[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
NASA CONTESTS AND PRIZES:
HOW CAN THEY HELP ADVANCE
SPACE EXPLORATION?
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON SPACE AND AERONAUTICS
COMMITTEE ON SCIENCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
JULY 15, 2004
__________
Serial No. 108-66
__________
Printed for the use of the Committee on Science
Available via the World Wide Web: http://www.house.gov/science
______
U.S. GOVERNMENT PRINTING OFFICE
94-832 WASHINGTON : 2004
____________________________________________________________________________
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COMMITTEE ON SCIENCE
HON. SHERWOOD L. BOEHLERT, New York, Chairman
RALPH M. HALL, Texas BART GORDON, Tennessee
LAMAR S. SMITH, Texas JERRY F. COSTELLO, Illinois
CURT WELDON, Pennsylvania EDDIE BERNICE JOHNSON, Texas
DANA ROHRABACHER, California LYNN C. WOOLSEY, California
KEN CALVERT, California NICK LAMPSON, Texas
NICK SMITH, Michigan JOHN B. LARSON, Connecticut
ROSCOE G. BARTLETT, Maryland MARK UDALL, Colorado
VERNON J. EHLERS, Michigan DAVID WU, Oregon
GIL GUTKNECHT, Minnesota MICHAEL M. HONDA, California
GEORGE R. NETHERCUTT, JR., BRAD MILLER, North Carolina
Washington LINCOLN DAVIS, Tennessee
FRANK D. LUCAS, Oklahoma SHEILA JACKSON LEE, Texas
JUDY BIGGERT, Illinois ZOE LOFGREN, California
WAYNE T. GILCHREST, Maryland BRAD SHERMAN, California
W. TODD AKIN, Missouri BRIAN BAIRD, Washington
TIMOTHY V. JOHNSON, Illinois DENNIS MOORE, Kansas
MELISSA A. HART, Pennsylvania ANTHONY D. WEINER, New York
J. RANDY FORBES, Virginia JIM MATHESON, Utah
PHIL GINGREY, Georgia DENNIS A. CARDOZA, California
ROB BISHOP, Utah VACANCY
MICHAEL C. BURGESS, Texas VACANCY
JO BONNER, Alabama VACANCY
TOM FEENEY, Florida
RANDY NEUGEBAUER, Texas
VACANCY
------
Subcommittee on Space and Aeronautics
DANA ROHRABACHER, California, Chairman
RALPH M. HALL, Texas NICK LAMPSON, Texas
LAMAR S. SMITH, Texas JOHN B. LARSON, Connecticut
CURT WELDON, Pennsylvania MARK UDALL, Colorado
KEN CALVERT, California DAVID WU, Oregon
ROSCOE G. BARTLETT, Maryland EDDIE BERNICE JOHNSON, Texas
GEORGE R. NETHERCUTT, JR., SHEILA JACKSON LEE, Texas
Washington BRAD SHERMAN, California
FRANK D. LUCAS, Oklahoma DENNIS MOORE, Kansas
J. RANDY FORBES, Virginia ANTHONY D. WEINER, New York
ROB BISHOP, Utah VACANCY
MICHAEL BURGESS, Texas VACANCY
JO BONNER, Alabama VACANCY
TOM FEENEY, Florida BART GORDON, Tennessee
VACANCY
SHERWOOD L. BOEHLERT, New York
BILL ADKINS Subcommittee Staff Director
ED FEDDEMAN Professional Staff Member
RUBEN VAN MITCHELL Professional Staff Member
KEN MONROE Professional Staff Member
CHRIS SHANK Professional Staff Member
RICHARD OBERMANN Democratic Professional Staff Member
TOM HAMMOND Staff Assistant
C O N T E N T S
July 15, 2004
Page
Witness List..................................................... 2
Hearing Charter.................................................. 3
Opening Statements
Statement by Representative Dana Rohrabacher, Chairman,
Subcommittee on Space and Aeronautics, Committee on Science,
U.S. House of Representatives.................................. 13
Written Statement............................................ 14
Statement by Representative Nick Lampson, Ranking Minority
Member, Subcommittee on Space and Aeronautics, Committee on
Science, U.S. House of Representatives......................... 14
Written Statement............................................ 15
Statement by Representative Eddie Bernice Johnson, Member,
Subcommittee on Space and Aeronautics, Committee on Science,
U.S. House of Representatives.................................. 17
Written Statement............................................ 17
Statement by Representative Sheila Jackson Lee, Member,
Subcommittee on Space and Aeronautics, Committee on Science,
U.S. House of Representatives.................................. 50
Written Statement............................................ 51
Witnesses:
Rear Admiral Craig E. Steidle, USN (Ret.), Associate
Administrator for Exploration Systems, National Aeronautics and
Space Administration (NASA)
Oral Statement............................................... 18
Written Statement............................................ 20
The Hon. Robert S. Walker, Chairman, Wexler & Walker Public
Policy Associates
Oral Statement............................................... 25
Dr. Peter H. Diamandis, Chairman and CEO, X-Prize Foundation
Oral Statement............................................... 26
Written Statement............................................ 28
Dr. Molly K. Macauley, Senior Fellow, Resources for the Future
Oral Statement............................................... 31
Written Statement............................................ 34
Biography.................................................... 41
Dr. Douglas Holtz-Eakin, Director, Congressional Budget Office
Oral Statement............................................... 42
Written Statement............................................ 43
Discussion
Organization of Prizes......................................... 47
Budget Treatment for Prizes.................................... 53
Prizes and Diversity........................................... 53
Safety......................................................... 55
Public vs. Private Prizes and Return on Investment............. 58
Appendix: Answers to Post-Hearing Questions
Rear Admiral Craig E. Steidle, USN (Ret.), Associate
Administrator for Exploration Systems, National Aeronautics and
Space Administration (NASA).................................... 62
The Hon. Robert S. Walker, Chairman, Wexler & Walker Public
Policy Associates.............................................. 69
Dr. Peter H. Diamandis, Chairman and CEO, X-Prize Foundation..... 73
Dr. Molly K. Macauley, Senior Fellow, Resources for the Future... 77
Dr. Douglas Holtz-Eakin, Director, Congressional Budget Office... 80
NASA CONTESTS AND PRIZES: HOW CAN THEY HELP ADVANCE SPACE EXPLORATION?
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THURSDAY, JULY 15, 2004
House of Representatives,
Subcommittee on Space and Aeronautics,
Committee on Science,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:06 a.m., in
Room 2318 of the Rayburn House Office Building, Hon. Dana
Rohrabacher [Chairman of the Subcommittee] presiding.
hearing charter
SUBCOMMITTEE ON SPACE AND AERONAUTICS
COMMITTEE ON SCIENCE
U.S. HOUSE OF REPRESENTATIVES
NASA Contests and Prizes:
How Can They Help Advance
Space Exploration?
thursday, july 15, 2004
10:00 a.m.-12:00 p.m.
2318 rayburn house office building
1. Purpose
On Thursday, July 15, 2004, the Subcommittee on Space and
Aeronautics of the Committee on Science will hold a hearing to examine
whether and how the National Aeronautics and Space Administration
(NASA) could use prizes to spur innovation.
NASA has requested permission to begin a small prize program and is
seeking legislative authority to run an expanded program. (See details
below.)
The type of prizes NASA would offer are known as ``inducement
prizes''--prizes offered to induce someone to undertake research with a
particular goal--as opposed to prizes given for previous achievements
(such as the Nobel Prize).
In its report issued last month, the President's Commission on
Implementation of United States Space Exploration Policy (also known as
the Aldridge Commission for its Chairman, former Under Secretary of
Defense Edward ``Pete'' Aldridge) recommended that NASA offer
inducement prizes.
Inducement prizes have also been in the news recently because of
the flight of Burt Rutan's SpaceShipOne--the first privately financed
flight into space--which was prompted by the X-Prize, a $10 million
inducement prize for a human sub-orbital space flight. The X-Prize is
privately funded and administered by a private foundation that was set
up for that purpose.
2. Witnesses
Rear Admiral Craig E. Steidle (Ret.) is the Associate Administrator at
NASA for Exploration Systems, and oversees the Centennial Challenges
program, NASA's program of prize contests.
The Honorable Robert Walker is the Chairman of Wexler & Walker Public
Policy Associates and former Chairman of the House Science Committee.
He was also a member of the Aldridge Commission.
Dr. Peter Diamandis is the Chairman of the X-Prize Foundation, a non-
profit organization dedicated to promoting the formation of a space-
tourism industry through a $10 million prize.
Dr. Molly Macauley is an economist and Senior Fellow with Resources for
the Future. Dr. Macauley's research interests include space economics
and policy and the economics of new technologies.
Dr. Douglas Holtz-Eakin is the Director of the Congressional Budget
Office.
3. Overarching Questions
The hearing will discuss the following topics:
1. What are the advantages and disadvantages of NASA using
prizes to spur innovation?
2. Should prizes be offered for the development of specific,
discrete technologies (such as the development of a better
astronaut glove), or for large technological feats (such as
sending a person into orbit), or should there be a wide range
in the size of prizes?
3. To what extent should NASA rely on prize competitions for
the development of important new technologies? Should NASA ever
rely exclusively on prize competitions for the development of a
technology, and if not, how should it determine how to meld
competitions with more traditional contracting?
4. How can NASA ensure that technologies resulting from a
prize competition are safe, as well as relevant to NASA's
objectives?
4. NASA's Proposal for Greater Prize Authority
As part of the Space Exploration Vision that the President
announced on January 14, NASA proposed the ``Centennial Challenges''
program--a set of prize contests for designing particular technologies.
NASA requested approval from the Appropriations Committee to begin the
Centennial Challenges this fiscal year by transferring $2 million from
other programs into the prize effort. The Appropriations Committee
denied the request, saying it ``was not included as part of the fiscal
year 2004 budget submission nor was the initiative approved in the
appropriations Act.''
This year's program was to award prizes up to $250,000. NASA is
also seeking statutory authority to expand the program to $50 million
annually and to allow it to award prizes of up to $10 million (and
greater amounts, up to $50 million, with the approval of the NASA
Administrator). NASA included the proposal in the reauthorization bill
proposal it sent to Congress earlier this year. (See attached list of
potential contest topics.)
5. Issues
Could prizes open new pathways to technological innovation for NASA?
Traditionally, NASA has used several tools to spur the development
of technologies it needs to carry out its mission. It has awarded
grants to universities and other non-profits, it has relied on its own
in-house scientists and engineers, and it has drawn up specifications
and then awarded contracts for the development or procurement of
specific technologies.
Prizes would presumably involve less direction from NASA than would
any of the traditional routes. Instead, NASA would offer a prize for
the development of a particular technology or achievement, and then
would wait to see what contestants produced. Proponents of prizes argue
that this would be less costly and less bureaucratic, and might spur
more creative thinking. In addition, they argue that inventors and
entrepreneurs (as opposed to large aerospace corporations) would be
more able to compete than they can under traditional processes, which
involve more ``red tape.''
Some of these benefits are discussed in a 1999 National Academy of
Sciences report, ``Concerning Federally Sponsored Inducement Prizes in
Science and Engineering.'' The report recommended that Congress
encourage federal agencies to experiment more extensively with
inducement prize contests in science and technology.
The report noted that traditional peer review processes tend to
favor proposals that seem safe over those that may produce surprising
and potentially more innovative results. The report also noted that the
federal procurement system can be intolerant of risk, and can place
costly bureaucratic demands on private-sector contractors.
In summary, the Academy cited prizes as having these benefits:
the ability to attract a broader spectrum of ideas
and participants by reducing the costs and other bureaucratic
barriers to participation by individuals or firms;
the ability of the Federal Government to shift much
of the risk and the financial burden of technology development
from the government to the contestants;
the ability to educate, inspire, and mobilize the
public for scientific, technological, and societal objectives.
What are the pitfalls of using prizes to spur technology development?
Prize contests can be less clear-cut than they first appear.
Problems can develop in the design of the contest, the selection of a
winner, and in the aftermath.
First, NASA would have to be careful in its design of prize
contests. The goal for which the prize was being awarded would have to
be clearly enough described that contestants (and NASA) had a firm
sense of what NASA was seeking and why. On the other hand, too detailed
a description by NASA would limit the kinds of ideas that a contest
could yield. A very detailed description would not end up being much
different than contract specifications.
The selection of a prize winner can also be difficult. Judges need
to be open to unexpected ideas. There are historical examples of
revolutionary ideas losing prize contests because the judges were not
open to unexpected ways of achieving the stated goals. (See below.) On
the other hand, NASA would also have to be careful to test prize
entries carefully to ensure that there were no safety or other problems
that might not be initially apparent.
Finally, in terms of the aftermath, NASA would have to decide how
to put a winning idea into actual use. A prize winner might not have
the financial wherewithal or even the technical capacity to actually
turn their winning idea into a viable product.
The 1999 Academy report suggested these steps to avoid some of the
pitfalls:
Contest rules should be seen as transparent, simple,
fair, and unbiased.
Prizes should be commensurate with the effort
required and goals sought.
Treatment of intellectual property resulting from
prize contests should be properly aligned with the objectives
and incentive structure of the prize contest.
Finally, it is unclear whether prizes would necessarily be a less
costly way of doing business once all the costs NASA would have to
incur in running a successful contest are taken into account.
How dependent upon prizes should NASA be for the development of
critical technologies?
If a technology is critical to a NASA objective--returning to the
Moon by 2020, for example--should NASA depend on prizes for the
development of relevant technologies? The timing of technology
development may be easier to control through traditional means of doing
business (although traditional programs have been plagued by delays at
times). If NASA wanted to use both prizes and traditional grants and
contracts to develop a technology, would those two paths be undertaken
simultaneously? Would those with a contract have an unfair advantage?
NASA and prize advocates have not yet made clear how they would answer
such questions.
What kinds of goals are appropriate for prize contests?
NASA has proposed to use prizes primarily to develop specific,
discrete technologies necessary to enable space exploration, such as
the development of a better astronaut glove. However, the Aldridge
Commission recommended a different type of prize program that would
``accelerate the development of enabling technologies. As an example of
a particularly challenging prize concept, $100 million to $1 billion
could be offered to the first organization to place humans on the Moon
and sustain them for a fixed period before they return to Earth.'' (p.
33)
The Commission did not elaborate on the idea. It is unclear, for
example, what responsibility NASA would have, if any, for ensuring the
safety of participants--or even if NASA would have any role at all
other than seeing if the expedition succeeded. Nor did the Commission
discuss how NASA would evaluate the long-term viability of whatever
technology was used on such a mission or how NASA would use any
technology that resulted. In one view, NASA would just stand back and
offer prizes to create incentives for a wholly private space endeavor.
But then would the government take on any manned missions itself?
In general, the more complex the goal of a contest, the more
complex NASA's role would likely be. (For example, evaluating a set of
technologies to go to the Moon is a more demanding undertaking than
evaluating an astronaut's glove.) At some point, the complexity might
eliminate the advantage of a contest over traditional means of
technology development.
6. Background
Recent events
The Defense Advanced Research Projects Agency (DARPA) has been a
trailblazer in the use of alternative procurement mechanisms. In the
2000 Defense Authorization Act, Congress gave DARPA authority to offers
prizes for ``outstanding achievements in basic, advanced, and applied
research, technology development, and prototype development'' with
military applications. DARPA has used that authority to establish its
Grand Challenges program, which is offering prizes for a successful
field test of autonomous ground vehicles over difficult terrain. In the
first such test in the Mojave Desert this March, no one won the $1
million award. The next field test will be held in October 2005 for a
$2 million prize.
On June 21, SpaceShipOne, the spacecraft built by Burt Rutan
completed the first privately funded manned space flight in history.
The flight was a preliminary test in preparation for an attempt Rutan
plans to make later this year to win the X-Prize--a $10 million
privately-sponsored prize awarded to the first team to launch three
humans up 100 kilometers (62 miles) into space, return them safely to
Earth, and repeat the launch within two weeks with the same ship. The
X-Prize has resulted in increased attention to the role of prizes as an
innovative way of attracting non-traditional players to the space
industry. (See attached article.)
History
Inducement prizes have been used for centuries.
One well known example is described in the best-selling book
Longitude by Dava Sobel. By the 17th century sailors had mastered the
ability to determine their exact latitude at sea, but calculating their
exact longitude proved to be more complicated. In 1714, through an Act
of Parliament, the British Government offered a reward of
20,000 (millions of dollars in today's money) for a
``practical and useful'' method of accurately determining longitude at
sea. The size of the prize reflected both the importance of the issue
and the fact that no reliable method was within reach at the time. John
Harrison, a working class man with little formal education, eventually
solved the problem by developing the first accurate clock that kept
time accurately even during a ship's pitching and rolling at sea.
However, despite the proven test of his invention at sea, the group
administering the prize (the Board of Longitude) refused to award him
the prize money--which historians attribute to the Board's domination
by astronomers who favored a rival, astronomy-based method of
determining longitude. The longitude case illustrates both the ability
of a large prize to draw serious proposals and the problems that can
arise if the judges have conflicts of interest.
Other prize contests of this type have included privately sponsored
prizes for feats of aviation in the early part of the 20th century. In
1919, Raymond Orteig, a New York hotel owner, offered $25,000 to the
first aviator to cross the Atlantic from New York to Paris (or vice
versa) without a stop. Charles Lindbergh, an unknown airmail pilot, won
the Orteig prize on May 28, 1927, 33 1/2 hours after taking off from
Roosevelt Field on Long Island. During this period, many skilled,
famous aviators died attempting to win the prize. In fact, the study of
aviation prizes (and early aviation in general) illustrates that
fatalities were highly likely in the attempts at such prizes. This
raises the issue of whether fatalities can be expected in the area of
prizes associated with manned space flight. If such prizes are
conducted and a fatality does occur, it is important to determine if
this could impede the development of such contests and stifle the
potential innovation that could result from inducement prize programs.
7. Questions for the Witnesses
The witnesses were asked to address the following questions in
their testimony:
Questions for Admiral Steidle
1. How does NASA plan to design and administer prizes to
induce the greatest possible innovation and advances in space
technologies? Why has NASA decided to offer prizes for the
development of specific, discrete technologies (such as the
development of a better astronaut glove) rather than for large
technological feats (such as sending a person into orbit)?
2. How does NASA plan to ensure that technologies resulting
from a competition are safe, as well as relevant to NASA's
objectives?
3. How involved does NASA plan to be in specifying either the
technologies that must be developed (or the goal that must be
achieved) to win a prize, overseeing the work of companies
competing for prizes, and judging the outcomes of prize
competitions? Are there any models NASA is using in designing
its prize program?
4. What are the benefits and drawbacks of prizes over other
ways the government can spur innovation within the private
sector? Are prizes better at drawing participation from non-
traditional players in private sector who are not normally
involved in government contracts?
Questions for Mr. Walker
1. What are the benefits and drawbacks of prizes over other
ways the government can spur innovation within the private
sector? Are prizes better at drawing participation from non-
traditional players in private sector who are not normally
involved in government contracts?
2. To what extent should prizes supplement or replace the
existing methods within NASA of developing new technologies,
such as contracting, procurement and grants?
3. How can prizes be designed and administered to induce the
greatest possible innovation and advances in space
technologies? Should they be offered for the development of
specific, discrete technologies (such as the development of a
better astronaut glove), for large technological feats (such as
sending a person into orbit), or should there be a wide range
in the sizes of prizes?
4. How involved should NASA itself be in specifying either the
technologies that must be developed (or the goal that must be
achieved) to win a prize, overseeing the work of companies
competing for prizes, and judging the outcomes of prize
competitions? Wouldn't NASA's involvement in prizes become more
intrusive the larger the technological feat that is being
encouraged?
5. How could NASA ensure that technologies resulting from a
competition are safe, as well as relevant to NASA's objectives?
Questions for Dr. Diamandis
1. What key ingredients have made the X-Prize so successful in
spurring participation by the private sector? To what extent
has the X-Prize attracted interest from NASA's traditional
contractors to participate in the competition?
