATP permits participation by companies of any size and provides two ways in which companies may apply for funding:
The ATP makes no distinction between large and small companies in setting criteria for participation or in making awards. The program does track participation of small companies as defined by the Small Business Administration (those with fewer than 500 employees) for statistical analysis. To date, for example, 58 percent of all ATP awards to single applicants have gone to small businesses; 42 percent have gone to medium or large businesses.
Possible changes to ATP policy that have been suggested include modifying the cost-sharing requirements for other than small companies to require them to pay a greater share of project costs and restricting participation of large companies to joint ventures.
The current House authorization bill for the Technology Administration (H.R. 1274) would require all companies (other than those meeting the Small Business Administration's definition) to pay a 60-40 cost share on total ATP project costs.
Analysis. The Technology Administration received comments that presented a wide range of opinions on changing the ATP's current cost-sharing requirements for large companies but relatively little support for any specific change. Little support was given to the idea of restricting large companies to joint ventures.
The primary goal of the ATP--significant economic benefit to the Nation by fostering of innovative, high-risk technologies--is unrelated to company size. Companies of all sizes have the good ideas and the technical capabilities to develop high-risk, enabling technologies that will stimulate the U.S. economy. The key issue for the ATP has always been the nature of the research and its contribution to the national technology pool and potential contribution to U.S. economic growth. The ATP has found that the best way to select excellent projects is through rigorous but fair competitions based entirely on technical and business merit. ATP competitions always have been open to all for-profit companies.
ATP has received criticism for providing funding to very large companies, which critics claim should be able to support their own research. In the view of many, including industry research managers, this ignores the realities of industrial R&D. Businesses can and do support research that is unlikely to be done by others if they expect to be able to recover the costs of the research. Businesses of all sizes, however, face disincentives for tackling high-risk, enabling technology development that has broad benefits that cannot be captured by the developer. Large and small businesses have equal difficulty finding funding for this type of research. Within large companies, internal competition is fierce for the limited resources available for longer term, higher risk R&D. The nature of ATP projects--greater uncertainty of receiving an adequate return on investment given the technical risk, the longer time to commercialization, and the inability to expropriate all of the economic benefits that would result from a successful project--makes it difficult for a company to support this kind of effort alone.
One of the major benefits of the ATP has been the creation of joint ventures and other teaming relationships that involve a substantial complement of large and small companies, universities, and/or national laboratories. These relationships can diffuse rapidly the new technologies developed under the ATP to many potential users, broadening the impact of the work, and creating lasting relationships between small and large companies to develop new technologies and bring them to commercialization. Large companies can play a particularly important role in these ATP joint ventures when teamed with small and mid-sized companies. A comment received from the Senate Science and Technology Caucus noted that in these cases, large companies are "providing an organizational structure, commercial experience and frequently, the avenue for eventual commercialization." Professional and trade organizations also commented that the greatest gains from large business participation in the ATP come from teaming arrangements.
Any change to the ATP rules on participation for large companies should be designed to encourage their participation in joint ventures and other team arrangements, and not to discourage them from participating.
A very significant issue that emerged during the course of the study is the general concern for the plight of the medium-sized companies who seem to have been forgotten in this debate. These firms are an increasingly important source of technological innovation as many large companies have brought their research activities into tighter focus and ask their suppliers to take on more of the R&D responsibility. These medium-sized companies also face many challenges, including a lack of research resources to tackle the problems they face. Many mid-sized companies lack the experience of teaming with other companies, universities, or the government to leverage their research efforts. Describing these companies in the same terms as those used for the very largest corporations does not seem appropriate.
A small company is one that meets the criterion of 500 or fewer employees established by the Small Business Administration. At the present time, the ATP has no definition of a large company other than "not small." As the program currently makes no distinction in its rules on the basis of company size this has not been critical, but it becomes critical in any discussion of future changes in the program's governing principles. In the context of the ATP, it is also important that any definition of large companies uses criteria that relate to the ability of the company to pursue R&D on its own. Total revenue, rather than the number of employees, is a better indicator of the resources available for R&D.
Therefore, before instituting any restrictions on company participation based on size, it is critically important for the ATP to have an adequate and equitable definition of "large." A convenient and useful definition is a ranking of the 500 largest companies based on total revenues, which, when published annually by Fortune magazine, is known popularly as the "Fortune 500." These companies typically have revenues in excess of $2.5 billion and over 10,000 employees.