2. How can prizes be designed and administered to induce the
greatest possible innovation and advances in space
technologies? Should they be offered for the development of
specific, discrete technologies (such as the development of a
better astronaut glove), for large technological feats (such as
sending a person into orbit), or should there be a wide range
in the sizes of prizes?
3. Might offering prizes encourage competitors to cut corners
when it comes to safety? How could NASA ensure that
technologies resulting from a competition are safe, as well as
relevant to NASA's objectives?
4. Should NASA offer prizes or are they best offered only by
private organizations such as yours? If you believe NASA should
fund prizes, how involved should NASA itself be in specifying
either the technologies that must be developed (or the goal
that must be achieved) to win a prize, overseeing the work of
companies competing for prizes, and judging the outcomes of
prize competitions? Wouldn't NASA's involvement in prizes
become more intrusive the larger the technological feat that is
being encouraged?
5. What needs to happen to transition technologies from a
prize winner to a successful ongoing concern? What are the
steps the Federal Government can take to make that transition
more likely?
Questions for Dr. Macauley
1. What are the benefits and drawbacks of prizes over other
ways the government can spur innovation from the private
sector? Are prizes better at drawing participation from non-
traditional players in private sector who are not normally
involved in government contracts?
2. Some have argued that either the design or administration
of certain prizes (e.g., the Longitude Prize) was biased
towards a particular technological solution. Are there lessons
from the historical record of scientific and technological
inducement prizes that could be learned to avoid potentially
serious flaws in the design and administration of such
programs?
3. How can prizes be designed and administered to induce the
greatest possible innovation and advances in space
technologies? Should they be offered for the development of
specific, discrete technologies (such as the development of a
better astronaut glove), for large technological feats (such as
sending a person into orbit), or should there be a wide range
in the sizes of prizes?
4. Should NASA offer prizes or are they best offered only by
private organizations? If you believe NASA should fund prizes,
how involved should NASA itself be in specifying either the
technologies that must be developed (or the goal that must be
achieved) to win a prize, overseeing the work of companies
competing for prizes, and judging the outcomes of prize
competitions? Wouldn't NASA's involvement in prizes become more
intrusive the larger the technological feat that is being
encouraged?
5. What needs to happen to transition technologies from a
prize winner to a successful ongoing concern? What are the
steps the Federal Government can take to make that transition
more likely?
Questions for Dr. Holtz-Eakin
Please discuss your view of prizes with respect to the following
issues:
1. How would prizes be scored for budgetary purposes?
2. What are the benefits and drawbacks of prizes over other
ways the government can spur innovation from the private
sector? Are prizes better at drawing participation from non-
traditional players in private sector who are not normally
involved in government contracts?
3. How can prizes be designed and administered to induce the
greatest possible innovation and advances in space
technologies? Should they be offered for the development of
specific, discrete technologies (such as the development of a
better astronaut glove), for large technological feats (such as
sending a person into orbit), or should there be a wide range
in the sizes of prizes? Wouldn't NASA's involvement in prizes
become more intrusive the larger the technological feat that is
being encouraged?
4. What is the experience private sector experience in the
area of prizes, including the issues of risk and intellectual
property?
5. What is the experience of the Federal Government in the
area of inducement prizes? If Congress were to consider a
program of inducement prizes for NASA, what issues does this
bring up, and what are the options, for either the
authorization or appropriations process?
6. What needs to happen to transition technologies from a
prize winner to a successful ongoing concern? What are the
steps the Federal Government can take to make that transition
more likely?
8. Attachments
New York Times article, ``Into Space, Without NASA'' (August 26,
2003).
Summary of candidates for NASA Centennial Challenges prizes.
Chairman Rohrabacher. Good morning. This hearing will be
called to order. And welcome to today's hearing entitled NASA
Contests and Prizes: How Can They Help Advance Space
Exploration?
Earlier this week, I collaborated with the American
Institute of Aeronautics and Astronautics in holding a
roundtable discussion, which Bob Walker, of course, was
moderator, on how commercial space transportation activities
can be utilized to enhance and facilitate the national space
exploration initiative. Not surprising, the topic of
competitive prizes dominated the discussion. The panel
participants agreed that prizes provide a potentially critical
near-term solution for re-invigorating the Nation's civil and
commercial space capabilities. Today's hearing will continue
that discussion, but we will continue that discussion on the
record by examining whether and how federally-sponsored prizes
inspire private sector innovation and encourage the development
of advanced technologies for space exploration.
Space entrepreneurs are anxious for policies that encourage
further commercial activities and for future opportunities in
space transportation. I was particularly pleased that the
Aldridge Commission recommended prizes as a significant means
for increasing the private sector's involvement in space
exploration. The good efforts of the Commission and the X-Prize
have given us the historic opportunity to do space in a smarter
way. In particular, the organizers of the X-Prize contest never
wavered in their belief that non-traditional players some day
would make a tremendous impact on space transportation. Indeed,
last month Burt Rutan's hybrid spacecraft design successfully
achieved suborbital flight and safely returned a human to
Earth. In performing this monumental task, he demonstrated that
space travel is no longer the sole domain of government. This
is compelling. It is a compelling example that a revamped
national space program fueled by inspired market-based
creativity and innovation holds promise for America in the
exploration and utilization of space.
As we go forward in further study of this concept, critical
issues will need to be addressed. What are the difficulties in
establishing a process to oversee the management of space
prizes on behalf of NASA? Should these prizes be within NASA or
outside of NASA? Is a separate space foundation the best way to
go? How do we determine the appropriate level for space prizes?
What space exploration missions or objectives are suitable for
competitive prizes? Our expert of witnesses will provide us
today and we hope with some very useful thoughts and some
creative ideas of their own when it comes to these issues and
how to make these things real.
We will celebrate the 35th anniversary of Apollo 11, that
mission to the Moon, next week on July 20. In recognizing the
courageous achievements of Armstrong and Aldrin, and Collins,
let us not forget that equally dedicated and courageous
individuals are now coming forward to write a second chapter of
America's space experience. These new pioneers are to be
applauded for their efforts in charting our future in the--in
space. I think of them sort of, as I mentioned at the
roundtable, as, perhaps, the Hans Solos of this generation,
maybe inspired by that film of the last generation.
So I am encouraged that today's hearing will help us move
forward and will help us see if this concept can be made real
in terms of space prizes.
[The prepared statement of Chairman Rohrabacher follows:]
Prepared Statement of Chairman Dana Rohrabacher
Earlier this week, I collaborated with the American Institute of
Aeronautics and Astronautics in holding a roundtable discussion on how
commercial space transportation activities can be utilized to enhance
and facilitate the national space exploration initiative. Not
surprising, the topic of competitive prizes dominated the discussion.
The panel participants agreed that prizes provide a potentially
critical, near-term solution for reinvigorating the Nation's civil and
commercial space capabilities. Today's hearing will continue that
discussion by examining whether and how federally sponsored prizes
inspire private sector innovation and encourage development of advanced
technologies for space exploration.
Space entrepreneurs are anxious for policies that encourage further
commercial activities and for future opportunities in space
transportation. I was particularly pleased that the Aldridge Commission
recommended prizes as a significant means for increasing the private
sector's involvement in space exploration. The good efforts of the
Commission and the X-Prize have given us the historic opportunity to do
space smarter. In particular, the organizers of the X-Prize contest
never wavered in their belief that non-traditional players some day
would make a tremendous impact on space transportation. Indeed, last
month Burt Rutan's hybrid spacecraft design successfully achieved sub-
orbital flight and safely returned a human to Earth. In performing this
monumental task he demonstrated that space travel is no longer the sole
domain of government. This is a compelling example that a revamped
national space program, fueled by inspired market-based creativity and
innovation, holds the promise of America exploring space.
As we go forward in further study of this promising concept,
critical issues will need to be addressed. What are the difficulties in
establishing a process to oversee the management of prizes on behalf of
NASA? Is a separate space foundation the best way to go? How do we
determine the appropriate level for prize awards? What space
exploration missions or objectives are suitable for competitive prizes?
Our expert of witnesses will provide us with their views and opinions
on these and other critical issues.
We will celebrate the 35th anniversary of the Apollo 11 mission to
the Moon next week on July 20th. In recognizing the courageous
achievements of Neil Armstrong, Buzz Aldrin, and Mike Collins, let us
not forget that equally dedicated and courageous individuals are now
coming forward to write the second chapter of America's space
experience. These new pioneers are to be applauded for their efforts in
charting our future in space. I am encouraged that today's hearing will
help us move towards that future.
Chairman Rohrabacher. Now Mr. Lampson, you may have a few
words to say.
Mr. Lampson. Thank you, Mr. Chairman.
And I was most curious to know about your house full of
babies and how well they are doing, and I am anxious to meet
them one of these days.
Chairman Rohrabacher. Technology helps there, too.
Mr. Lampson. Well, good morning, everyone. And I also want
to welcome our witnesses this morning to today's hearing,
including Bob Walker, the former Chairman of the Science
Committee.
We are here today to examine the role that government-
sponsored prizes might play in promoting the development of
needed space technologies and, equally important, how such
prize programs would need to be structured to be both effective
and efficient. While there are numerous precedence for prizes
offered by individuals and organizations in the private sector,
there has been little experience today with governmentally-
supported incentive prizes or contests. The often-sited
Longitude Prize, first offered by the British Government in
1714, provides a historical example of the potential value of
incentive prizes. On the other hand, it took decades and some
politics for that prize finally to be awarded to the inventor
of the first accurate marine chronometer. In addition, the
winning inventor was, in fact, ``sustained for many years by
research grants from the group administering the prize.'' That
is a quote from a 1999 National Academy's report. And that is a
fact that is not often acknowledged.
The most recent government-sponsored prize appears to be
the DARPA Grand Prize Challenge, which has not yet produced a
winner. Nonetheless, DARPA indicates that it is pleased with
what has been accomplished to date. I think we need to take a
serious look at prizes, strip away the hyperbole, and determine
a few things: when such prizes make sense; what it would cost
to provide adequate prize incentives; and thirdly, how the
rules governing the prizes should be structured.
There is no question that the recent success of
SpaceShipOne in reaching the edge of space has generated a lot
of excitement. I applaud Burt Rutan's achievement, as mentioned
by the Chairman. I wish all of his X-Prize competitors the best
with luck.
The development of a healthy commercial space sector is
important to the future of this country, and it is something
that I have long supported. It can also provide valuable
capabilities to aide the Nation's civil space program, and
perhaps prizes could have and could play a role in increasing
the involvement of the private sector, and I look forward to
hearing from our witnesses on that particular point.
However, the establishment of incentive prizes should not
be viewed as a substitute for adequate and sustained investment
by the Federal Government in aeronautics and space R&D. We need
to support a robust NASA budget this year and in the years to
come. I hope that today's focus on prizes will not divert from
the importance of continuing that critical federal involvement
in space exploration and utilization.
I want to offer an apology to our panel. I have a conflict.
I am going to not be able to stay for the entire period. I
will, indeed, look at all of what your comments and the
questions and answers are, so forgive me for not--I assure you,
this is one of the things that my greatest interest, as the
Chairman knows, and I find it difficult for me to place a
higher priority than this, but sometimes it just has to be
done.
So again, I welcome you and thank you very much for coming.
I look forward to learning more about your testimony, and I
yield back my time, Mr. Chairman.
[The prepared statement of Mr. Lampson follows:]
Prepared Statement of Representative Nick Lampson
Good morning. I'd like to welcome the witnesses to today's hearing,
including in particular Bob Walker, the former Chairman of the Science
Committee. We are here today to examine the role that government-
sponsored prizes might play in promoting the development of needed
space technologies and equally importantly, how such prize programs
would need to be structured to be both effective and efficient.
While there are numerous precedents for prizes offered by
individuals and organizations in the private sector, there has been
little experience to date with governmentally-supported incentive
prizes or contests. The oft-cited ``Longitude'' prize first offered by
the British government in 1714 provides a historical example of the
potential value of incentive prizes. On the other hand, it took decades
and some politics for that prize finally to be awarded to the inventor
of the first accurate marine chronometer. In addition, the winning
inventor was in fact ``sustained for many years by research grants from
the group administering the prize'' [to quote a 1999 National Academies
report], a fact not often acknowledged. The most recent government-
sponsored prize appears to be the DARPA ``Grand Challenge'' prize,
which has not yet produced a winner. Nonetheless, DARPA indicates that
it is pleased with what has been accomplished to date.
I think we need to take a serious look at prizes, strip away the
hyperbole, and determine:
when such prizes make sense,
what it would cost to provide adequate prize
incentives, and
how the rules governing the prizes should be
structured.
There is no question that the recent success of SpaceShip One in
reaching the edge of space has generated a lot of excitement. I applaud
Burt Rutan's achievement, and I wish all of his X-Prize competitors the
best of luck. The development of a healthy commercial space sector is
important to the future of this country, and it's something I have long
supported. It can also provide valuable capabilities to aid the
Nation's civil space program. And perhaps prizes could have can play a
role in increasing the involvement of the private sector--I look
forward to hearing from our witnesses on that point.
However, the establishment of incentive prizes should not be viewed
a substitute for adequate and sustained investment by the Federal
Government in aeronautics and space R&D. We need to support a robust
NASA budget this year and in the years to come. I hope that today's
focus on prizes will not divert from the importance of continuing that
critical federal involvement in space exploration and utilization.
That said, I again want to welcome our witnesses, and I look
forward to your testimony.
Chairman Rohrabacher. Well, thank you very much. And you
know, no one can doubt your commitment. You are the ultimate
activist in these things, so I hope you are successful in
your--okay.
Today we have some fine witnesses with us, and I would like
to introduce them at this time. And we have with us, of course,
the Chairman of the Full Committee, Mr. Boehlert. Would you--
Chairman Boehlert, would you like to have an opening statement
of any kind?
Mr. Boehlert. No, Mr. Chairman. I applaud you for following
through on your commitment to this. It is an idea that we are
all enamored with, and we want to develop it to its maximum
potential, and you have got great witnesses. Let us hear from
them.
Chairman Rohrabacher. All right. Thank you very much.
So we do have great witnesses. We have Rear Admiral Craig
Steidle, who is NASA's Associate Administrator for Exploration
Systems. He oversees the Centennial Challenges Program, NASA's
program prize contest. And Admiral, we appreciate having you
here. We will be--and we have had many good meetings together.
Rear Admiral Steidle. Certainly.
Chairman Rohrabacher. And the Honorable Bob Walker, Robert
Walker, who is the Chairman of Wexler & Walker Public Policy
Associates, and of course, as we have mentioned, former
Chairman of the House Science Committee, my former boss, also a
member of the Aldridge Commission, which recommended that NASA
offer large prizes in order to spur innovation. Peter
Diamandis, Chairman of the X-Prize Foundation, a non-profit
organization dedicated to promotion and promoting the formation
of space tourism through a $10 million prize and a man who is
now basking in the spotlight of success, and everyone is
patting him on the back. And when someone succeeds, they get
pats on the back in politics, and when they fail, there are
knives in the hands of the people who are patting you on the
back. And then Dr. Molly Macauley, an economist and Senior
Fellow with Resources for the Future. Dr. Macauley's research
interests include space economics and economic policies for new
technologies. We will all appreciate hearing from you. And Dr.
Douglas Holtz-Eakin is the Director of the Congressional Budget
Office, Chairman and someone whose expertise is important for
us, because every decision in terms of policy also is a
decision about budget, which we know.
Chairman Rohrabacher. So our witnesses should know that
they--we know you have a lot to say, but we would hopefully
hear only about five minutes at--in your opening statement, and
then we will get to questions and answers.
Ms. Johnson from Texas.
Ms. Johnson. Thank you very much, Mr. Chairman, and Ranking
Member, who just stepped out, Mr. Lampson, for holding this
hearing. And let me welcome Mr. Walker, who chaired this
committee. It is good to see you.
I understand the purpose of this hearing is to examine
NASA's proposed Centennial Challenges Prize Program and the
role that prizes might play in encouraging technological
developments. At a time when NASA's space program is at a
virtual standstill because of the unfortunate accident in
February of 2003 and budget shortfalls, it is increasingly
necessary that this agency be extremely careful in setting
priorities for the future.
With that in mind, I have two major concerns about this
prize program proposed: safety and fairness. The safety of all
participants must remain a primary concern since space travel
is inherently dangerous. Under no circumstances should we allow
the desire for profit to ever interfere with the responsibility
of maintaining safety. NASA should also strive for higher
standards of fairness. This proposed program would award a
prize upon delivery of a desired technological development.
Unfortunately, no funding will be provided to the participants
in advance. While such an approach may bring in some
entrepreneurs who might not otherwise participate in technology
development for NASA, it may also eliminate participation of
researchers from universities or not-for-profit organizations
who typically are dependent on research grants to support
themselves and their graduate students. I strongly urge that
this prize proposal includes stipulations requiring the
inclusion of small and/or minority-owned businesses and
educational interests, otherwise, entire segments of our
business community will be unfairly excluded from participating
in financially lucrative NASA activities.
With that being said, I am hopeful that Congress and NASA
can work together amicably to devise an effective and inclusive
program. I look forward to hearing the testimony of our
distinguished witnesses today.
Thank you, Mr. Chairman, and I yield back.
[The prepared statement of Ms. Johnson follows:]
Prepared Statement of Representative Eddie Bernice Johnson
Thank you, Mr. Chairman. I would like to thank you and Ranking
Member Lampson for holding this Subcommittee on Space and Aeronautics
hearing today on Space Prizes.
The purpose of this hearing is to examine NASA's proposed
``Centennial Challenges'' prize program and the role that prizes might
play in encouraging technological developments.
At a time when NASA's space program is at a virtual standstill
because of the unfortunate accident in February of 2003 and budget
shortfalls, it is increasingly necessary that this agency be extremely
careful in setting priorities for the future.
With that in mind, I have two major concerns about this prize
program proposal: safety and fairness.
The safety of all participants must remain a primary concern since
space travel is inherently dangerous. Under no circumstances should we
allow the desire for profits to ever interfere with the responsibility
of maintaining safety.
NASA should also strive for a higher standard of fairness. This
proposed program would award a prize upon delivery of the desired
technological development. Unfortunately, no funding will be provided
to the participants in advance.
While such an approach may bring in some entrepreneurs who might
not otherwise participate in technology development for NASA, it may
also eliminate the participation of researchers from universities or
other not-for-profit organizations, who typically are dependent on
research grants to support themselves and their graduate students.
I strongly urge that this prize proposal include stipulations
requiring the inclusion of small and/or minority owned businesses and
educational interest. Otherwise, entire segments of our business
community will be unfairly excluded from participation in financially
lucrative NASA activities.
With that being said, I am hopeful that Congress and NASA can work
together amicably to devise an effective and inclusive program. I look
forward to hearing the testimony of our distinguished witnesses today.
Mr. Chair, I yield back my time.
Chairman Rohrabacher. Thank you very much.
Now we have heard the yin and the yang, so--Admiral
Steidle, you might--you may proceed.
STATEMENT OF REAR ADMIRAL CRAIG E. STEIDLE (RET.), ASSOCIATE
ADMINISTRATOR, OFFICE OF EXPLORATION SYSTEMS, NATIONAL
AERONAUTICS AND SPACE ADMINISTRATION
Rear Admiral Steidle. Yes, sir. Thank you very much, sir.
Mr. Chairman, Members of the Subcommittee, thank you for
the opportunity to appear today to discuss the past
accomplishments and the future promise of prize competitions.
Prize competitions are proving to be an important tool for
innovation, not only for NASA in our Centennial Challenges
Program, but for private efforts, like the X-Prize, and other
federal agencies, like the Defense Advanced Research Projects
Agency and their Grand Challenges competition. Congress's
attention and support will be important in the months and years
ahead for all of these efforts.