Changes
1. Define a large company as one of the 500 largest companies based on total revenue (analogous to the Fortune 500).
This change would eliminate the problem of unintentionally disadvantaging thousands of medium-sized firms of limited resources, which would not be able to compete effectively in the ATP under rules intended for truly large companies. It uses a simple, unambiguous, and relatively effective measure of size. Using this definition has the advantage of using a highly recognized and available criterion. The private sector packages and disseminates the information annually, so it is available to all potential applicants at no additional cost to the government.
2. Modify the ATP evaluation criteria for project selection to place greater emphasis on joint ventures and consortia with a broad range of participants and less on single-company projects by large companies.
An increased emphasis on joint ventures is consistent with the ATP's overall goals, since they tend to promote the rapid diffusion and introduction of ATP-sponsored technologies into the marketplace. This provision will encourage joint ventures that team large companies with smaller companies and other technology resources, such as universities and federal laboratories, without disadvantaging small and medium-sized companies that may wish to pursue single-company projects.
3. Change the cost-sharing requirement for large companies (as defined above) to at least a minimum 60-40 share of total project costs when applying as single applicants.
This change will:
4. Oppose restriction of large companies to joint ventures.
The Technology Administration found little support for such a restriction. It also would be inconsistent with a key tenet of the ATP that has worked successfully; letting applicant companies choose the R&D structure and arrangement that best suits the proposed project. ATP projects that are structured as a single large company teamed (through sub contracts) with universities, small companies, or national laboratories produce substantial public benefits and would be eliminated by such a restriction.
Status. Does the ATP supplant private sources of venture capital? That question is asked frequently in the course of policy discussions about the program. The evidence shows that the ATP has worked effectively to leverage private-sector development of enabling technologies without displacing private capital funding. ATP funds those technology projects that either would not be supported at all without the ATP or it accelerates the development of those technologies where time is of the essence and which otherwise would be supported at too low a level to achieve results in the critical period.
Several factors work to ensure that the ATP does not replace private capital in funding technology development:
Analysis. The Technology Administration received comments that were nearly unanimous in the opinion that the ATP does not compete with venture capital.
Studies by the ATP** and the General Accounting Office***September 1996. have tended to substantiate that the ATP does not replace sources of venture capital and that those applicants that tried to find private capital for projects before approaching the ATP failed. The National Venture Capital Association, comprised of over 240 professional venture capital firms which invest over 80 percent of all professional venture capital dollars annually in companies located throughout the United States, has endorsed strongly the role of the ATP.
Some support was voiced for an ATP effort to help applicants--small companies in particular--to access sources of private capital for further development work after the completion of the ATP project. Because the ATP does not support product-development work, companies generally must face significant costs to commercialize a new technology after a successful ATP project. The venture-capital community is an important source of funding for this product-development phase, and better linkages between ATP winners--particularly small and mid-sized companies--and venture capitalists would support the ATP's goal of diffusion and adaption of new technologies.
Changes
1. The ATP will identify mechanisms to build stronger links with the private-sector's venture-capital community.
The goal of these actions will be to:
The ATP is considering additional activities to improve the dissemination of technologies developed under the program (see "ATP Program Changes in Response to This Study") and to aid companies in finding additional sources of funding after completion of an ATP project.
***U.S. General Accounting Office, Report to the Ranking Minority Member, Committee on Science, House of Representatives, Measuring Performance, The Advanced Technology Program and Private-Sector Funding, GAO/RCED-96-47, Washington, D.C., January 1996.
Letter Report to the Honorable Robert S. Walker, Chairman, Committee on Science, House of Representatives, R&D Funding Sources for ATP Applicants, GAO/RCED/OCE-96-258R, Washington, D.C., September 1996.
Status. A significant feature of the ATP's allocation of funds is the use of focused programs to establish concentrated research efforts in certain specific technology fields. The primary ATP competition is a General Competition held at least annually and open to proposals from any area of technology. Beginning in 1994, the ATP added to the General Competitions a series of focused programs, which hold competitions restricted to those technologies that advance the overall goals of the focused program.
ATP focused programs are intended to allow for strategic investments in broad technology fields where the challenges go beyond the scope of any single project and where a multiplicity of projects can reap the benefits of synergy. Focused programs are selected in a process analogous to that used to select research projects. The process generally begins with "white papers" submitted by industry and other interested parties describing a potential focused program area. Program proposals are developed by synthesizing the ideas of related white papers and amplifying plans and details though public workshops, studies, and expert advice. Program proposals are judged against four criteria:
ATP focused programs are not open-ended. A typical program is intended to run about five years. Budgets are typically about $10 million to $20 million per year from the ATP and a comparable amount from the private sector. The ATP has established 12 focused programs to date.*
Analysis. Given the overall objectives of the program, comments received by the Technology Administration were generally favorable on the processes by which the ATP is conducted. There was little or no support for any major modifications to the ATP competition process or the development, selection, and use of focused programs within the ATP.
The principal concern of industry with the ATP budget and allocation process is one of stability of both the budget and the rules of participation. The ATP seeks to foster relatively long-range R&D efforts and partnering efforts such as joint-research ventures in industry. Industry participation in the ATP requires a significant investment, both in planning and commitment of resources, and these commitments are not easily made in an atmosphere of instability. The recent budget history of the ATP has been marked by protracted debate and uncertainty over the future of the program, which, in turn, has caused some companies to defer plans to develop and submit proposals.
Changes. A stable, reliable Advanced Technology Program is the most important ATP budget issue, as reflected by the comments received.
In addition to the issues raised in the public solicitation for comment, there are several other matters that have been brought to the Department's attention or that have been discussed by ATP participants, program managers, and policy makers over the past several years.
Recommendations of the Department’s Inspector General. The Inspector General for the Department of Commerce has identified two issues related to the accounting of ATP project costs based on commercial pricing and the management of incremental funding for multiyear projects. The issues are:
Currently, members of an ATP-sponsored joint venture are required to fund a minimum of 50 percent of the project’s total costs. Contributions of equipment and other necessary resources may count toward this share, but they must be valued at cost as prescribed by OMB Circular A-110. However, a significant number of joint venture participants are claiming costs based on commercial billing rates rather than actual costs, as required by the terms of the ATP award (which incorporates OMB Circular A-110 cost requirements). The questionable transactions generally involve software development companies that provide licenses, software maintenance and support, or other items from a commercial product line for use on the project. Many software companies do not use an accounting system that directly accounts for the true “cost” of the project.
Prospectively, ATP program officials have taken steps to educate prospective applicants on the cost and accounting requirements for federal financial assistance awards, specifically the requirement that cost claims be based on actual costs, not commercial market prices. The Department, NIST and the OIG understand the strict obligation to comply with the cost requirements of OMB Circular A-110. ATP program and grant officials will continue to make it very clear to all future joint venture participants that they must comply with OMB Circular A-110 actual cost requirements and if they cannot, that they should not participate as a joint venture member.
Retrospectively, NIST and OIG are beginning to deal with questioned commercial pricing issues from recent OIG audits. Since some participants have stated that they cannot or will not comply with OMB Circular A-110, we need to understand where the financial management process has broken down. The OIG and ATP program officials are working to resolve the individual audit issues addressed in each audit report, including arriving at an acceptable cost basis for industry matching funds as appropriate. As the resolution process continues, the OIG will suggest any additional policy changes necessary to address the commercial pricing issue.
ATP projects are funded on a multi-year basis, however, funding is provided on an incremental basis (i.e., one year at a time). Continued funding is contingent on availability of funds from Congress and satisfactory performance. Multi-year proposals must have scopes of work which are severable and can be easily separated into annual increments of meaningful work which represent solid accomplishments if prospective funding is not made available to the recipient. ATP has agreed to ensure that all multi-year funded projects contain clearly defined quantitative technical milestones which are severable into annual increments of meaningful work so in the event that prospective funding is not provided, work already funded has significance.
Authorizing Legislation. Several additional issues deal with ways to improve the administration and effectiveness of the ATP by reducing paperwork while increasing fairness, and each has been suggested to Congress recently or in the past for action. These include:
The original ATP legislation (Omnibus Trade and Competitiveness Act of 1988) contained a provision that required partial recoupment of licensing fees and royalties earned from technologies resulting under an ATP research project. The American Technology Preeminence Act of 1991 repealed the recoupment provision for future ATP recipients. However, 39 ATP awards issued from the first two competitions are still subject to the recoupment provision. This is an inequitable treatment of the earlier ATP award recipients. Moreover, since there is no time limit, recoupment payments would be required until the patents expired (as long as 20 years) even though only modest royalties, if any, are expected from these projects. The large effort required by award recipients to maintain records for audit purposes for long periods of time would not be cost effective. The oversight in the 1991 repeal should be corrected to extend to these awards.