I would like to take just a few minutes, sir, to do a--to
describe NASA's new prize competition program, Centennial
Challenges, including how it supports NASA's new direction, the
program's goals, the past prize competitions that Centennial
Challenge is modeled on, and the recent developments. And I
will close by outlining future directions for Centennial
Challenges and describing how Congress can help to support this
exciting new program.
On the 14th of January, President Bush visited us at NASA
Headquarters and announced a new Vision for Space Exploration.
Embodied within the vision are many difficult technical
challenges. Meeting these challenges will require us to unleash
the best innovative talents our nation has, recognizing that
NASA needs a dynamic mechanism for tapping the ingenuity of the
Nation, wherever it may be, we created Centennial Challenges.
Centennial Challenge is a very different approach from how
NASA and nearly all federal R&D agencies have traditionally
gone about technical innovation. Instead of soliciting
proposals for a grant or contract award, NASA will set a
technical challenge, the prize amount to be awarded for
achieving that challenge, and a set of rules by which teams
will compete for that prize. Through this particular program,
we hope, first of all, Ms. Johnson, to be fair and safe. We
hope to stimulate innovation in ways that standard federal
procurement can not. We hope to enrich NASA's research with
these new innovations and innovators. We hope to address
traditional technology development obstacles. And we hope to
achieve returns that significantly outweigh the program's
investment. And also, we hope to educate, inspire, and motivate
the public to participate with us.
Centennial Challenge is modeled on and grows from the
successes of prior programs, some of which Congressman Lampson
eluded to this morning. These prior successes demonstrate the
important advantages of prize competitions, that being the
ability to reach out to new inventors, innovators, and risk-
takers and have them apply their experience, thinking, and
resources toward the development of novel and unorthodox
solutions. It is exactly these kinds of unexpected winners and
their ingenious solutions that we hope to identify and
leverage.
The science and engineering community has long recognized
the value of prize competitions. In 1999, the National Academy
conducted a blue ribbon workshop entitled ``Concerning
Federally-sponsored Inducement Prizes in Engineering and
Science.'' The central recommendation of that workshop was that
Congress should encourage federal agencies to experiment with--
extensively with inducement prize contests in science and
technology.
We recognize the need to obtain external inputs on our
future prize competitions. To obtain these external inputs, we
held our first annual Centennial Prize Workshop here in DC last
month. This two-day workshop was a significant success. We had
over 200 attendees that participated, including representatives
from both established and emergent aerospace companies,
representatives from other industry sectors, researchers from
universities, non-profit organizations, members of various
financial institutions, educators, students, and hobbyists. It
was a tremendous success, and we saw an overwhelming support
for this program.
About 30 managers from NASA's field centers and from other
federal R&D agencies and from the X-Prize Foundation moderated
these particular workshops for us. Keynote speakers included a
Member of Congress, the President's Science Advisor, and the
Captain of the Aerospace Industry. Together these participants
provided invaluable inputs, which are being summarized in a
report on our website, CentennialChallenges.NASA.gov.
Simultaneously with this workshop, the President's
Commission on implementation, thanks to Mr. Walker, the House
Space Exploration Policy released its report entitled ``A
Journey to Inspire, Innovate, and Discover.'' Among the many
important recommendations included, Congress increased the
potential for commercial opportunities related to the Nation's
space exploration vision by creating significant monetary
prizes for the accomplishment of these space missions.
I would like to take just a second, sir, if I could to
introduce to you Mr. Brant Sponberg who is sitting behind me
right here. Brant is my assistant at NASA and is NASA's manager
of the Centennial Challenges Program. He and his staff are
currently working extremely hard at revising their program
plans based on these inputs from these workshops, other
studies, and the Commission's report in developing specific
prize competitions. Examples of the kind of challenges that we
are examining include: complete robotic and human space
missions, key technologies, leveraging partnering
opportunities, educational enrichment programs. In all of these
competitions, it will be important to review the proposed rules
to ensure that it is safe and fair, that the objective is
transparent, that they can not be gained by competitors, that
they will attract a strong field of competitors. Depending on
the size of the prize purse, we plan to subject the draft rules
for each competition to independent internal and external
review. In the case of the largest prizes, we will likely have
a public comment period to obtain additional inputs on these
draft rules and processes.
With the exception of these prize competitions targeted at
students, we plan to make all challenges open to any U.S.
competitor who is not a federally employed. The Program Manager
is committed to keeping overhead costs as low as possible so
that the maximum amount of funding is available for these
prizes and purses. And we will shortly release a request for
information nationally to solicit inputs on how to structure
the Centennial Challenges support and maintain this low
overhead.
And so Congress is extremely important to the success of
this Centennial Challenges program. We have requested specific
authority from Congress to conduct large prize competitions
with purses up to $50 million in size and to retain funding in
prize purses over multiple years. Both of these authorities are
important to maximize the agility of the Centennial Challenges
Program. NASA's fiscal year 2005 budget request for Centennial
Challenges is $20 million, and NASA has requested a $2 million
reprogramming change in fiscal year 2004 to start and kick-off
the Centennial Challenge Program.
This program is exciting and is an integral part of NASA's
new direction and significantly a part of the Exploration
Initiative. It represents an opportunity to reach new
communities of innovators to find novel solutions to hard
technical problems that we face in the future. And I greatly
look forward to our future prize competitions, the new
approaches that they will inject into our programs, the new
ways of doing businesses and processes, and I look forward to
that day where I can shake hands with the first prize winner.
I thank you, sir, for the opportunity that the Committee
has provided us today, and I look forward to your questions.
[The prepared statement of Rear Admiral Steidle follows:]
Prepared Statement of Rear Adm. Craig E. Steidle, USN (Ret.)
Mr. Chairman and Members of the Subcommittee, thank you for the
opportunity to appear today to discuss the past accomplishments and
future promise of prize competitions. Prize competitions are proving to
be an important tool for innovation, not only for NASA and our
Centennial Challenges program, but also for private efforts like the X-
PRIZE and for other federal agencies like the Defense Advanced Research
Projects Agency and their Grand Challenge competition. Congress's
attention and support will be important in the months and years ahead
to all of these efforts.
I would like to take a few minutes to describe NASA's new prize
competition program, Centennial Challenges, including how it supports
NASA's new direction, the program's goals, the past prize competitions
that Centennial Challenges is modeled on, and recent developments. I
will close by outlining future directions for Centennial Challenges and
describing how Congress can help support this exciting new program.
Centennial Challenges and the Vision for Space Exploration
On January 14th, President Bush visited NASA Headquarters and
announced a new Vision for Space Exploration. The Vision lays out a
strategy for sustained, long-term human and robotic exploration of our
solar system and the worlds that lay beyond. Embedded within the Vision
are many difficult technical challenges, from autonomy and
communications to power and propulsion to structures and spacecraft.
Meeting these challenges will require us to unleash the best innovative
talents our Nation has to offer. Recognizing that NASA needs a dynamic
mechanism for tapping the ingenuity of our Nation, wherever it may lie,
we created Centennial Challenges.
Centennial Challenges is a very different approach from how NASA,
and nearly all federal R&D agencies, have traditionally gone about
technical innovation. Instead of soliciting proposals for a grant or
contract award, NASA will set a technical challenge, the prize amount
to be awarded for achieving that challenge, and a set of rules by which
teams will compete for that prize. Through Centennial Challenges, we
hope to:
Stimulate Innovation in Ways That Standard Federal Procurement
Cannot--By specifying technical goals but not pre-selecting the best
way to achieve them, a large number of approaches to a problem will be
developed, including unorthodox approaches that would likely not be
pursued in a traditional procurement.
Enrich NASA Research With New Innovators--Centennial Challenge
winners will be judged and earn awards based on actual achievements,
not proposals. Using this approach, we hope to reach new innovators who
would not normally work on NASA issues and find novel or low-cost
solutions to NASA engineering problems that would not be developed
otherwise.
Help Address Traditional Technology Development Obstacles--In each
Challenge, multiple teams will be developing, integrating, testing, or
flying various approaches to the same technical goal. With multiple
teams and multiple approaches, Centennial Challenges will help
transition new technologies into operation and address other
traditional technology pitfalls.
Achieve Returns That Outweigh the Program's Investment--History
shows that the total resources spent by teams to win prize competitions
usually exceeds the value of the prize many times over. By having
multiple teams bring varied resources and knowledge to bear on a
problem, we will get more solutions developed and tested.
Educate, Inspire and Motivate the Public--Highly visible Challenges
will draw substantial public, educator, and student interest in NASA,
the competitors, and the technical field of the Challenge itself.
Short History of Prize Competitions
Centennial Challenges is modeled on and builds on the success of
prior prize competitions in stimulating technological innovation,
scientific discovery, and new exploration achievements.
As early as the 18th century, the British government offered the
Longitude Prize, a competition for a navigational solution to the
accurate determination of longitude on the high seas. At the time the
prize was set, it was assumed that the solution laid in using star maps
as navigational aides and that the winner would be an astronomer.
The solution was actually achieved by a London clock maker and his
invention, the marine chronometer.
In the early 20th century, numerous prizes were offered for new
achievements in aviation by governments, the U.S. airmail service,
wealthy individuals, and even newspapers in both the United States and
Europe. Perhaps the most famous of these aviation prizes was the Orteig
Prize for the first crossing of the Atlantic Ocean by air. Again, at
the time the prize was set, many assumed that a famous Arctic explorer
of that age would win. Instead, a relatively unknown airmail pilot
named Charles Lindbergh won the Orteig Prize and went down in history
as the first person to cross the Atlantic in an airplane, opening a new
avenue of transcontinental transportation.
These two historical examples demonstrate an important advantage of
prize competitions--the ability to reach out to new inventors,
innovators, and risk-takers and have them apply their experience,
thinking, and resources towards the development of novel and unorthodox
solutions. It is exactly these kinds of unexpected winners and their
ingenious solutions that we hope to identify and leverage through
Centennial Challenges.
More recently, the privately funded X-PRIZE Foundation has
demonstrated the tradition of prize competitions in stimulating
innovative solutions to technical challenges. Established in 1996 with
the goal of demonstrating private, reusable, sub-orbital human space
flight, the X-PRIZE spurred Mike Melvill's June 21st test flight above
100 kilometers, making him the first astronaut to fly a vehicle
developed by the private sector to space. The achievements of Burt
Rutan and Scaled Composites, the team behind Melvill's flight, are a
remarkable private sector engineering achievement. We at NASA are
looking forward to a winning X-PRIZE team, hopefully later this year.
The science and engineering community has long recognized the value
of prize competitions. In 1999, the National Academy of Engineering
conducted a blue ribbon workshop titled ``Concerning Federally
Sponsored Inducement Prizes in Engineering and Science.'' The central
recommendation of this workshop's report was that:
``Congress should encourage federal agencies to experiment
more extensively with inducement prize contests in science and
technology.''
The workshop's report also includes a number of important
recommendations regarding how agencies should structure and conduct
prize competitions.
The Defense Advanced Research Projects Agency (DARPA) is the first
federal agency to pursue the Academy's recommendations and establish a
major prize competition. The DARPA Grand Challenge is an annual race
aimed at developing autonomous vehicle capabilities for the
battlefield, and the first race was held earlier this year in the
California desert. We at NASA have a great deal of interest in
autonomous systems and robotics and are eagerly anticipating next
year's Grand Challenge race.
Recent Developments
Building on this successful history and recognizing the potential
value of prize competitions to augment our ability to implement the
Vision for Space Exploration and ongoing NASA programs, we conducted an
internal study to gather ideas for NASA prize competitions. Two of the
founders of the X-PRIZE, including Dr. Peter Diamandis who is with us
here today, assisted with this study. We collected almost 130 prize
competition concepts and winnowed the list to 15, which was the basis
for the initial formulation of Centennial Challenges.
However, we also recognized the need to obtain external inputs on
our future prize competitions. Since the teams competing for a
particular Challenge will come from outside NASA, we felt it was
important to understand what Challenges outside organizations would be
interested in competing for and to get their thoughts on how to
structure these competitions. To obtain these external inputs, we held
the first annual Centennial Challenges Workshop here in Washington last
month. The two-day workshop was a great success, both in terms of the
attendance and the inputs we received. Over 200 attendees participated,
including representatives of both established and emergent aerospace
companies, representatives from other industry sectors, researchers
from universities and non-profit organizations, members of various
financing communities, educators and students, representatives of space
advocacy groups, and even hobbyists and interested members of the
public. About 30 managers from NASA's field centers, from other federal
R&D agencies, and from the X-PRIZE Foundation helped moderate the
workshop. Keynote speakers included a member of Congress, the
President's Science Advisor, and a captain of the emergent aerospace
industry. Together, these participants provided invaluable inputs. They
identified excellent prize competition concepts that were missed by our
internal study and gave us important feedback on goals and rules for
specific competitions. The inputs from the workshop are summarized in a
report that is available through a link on our website at
www.centennialchallenges.nasa.gov.
Simultaneous with our workshop, the President's Commission on
Implementation of U.S. Space Exploration Policy released its report
titled ``A Journey to Inspire, Innovate and Discover.'' Among the many
important recommendations made by Chairman Pete Aldridge and the
Commission is that:
Congress increase the potential for commercial opportunities
related to the national space exploration vision. . .by
creating significant monetary prizes for the accomplishment of
space missions. . .
The Commission goes on to state, ``NASA should expend its
Centennial prize program to encourage entrepreneurs and risk-takers to
undertake major space missions.'' We have taken the Commission's words
to heart and are actively exploring ambitious prize competition
concepts.
Future Directions for Centennial Challenges
My Centennial Challenges Manager, Mr. Brant Sponberg, and his staff
are currently hard at work revising their program plan based on the
inputs from our internal study, the June workshop, and the Commission
report and are developing the specific prize competitions that NASA
would like to begin in FY 2004 with a few small ($250,000) prizes and
then expand the effort in FY 2005. Examples of the kinds of Challenges
they are examining include prize competitions:
For Full Missions--These would be prize competitions for the
successful completion of a challenging robotic or human space mission
by a private sector organization. The size the purses for these kinds
of prize competitions would be in the single to few tens of millions of
dollars and competitors will likely include aerospace companies and
university teams. Examples include Challenges for: the first private
robotic soft landing on the Moon, the return of samples from near-Earth
asteroids, or even the first private orbital human space flight.
For Key Technologies--These would be prize competitions for the
successful development and demonstration of a technological capability
that is important to future space exploration or other NASA programs.
The size of the purses for these prize competitions would range from
hundreds of thousands of dollars to a few million dollars and
competitors will likely include industry researchers, university
researchers, and other inventors. Examples include Challenges for: a
more dexterous astronaut glove; an aerocapture mission demonstration; a
highly accurate descent and landing system; autonomous robots capable
of retrieving science samples from Earth environments that are
analogous to those on other worlds; a highly-efficient and low mass
power distribution system for robotic or human bases on other worlds;
and highly efficient lunar resource processing techniques.
To Leverage Partnering Opportunities--These would be prize
competitions for technical goals and capabilities that are common
between NASA and other organizations. The size of the purses for these
prize competitions would range from hundreds of thousands of dollars to
a few million dollars. Partners would cost-share the purse with NASA or
be responsible for competition administration. Partners could include:
professional organizations, corporations and non-profit research
organizations, other federal R&D agencies, hobbyist organizations, and
public space advocacy groups. Examples include Challenges for: an
autonomous, low mass drilling system for accessing underground science
samples and resources on other worlds and on Earth; an improved power
storage system for rovers and for various Earth-based applications; a
fully autonomous unmanned aerial vehicle for cargo delivery; high
strength-to-weight materials; and a solar sail mission to provide space
weather data for various government customers.
For Educational Enrichment--These would be prize competitions to
excite and encourage college and secondary school students to pursue
educations and careers in science, technology, engineering, and math.
The size of the purses for these kinds of prize competitions would
range from the thousands to tens of thousands of dollars. Examples
include a robot ``survivor'' contest and a contest for a model rocket
that must launch after being dropped from a certain height and re-land.
In all of these competitions, it will be important to review the
proposed rules to ensure that: they are fair, objective and
transparent; that they cannot be ``gamed'' by competitors; and that
they will attract a strong field of competitors. Depending on the size
of the prize purse, we plan to subject the draft rules for each
competition to independent internal and/or external review. In the case
of the largest prize competitions, we will likely have a public comment
period to obtain additional inputs on draft rules.
With the exception of those prize competitions targeted at
students, we plan to make all Challenges open to any U.S. competitor
who is not a federal employee. My program manager is committed to
keeping overhead costs low so the maximum amount of funding is
available for prize purses. We will shortly release a request for
information (RFI) to solicit inputs on how to structure Centennial
Challenges support and maintain low overhead.
Congressional Support Is Key
Congress is important to the success of Centennial Challenges. NASA
has requested specific authority from Congress to conduct large prize
competitions with purses up to $50 million in size and to retain
funding for prize purses over multiple years. Both of these authorities
are important to maximize the utility of Centennial Challenges. Without
them, the ability of Centennial Challenges to conduct prize
competitions for space missions or significant technology
demonstrations and to partner with other NASA programs will be greatly
diminished. NASA's FY 2005 budget request for Centennial Challenges is
$20 million, and NASA has included a $2 million reprogramming change in
the FY 2004 Operating Plan to undertake a few small ($250,000) prizes.
Centennial Challenges is an exciting and integral part of NASA's
new direction. It represents an opportunity to reach new communities of
innovators and to find novel solutions to hard technical hurdles. I
greatly look forward to our future prize competitions, the new
approaches that they will inject into our programs, and to one day
shaking the hand of our first Challenge winner. Thank you for the forum
that the Committee provided today. I look forward to responding to your
questions.
Chairman Rohrabacher. Thank you very much, Admiral. And it
is getting into the details and see how this Centennial
Challenge works. And it is going to be a very interesting new
innovation to watch. It is, clearly, a step in the right
direction, and a step in the direction that some of us have
been advocating.
But now Mr. Walker may think that it is only one step in
the right direction. He may want to go maybe 150 or 300 steps
in another direction. So Mr. Walker, you may proceed.
Mr. Walker. Thank you, Mr. Chairman.
I am delighted to be with you. And thank you for your kind
words and Mrs. Johnson for her kind words. And I am delighted
to be back in the room.
Chairman Rohrabacher. Mr. Walker, could I--can I sort of
take the prerogative of the Chair at this moment? Mr. Burgess
has joined us and has a request to make.
Mr. Burgess. I thank you, Mr. Chairman, and appreciate the
indulgence of the members of--the witnesses who are here today.
But I wanted to take a moment to introduce a guest to this
committee. This is Taghreed Qaraghuli, a member of the Iraqi
Women's Delegation. And Mr. Chairman, I ask for unanimous
consent that she be allowed to sit at the dais for today's
Subcommittee hearing. The Iraqi Women's Delegation is visiting
Congress to learn firsthand how American democracy works.
Chairman Rohrabacher. With unanimous consent, hearing no
objections, so ordered.
And let me express--Ms. Johnson, you have a guest as well?
Would you like to have her join us as well? Would you like to
introduce her to us?
Ms. Johnson. She is one of the leaders of the delegation
from Iraq.
Chairman Rohrabacher. Well, we have two ladies who are
joining us. And let me note that we want to welcome both of
them to our hearing, and with unanimous consent, hearing no
objection, we will have them join us today. And let me note
this to our guests. We wish you all of the success in the
world, and we hope that Iraqi women will be a role model for
women throughout the Islamic world and show how democracy and
freedom can work and how everyone will be included in a
democratic society. And so we are very, very pleased to have
you both with us today. And as we talk about technology and
talk about the prizes.
So excuse me, Mr. Walker. You may proceed.
STATEMENT OF HONORABLE ROBERT S. WALKER, CHAIRMAN, WEXLER &
WALKER PUBLIC POLICY ASSOCIATES
Mr. Walker. Thank you, Mr. Chairman. And I am delighted to
be back in the room.
As a matter of fact, one of the things I was going to
mention as I started here is that some people asked me about
the Connestoga wagon that is in the portrait that--of me that
stares so ominously down on this room back there. And they
wonder how it--how a Connestoga wagon got in there. And I can
explain to them the reason why it is there is because the
Connestoga wagon was invented in my old Congressional District,
and it was, in fact, the high-tech of its era. Now some of it--
my constituents still cling to that high-tech, even to this
day, but I thought it was a nice symbol, also, for the reason
why we are here talking about prizes today, because the
Connestoga wagon became symbolic of Americans moving on to the
new frontier of the west.
And in large--the large reason why they went was for a
prize of some sort. Now it wasn't a specifically designated
prize. Often, it was Sutter's gold. It was opportunity of one
kind or another. But in some cases, they went for 180 acres of
land that was being offered by the Government. And those were,
in fact, real incentives that inspired people to do things that
they wouldn't otherwise do. I would suggest to you that the
reason why you want to do prizes is because you will get people
involved to win prizes who would never dream of pursuing a
government contract. What you will do is encourage people to
take risks that they might find unacceptable if there wasn't a
prize out there, and certainly take some risks that the
Government inside of its regular institutions would probably
find unacceptable. So what you will end up with prizes is
people willing to do things that are outside the box, that you
won't necessarily have RFPs or specs. You will have a goal. And
if there will be people who will take that desire to pursue
that goal and extend it in ways that we can't even imagine.
Now I don't suggest that this should be NASA's sole way of
pursuing space technology for the future. NASA has a lot of
contributions to make on the high-tech arena or in the high-
tech arena. And this should simply be a mechanism by which NASA
reaches out beyond what it can traditionally do to get new
thinking into the mix. I think that NASA can play a role in
helping some of these people who are pursuing prizes by being a
high-tech advisor to them along the line and give them ideas
where they run into places where they might otherwise stumble.
But it should be a part of a totality of a program, not just
the only piece of the program.
In my mind, the prizes here should be big. I think that you
ought to have a couple of these prizes that are very large so
that smaller developments are done in the wake of that big
goal. And I would offer you one example. I sit on the Board of
a company called Space Dev. Space Dev has a technology called
``hybrid rocket technology.'' It is not new. It is not a new
idea. In fact, this company bought it from a company called
Amroc that went out of business some years ago. For years, this
little company has tried to get people interested in hybrid
rocket technology. The Government wasn't interested. NASA
wasn't interested. The Defense Department wasn't interested.
Nobody was particularly interested.
But Burt Rutan was going after the X-Prize, and he needed a
rocket. And he needed a rocket he could buy pretty cheap. And
it doesn't cost you very much to make hybrid rockets, because
they are made out of rubber and laughing gas. So our rocket
went out, and they tested it about three or four times on the
ground, and then they put a man on it, and he flew. And he flew
a couple test flights, and then just the other day, he went
suborbital on that technology.
Now since that time, because it is the first new human-
rated rocket in 25 years, there has been lots of interest in
it, and it all came about, because there was somebody willing
to invest in Burt Rutan's idea of how you pursue a prize. That
is the wake of technology that you can begin to build behind
the prize. And so Space Dev may end up with a technology that
will have broad application that does not necessarily even
reference the prize in the end.
So it seems to me that you do want to have a big enough
goal so that you get this technology in the wake and maybe a
goal big enough that you can't even write specs for it. The way
in which this can really begin to have an impact is if you set
a goal so big that people can't sit around and write a lot of
specifications for it, you simply give people the opportunity
to move ahead.
Now in my mind, one of the things that you have got to be
very careful of as you do this is how much risk you are willing
to accept. I would suggest to you that the idea behind these
prizes should be to increase the amount of risk that you are
willing to accept. But you can not absolutely ensure safety if
you are pursuing some of these prizes. The prizes are a risk-
taking mechanism. And risk toward reward should be something
that should be very inherent in what you do. And so I would
hope that as you develop your mechanisms, maybe you need to go
off-line and establish a charter or a foundation that offers
some of these prizes so that Government doesn't have to get
involved in the questions before appropriation committees every
year about why did this fail, because in all honesty, you will
probably get as much failure in these programs as you will get
success, but that will be a good thing. Risk has to be a part
of the end results that you want out of a prize program.
Thank you, Mr. Chairman.
Chairman Rohrabacher. Mr. Diamandis.
STATEMENT OF DR. PETER H. DIAMANDIS, CHAIRMAN & CEO, X-PRIZE
FOUNDATION
Dr. Diamandis. Mr. Chairman and honorable Members, thank
you. I am thrilled to be here.
And I wish to speak on three subjects: the X-Prize to give
everybody an update; the--our support and interest in
Centennial Challenges; and third, to echo Mr. Walker's remarks,
the need to embrace increased levels of risk fundamentally.
We kicked off the X-Prize because there is an inherent
interest in the U.S. public to go and fly into space. Over 60
percent of the people consistently say they would like a chance
to go. But you know, up until recently, it has been very rare
that you can go. In 1995, after reading ``The Spirit of St.
Louis,'' I proposed the idea of a $10 million cash prize we now
have named the Ansari X-Prize. And we have now 27 teams from
seven countries building private spaceships to compete to win
this $10 million. And they are spending in excess of probably
$100 million, some say as much as $400 million, I will say, for
the record, over $100 million to go and win this. And the
beautiful thing is we don't pay $1, not a single dollar, until
someone does it, unlike traditional government procurements
where you will spend the money inherent--you know, independent
of whether someone does it or not. And in fact, they may never
reach the design goals they desire. We don't spend $1 until it
is actually won. And that is the beauty of the competition.
The other element is we have been able to attract people
that would never look at a government contract, as Mr. Walker
said. The--this is a way of, in one essence, getting fixed-
price science or fixed-price engineering. You put out the goal.
It is a challenging goal. And once that is put out there, if
enough money and time is given, it will be achieved. And you
are bringing levels of entrepreneurship and levels of
intelligence and levels of motivation you can not buy with a
contract. There is no way you can secure that through a
traditional mechanism.
We are getting people thinking about this around the world
during shower time, during, you know, time when they are at
dinner. This is bringing out the human spirit, the need to
achieve that greatness, that goal, to do something that is
meaningful with their lives. And the U.S. Government and NASA
can do that and capture that level of enthusiasm and get the
world excited. You know, I want to see kids getting on the Net
and looking at the prizes to help shape what they do in their
careers. What do people say out there is exciting to do? What
can I go after? Because right now, if you want to be an
astronaut, you know, the last 40 years have told you the
chances are 1 in 1,000. And even if you become an astronaut,
your chances of flying are 50 percent. And people say, ``Well,
space isn't really something I can do.'' Well, this makes it
available for everybody.
Now I want to address the issue of risk. I feel
fundamentally that unless we embrace risk, especially as
Americans, we will not have the innovation. The price of going
to orbit has gone up over 40 years, arguably, not down, and it
has not become less risky. We need to embrace risk to offer new
breakthroughs. The day before something is a breakthrough, it
is a crazy idea. If it is not a crazy idea or an idea that is
not--it is not a breakthrough, it is a small incremental
improvement. So how do we allow breakthroughs if we don't allow
risk? I mean, we are Americans. 500 years ago, thousands of
people risked their lives to cross the Atlantic. And we are
thankful for that. And then 200 years ago, they risked their
lives to cross the Americas right now in Los Angeles. I mean,
why would I want to stop taking risks now as we are on the
verge of the greatest frontier ever? Please, don't say we
shouldn't go with risk. You know, that old motto, ``Failure is
not an option,'' well, if we can't fail, we can't have
breakthroughs. We have to allow mechanisms to do that.
One of the issues that have made X-Prize a success so far--
and I appreciate your kind words, Mr. Chairman, but until we
write that $10 million check, we have not yet succeeded, but we
hope to do that in the next three months. The key ingredients
here are the rules. The rule-making process will determine
whether there is a success or there is a failure, whether you
get garbage or you get nothing at all. We have spent 80 percent
of our time up front thinking about the key rules. That is
fundamental. The second thing that is important is it has got
to be romantic and exciting. It has got to capture the hearts
and minds of nine-year-old boys to CEOs of companies. And the
third part that has made the X-Prize successful is the back
end, the potential marketplace, the fact that there is a $1- to
$3 billion-a-year space travel marketplace that will
materialize out of that.
Those three components, the rules, the excitement of the
concept, and the fact that there is someplace it can go, and it
doesn't have to be someplace you can go, necessarily only to
government, and government--it isn't government's job to make
sure there is a business market there. But if the rules are
properly written, like we did with the X-Prize where we said
three people versus one person, we--and reusable, that
inherently said the vehicles coming out of this could service a
marketplace. And that was our--that was the important thing
that we set out there.
I want to--in the--my last minute here, give my support to
the Centennial Challenges Program. I think it is the most
fundamentally critical thing that NASA could be doing. The
level of excitement. And rather than $20 million or $25 million
a year, I would love to see, you know, a good 10 percent of the
NASA budget put toward prizes. Why not for every contract that
is--let there be a series of prizes attached to those to allow
people who would never go after the same things that Lockheed
and Boeing did? In fact, you know, when asked why isn't
Lockheed and Boeing going for the X-Prize, well, the fact of
the matter is the current procurement methods have ruined the
large contractors. They do not take the risks. They don't build
the 777 until they know there is enough orders there. They
don't go and build any new launch vehicle until they know the
government is prepared to pay--foot the bill. It is really only
the small entrepreneurial companies, the university people, the
people who could never go after this that are willing to take
the level of risk. So there has to be both sides of the
equation. And I think prizes could enable that.
Thank you, Mr. Chairman.
[The prepared statement of Dr. Diamandis follows:]
Prepared Statement of Peter H. Diamandis
Chairman Rohrabacher, Members of the Subcommittee, it's an honor to
be here.
Today I wish to brief you on three subjects: First, the X-PRIZE
Competition; Second, the critical need to support NASA's plans for the
Centennial Challenges; and third, the need to embrace an increased
level of risk in our exploration of space.
X-PRIZE:
There is little doubt that there is a large and vibrant marketplace
of individuals willing to pay for the opportunity to fly into space.
Surveys consistently indicate that over 60 percent of the U.S. public
would welcome the opportunity to take such a trip, and the most recent
Futron Corporation study quantifies this public space flight market at
over $1 billion dollars per year during the next twenty years.
Unfortunately, the private spaceships needed to service this market
do not yet exist. To solve this challenge, in 1995 I proposed the idea
that a prize be offered to the first private team to develop such a
ship. In May 1996, in St. Louis under the Arch, with then NASA
Administrator and 20 astronauts, the X-PRIZE was announced. Ten million
dollars was offered to the first team able to privately build a ship
and fly three people to 100 kilometers altitude, twice within a two-
week period.
Today we have twenty-six teams from seven nations competing and we
expect a winner of the X-PRIZE in the next three to four months.
The results of this competition have been nothing short of
miraculous. For the promise of $10 million, more than $50 million has
been spent in research, development and testing. And where we might
normally have expected one or two paper designs resulting from a
typical government procurement, we're seeing dozens of real vehicles,
motors and systems being built and tested. This is Darwinian evolution
applied to spaceships. Rather than a paper competition with selection
boards, the winner will be determined by the actual ignition of engines
and the flight of humans into space. Best of all, we don't pay a single
dollar until the result is achieved. The bottom line is that prizes
work!
I'm also very proud that the X-PRIZE has played a roll with NASA in
the creation of the newly announced Centennial Challenges. These annual
NASA prizes will help encourage out-of-the-box thinking that is sorely
needed in our risk averse space community. While the annual budget for
NASA's Centennial Challenges is only $25 million today, I imagine a
future where 2.5 percent of the NASA budget, some $400 million, would
be offered each year. Entrepreneurs will solve the problems that large
bureaucracies cannot. Prizes offer NASA and the U.S. Government both
fixed-cost science and fixed-cost engineering. More importantly they
offer NASA the passion and dedication of the entrepreneurial mind that
cannot be purchased at any price.
I encourage the Congress to fully embrace and support the use of
prizes by NASA. Admiral Steidle and all of Code T are to be
congratulated for their efforts in launching the Centennial Challenges
and should be fully supported to encourage this new way of doing
business within the Agency.
DETAILS ABOUT PRIZES:
What are the key ingredients that have made the X-PRIZE so successful?
I would attribute our success to three key components. First, the
rules were well thought through and clearly presented. You'll hear me
speak of this over and over again--writing the rules is more than 80
percent of the battle. Our second key to success was the romance and
excitement involved with the prize topic. Sub-orbital space flight
included the human element, the potential to create heroes and a
personal message to every viewer of the competition, that message being
``You can go next!'' The third key component was the existence of a
business or market to support the teams after the prize was won. The
potential for a billion dollar space tourism market has helped teams
justify their investments and fuel their enthusiasm.
To what extent has the X-PRIZE attracted interest from NASA's
TRADITIONAL CONTRACTORS TO PARTICIPATE?
None of the traditional contractors have demonstrated any interest
in the X-PRIZE competition. In fact, shockingly, none have had any
interest in supporting us as a non-profit educational organization,
even though, in my opinion, these large corporations may be one of the
greatest beneficiaries from our activities.
The current contracting methods have spoiled the incumbents. They
are paid for paper designs and are paid in cost-plus contracts whether
they deliver or not.
But luckily, it is not the traditional contractors who we seek to
attract with these competitions. They lack the ability to take the
risks involved in achieving breakthroughs and to achieve low-cost
solutions.
How can prizes be designed and administered to induce the greatest
possible innovation?
Writing the prize rules is the most critical step to achieving this
goal. Well written rules will deliver breakthroughs, diversity and
innovation. Poorly written rules will result in no entries, or worse
yet, trivial solutions.
In addition the competing teams must believe that there is an even
playing field without bias for a preferred technology or company.
Judging must be independent of the offering agency and teams must be
left alone to the maximum extent possible.
Should prizes be offered for discrete technologies, or for large
technological feats?
The answer is, of course, both. However in the case of discrete
technologies, they need to be wrapped into a competition which makes
for good theater in some fashion. Remember that teams must create
sufficient interest from a group of potential financiers to underwrite
their effort. As such what they are doing must fall into one of the
following areas:
It must be great theater; likely to involve the human
element in some fashion.
It needs to inspire youth and educate the public
It must attract the attention of the global press
It must portend a large and vibrant marketplace
For example a device able to detect a bacterium or virus in a 100
grams of soil might be boring, but dress it as a life-detection prize
or better yet, a home-land defense pathogen detection prize and the
concept will get the attention of the media and corporate sponsors.
Might offering prizes encourage competitors to cut corners when it
comes to safety? How can NASA ensure that the technologies
resulting from a competition are safe and relevant to NASA's
objectives?
I will speak more about risk at the end of this testimony. Safety
is a relative issue. It is balanced against many factors. Would you
preclude two personally funded bicycle mechanics from Dayton Ohio from
building a self launching powered aircraft? Did they cut corners? Who
can judge them? If the government attempts to regulate safety issues
related to teams competing for prizes, it will kill the potential for
innovation.
The goal for the technology resulting from competition is not to
put them directly into production or use, it is to explore new
approaches or ways of thinking. The idea is to invent the transistor
not to perfect the process leading to a Pentium Chip. We should not
expect technologies resulting from a competition to be safe--we should
expected the technologies to be different and full of potential and
possibilities.
Should NASA offer prizes or are they best offered by private
organizations such as the X-PRIZE?
NASA should most definitely be offering prizes! This is in addition
to private organizations, or in cooperation with private organizations
like the X-PRIZE.
As a taxpayer I cannot think of a better thing NASA can be doing
with my money than offering prizes.
How involved should NASA be in specifying the technologies that must be
developed?
The most dangerous thing NASA could do is to over-specify the rules
or specify what technologies should be used. The rule making process
will determine the success or failure of a competition. Writing these
rules is an art form requiring specifying just enough, but not so much
as to limit the creativity of the contestants.
How involved should NASA be in overseeing the work of companies
competing? How involved should they be in judging the
competition?
Again, oversight of the teams competing needs to be very carefully
managed. It needs enough agency involvement to support team needs,
clarify rules and must support the credibility of the prize effort with
potential sponsors, but should NOT direct their creative approach in
any fashion. Teams need to be allowed to explore non-traditional
approaches which might seem 180-degrees out of phase with current
accepted practices. This is the only way to bring about true
breakthroughs.
What needs to happen to transition technologies from a prize winner to
a successful ongoing concern? What can the government do to
support this transition?
The best way to achieve this lies once again in the writing of the
rules. As an example, the X-PRIZE chose to require a three-person
vehicle rather than a one-person ship. The reason for this was to allow
for the creation of a capability that would most easily make the
transition to a revenue generating spaceship.
ACCEPTING RISK:
Finally I'd like to address the issue of risk. In contrast to
individuals who speak about reducing exposure to risk, I want to speak
in favor of accepting more risk.
There is no question that there is risk involved in winning the X-
PRIZE, as well as risk in going to the Moon or Mars or opening any
portion of the space frontier. BUT, this is a risk worth taking!
As American many of us forget the debt we owe to early explorers.
Tens-of-thousands of people risked their lives to open the `new world'
or the American west. Thousands lost their lives and we are here today
as a result of their courage.
Space is a frontier and frontiers are risky! As explorers and as
Americans, we must have the right to take risks that we believe are
worthwhile and significant. We owe it to ourselves and future
generations. In a time when people are risking their lives in motor
sports or bungee jumping, it seems a bit shallow to be concerned about
the risk involved exploring space.
It is also critical that we take risk in our technology development
and that we allow for failure. Without risk and without room for
failure we can not have the very breakthroughs we so desperately need.
A breakthrough, by definition, is something that was considered a
``crazy idea'' the day before it became a breakthrough. If it wasn't
considered a crazy idea, then it really isn't a breakthrough, is it? It
would have simply been an incremental improvement.
Remember those immortal words, ``Failure is not an option?'' If we
live and work in an environment where we cannot fail, than
breakthroughs may not be an option either.
I urge both this committee and NASA to take steps which will help
the American people understand that space exploration is intrinsically
risky, yet a risk worth taking. Let's make space explorers heroes once
again.
Chairman Rohrabacher. Tell us how you really think.
Great. Thank you very much for that testimony.
Dr. Macauley.
STATEMENT OF DR. MOLLY K. MACAULEY, SENIOR FELLOW, RESOURCES
FOR THE FUTURE
Dr. Macauley. Thank you, Mr. Chairman, and Members of the
Committee. It is an honor to be here and for our guests, our
Iraqi guests, it is an honor for me to be here with you. And I
notice that your joining Congresswoman Johnson has increased
the participation of women up there 50 percent, so thank you
very, very much.
In my short answer to are prizes a good idea is yes, but
being the researcher that I am, I have a couple of buts to add
with that, so let me go ahead and mention those. First of all,
we are not working with a clean slate. We have a heavy hand of
government in space R&D already through procurement contracts
and through peer-reviewed research, which hasn't been mentioned
a lot yet, so we have to think of prizes as a tool in an
already existing portfolio. But with that in mind, you know,
peer-reviewed research and contracts have a lot of
imperfections, as do prizes. But some of them offset each
other, so taken together, these are all a set of tools that I
think we can effectively use to marshal innovation in our space
program.
In my written statement, I look at the history of prizes,
because we are forging somewhat new territory here both by
bringing back prizes and having them governmentally sponsored.
So one question is what can we learn from the history of
prizes, and there is a rather large history. We can look at
prizes in aviation, automobiles, and rocketry, and I think very
important for discussion of the Centennial Challenges, which
may involve innovation in technologies that may be unique to
NASA that may not have commercial payoff, that may not have an
enduring relationship with government as customer. These may be
very specific technologies that further space exploration per
se. And interesting from the history of prizes, those are still
good candidates.