Under current legislative authority covering intellectual property rights under the ATP, intellectual property rights vest in a U.S. company or companies. Many ATP projects are joint ventures led by small, medium, or large companies with other participants--including academic institutions--as equal partners. The purpose of ATP's funding of promising but risky industrial research is to help ensure that America's best technology ideas make it to the starting blocks of commercialization, where they can pay off with broad-based benefits for the economy. Modifying the law to allow the joint venture participants to determine the intellectual property rights of the joint venture would go a long way in promoting this purpose. This modification, which is now pending as part of the House-passed Technology Administration authorization bill (H.R. 1274) and is in proposals made by the Administration, would provide greater flexibility to joint ventures and perhaps stimulate additional participation by academic and non-profit organizations.
Under current ATP legislative authority, a joint venture may be funded for up to five years and single companies up to three years. No extensions to this time limitation may be granted "unless a full and complete explanation" is submitted in writing by the Secretary to Congressional oversight committees. Granting no-cost time extensions is a common practice in federal assistance programs when the federal portion of the project budgets would not be increased beyond the originally approved budget and commitment. There are occasions when a project schedule slips due to unforeseen circumstances. For example, a major piece of scientific equipment may be delivered late, thus delaying progress on the project. In such cases, ATP should have the authority to grant a no-cost time extension without having to seek permission of the Congress. This proposed change, which is fully supported by the Department, is part of H.R. 1274.
Changes
1. The ATP will work with the Department's Inspector General to rapidly resolve issues associated with commercial pricing in joint ventures and incremental funding for multiyear, non-severable awards.
2. The Department will work to achieve several changes to ATP rules and procedures in the pending House authorization bill for the Technology Administration that would improve the administration and effectiveness of the ATP by reducing paperwork and increasing participation.
These changes would allow the members of ATP joint ventures to determine the most appropriate assignment of intellectual property rights arising from the project without undue restrictions and would give the ATP some additional flexibility in the management of its projects, as required by the high-risk nature of the research.
The Secretary launched this study to help strengthen the ATP. In addition to the other planned changes, the Department has identified several ways to expand the flow of information about the ATP, which could extend the benefits of this program to a larger segment of the economy and would improve the program’s management. These include:
Back to Table
of ContentsOn April 4, 1997, a Notice was published in the Federal Register providing the public a 30-day opportunity to comment on ways to improve the operation of the Advanced Technology Program. In order to stimulate responses in areas related to the issues of the study, a number of specific questions were posed in the Notice and copies were sent to the interested parties described in the report. A copy of the Notice is included in this report.
Eighty-one responses were received from a variety of sources. The distribution of responses by type of organization is shown in Figure 1. Some respondents clearly expressed a personal opinion and not an institutional position; their comments are, therefore, considered as responses by individuals. This included two replies from professors at universities who provided extensive comments on many of the questions from the point of view of an integrated public policy. Their opinions cannot be ascribed to any particular constituent group and are considered the responses of individuals. The responses ascribed to organizations are most often described as representing the policy views of those organizations. Particularly important here are the comments of professional and trade associations that represent the consensus views of at least the policy- making parts of their memberships. Their comments, therefore, must be viewed as having considerable support within the groups they represent.
Many respondents offered comments on only one or two issues. A smaller number submitted detailed responses to nearly all the questions that were reported as the result of considerable discussion within their organizations.
The following sections summarize the positions taken by the various types of organizations and individuals on each of the issues that are the principal focus of the study. These summaries only cover the 81 responses received at the time the comment period closed, and the opinions expressed by this set of organizations do not necessarily represent the consensus opinion of all such organizations. The recommendations in the report are based not only on these comments but also on other studies and the extensive previous experience of the program.
This study sought recommendations regarding the solicitation process for ongoing focused programs, the initiation of new focused programs. This information was sought in the context of the ATP budget process and allocation of funds. Specific responses were received from large and small businesses, non-profits, state and local governments, professional and trade associations, and individuals.
The concept of focused programs received substantial support from all types of respondents. Exceptions to this called for only general competitions or limiting focused solicitations to a single opportunity for each program area.
When considering starting and stopping focused programs, the overwhelming response from all sectors was to preserve flexibility and to make decisions based on impact and momentum of the funded projects. Some consideration was given to forming a board including outside experts to participate in this decision, but for the most part the responses favored careful analysis of economic impact as key to the solicitation strategy.