If you look at the history of aviation prizes, Curtiss,
Bleriot, Sigorsky, and Farman were among aviators winning
prizes, but there were many, many dozens of others. The thing
about those four individuals is they did end up developing a
product line of aircraft. But dozens of others who were
successfully competitive for prizes didn't. Apparently they
were motivated just by the thrill, and that is my point that we
can also see prizes given for solving mathematical theorems.
And there was a prize offered by the French Academy of Sciences
in 1790 for producing a soda alkali from salt. So again, the
point is if some of the Centennial Challenges are addressing
very unique, maybe NASA-specific innovations, they still may be
fair game for prizes if one of the motivations is the thrill of
invention and not necessarily the lure of a market.
However, these inventors were often interested in patenting
their innovation. So NASA prizes don't necessarily have to
target innovation for commercial profitability but the
assignment of property rights to the inventor may be necessary
to attract participation.
Also, the heyday of prizes in our U.S. history took place
during an era of very limited government. These aviation prizes
and these prizes for automobile races were taking place largely
even before we had the personal income tax or corporate taxes.
It was the heyday when the private sector owned a lot of the
mass transit, the railways, the trolley cars, the private
sector-owned electricity companies and water companies. It was
the era of innovation spurred by Carnegie, Rockefeller, J.P.
Morgan, Jay Gould, Vanderbilt. Today's culture is very, very
different I would assert. We have the very heavy hand of
government both in tax policy and in R&D policy, and I think
that it is fair to say we can't look at prizes as the silver
bullet that is going to reinvigorate enthusiasm for space like
prizes seemed to do in the early decades of the 1900's.
Times have changed, and so I don't want to unfairly burden
with prizes as being that silver bullet that will all of a
sudden encourage the Appropriations Committee to begin spending
a lot more money on space. I think we need to realistically
look at the bowl of prizes here. They can, nonetheless,
complement existing approaches to contracts and peer review, et
cetera.
As mentioned, another advantage of prizes is the financial
risk rests largely with the competitors and those whom they
find to fund their work. That is an advantage for the taxpayer,
because the risk is allocated somewhere else in our economy,
but this can have some problems. For example, if the prize is
offered for a technology that is a tent pole, absolutely
critical for one of NASA's ideas, and we find out we are unable
to award the prize because we simply find that our best and
brightest can't do it, then we may be delayed in the pursuit of
that technology and government may end up spending more money
to find a substitute or a work-around. So offering a prize for
something that is a critical tent pole in our pursuit of our
objectives, we have to think a little bit about that. And of
course, grants and peer-reviewed research have no guarantee of
success, either, but again, for tent pole technologies, we
might have to think a little more carefully about prizes.
There is another advantage of prizes that is particularly
important in Centennial Challenges, and that is that an
unawarded prize, a prize that we offer but we find no winner,
is still important. Failure can be very important, because we
learn from that. What we would learn from offering a prize for
which there is no winner is that our best and brightest right
now, given the current state of technology, simply can't do it,
and that is very important information for managers of
innovation in something that is unique and interesting. So
failure, in and of itself, is not necessarily bad. It brings us
information. Albeit it brings us delay and we figure out a
work-around, but it is important information.
A couple of disadvantages of prizes, as mentioned earlier,
a cash flow problem for those entrepreneurs who want to step up
to the plate but really are going to have to spend some time
finding funding to underwrite the effort. And also there is a
lot of economics research about possibly wasteful effort if you
have got a lot of folks competing for a prize. From a broad,
societal perspective, some economic theories have suggested
that can be very wasteful. There is a duplication of effort in
some of those cases.
Now problems with government-sponsored prizes, I know that
Doug to my left here will address these, but one of them is
committing to a prize across Administrations, Congresses, and
fiscal years. Another problem is how we want to allocate
property rights. In my testimony, I have a note that the
government, in 1960 or so, ended up paying Mrs. Robert Goddard
and the Guggenheim Foundation a large settlement for government
use of more than 200 of Robert Goddard's patents. Mr. Goddard
died in 1945. So that is an example of where figuring out in
advance how we want to handle property rights is very
important.
I also think involving an outside board of experts to judge
the prize is very desirable, appropriate, and perhaps even
necessary. I think eligibility for the prize should be broad
and include government employees and FFRDCs. So here I differ a
bit with the present structure of Centennial Challenges. A lot
of our Nation's talent in space does rest with some of the
FFRDCs and the NASA centers, and I think it is important that
eligibility be very broad, but that is why we have an outside
Board of Directors completely unrelated to NASA serving as
judges and other administers of the prize.
Let me also say that NASA often uses these kinds of success
measures: create jobs, attracts students to science and math.
Prizes will not necessarily create jobs. Prizes will not
necessarily attract students to science and math. Prizes will
not necessarily increase the number of engineers and scientists
or broaden participation of underrepresented minorities or prop
up a group of suppliers, say, of space transportation to
protect that industry. And again, those are often objectives
that we have used in our space program. And prizes are not
necessarily going to further those. We can argue whether those
are appropriate success metrics, but prizes are likely not to
be well aligned with those.
And then finally I want to echo some comments that have
already been made about the issue of safety and risk. Again, if
we look at the history of prizes in aviation, my research
assistant, Maria Shriver, seated behind me, has not only looked
at the history of prizes but the history of fatalities during
that era of the heyday of aviation prizes. And aviators were
dying left and right each year, and yet the prizes continued to
be offered, and many continued to be awarded. It was a very
different attitude toward loss of life and risk sharply in
contrast to our responses to Apollo I, Challenger, and
Columbia. And I would assert that we really need to rethink
attitudes toward and public policy for fatalities in the space
program.
And I think I will stop there and look forward to your
questions.
[The prepared statement of Dr. Macauley follows:]
Prepared Statement of Molly K. Macauley
Advantages and Disadvantages of Prizes in a Portfolio of Financial
Incentives for Space Activities
Mr. Chairman and distinguished Members of the Committee, thank you
for inviting me to meet with you today. My name is Molly K. Macauley
and I am a senior fellow at Resources for the Future, a nonpartisan
research organization established in 1952 upon the recommendation of
the presidentially appointed Paley Commission. Researchers at RFF
conduct independent analyses of issues concerned with natural resources
and the environment. I emphasize that the views I present today are
mine alone.\1\ Resources for the Future takes no institutional position
on legislative, regulatory, judicial, or other public policy matters.
---------------------------------------------------------------------------
\1\ I thank Maria Schriver for excellent research assistance,
particularly in collecting and organizing information about the history
of aviation prizes. Responsibility for opinions and errors in this
testimony rests exclusively with the author.
---------------------------------------------------------------------------
My research interests are space policy issues with a focus on
economics. My areas of study include: space transportation and space
transportation vouchers; economic incentive-based approaches, including
auctions, for the allocation of the geostationary orbit and the
electromagnetic spectrum; management of space debris; the public and
private value of remote sensing information; the roles of government
and the private sector in commercial remote sensing; and the economic
viability of satellite solar power for both terrestrial power
generation and as a power plug in space for space-based activities.
This research has taken the form of books, lectures, and published
articles. My research on these topics is funded by grants from the
National Aeronautics and Space Administration, the Federal Aviation
Administration, and Resources for the Future. My comments on today's
discussion of space prizes are funded solely by my discretionary budget
at Resources for the Future.
Before offering my comments I'd like to make two introductory
points.
The first is that for years, we have searched for the ``silver
bullet'' that would propel our nation back into space by way of the
Shuttle and Space Station for the multiple pursuits of scientific
exploration on one hand and a vibrant commercial space industry on the
other. There is no lack of ingenuity in ideas for both of these goals.
But critics of NASA's plans--regardless of the specific details
involved--assert that they take too much time and money away from more
pressing societal needs. And, critics of commercial space activities
assert that such projects carry unique risks, take too much time to
develop, and take too much time before they earn any money.
Obviously, priority determines the allocation of budgets in both
the private and government sectors of the economy. There is ``ample''
money in general but competing priorities for spending it. Risk, long
lead times, and long payback periods cannot be blamed as a death knell
of space because significant investment takes place in other high risk,
highly uncertain industries including pharmaceutical development,
information technology-related hardware and software, and hybrid autos.
A second introductory comment summarizes my conclusions. Prizes,
although not a silver bullet for invigorating enthusiasm for space or
elevating its priority in spending decisions, could nonetheless
complement government's existing approaches to inducing innovation--
procurement contracts and peer-reviewed grants. Even if an offered
prize is never awarded because competitors fail all attempts to win,
the outcome can shed light on the state of technology maturation. In
particular, an unawarded prize can signal that even the best
technological efforts aren't quite ripe at the proffered level of
monetary reward. Such a result is important information for government
when pursuing new technology subject to a limited budget.
The remainder of my testimony addresses these topics: previous
experiences of using prizes to encourage innovation, including prizes
in aviation, automobiles, and rocketry; use of prizes in the current
era of heavy government involvement in R&D (most experience with prizes
pre-dated ``big government''); and advantages and disadvantages of
prizes compared with procurement contracts and peer-reviewed research
grants. The concluding sections draw from these observations to offer
comments about NASA prizes.
I. Observations about the history of using prizes to encourage
innovation
Prizes have a long history of encouraging innovation, and a look
back at these contests can offer insights into what might be expected
from NASA prizes. The following examples highlight use of prizes in
basic and applied research in chemistry, autos, and aviation. Another
example, rocketry, is a case in which prizes were scarcely used.
Soda alkali. One of the earliest documented uses of prizes took
place in the 1780s when the French Academy offered 100,000 francs to
whomever could produce a soda alkali from sea salt. The competition
successfully led to a process that became the basis of the modern
chemical industry.\2\
---------------------------------------------------------------------------
\2\ See Joel Mokyr, The Lever of Riches (New York: Oxford
University Press), 1990.
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Autos. Prizes also figured prominently in the development of the
automobile, with dozens of popular, well-publicized auto races
beginning in the 1890s, mostly in Europe. One of the notable contests
in the United States--the ``Great Chicago Auto Race ``--is credited
with giving birth to the American auto industry. In 1895, H.H.
Kohlstaat, publisher of the Chicago Times-Herald, sponsored this
competition to test the overall utility, cost, speed, economy of
operation, and general appearance of cars.\3\
---------------------------------------------------------------------------
\3\ See Paul A. Hughes, ``A History of Early Electric Cars,'' at
http://www. Geocities.com/Athens/Crete/6111/electcar.htm (accessed July
2004) and Richard Wright, ``A Brief History of the Automobile Industry
in the United States,'' at http://www.theautochannel.com/content/mania/
industry/history/chap10.html (accessed July 2004).
---------------------------------------------------------------------------
Kohlstaat was surprised at the number of letters and telegrams he
received expressing interest in participating in the contest. The auto
business had seemed centered in Europe, yet he found that there were
widespread efforts underway in the U.S. Most of the inventors were
simply unaware of the work of the others. Unlike previous road races,
the contest placed only secondary emphasis on the outcome of the race
itself--rather, the awards were for evaluating performance of
characteristics of the cars. Entrants included individual inventors as
well as the R.H. Macy Company and the De La Vergne Refrigerating
Company. Macy's had been importing German-built Benz cars and hoped to
sell them in Chicago after publicity from the race.
Only six cars ultimately participated--many competitors were
discouraged by a large snowstorm the night before the race. Two cars
finished the race, but four entries won cash awards: the first place
finisher, inventor Frank Duryea, earned $2,000 (about $50,000 in 2004
dollars) for his auto's speed, power, compactness, and overall race
performance; the other finisher won $1,500 for performance and overall
economy. The Macy entry, which did not finish the race, and another
entrant won $500 each for general performance. A fifth entrant got a
special gold medal for safety; the absence of noise, vibration, heat or
odor; and general excellence of design and workmanship. Duryea later
went on to become the biggest producer of autos in the U.S., building
13 cars in 1896 (the cars were hand-built; mass production of autos was
years away).
Aviation.\4\ Another notable and frequent use of prizes--and much
of the inspiration for the X-Prize--was in the early history of
aviation. Between roughly 1908 and 1915, the heyday of privately
sponsored competitions for distance, elevation, and speed jumpstarted
the aviation industry. Three dozen or so individual prizes during this
period--at roughly the rate of four or more annually--fostered
innovations that decidedly gave birth to the industry. Some general
observations about aviation prizes include:
---------------------------------------------------------------------------
\4\ The history of prizes in this section is drawn from M. Josephy
Jr., editor in charge (1962), The American Heritage History of Flight
(American Heritage Publishing Company); ``The History Buff,'' at http:/
/www.ehistorybuff.com/wwrightals.html (accessed July 2004); and Gregg
Maryniak (2001), ``When Will We See a Golden Age of Spaceflight?'' Pre-
publication draft at http://www.xprize.org/papers/XP-CATO-
Maryniak.5Mar01.doc (accessed July 2004).
1. Prizes were usually offered for incremental improvements.
For example, the first couple of prizes were for flights of 25
meters and 100 meters, then for over 1,000 feet in elevation.
Subsequent prizes were for longer distances, higher elevation,
---------------------------------------------------------------------------
and faster time.
2. Prizes were almost without exception offered by private
individuals and companies, not by governments. Sponsors were
mostly wealthy entrepreneurs such as Raymond Orteig, a New York
hotel owner; Jacques Schneider, a wealthy French industrialist;
Ralph Pulitzer, the son of newspaper publisher Joseph Pulitzer;
James D. Dole, a Hawaiian planter; Eduoard and Andre Michelin,
executives of what was to become the Michelin Tire Company; and
James Gordon Bennett, the publisher of the New York Herald.
Prizes were also offered by the French Aero Club, which
undertook private fundraising to obtain the prize money; the
French Champagne industry; the Harvard Aeronautical Society;
the Daniel Guggenheim Fund; the Daily Mail of London; and the
New York World. Governments funded military planes to race in
competitions after World War I but didn't supply the prize
money.
3. Big air meets were popular during 1909--1911 but then they
either continued without much publicity or became less
profitable. Many meets continued as annual races into the
1930s--the meets were not competitions for ``be the first to. .
.'' but were for speed and demonstrations of skill.
4. There were prizes that were never awarded or that were
awarded only after a long extension of the competition
deadline. For example, the Orteig prize, awarded to Charles
Lindbergh in 1927, was originally offered in 1919 for a period
of up to five years, but the deadline was extended.
5. Prizes were offered for generally specified objectives like
distance, speed, or minimum number of refueling and maintenance
stops. Prize guidelines typically did not include stipulations
about the technological approach or other engineering
characteristics.
6. In at least one documented instance, a company underwrote a
competitor in exchange for advertising the company's product
(consumer soft drinks) on his plane.
7. Prize amounts varied widely--in 2004 dollars, the amounts
ranged from about $200,000 to over $1 million. The typical
amount was around $300,000. Later prizes were almost always for
more difficult achievements, but prize monies didn't increase
accordingly. The amounts do not seem correlated with the
difficulty of the achievement required to win--but this
observation may be biased by the paucity of detailed
information about the prizes.
8. Accidents and fatalities were common--but did not lead to
standdowns in holding competitions.
9. Whether contestants sought commercial gain from their
innovation is not clear from the available records about the
prizes. Some winners--but by far the minority--became founding
fathers of a product line of aircraft--such as Louis Bleriot,
Glenn Curtiss, Henri Farman, and Igor Sigorsky.
Rocketry. The success of prizes in fueling innovation in autos and
aviation sharply contrasts with the history of rocketry and space
travel.\5\ With one exception, the earliest efforts in rocket
development never attracted prize money. Research grants rather than
prizes typically financed studies of rockets--although even research
grants were rare in the early decades. Konstantin Tsiolkovsky, Robert
Goddard, and Hermann Oberth--the fathers of space travel--worked
independently in self-financed home-based or academic laboratories.
Tsiolkovsky received a grant of 899 rubles in 1899 from the Russian
Academy of Science. Goddard, after making multiple requests (with the
urging of Lindbergh), was given grants of $5000 and later, $3,500, from
the Smithsonian Institution during 1917-1920.
---------------------------------------------------------------------------
\5\ See Wernher von Braun and Frederick I. Ordway III (1975),
History of Rocketry and Space Travel (New York: Thomas Y. Crowell
Company)
---------------------------------------------------------------------------
In 1927, some forty years after the first serious, scholarly
articles on rocketry had been published, Robert Esnault-Pelterie, a
well-known airplane inventor, and his friend, banker Andre Louis-
Hirsch, established a 5000-franc prize. The prize was to be awarded
annually to the author of the most outstanding work on astronautics.
Public interest in rocketry was generally cool to lukewarm--in
fact, ``talk of rockets and space travel was viewed as crackpot by the
public and as unscientific by most scientists.'' \6\ Newspaper
reporters, seizing upon some of Goddard's writing about how rockets
could get to the Moon, sensationalized the statements and referred
sarcastically to Goddard as the ``moon man.'' The American
Interplanetary Society--a professional organization that was a
forerunner of the American Institute of Aeronautics and Astronautics--
changed its name to the American Rocket Society because interplanetary
travel was so ridiculed.
---------------------------------------------------------------------------
\6\ See von Braun and Ordway.
---------------------------------------------------------------------------
For a long time, the early rocket scientists were unaware of each
other's work, separated by geography and language. Beginning in the
1920's and 1930's, rocket and interplanetary societies formed in
Western Europe and the U.S., researchers began regularly to report
results in professional journals, and many experimental studies of
rockets began under the auspices of defense agencies abroad (but not in
the U.S). At this time, research in rocketry was best organized in
Russia, where the Soviets created a government bureau for
interplanetary flight, staged an exhibition on rocket technology, and
published conference papers and a nine-volume encyclopedia. Research
programs in Germany and France were also active in both theoretical
studies and experimental testing of rocket components.
In the U.S., the Guggenheim Foundation was funding some of
Goddard's research, but as late as 1940 the Army and Navy remained
generally uninterested (although the Army was conducting some limited
research on rocket propellants). The Air Corps responded to one of
Goddard's proposals for support by writing that the Corps ``was deeply
interested in the research work being carried out. . .under the
auspices of the Guggenheim Foundation (but) does not, at this time,
feel justified in obligating further funds for basic jet propulsion
research and experimentation.'' \7\ By 1945, the U.S. government rocket
program was more fully developed, with large expenditures and
production facilities coordinated across the military services by
President Roosevelt's National Defense Research Committee.
---------------------------------------------------------------------------
\7\ See von Braun and Ordway.
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Some observations. These experiences show the usefulness of prizes
in fundamental research (soda alkali) and in advancing technology
(autos and aviation). Of course, the counterfactual question of ``would
innovation have come about in the absence of prizes,'' and if so how
fast and at what cost, is equally important--but hard to answer. These
experiences also took place before the rise of government's heavy hand
in R&D (more on this in a later section below).
The absence of prizes in rocketry also raises questions. Several
reasons could explain the difference between the role of prizes in
spurring aviation and the virtual absence of prizes in the early
development of space technology. The industrialists and media who
funded aviation prizes appeared to be responding to an enthusiastic
public in seeking publicity for derring-do involving human flight, and
at least in one case (maybe more, if documentation were more complete),
the chance to use a plane as a flying billboard by advertising consumer
products on the fuselage. Public perception of rocketry was
incredulous, less enthusiastic and as noted, even marked by ridicule.
Rocketry, perhaps more so than aviation, was the ``stuff'' of
science fiction. Visible success--a rocket that successfully launches
high and far--was also more difficult to achieve than success in
aviation during these formative years. In addition, far fewer
individuals were experimenting with rockets--thus, many fewer
contestants might have stepped up to rocketry prizes were they to have
been offered. Finally, a reason for using prizes in aviation might at
first glance be the potential for commercializing the technology, but
as noted earlier, this motive is far from obvious. A commercial profit
motive in competing for aviation prizes per se (as distinguished from
using the plane as a flying billboard for consumer products) is not
evident in the written record--most of the competitions were ``one-
shot'' (although, again as noted, some aviation product lines were
spawned). More generally, the technological advances encouraged by
aviation prizes were each incremental but taken together built a
foundation for the evolving commercial aviation industry.
II. What's different now--an era of government-sponsored R&D
The climate for aviation prizes to reward technological advance
pre-dated today's complex relationship between the private and
government sectors in general and in space-related R&D in particular.
The heyday of prizes was about 1900 to 1917--two decades in which
aviation feats made the news for an attentive public interested in the
new technology, thrilled by its daredevils, and newly enamored of all
modes of transportation as the era of the auto began. The period was
undoubtedly one of the most distinctive periods in the history of
innovation. The private sector reigned in almost all economic sectors.
For instance, almost 100 % of public transit systems-street railroads
and trolleys--were privately owned, and individuals or private
syndicates held about 85 percent of electric companies and 50 percent
of water companies.
Economic growth was also rapid. Per capita income roughly doubled
just after the turn of the century due to an economy-wide increase in
output. It was the era of modernization in steel mills, the beginning
of skyscrapers, and rapid urbanization. It was also the chapter of the
great industrialists--Andrew Carnegie in steel, John D. Rockefeller in
oil, J.P. Morgan in finance, and railroad magnates like Jay Gould,
Edward Harriman, Collis Huntington, and Cornelius Vanderbilt These
entrepreneurs and their companies did the bulk of R&D.
Not surprisingly, government began to grow rapidly with the advent
of personal and corporate income taxes in 1913 and a corporate excise
tax enacted in 1909. Government spending increased from about $500
million in 1902, to about $900 million in 1913, then to $1.8 billion in
1922 (all amounts are adjusted for inflation). Per capita government
spending increased 21/2 times from its level in 1902 to its level in
1922. World War I, the Depression, and World War II brought further
large increases in federal spending. Most expenditures before 1915 were
for defense, the postal service, and veterans services; by 1920,
expenditures included these activities plus growing interest on debt
and financing of air and water transportation.
Increased government expenditure during this time was not, however,
directed towards R&D. About the only role of government in innovation--
albeit an important role--was protecting invention by way of the very
active patent system. The large expansion of government R&D that
characterizes today's public sector began after World War II in the
form of procurement contracts and peer-reviewed research grants to
universities. At the same time, a new, so-called social contract
between government and researchers evolved to provide for freely
sharing the results of research in exchange for funding.\8\
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\8\ See historical discussion and references in US Congress, Office
of Technology Assessment (1991), Federally Funded Research for a Decade
OTA-SET-490 (Washington, DC: U.S. Government Printing Office).
---------------------------------------------------------------------------
Government involvement now extends well beyond protecting
intellectual property to include direct subsidies and R&D tax credits
as well as carrying out research at government laboratories or other
facilities, often in partnership with the private and academic sectors.
Government's influence is far wider because a host of other policies,
although not directed toward R&D, also significantly affect the rate
and direction of innovation. These include safety and health
regulation, mandatory labor practices, and environmental protection.
Analyses evaluating the fruits of government-sponsored R&D reveal a
mixed record. The supersonic transport, the Clinch River Breeder
reactor, synthetic fuels from coal, and the photovoltaics
commercialization programs are among ``failures'' according to most
analysts.\9\ In other cases, government investment seems to have paid
off. For example, a recent National Research Council study of fossil
energy research supported by the U.S. Department of Energy found that a
least a handful of R&D initiatives ranging from electronic ballasts in
compact fluorescent tubes to atmospheric fluidized-bed coal combustions
were ``well worth it'' in that the estimated net realized economic
benefits were positive.\10\
---------------------------------------------------------------------------
\9\ The edited volume by Linda Cohen and Roger Noll (1991) The
Technology Pork Barrel (Washington, DC: Brookings Institution)
discusses these examples.
\10\ National Research Council (2001) Energy Research at DOE: Was
it Worth It? (Washington, DC: National Academy Press).
---------------------------------------------------------------------------
III. The tight coupling of government R&D funding and aerospace
Government stepped in to fund and manage civilian space activity in
response to Sputnik and the Cold War--putting a ``government in
charge'' imprimatur on space activities. Government involvement
continues--of all federal R&D money flowing to industry, about a third
goes to the aerospace sector, and of that, 98 percent goes to nine
companies.\11\ Two-thirds of R&D funding in aerospace is federally
financed.\12\ Not all space developments have been publicly funded,
however. There have been some important exceptions in which large
amounts of private money were invested in developing space technology.
NASA and the Department of Defense jointly funded a small amount of the
development costs of the Hughes Aircraft Company to design the Syncom
satellites (the first commercial geostationary communications
satellites), but most of the funding came from the Comsat Corporation
using money from common carriers and from a public stock offering.\13\
Private money also contributed to underwriting the cost and risk of
developing the launch vehicle Pegasus and portions of the Sea Launch
system. Like any industry, however, for every profitable success there
are many more financial failures. There have been unsuccessful attempts
to privately finance new space transportation systems, low-Earth orbit
communications networks, and some commercial Earth-observations
satellite systems.
---------------------------------------------------------------------------
\11\ Federal funding of R&D increased from about $ 50 billion in
1960 to over $80 billion in 1990 (all figures in 2002 dollars), growing
rapidly during the ``golden years'' for research after the launch of
Sputnik and the commitment to land on the Moon. Federal R&D funding in
recent years has been around $105 billion.
\12\ Tables A-9 and A-15, National Science Foundation, Research and
Development in Industry: 2000, at http://www.nsf.gov (accessed July
2004).
\13\ At the time, the public held half of Comsat's stock and
communications companies like AT&T, ITT, RCA, and Western Union held
the other half. For more on the development of commercial
communications satellites see John L. McLucas (1991) Space Commerce
(Cambridge, MA: Harvard University Press).
---------------------------------------------------------------------------
IV. Prizes, procurement contracts, and peer-reviewed research grants in
the 21st century
As government grew, prize offerings tailed off not only in aviation
but also in other fields. There may be no causal link, or maybe there
is one. The answer would shed some light on whether reinstituting
prizes now can be successful in inducing innovation. Part of the answer
also rests with whether prizes are compatible with or offer significant
advantages compared with the ingrained contracting and grant-making
relationships between government and the private sector in space R&D.
In any case, neither prizes nor, for that matter, other traditional
approaches to R&D sponsorship by way of peer-review or procurement
contracts guarantee ``success'' in bringing about innovation.
Much of the preceding discussion has emphasized the historical
success of prizes but they have some disadvantages. These include:
-- no provision for up-front cash flow to defray expenses;
-- duplication of research effort if many individuals or
groups compete;
-- uncertainty about whether the innovation can succeed; and
-- delays in the pace of innovation if a lot of time elapses
before it is determined that there are no winners.
In addition, prizes are unlikely to meet other social objectives
that government sponsorship in general, or NASA sponsorship in
particular, has traditionally pursued. For example, prizes do not
necessarily further these goals that NASA has frequently set forth as
success measures in its R&D policy:
-- increase the number of academic researchers;
-- increase the number of scientists and engineers;
-- create jobs;
-- influence political support by way of job creation;
-- broaden the participation of traditionally under-
represented groups in science and technology; and
-- prop up a particular supplier or group of suppliers to
ensure choice (say, to ensure that a range of capacities is
available in space transportation by dividing business among
companies that offer different classes of vehicle lift)
In addition, there are some disadvantages of government-sponsored
prizes compared with privately sponsored prizes:
-- Government typically cannot commit to funding beyond a
fiscal year, thus limiting the timing of the prize competition
and cutting short the time that might be required for the
technical achievement it awards.
-- Any uncertainty about whether the prize will actually be
awarded due to government budgets or changes in administration
will weaken if not eliminate incentives to compete.
-- Intellectual property rights to the achievement may need to
reside with the competitor to induce participation, even though
the taxpayer, by financing the prize, could fairly claim
rights. It is interesting to note that after contentious
deliberations, in 1960 the U.S. government awarded the
Guggenheim Foundation and Robert Goddard's widow $1 million in
settlement for government use of more than 200 of Goddard's
patents (Goddard died in 1945).\14\
---------------------------------------------------------------------------
\14\ See von Braun and Ordway.
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Some of these disadvantages are also an outcome of traditional
grants and procurement contracts. And, grants and contracts offer some
advantages over prizes. What follows summarizes some of the
differences:
Asymmetry of information. The engineer/entrepreneur may have a
better idea of the technical riskiness of the R&D than the government.
In this case, offering an award upon completion of rather than in
advance of research lessens the cost to the government of pursuing
highly risky innovation.
Information and uncertainty. While prizes put the burden of proof
on competitors, grants and procurement contracts, by requiring up front
information, can more promptly reduce (although not eliminate)
uncertainty about whether the innovation is feasible. Prizes may go un-
awarded for the duration of the competition, and only then, after this
delay, might it be concluded that the technology is not yet feasible
(although other reasons may explain the lack of a winner). Using prizes
can thus delay a determination that a technology is infeasible and
delay pursuit of alternative paths that might have been more quickly
pursued under a grant or contract.
Cash flow. Grants and contracts, by providing funding up-front,
underwrite early stages of innovation. Prizes, by providing an award
only upon completion, could create cash-flow problems for contestants
or require them to spend time and resources to find financial support
during the competition.
Who bears financial risk. Financial risk rests largely with the
taxpayer under grants and contracts and projects can fail or be
terminated before providing any return to the taxpayer. Prizes do not
guarantee success but the financial risk rests with competitors and
their funders rather than the taxpayer.
Safety risk. The early history of aviation is replete with
accidents and fatalities in pursuit of innovation, but efforts
continued with scarcely a hiccup. The government's approach to safety
risk is wholly different, as illustrated by the lengthy standdown of
U.S. human space flight activities in the wake of the Apollo 1,
Challenger, and Columbia fatalities.
Duplication of effort. A prize rather than a research grant made to
one firm may have the advantage that ``two (or more) chances are better
than one'' if there are several independent research programs. On the
other hand, from a broad view of the Nation's resources as a whole,
there may be wasteful duplication of effort if there are simultaneous
research programs all pursuing the same goal.\15\
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\15\ Researchers have investigated the problem of ``patent races''
and whether simultaneous pursuit of a new technology leads to wasteful
duplication. For example, see discussion in Jean Tirole (1988) The
Theory of Industrial Organization (Cambridge, MA: MIT Press), Chapter
10.
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Awardees' incentives. Most peer-reviewed grants result in
publications and sometimes, patents. By and large, grants are not
intended for nor do they typically result in commercial products or
services. Procurement contracts can satisfy government-unique
requirements or lead to commercial feasibility. The motives for
competing for prizes are less clear--in the history of aviation prizes,
only a few entrants themselves followed up with commercial product
lines, but they may have collected patents (the data about the long-
term pay-offs to aviation prizes are sparse). Typically an award
recipient, whether it is an individual competing for a prize or a
corporation winning a procurement contract, capitalizes any expected
commercial value of the research or innovation into their decision
whether to compete.
Basic research, technology development, and commercialization. All
three approaches can underwrite basic research, technology development,
or commercialization. For example, a university researcher with access
to a laboratory may be as interested in competing for a prize as in
competing for a research grant. A private inventor may compete for an
award for modest improvements in technology or may be inspired to
research more radical innovation, irrespective of commercial potential.
Prizes have been awarded for solving mathematical problems (the
Wolfskehl Prize for proving Fermat's last theorem\16\ ) as well as for
technology development with commercial potential--the motives for
pursuing an award seem varied.
---------------------------------------------------------------------------
\16\ See National Academy of Engineering (1999) Concerning
Federally Sponsored Inducement Prizes in Engineering and Science
(Washington, DC: National Academy Press).
---------------------------------------------------------------------------
Failure. All three approaches provide an opportunity to learn what
``doesn't work.'' The Defense Advanced Research Projects Agency
(DARPA), for example, had no winner in its recent, $11 million Grand
Challenge race for robotic navigation of a 142-mile stretch of the
Mojave Desert. DARPA admitted that it was pessimistic about a
successful finish because the technology is not yet that advanced, but
also pointed out that learning from mistakes is a way to advance
technology. The agency plans to hold the competition again in 2006.
Similarly, a recent government contract for a follow-on Earth
observation satellite system for the Landsat program was not awarded to
any bidder because proposals did not meet all the criteria. In these
cases, failing to find a winner signaled that the technology, cost, or
both was not yet up to the expected par. The chance to learn more than
this--that is, to learn more about details of engineering design,
engineering cost, and so forth--is limited, however, unless competitors
are required to share information about their approach rather than keep
the information proprietary.
Because of these differences in prizes, grants, and contracts, all
three approaches, taken together, can provide a good portfolio of tools
to encourage innovation. As an additional note, in all three
approaches, ownership of intellectual property needs to be determined
and will affect the public and private pay-off to the innovation.
V. NASA prizes
The candidate Centennial Challenges identified by NASA for prize
awards range from very low cost spacecraft missions, to breakthrough
robotic capability, to revolutionary technology demonstrations.\17\
There is precedent in the history of prizes for awards to address all
of these types of innovations. However, the specific candidate
challenges that NASA has identified do not include prizes for Earth
science--even though the language accompanying the Challenges preamble
embraces Earth science. Innovation in Earth sciences might be a good
prospect for prizes given the rapid pace of new sensor development and
the manifested interest of the private sector in Earth observations.
---------------------------------------------------------------------------
\17\ See ``Centennial Challenges Program'' at http://
centennialcallenges.nasa.gov/workshop.htm (accessed July 2004).
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It is hard to outline a formula for determining the size of the
prizes- awards set too low may just miss inducing an innovation; awards
set too high result in taxpayers paying more than necessary to induce
the innovation. Not all competitors will necessarily be pursuing
commercialization or an ongoing supplier relationship, if the history
of aviation prizes is a guide to motives for participation. For this
reason, potential commercial profitability may not figure in
competitors' participation decisions or be relevant to government's
procedures for determining the size of the prize.
In any case, if a prize is offered but not awarded, the outcome may
signal that the technology is simply not yet mature enough at that
price--important information for government R&D managers. For ``tent
pole'' technology development--that is, technology that is essential in
furthering a goal--the uncertainty of success in a prize competition
weakens the usefulness of prizes (although grants and contracts do not
necessarily guarantee success either).
Shortcomings of government prize sponsorship, as noted earlier,
include commitments to funding across fiscal years, political
administrations, and different Congresses. Problems also involve
determining an appropriate allocation of rights to intellectual
property developed with taxpayer support but possibly of commercial
proprietary value. It would be useful for competitors to share results
even if their attempt is unsuccessful (learning by doing), but so doing
could undermine expected private value and thus come full circle to
discourage participation in the competition.
Involving a broad range of expertise, including outside experts,
may be an advantage in structuring government-backed prizes. For
instance, it may be desirable for a board of directors consisting of
experts outside of government to administer and judge contests. Because
a prize can ``ferret out'' new ideas, eligibility to compete should
also be broad (the Centennial Challenges prohibit federal employees and
employees of federally funded research and development centers (FFRDCs)
from competing, but much talent in aerospace is at NASA centers and
FFRDCs).
VI. Conclusions
The history of prizes is attractive enough to warrant experimenting
with their use in NASA activities. Further review of the structure of
previous contests (their guidelines, funding, and results) and in
particular, their assignment of property rights would provide helpful
``lessons learned'' as plans proceed. But prizes cannot fully
substitute for peer-reviewed grants and procurement contracts. Even
though these funding mechanisms are far from perfect, they balance some
of the disadvantages of prizes. Taken together, all of these forms of
financial support make up a portfolio of tools for encouraging
innovation.
Biography for Molly K. Macauley
Dr. Macauley is a Senior Fellow with Resources for the Future
(RFF), a research organization established upon the recommendation of
the presidentially appointed Paley Commission in 1952. Dr. Macauley's
research at RFF includes the valuation of non-priced space resources,
the design of incentive arrangements to improve space resource use, and
the appropriate relationship between public and private endeavors in
space research, development, and commercial enterprise. Dr Macauley has
been a visiting professor at Johns Hopkins University, Department of
Economics, and at the John Hopkins School of Advanced International
Studies. She has also been a visiting professor at Princeton University
in the Woodrow Wilson School of Public Affairs. Dr. Macauley has
testified before Congress on the Commercial Space Act of 1997, the
Omnibus Space Commercialization Act of 1996, the Space Business
Incentives Act of 1996, and space commercialization. She has served on
many national level committees and panels including the congressionally
mandated Economic Study of Space Solar Power (Chair), the National
Research Council's (NRC) Aerospace and Space Engineering Board's
steering committee on issues of technology development for human and
robotic exploration and development of space, the NRC Space Studies
Board steering group on space applications and commercialization, and
the NRC Space Studies Board task force on priorities in space research.
In 1994, she was selected as one of the National Space Society's
``Rising Stars,'' and in 2001 she was voted into the International
Academy of Astronautics. Dr. Macauley has published extensively with
more than 70 journal articles, books, and chapters of books. She has
served on the Board of Directors of Women in Aerospace and is President
of the Thomas Jefferson Public Policy Program, College of William and
Mary. Her Ph.D. in economics is from Johns Hopkins University and her
undergraduate degree in economics is from The College of William and
Mary.
Chairman Rohrabacher. Well, thank you very much for your
provocative testimony. And I am sure we will get around to some
dialogue, maybe even interpanel dialogue, on some of the issues
you have brought before us today. Just to remind you, however,
someone did say that the era of ``big government'' is over. I
don't know what happened after that, but I remember somebody
said that.
So Mr. Holtz-Eakin--now pronounce it for me.
Dr. Holtz-Eakin. Holtz-Eakin.
Chairman Rohrabacher. Holtz-Eakin. Mr. Holtz-Eakin. Dr.
Holtz-Eakin.
STATEMENT OF DR. DOUGLAS HOLTZ-EAKIN, DIRECTOR, CONGRESSIONAL
BUDGET OFFICE
Dr. Holtz-Eakin. Mr. Chairman, Members of the Committee,
international guests, the CBO is delighted for the chance to
appear today. We have submitted our testimony for the record.
Let me simply make four points that will reflect some of
the comments that have been made by the panel members before
me. In some circumstances, prizes--inducement prizes and
incentive prizes are an effective means to acquire new
technologies, and thus, as Dr. Macauley said, would be a useful
addition to the portfolio of tools that NASA has to pursue its
objectives in aeronautics and space. However, prizes are not a
panacea. While at the level of individuals, it will alter the
mix of risk and rewards and may induce new entrants: those with
a greater taste for risk, those who are currently curtailed by
the barrier from federal procurement compliance. This may
induce these new entrants into the pursuit of accomplishment.
At the aggregate level, the use of prizes does not change the
ultimate technological challenges or the research requirements.
And for that reason, if they are deployed in the pursuit of
great and risky challenges, they will require correspondingly
large prizes in order to be successful.
And the prizes are more than the money. As has been
emphasized before me, the rules in pursuit of the prize must be
clear and consistently employed. That--an important
consideration in thinking about setting out the rules is what
constitutes the timing in pursuit of the prize, who will be
eligible to participate, and when is new participation cut off.
What will be the rules for the transfer of the ultimate
technology at the end of the pursuit of this prize, and who
will have the rights to that will be an important part of the
incentives provided by the prize. And finally, the prize payoff
must be assured, which will, in fact, in this context, largely
depend on the budgetary treatment.
Now that budgetary treatment in the end will depend on how
Congress chooses to write any such legislation. And the two
examples that exist at the moment, I believe, show some of the
outer boundaries of the possibilities. The DARPA prize that was
mentioned earlier is financed out of annual appropriations. In
2004, when it was not awarded, the $1 million was reprogrammed
and used for other purposes. The $1 million was not large,
relative to the overall budget, and was relatively assured in
the eyes of the competitors. Larger prizes might not be
suitable in that circumstance because of the possibility that a
large prize would be subject to rescinding or reprogramming. In
those circumstances, what NASA has requested in this--for the
Centennial Challenges, is an authorization of appropriation of
now-year money. Money that will be available in whatever year
in which the prize might be awarded, it would be subject to
appropriation, but once appropriated, that budget authority
would remain present until the prize was used and would provide
some assurance to competitors that the resources would
ultimately be there upon completion of the technological
objective.