Responses to the concept of limiting participation in focused programs to a single competition after which further proposals would be accepted through general competition were mixed. Proponents of this policy pointed up the advantages of meeting strategic objectives, avoiding perception of picking winners and losers, and the expected result of better prioritized industry research. Most responses again favored a flexible approach that examined results as part of the decision process leading to solicitations.
Two questions in the Federal Register Notice specifically addressed participation by large companies: whether large companies should participate only as members of teaming arrangements and whether large companies should be required to contribute a monetary cost share as single applicants. These questions received many responses, as about half of the respondents expressed opinions about large business participation.
There was no consensus about whether large business single applicants should change their cost-sharing arrangements. Those who favored requiring a monetary cost share recommended a 50-50 split. They felt that this was a higher level of commitment than current practice and that this would ensure that companies were committed to the projects they proposed. Those who didn’t favor it saw no reason to discriminate based on company size.
According to Praxair, Inc., a current single applicant participant in the ATP, “requiring industry to provide support for the programs, typically at least 50%, ensures that the proposed programs have a sound technical basis and reasonable commercial prospects.” Boeing, which is a member of two active ATP-funded joint venture projects, gave the additional reason to favor a share ratio of total project cost, that “this would allow DoD, DOE, and NASA contractors . . . to consistently use their existing cost accounting practices to price, cost match and manage these types of agreements, regardless of which government agency is entering into the cooperative agreement.” On the other hand, Hughes Electronics Corp. stated that “the requirement to pay [the] indirect costs is already so onerous that it makes it uneconomic . . . to participate.”
Small businesses and individuals also were split on whether large companies should be required to pay at least half of the total costs of single applicant projects. The primary reasons for wanting the requirement were to ensure industry commitment to a project and to “level the playing field” between large and small companies. Those who didn’t want the requirement saw no reason for treating companies differently based on size.
The majority of respondents felt that large company participation should not be restricted to joint ventures, although there was a mixture of opinion among small businesses. Professional and trade associations who responded were unanimous that all companies should be able to compete for awards on the merits of their proposals, regardless of company size. However, they also agreed that the greatest gain from large business participation would come in the form of teaming arrangements.
Large companies also agreed that they should not be prevented from participating as single applicants, both because they have good ideas and because they can have difficulty in obtaining funding. According to Solarex, another single applicant participant in the ATP, “even large companies have limited funds for R&D support and find it hard to fund good ideas outside of their core business. International competition has resulted in industrial laboratories performing low risk, short term development at the expense of long term research.” Another active participant in single applicant and joint venture ATP projects, 3M, stated that “Critical technologies often reside in large U.S. companies, however, they may not be adequately funded due to the high risk nature of the effort. Individual companies (large or small) may be uniquely positioned to meet the intent of the ATP and provide economic benefit to the country without the necessity of a partnership.” Large companies also have the necessary resources to develop and market technology globally.
Non-profits did not see the need to restrict program access based on company size. According to the Auto Body Consortium, which has five years of experience working with the ATP program, “Single company ATP awards serve to accelerate progress on a specific high-risk technology. The joint venture approach enables a broad range of technologies to be accelerated to have major impact on complex systems. . . Both approaches make sense and address the national competitiveness needs.”
Individual respondents also agreed that large companies should not be restricted from participating as single applicants for all of the reasons mentioned above: they liked merit-based award selection, some believed that large companies can have difficulty finding R&D funding, and they acknowledged large business’ good ideas.
Many small businesses wanted to restrict large business participation, either to joint ventures, to subcontractor status, or from participation entirely. Only about one-third of the small businesses responding to this question felt that company size should not be an issue.
This study sought comments on the possibility that ATP displaces private sources of capital. Multiple responses on this topic were received from individuals, large and small businesses, professional and trade associations, non-profits, and state/local governments. Most respondents pointed out the various reasons that venture capital sources and the ATP do not intersect and in fact cannot be expected to intersect.
ATP funds long-term, high-risk, enabling technology; there are few sources of private funding for these.
Recognizing this mismatch between the goals of venture capital sources and the purposes of the ATP, several respondents felt there was some effective role for government after projects were completed. Several respondents suggested that completed projects should be featured in meetings or gatherings with venture capitalists to promote commercialization activities. Others suggested that the ATP should become actively involved in outreach or funding of innovation beyond its current limits. The concept of some funding for post project commercialization from the ATP directly also was suggested.