Those are the four major points in the testimony. They are
reflective, I think, of the issues that have been surfaced by
the panel members before me. We look forward to answering your
questions.
[The prepared statement of Dr. Holtz-Eakin follows:]
Prepared Statement of Douglas Holtz-Eakin
Mr. Chairman, Congressman Lampson, and Members of the Subcommittee,
thank you for this opportunity to present the Congressional Budget
Office's views on the basic economics and budgetary treatment of cash
prizes, or inducement prizes, like those that would be included in the
Administration's Centennial Challenge prize program proposed in the
2005 budget for the National Aeronautics and Space Administration
(NASA). In my remarks today, I would like to make four points:
In some circumstances, inducement prizes are an
effective means of acquiring technologies that the government
deems desirable but that are unlikely to be provided by private
markets. But there is no free lunch. Innovators and researchers
must be paid for what they do. Inducement prizes have to be
very large if the objectives sought are risky and expensive.
Prizes can be most useful when the government seeks
participation in research efforts by people or firms that might
not participate in the traditional procurement process.
Contests offer the advantage of lowering the barriers to entry
typically posed by the government's procurement procedures.
The rules and structure of contests can make a
difference in the level of effort put forth by participants and
in the payoff to the government.
Inducement prizes entitle successful competitors to a
future payment. To fulfill that type of commitment, the
sponsoring agency needs to have sufficient budget authority to
cover the potential payment before offering the prize. As a
general rule, money needs to be appropriated up front for the
full cost of the prize.
No Free Lunch
An inducement prize is one among many means that the government can
use to spur the development of innovative technologies. Like direct
production, contracting for specific systems, and research grants, cash
prizes have characteristics that make them a more or less effective way
to do business depending on the circumstances. But prize competitions
do not change the underlying factors that determine risks and rewards.
An individual or business choosing to participate in a government-
sponsored contest will address those risks and their cost in deciding
whether to enter and, once entered, in deciding how much effort to
undertake. Large and expensive technical risks will require large
prizes if they are to induce effort.
Charles Lindberg won a $25,000 prize when he succeeded in flying
from New York City to Paris in 1927. Inflated to 2005 dollars, that
prize amounts to a little over $260,000--a very small amount measured
against the scale of NASA's major programs. Advocates suggest that
inducement prizes are more likely than traditional contracting to
produce revolutionary technical changes that reduce costs because they
bring new players and new ideas to the playing field. That may be the
case, but the point remains that the large scale of the projects that
dominate NASA's programs--for example, the Crew Exploration Vehicle is
currently estimated to require development expenditures of over $12
billion (in 2005 dollars)--would probably require prizes of the same
order magnitude as the current cost estimates, if they were to produce
the desired results.
Prizes are not new; there are examples from the United States and
abroad currently in effect and stretching back to the 18th century.\1\
Before Lindberg won his prize, Glenn Curtis won prizes of $2,500 in
1908 and $10,000 in 1909 for achieving a set of firsts in wheeled
takeoffs and flight distances.\2\ In the early 1700s, the British
Parliament offered a substantial prize to the developer of a means to
gauge longitude at sea. As this Subcommittee is well aware, the
privately funded Ansari X-Prize offers $10 million to the first team
able to fly a vehicle carrying one person, but capable of carrying
three, to an altitude of 62 miles above the Earth and return safely,
twice within a 14-day period. And in 2004, the Defense Advanced
Research Projects Agency's (DARPA's) Grand Challenge offered a prize to
the first developer of a robotic rover capable of completing a
challenging desert obstacle course.\3\ Although no contestant succeeded
this year, the competition will again be run in October 2005.
---------------------------------------------------------------------------
\1\ See Steering Committee for the Workshop to Assess the Potential
for Promoting Technological Advance Through Government-Sponsored
Inducement Prizes in Engineering and Science, Concerning Federally
Sponsored Inducement Prizes in Engineering and Science (Washington,
D.C.: National Academy of Engineering, November 1999), Appendix A.
\2\ U.S. Centennial of Flight Commission, ``Glenn H. Curtiss,''
available at www.centennialofflight.gov/essay/ Explorers--Record--
Setters--and--Daredevils/Curtiss/EX3.htm.
\3\ The DARPA Grand Challenge is described at www.darpa.mil/
grandchallenge.
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Prizes and Participation
What is different about prizes, and what advantages may they offer?
Experience from both the Ansari X- and DARPA prize contests suggests
that inducement prizes will draw untraditional participants and ideas
that the usual contracting procedures will not. Thus, the prize
mechanism may be most valuable when the government is seeking to
achieve a specified objective but has little idea of how to do so, and
therefore wants to encourage a wide variety of approaches.
Probably the main reason that prize competitions induce wider
participation than other lures the government can use is that they
impose few contracting and accounting requirements. Such requirements
pose significant barriers to entry by newcomers, especially small
firms, in traditional competitions for government contracts.
A second factor that might play a role in inducing wider
participation is the prestige associated with winning an open
competition. Relatively unknown entrants might find a well-publicized
competition more attractive than an equivalent procurement contract if
winning would provide a larger boost to their credibility in the
marketplace. They might also value the resulting prestige more than
established firms would and therefore be more inclined to participate.
Rules and Structure
The rules and structure of a contest matter and are likely to be
critical to the government's getting its money's worth for the prize
offered. My testimony touches on only a few of the major points from
the substantial body of literature on the subject.
Most important, the contest's rules must be adhered to. Awarding a
prize for performance that falls short of the designated finish line
establishes a precedent that contestants may use in future competitions
to claim rewards for less than complete success. To successfully make
repeated use of contests, the government must establish a reputation
for following the rules that it establishes.
Clarity in the rules is also essential. Unclear or unenforceable
rules are an invitation to conflict, and the government will bear a
cost of adjudication when disputes arise. Conflicts over rules in the
Federal Communications Commission's auctions of licenses to use the
radio spectrum and in its Pioneer's Preference policy (which granted
spectrum license rights to the developers of innovative technologies or
approaches to using the radio spectrum) are relevant illustrations. In
both cases, unclear rules led to prolonged and expensive legal disputes
between the government and private parties.
A cash award contest could be structured as a tournament or race,
each of which offers advantages and disadvantages. A tournament, which
specifies an objective and a time limit, guarantees an award to the
party that has made the most progress toward meeting the objective. It
encourages participation--parties with substantial uncertainty may
enter on the basis of partial insights--but can impose high costs on
the government for evaluating many participants' relative progress
toward the goal. In contrast, a race specifies a goal and may or may
not specify a time period, but an award is made only if a party
achieves the goal. Participation may be less than if partial success is
rewarded, but the government pays only for meeting the specified
objective and is likely to incur lower evaluation costs because
unequivocal success is more easily judged than progress toward the
goal.
Rules governing entry and elimination, if the contest has phases,
are also important. A competitor for a cash prize makes decisions about
whether to enter and how much effort to expend mindful of the odds both
of achieving the goal and of achieving it before competitors do. More
entrants worsen the odds of being first and lead to decreased effort.
Fewer entrants, however, may deny the government the benefits of
capturing a wide array of novel approaches--one of the main reasons for
choosing a contest over other forms of acquisition.
The designers of a government-sponsored contest face the problem of
structuring the competition so that rewards are sufficient to offer a
good prospect of success but take account of the subsequent benefits of
spreading technological innovation to the larger economy. A competition
that limits the patent rights of a successful winner will attract fewer
entrants and less effort but at the same time allow for the rapid
diffusion of technology. In some cases, offering a larger prize to
attract more entrants and greater effort in exchange for intellectual
property rights may make sense for the government.
In many circumstances, cash awards may be outstanding for a number
of years. For example, the $10 million Ansari X-Prize was first offered
in 1996. To provide the same inducement today, the prize would have to
have grown to over $12 million. Government-sponsored competitions could
maintain a constant level of real incentives by indexing the value of
prizes to the rate of inflation. Also, in the interest of matching
rewards and effort, contest rules could specify increasing rewards at
the government's discretion. For example, DARPA is increasing its
challenge award from the $1 million offered in 2004, when no competitor
completed the course, to $2 million for the 2005 race. Elimination
rounds could also be used to intensify the competitive effort. As the
number of competitors decreases, their improved prospects of finishing
first increase the expected value of the prize and prompt greater
effort.
Financing and Federal Budgetary Treatment
Policy-makers have several alternatives for the financing of prize
money. To best encourage successful competition for advancement in
space travel and exploration, however, the government would have to
make clear that the funds to reward the winners were available and were
not contingent on future legislative actions. That approach would mean
providing the budget authority up front--appropriated by the Congress
and accounted for in the federal budget. Were funds to be appropriated
later, a degree of uncertainty would probably limit participation.
Practices in the private sector also suggest that a sponsor may
tailor its financing to the nature of the prize. For example,
recipients of performance awards like the Nobel Prize have no fixed
expectation of receiving the prize, so the sponsor has no obligation to
fund a specific number or size of awards. In contrast, individuals or
businesses vying for an inducement prize are opting to compete on the
basis of a promise of a specified payment. As a result, the sponsor
must guarantee that it will be able to pay the amount promised at the
time promised. The Ansari X-Prize Foundation is being funded by private
donations, but the amount and timing of the payment are backed by an
insurance policy, making it clear to competitors that the funds will be
there for a successful entrant.
Most existing federal prizes are used to recognize past
performance--for instance, the Malcolm Baldrige National Quality Award
and the Vannevar Bush award for public service activities in science
and technology. Such awards typically are in the form of medals and
other non-cash compensation, but agencies still need funding to cover
the cost of the prizes and the programs. Such programs are funded by
annual appropriations, so the level of funding can fluctuate from year
to year depending on federal priorities.
DARPA's 2004 competition illustrates the approach of appropriating
the full cost up front. The budget authority for the $1 million prize
was included as part of the agency's $2.8 billion appropriation for
2004. When DARPA announced the competition, it reserved the $1 million
needed to cover the potential payment. Once the competition ended
without a winner, DARPA released those funds and was able to use the
money for other authorized purposes. Had there been a winner, the
agency would have incurred an outlay when it paid the prize.
Very large cash prizes may require additional measures to secure a
future federal payment. Given the amount and short time horizon of the
DARPA prize, competitors may be confident that the agency will be able
to pay the $1 million. Competitors may have less confidence, however,
if the promise to pay extends several years into the future, especially
if the prize represents a much larger share of an agency's budget.
Funds appropriated for a payment that is in the future but have yet to
be obligated can be rescinded or otherwise limited by subsequent
legislative action, especially if federal policies toward the program's
objectives change.
Proponents of prizes valued at hundreds of millions or billions of
dollars must consider ways to balance contestants' need for assurance
about the funding with the cost of ensuring payment. As mentioned, the
sponsors of the X-Prize purchased an insurance policy to guarantee the
prize money. Alternatively, federal funds could be put in a private
escrow account, but such a transaction would involve making the
payment--that is, a budget outlay--at the time the money was put in the
escrow fund; if there was no winner, unclaimed funds would be returned
to the government, but that receipt would not occur until after the
competition was over.
The budgetary impact of any award program ultimately depends on
policy-makers' choices about the terms. Specifying the amounts
authorized to be appropriated is the key element of Congressional
control, but other terms are important as well. NASA has requested
authority for a permanent award program, not a pilot program.
Individual awards would be limited to $10 million (although the
Administrator or his or her designee could increase that sum), and any
appropriated funds would be available indefinitely (as so-called no-
year money). That approach would give the agency latitude in setting
the duration of competitions without risk that the authority would
lapse, and it would allow the agency to reuse any unclaimed (and
therefore unobligated) funds for other competitions.
Discussion
Chairman Rohrabacher. Well, thank you very much. And that
was a very good summary, I might add, so I appreciate that.
We have--Ms. Jackson Lee has joined us. Thank you very
much.
We now will go into some questions and answers. And I--
first a little bit about--I think the risk issue has been
pretty well addressed by the testimony. And there--you know,
two points of view on how much risk--you let us know that
Charles Lindbergh and, as you mentioned in your testimony,
there were people dying before Charles Lindbergh took off, and
he took off anyway. And the question is was that a good thing
that Charles Lindbergh took off and ended up flying across the
Atlantic and accomplished his mission. I think it was historic.
I think it did something for the spirit of the American people.
And it was a risk. There was no doubt about that to the people
that died beforehand. But did that do great things for America
and for the world? I think it did.
If anyone disagrees with that, I--please feel free to jump
in. We don't want to attack the memory of Charles Lindbergh
here. Okay. All right.
I think all--what we hear also is this--the testimony about
hybrid rockets and how the fact that they were ignored by the
establishment. There is no doubt that this idea about awards
and prizes is an idea that is trying to get around the fact
that our establishment seems to be stuck in a morass. And is--
and the established institutions in our society that are
supposed to be leading us on technologically and upward into
space are not working. It is not happening that way. There is
too much--and whether it is private sector or public sector,
there is too--the bureaucracy and politics that has developed
over the years like slag on a rocket nozzle is keeping us down.
And it is preventing us from taking advantage of ideas that are
already here. How long did you say the hybrid rocket has been
around? Which--was it Bob who mentioned that?
Mr. Walker. Yeah. I--the Amroc technology goes back into
the '60's, I think. I am not exactly certain of that, but I
think Amroc--it was the '60's or the '70's when they first came
up with the concept that is today being used in the hybrid
rockets that Space Dev is building.
Chairman Rohrabacher. So we need to make sure that we have
a system that will--in much--be able to reach out and be able
to use these new technologies, which are now being cut off. Let
me ask about how we see the--and by the way, there is a mention
of duplication of effort as--might be a cost in this. Yes,
there is a--you know, there is analysis that can have a down
side to everything, but I know that we were up against a system
that eliminated all of the duplication of competition. We were
up against that system for 50 years. And by the end of that 50
years, that system couldn't produce toilet paper. And I
remember going into stores in communist countries, and they had
eliminated all of the competition in toothpaste, for example.
You go into a communist store and it said ``toothpaste.'' And
that is all it had, ``toothpaste.'' It didn't have ``gleam'' or
didn't have these various, you know, ``all bright'' or whatever
kind of toothpaste. You go into a store now, we have got
toothpaste of every kind and variety you could imagine. But
what struck me about the toothpaste in communist countries is
it was awful. It was really bad. And yeah, there is some
duplication when you have competition, but I have a feeling
that it actually is worth it. And that is just a thought.
Organization of Prizes
About how we would organize this idea of prizes, what
structure we would use if we accept that it is an idea--a good
idea. If, in the end, the downside is looked at the upside and
we all--and we come to a consensus in our society that it is a
good thing to move forward on this idea, where will we put it
and who will make the determinations? A lot of these questions
have been talked about today. Let me ask, is it a better idea
to create a separate foundation? Can this be done within NASA?
The Chair would personally suggest that it might be a good idea
to establish something like the National Endowment for Space
Technology and Innovation, something like that, which would put
a group of people outside of the current structure in a
position to offer the prizes, oversee the prizes, and to make
sure that they were paid. But that is just an idea. Maybe if we
go down the panel of how you would see the--can it work within
NASA? And if it can't, what is the best alternative?
Rear Admiral Steidle. Sir, I thank you, sir. I, of course,
from the perspective of where I am, feel that it is in the
right place, sir, right where it is now, and that--and for this
reason.
Chairman Rohrabacher. I thought you might say the Navy
would be the best place to put it. But----
Rear Admiral Steidle. Yes, sir, a year ago, I would have
said that. Yes, sir. But what has to be done is the focal point
of these particular challenges. There needs to be a focal point
on where are we headed with this, what are the requirements,
what are the particular aspects that we hope to achieve and the
expectations. The President's Vision right now gives us those
particular directions and focus and vision around which we can
place the Centennial Challenge Program. It also gives us a
scope in the programs that we have from our traditional
procurement processes and RFPs and RFIs through small business
innovative research into technical transfer programs to another
aspect called Centennial Challenges. So I think if it was put
somewhere else other than this, you must have, I think, some
sort of a link back to the visions and the expectations that
you need. And for that reason, I think where it is right now,
focused on the Exploration Vision that the President provided,
it is a perfect addition.
Chairman Rohrabacher. We are going to be watching the
Centennial Challenge and how it works and note its successes
and failures. And you will be a good guide for us. Thank you
very much.
Mr. Walker.
Mr. Walker. Mr. Chairman, I think that the testimony from
the CBO may have given you a guideline here. It seems to me
that it is entirely appropriate that the--NASA would have some
discreet kinds of technology that it would utilize prizes for
and that they would be for fairly nominal sums inside an
appropriation cycle that everybody understood it--what was
manageable. But if you want to go for a really big prize, the
kind of thing that I was talking about, you may want to reach
outside NASA. I mean, if you are going for a $100 million prize
or a $200 million prize, something along those lines, you may
want to have a separate foundation that you charter and you may
put some government money into it or you may provide the kinds
of tax incentives that would allow that chartered foundation to
raise the money. But that may be a more appropriate mechanism
if you go for a very big kind of concept.
Chairman Rohrabacher. Perhaps even having a tax credit----
Mr. Walker. A tax credit might be another way of doing it
to assure that someone with a large amount of wealth that wants
to be intimately involved with such a program would have the
ability to get in it.
Chairman Rohrabacher. Right.
Dr. Diamandis. Mr. Chairman, I would like to go on the
record to say----
Chairman Rohrabacher. You need to push a button on that.
Okay.
Dr. Diamandis. Thank you. I would like to go on the record
to say I don't think there is a need to charter any kind of a
new organization or foundation. Organizations, like my
organization, X-Prize Foundation as a private foundation, would
be thrilled to work in partnership with NASA. In fact, our very
existence has been to pull together the global expertise to
manage and run prizes, I would say, on an efficiency that is
not seen elsewhere. One of the things that a private foundation
can do in managing it is be innovative, such as go take NASA
funds. Of course, the rules need to be set in concert. The
objectives need to be set in concert with NASA. NASA is the
customer--or the American people are the customer through
NASA's eyes and vision. But a private, outside foundation can
do things such as go and match that money from outside private
corporate money, make deals with media companies to bring media
attention and their capital. I think it is not unlikely that
NASA money could be matched 4:1 with outside capitol, so a $10
million prize becomes a $40 million prize. And you have a level
of, also, independence that I think is critical to getting
teams to compete.
I promised to read an e-mail here from Burt Rutan today,
because he was unable to come out. So I will read this. I agree
with some of what he says, not necessarily all of it, but I am
going to read it nonetheless. It says, and this is with all due
respect to NASA, and Burt is sometimes outspoken, so my
apologies in advance. It says, ``The Congress must direct NASA
to conduct the prizes in the only way that they can work, to
allow innovation and provide an atmosphere that will result in
breakthroughs. That was done by Kremer and Orteig and X-Prize,
i.e., the dollars were offered and guaranteed, but the offer
had nothing to do with how the applicant approached the problem
and had nothing to do with what risks the applicant should
take. In fact, there should be no information passed until the
applicant is ready to fly for the record. The DARPA $1 million
prize for robotic vehicles was not run correctly. DARPA spent
$6 million to monitor the applicants, six times the prize
amount, and DARPA's work all tended to dissuade innovation. I
have no faith that NASA knows how to run a technology prize.
They must be directed by Congress to do it right.'' I do know
that, you know, we have a 10:1 ratio in the other way in terms
of the amount of money we spend to run the prize on an annual
basis versus the prize amount. And we have been able to go out
and attract a lot of innovators and benefactors, which I think
could also be done to leverage NASA's dollars.
Chairman Rohrabacher. Let us note that I think it was Mr.
Rutan that said that this--his project cost, what, $20 million
to come thus far, and he said that had this been done totally
within NASA, that it would be--that would have been paying for
the blueprints.
Mr. Walker. Mr. Chairman, what he has said is it cost at
least $20 million.