Two questions raised in the Federal Register notice regarding mechanisms to foster high- quality proposals from companies in states that lack large numbers of R&D-intensive companies or establishment of a separate program to aid under-represented states received similar reactions among the respondents. There was predominant opposition to the establishment of “set-asides” or “quotas” under the ATP to aid states that currently are under-represented. There was considerable support that ATP awards continue to be made on the basis of business and technical merit without regard to the geographic location of participants.
One suggested mechanisms provided to foster high-quality proposals was from the Coalition of Technology Partnerships (CTP), which “believes that NSF’s EPSCOR [Experimental Program to Stimulate Research] Program would be a good model to follow if modified to put the burden on the state . . . a state would have to decide what its unique core of technology contributors is and to develop that. The CTP would be in support of the EPSCOT (Experimental Program to Stimulate Competitive Technology) if its goal is to stimulate technology in non-competing states . . .” Another trade association and small business suggested that there should be cooperation between ATP and state economic development agencies to develop mechanisms in this regard.
Small and large businesses were the strongest opponents regarding mechanisms to foster high-quality proposals. A large company, W.R. Grace & Company, a current ATP awardee, stated “The credibility of the ATP program comes from the fact that it is an industry-driven competitive and peer-reviewed process.” A small business, IGC Intermagnetics General Corp. commented that “A state without R&D intensive companies should not receive awards based on a quota.”
Large companies were unanimously opposed to separate programs for under-represented states. With the exception of one company, small businesses reacted in the same manner. The Boeing Company, a current ATP awardee, felt that “Encouraging the participation by parties in under-represented states should be the focus of increased awareness programs rather than localized competitions or quotas.” 3M, another current ATP awardee, commented that “The goals of the ATP projects are to develop U.S.A. competitiveness, not state vs. state competitiveness . . . Any dilution of the ATP criteria will compromise the program’s effectiveness.”
On the state and local government level, the California Office of Competitive Technologies raised the issue of under-represented regions within states stating “Embarking on a quota system will just skew program results and have a negative impact on the overall effectiveness . . . Such a practice will lead to inner city areas in LA legitimately claiming to be under-represented in ATP awards and therefore deserving of special treatment while the rest of CA does very well in the ATP program (a slippery slope).”
One of the few responses that favored a separate consideration for under-represented states was given by the Wyoming Science, Technology, and Energy Authority, which responded that “Geographically determined awards are difficult to justify in terms of merit-based competitions, but may be a necessary evil to garner political support. Perhaps an experimental program to see if a regional approach would work? Are there other experimental approaches to extract good projects and applicants from regions now not competitive?”
This study provided the opportunity to address points other than the questions raised in the Federal Register Notice. Individuals as well as several organizations submitted suggestions for program improvements. The following is a summary of some of those comments grouped into some common themes.
Modification of Intellectual Property Ownership Requirement
Universities, University Associations, Non-profit Organizations
Several comments called for changes in the rule regarding retention of ownership of inventions. Essentially, these respondents pointed out their difficulties with the current ATP rule and its interpretation. The university respondents pointed out several consequences of the current situation including:
This group of respondents suggested legislative or rule-making approaches to changing the current intellectual property ownership situation.
Proposal Eligibility Criteria
Education, Small Businesses, Individuals, Non-profit Organizations
Several comments related to alternate criteria for leading and submitting proposals to the ATP. Suggested changes included the following:
Focus Programs
National Laboratories, Professional and Trade Associations, Small Businesses
From a variety of sources, support emerged for planning and conducting focused programs as a key element of the ATP solicitation strategy. The following points were made:
Cost Share Requirements
Large Businesses, Non-profit Organizations
A variety of comments were offered in the area of cost sharing and federal fund matching distinct from the specific alternatives suggested by the questions. The comments were quite diverse as described below:
Project Selection
Small Businesses, Large Businesses
A wide variety of comments addressing project selection and to some extent eligibility were offered. These included:
Two responses were received that represented the comments of several Members of Congress. While these comments did not answer the specific questions posed in the Notice, they made many points that are germane to the broad issues of the study. A letter from Reps. Sensenbrenner and Morella made three points:
A letter from Sens. Frist, Lieberman, Domenici, and Rockefeller, writing as the Senate Science and Technology Caucus, made several suggestions:
Back to Table
of Contents