Chairman Rohrabacher. At least 20 million? So I would
suggest that this is a very low estimate on the part of Mr.
Rutan that if it had gone through NASA it would have been--the
blueprints would have been more like $50 million and to
complete the project, it would have been a $500 million
project. $500 million for what was done in the private sector
for $20 million. Now people can disagree with that, but I think
that that is not totally--that is not an outlandish thing to
guess on my part.
Finally, the last two witnesses on how we should structure
it, and then we will do Ms. Jackson Lee.
Dr. Macauley. Mr. Chairman, you suggested a National
Endowment for Space Technology and Investment--Space Technology
Investment. And I have a problem with that, because the acronym
is NESTI, and I think we should do better than that, so let us
go back to the drawing board on the name. But I think it is
absolutely essential that the money and the administration and
the rules and the judging be outside of NASA for a number of
reasons. One is, as I indicated in my testimony, I think
eligibility needs to extend to the talent we have at NASA
centers and FFRDCs. The only way to avoid a conflict of
interest there is to decouple the administration, judging, et
cetera from NASA.
Secondly, I can already see the kinds of administrative
legally and regulatory required burden that is going to be put
on a NASA-administered prize. And to whatever extent we can
decouple it through a quasi-private/public instrument or a
colleague of mine suggested, because we already have a
government relationship with them, the Smithsonian Institution,
but it has its own set of problems. But also, our community is
so insular; we talk with ourselves and among ourselves. And we
have got to engage the Vanderbilts and the Carnegies that are
the titans of other than space industry. And we can do that if
we have them work on this as part of a Board of Directors for
this prize. Our space community talks to itself. We are too
insular. We have got to reach out and engage the titans of our
industry and other industries. And that is--a nice vehicle to
do it is to have them to be involved in this prize situation.
Chairman Rohrabacher. Thank you. Let us note that we have
people--the space industry and this X-Prize actually reaching
out to titans of other industries, other entrepreneurs, people
who were in the dot-com industry and the--and in the Internet.
And there are people with huge resources there that are very
interested in this arena. And that is what this private
alternative has actually mobilized.
Mr. Holtz-Eakin and then Ms. Jackson Lee.
Dr. Holtz-Eakin. Well, statutes preclude me from making
specific recommendations, so I won't offer up the CBO as the
location for this, but I will suggest that there are two kinds
of considerations that would offer--enter into the decision.
The first is what institution is best suited to pick the
objectives for such prizes. The formal research literature on
the use of prizes suggests that they are most effective in
situations that are characterized by great uncertainty about
how to literally get from point A to point B and not situations
in which the risks are level of effort, management, or
financial risks, the costs come in higher than you expected. So
finding those kinds of situations and using prizes for them is
really the threshold question. What are we trying to do?
The next consideration would be which institution is best
suited to create the certainty in the rules, not changing the
rules in the middle of the game, and in the payoffs and the
final ownership of the technologies. And those are the things
that should decide it, not the labels on government versus non-
government.
Chairman Rohrabacher. Okay. Well, thank you very much.
Ms. Jackson Lee, thank you for giving the Chair a little
extra time.
Ms. Jackson Lee. Thank you, Mr. Chairman. Thank you very
much, Mr. Chairman.
And it is a pleasure to be able to have the distinguished
former Chairman of this distinguished Committee before us. And
we thank you for the work you have done during your tenure here
in Congress and certainly the commitment that you continue to
have in the business of science in America. When you were
Chairman, and I still continue to say, but we have moved into a
new century, and isn't that terrible to be able to say. That
will be good for your book. But I have said always that science
is the--then the work of the 21st Century. I will continue to
say that science does create opportunities for this century and
centuries to come. So this is an important hearing from the
perspective of, I think what Dr. Holtz-Eakin just mentioned.
It--this hearing speaks to the question of getting from A to B
with a great deal of uncertainty or the issue would be one of,
at this point, so problematic that we didn't even know what we
were discussing. So you are sort of reaching far into the
unknown is what I think you are suggesting that prizes might be
the best for.
Mr. Chairman, you know that I have been, hopefully, a
passionate advocate for space exploration and certainly space
and aeronautics and certainly the cutting-edge research. And so
this hearing is important for that reason. I don't think I have
a particular stake, at this point, in whether it is government
or private, but I do wish to raise some issues. And I ask
unanimous consent, Mr. Chairman, for my entire statement to be
put into the record at this time.
Chairman Rohrabacher. Certainly, with no objection.
Ms. Jackson Lee. Thank you.
[The prepared statement of Ms. Jackson Lee follows:]
Prepared Statement of Representative Sheila Jackson Lee
Thank you for calling what promises to be a provocative hearing.
Contests and prizes seem to be a clever way of encouraging development
of space technologies. It will be interesting to explore how this
mechanism can be used to supplement our nation's space program.
However, Mr. Chairman I must question the choice of this subject
for a hearing, at this moment in time. Just last year, we lost the
Space Shuttle Columbia and her seven brave crew members. We got a tough
report from Admiral Gehman and the CAIB, giving a laundry list of
changes that need to be made at NASA to improve safety in the future. I
have been pushing for a NASA safety hearing for six-months now, to find
out what changes are being made and whether legislative action is
necessary.
The CAIB reported that NASA's management practices and safety
``culture'' were partially to blame for the Shuttle disaster.
Obviously, the same management and culture were responsible for
developing the International Space Station. I have been expressing my
concern for nine-months that the ISS may have its own hidden O-ring or
falling-foam problem. Over the past six months, we have seen failing
gyros, broken exercise equipment, faulty space suits, air quality
monitoring devices, and our astronauts heard a crunching sound that is
yet to be explained. We have not fully reinforced the ISS to shield it
from micrometeoroids, and the small crew and grounding of the Shuttle
may make it difficult to deal with other challenges in the future. It
seems that having a hearing to talk about ISS safety issues could be
fruitful.
I know other Members of this committee have been concerned for
years about accounting and cost-overruns at NASA. As we are considering
a bold new mission at NASA, it seems that delving into some of these
financial matters might be prudent.
There are so many pressing issues at NASA. I am curious why we are
discussing prizes today. Perhaps the latest activity surrounding the X-
Prize has made this hearing more press-worthy, but I can't say that the
hearing is particularly timely. These prizes have been around for
centuries, and we don't have a legislative proposal before us to
consider.
Mr. Chairman, you know I am a passionate advocate for space
exploration and enjoy discussing ways to get our industries to lead in
the field, and the American people more engaged in such noble pursuits.
I just wish that as this Congress comes to a close, we can focus some
of the Committee's energies on the truly pressing issues that face NASA
and our space mission.
On today's subject, I would also like to note: prizes may well be
an exciting and valuable tool to spark innovation in our space
industry. However, there is no such thing as a free lunch, or free
launch, I should say. There will be trade-offs: perhaps we will
sacrifice the rights to royalty-free use of the technology later;
perhaps we will lose the ability to monitor progress in the field;
perhaps our universities and non-profit institutions will be cut out of
the program; perhaps safety will suffer. I look forward to discussing
the benefits and possible pitfalls of prizes and contests.
Thank you.
Ms. Jackson Lee. As I have said, I appreciate this hearing,
because I think it is important, because I think dreamers in
America and inventors are part of what the American psyche is
all about. And I would acknowledge to Dr. Macauley that I would
in the issue of space prize is the progeny of a George
Washington Carver could also be included and also as we seek to
include and encourage more young women to get into math and
science and certainly more Hispanics and African Americans and
other minorities to do so as well.
So there lies my angst and my concern as we talk about
prizes. Let me raise several points, and I would hope that my
colleagues would welcome the dialogue.
First of all, as it relates to the government, let us not
play cheap all ability to research and to discover. I think we
have pinpointed the Internet to the Pentagon, some lowly
government bureaucrats who--that they might be called, and
others who pinpointed that beginning. And we appreciate very
much their leadership on that issue. So we know that we have
the ability to discover and to find great challenges or great
resolve to the problems of America.
But I also raise the point of this hearing in that we have
a number of other important issues that I think would be
welcomed before the Science Committee, and I just want to share
this with my colleagues. We still have to finish out the
Columbia Accident Investigation Board's recommendation. The
Gehman Report is extremely important. I have been a strong and
long advocate of International Space Station's safety. And each
day, we hear of matters that draw us to making sure that we
have that hearing. We must as well fix cost overruns and
accounting problems, and we also need to address the Aldridge
Commission's recommendations.
I hope that, as we look at this exciting opportunity for
prizes, we are not failing to address questions that will allow
us to go into space safely. I think risk taking is something
that Americans have always done. That is why we are the kind of
Nation that we are. But, in fact, I think we must be concerned
about safety, and I am still looking forward, Mr. Chairman, and
you have agreed, and I must compliment you on that, that a
safety hearing on both responding to the Gehman Report, but
more importantly, the International Space Station is extremely
important. I would love to have a prize dealing with how we
make that entity safe to the extent that we feel very
comfortable with it. And I know, again, that when you go into
space it is a risk.
But let me pose these questions. And let me start with Dr.
Holtz-Eakin on two aspects of your points that you made. And I
would appreciate your response. First of all, you said the
prizes do have their place. They are certainly useful for
individuals who don't have a stomach for the procurement
process and clearly want to be able to move more quickly than
we would allow them to go. But how would you propose to score?
How would CBO score prizes, and, for example, with the $20
million requested for prizes in NASA, which we have already
discovered may be a little too low, budget--be counted against
the fiscal year 2005 budget or would it be counted against the
year in which the prize is awarded? Would the way the rules are
written for the prize affect the way it would be scored? And
you sort of mentioned partly that, but if I could get a more
enunciated position.
Let me also suggest that we have a number of programs that
are going on, the Small Business Innovative Research Program,
the SBIR program, which is described as a highly competitive,
three-phase award system, which provides qualified small
business concerns with the opportunities to propose innovative
ideas that meet the specific research and development needs of
the Federal Government. SBIR, in particular, seems to have
goals similar to NASA's proposed Centennial Challenge Prize
Program. What do you see as the relative strengths and
weaknesses? Can we utilize those? Are we being duplicative when
we talk about these huge and large prizes?
Finally, let me say I am concerned with small businesses,
minority-owned businesses. And as I look at the think tanks, I
would be interested to know whether those folks are even
included. As I tussle with the NASA procurement system, let me
say that I am not very happy with what NASA has done. Johnson
happens to be in my Congressional area or region. I still get
calls often from small businesses and minority-owned businesses
that they just can't break through, and their product is
competitive. So we talk about prizes, although I know that is
to reward people for their innovativeness in their research. Do
we have any way to ensure that it is encompassing and open to
everyone and give everyone an opportunity to be able to
participate in a new scientific breakthrough?
Budget Treatment for Prizes
With that, I would yield to Dr. Holtz-Eakin on those two
specific questions on your $20 million, and that seems like a
small amount, but also any other side existing programs that
might be useful in this effort.
Dr. Holtz-Eakin. The budgetary treatment will be driven by
the legislation as written, but the broad principle is that the
budget should reflect the cost or the commitment that has been
made of the taxpayers' money. And so in the specific case of
the NASA request, as we understand it, there would be
authorization of the appropriation of monies, $20 million, and
that appropriation would be now-year money, so there would be a
commitment of budget authority of $20 million that would last
in principle and perpetuity that would allow NASA to award the
prize. That would be a budget authority. It would be scored in
the year in which it was award, 2005 say. When the monies are
finally paid, in the event of a winner of the prize, then it
would show up as an outlay in the federal budget, so there
would be a large time difference between the budget authority
being granted and the outlay being recorded on the budget.
There are lots of other possibilities, depending on the
degree of certainty with which the funds are actually
committed. If there was just a single-year appropriation with
no ability to carry it from year to year, then there would be
budget authority and, perhaps, no outlay in that year and it
would disappear and be rescinded, and perhaps, reprogrammed. So
it really will depend on how it is structured.
With regard to the SBIR, I don't know enough right now to
give you a good answer. We would be happy to work with you on
that and get back and look at comparisons.
Ms. Jackson Lee. If I may, Mr. Chairman, for Dr. Macauley
and Dr. Diamandis.
Dr. Diamandis. Diamandis.
Prizes and Diversity
Ms. Jackson Lee. Thank you for correcting me.
Tell me about this concept of the prize and how it would be
encompassing and take into account my concerns for the emerging
populations of scientists and engineers and innovative
thinkers? Science is not very diverse right now, frankly. And
all I can see is the private prize, which again would be self-
contained, dominated by people who are already in the field,
and if you will, excluding by being a very select and exclusive
club, leaving out thousands of my constituents.
Dr. Macauley. I did point out that the prizes are probably
not going to address that kind of objective. And therefore, we
need to think carefully about the other tools we have that
might do that, whether it is, you know, instances in our
contracting or peer-reviewed research that require diversity
and require reaching out to all of these various groups. So it
is a societal goal that needs to be taken into account. It is
something that was not part of the early history of prizes in
this country, so it is new territory to figure out how, from a
public policy view, we accommodate those kinds of objectives.
It is--this is new territory, and it is history in the making.
And when we look back to try to learn lessons learned on that
particular dimension, we don't have a lot to draw from.
Dr. Diamandis. Actually, I thank you, Ms. Jackson Lee, for
asking the question, because it allows me to bring up a point,
which is it is exactly the opposite from what your presumption
may be. Of the 27 teams going for the $27 million Ansari X-
Prize, none of them, other than Scaled Composites, are
traditional contractors. In fact, all of them are small groups,
groups out of universities. One is a woman-owned business and
with a woman pilot. And they come--a diversity. They come out
of the dot-com world. They come out of retired NASA employees.
They come out of, literally, college kids who came together to
make this dream happen.
So it is--by putting up the prize, it actually flattens the
playing field, so the large, traditional players, who can only
have the ability to go--have the contracting capability and
understand government game, can apply. In fact, we--this
encourages the non-traditional, smaller groups to get involved,
the ones with the ideas that are really innovative that would
never see the traditional light of day.
Rear Admiral Steidle. I wonder if you would allow me just
to comment on that. In a set up of workshops that we just
conducted here in Washington, we used the small and minority
business programs at NASA to do the advertising for those
particular workshops, and it was reflected in the over 200
responses and corporations that participated in our workshop
just for Centennial Challenges. The Small Business Innovative
Research and the university research programs, as well as
technology transfer programs, are also in my directorate for--
across NASA wide. I just went out--we just went out with a
solicitation on the 7th of July. We--for small business, next
phase, and we expect 2,600 responses. That is the indication
from the notification of intent that we have. We are trying to
change the way we do business. For instance, on some of our
broad agency announcements, we are going to put it up on
WEBCAST, because we know there are a lot of individuals and a
lot of businesses that don't have access to Federal Biz-Ops and
things of that nature. So we are trying to do things
differently and make sure we expand that horizon. And the
Centennial Challenges will be another tool that will allow us
to do that and incorporate other assets.
Ms. Jackson Lee. Mr. Chairman, you have been very kind and,
with your indulgence, I didn't know if Chairman Walker wanted
to jump in.
Mr. Walker. The only thing--the only comment I would make
along these lines is that I think that any time you can expand
opportunities, you do, in fact, reach out to people who are
entrepreneurial, regardless of background. And the advantage of
prizes is that this is an opening of opportunities that have
never existed before in the space arena. We have tended to be
very myopic in how we have done space over the years, and this
does allow us to have a much broader horizon and, I think, will
inspire many more people to take the opportunity to become
involved in the space enterprise.
Ms. Jackson Lee. Mr. Chairman, thank you for your
indulgence. I knew if I asked the question, I would get some
good answers, and----
Chairman Rohrabacher. I think you got very provocative. It
was a provocative question and good answers and the Chairman
would note that before the era of ``big government''----
Ms. Jackson Lee. Yes.
Chairman Rohrabacher [continuing]. Black Americans made
enormous contributions in the field of technology. And I think
Black America now is just coming to the realization of this
heritage that they have got. And I--not just George Washington
Carver. We are talking about people who--for example, you have
got a guy who invented the way that we make shoes that made it
possible for our--for us to have shoes. I mean, the bottom line
people before this guy came along, and I don't--I can't
pronounce his name. It was--but anyway, this fellow made it
possible for people to have two pairs of shoes, for Pete's
sake. And it was due to a very complicated invention, as well
as, of course--I mean, we are doing things like ``The Real
McCoy,'' that whole thing. People think it is an American
expression from, you know, Kentucky or something. It is
actually a fellow named McCoy who was a Black American who
produced an important piece of technology that permitted us to
have safe engines for railroads. And so I think we don't have
anything to worry about there. I think that we don't need ``big
government'' to ensure that there is going to be opportunity.
We need opportunity to make sure that we don't need ``big
government.''
Ms. Jackson Lee. Well, I thank you. I just want the
thinkers out here to know that they need to reach out to those
colleges and places where those individuals are.
Chairman Rohrabacher. Sure.
Ms. Jackson Lee. Thank you.
Chairman Rohrabacher. Okay.
Mr. Forbes. We have 15 minutes. I think we can get a few
more questions before we break and maybe----
Safety
Mr. Forbes. Thank you, Mr. Chairman, and I, too, thank you
for having this hearing and thank all of you. It is exciting to
listen to what we can do when we combine the private sector
with the public sector whether we are building spaceships or
whether we are building naval ships. And one of the things that
I hear as the number one request, I guess, from the applicants
is, ``We want as little monitoring as possible and let us
alone. Let us just do what we do best and that is create this
product.'' And sometimes that is the difference between the $20
million price tag and the $500 million price tag that we add so
many other things on to it, that by the time we get finished,
it costs $500 million instead of $20 million. But in a perfect
environment, we could say, ``Okay. We are just going to let the
applicants go.'' But we don't always live in a perfect
environment. There are two big components that we look at,
especially in this committee. One of them is what we have heard
mentioned earlier with the safety component. And the second
one, and we have heard this eluded to as well, when we spend
dollars on the space program, one of the things that compels me
to do that more and more is not just the spin-off technology we
get, but also the magnet that serves to attract math and
science students across the country, which I just think is a
huge goal for the dollars that we spend.
And so I would throw out two questions to you. First as to
the safety aspect, where does the pendulum swing as far as any
monitoring we have to do with the applicants, specifically
since this could be a government-sponsored prize, at least in
some part? What liability do we have to the applicants, and how
much monitoring do we have to do there? And secondly, what, if
any, monitoring do we do to the applicants to make sure that
these dollars are reaching out as much as possible to serve as
that magnet to draw more and more math and science students to
the field? I still think it is a huge vulnerability for the
country. So I would throw that out to the panelists.
Rear Admiral Steidle. I will start off with that, sir.
First of all, we have designed and Dr. Diamandis has helped us
significantly. And it wasn't known here. I don't think I
mentioned that, but he has helped us design this particular
program. And with the lessons learned that he has put his in,
he has helped us with the Centennial Challenges, so we are
headed down in that particular direction very similar to what
he has done.
From a safety aspect, we have to define the expectations
and what is to be expected and get out of the way, do not
provide the technical solutions and technical processes and
things. If we knew those things, we wouldn't need a prize in
the first place. So the government has to move away from that.
But we can provide our ranges and the FAA can possibly be there
for that particular event when the prize is demonstrated. And I
believe that is what the X-Prize is doing as well. And I think
that is very, very appropriate. We plan to market, as best that
we possibly can, through workshops, through WEBCAST, through
websites to get a full, across-the-board participation from
some large prizes down to smaller prizes and ones in the
middle. So it is incumbent upon us to define those workshops
and then spread the word on that.
Mr. Walker. In my view on this, I mean, there are certain
things that you are going to do to protect the public,
obviously. You are not going to let Burt Rutan take off from
the mall in Washington, DC. You are going to make certain that
you have things that are in place to protect the public in
these things. But where you have to allow the risk is if Bob
Walker wants to get in Burt Rutan's craft and go flying, you
ought not be preventing that. You ought to make certain that
you have the kind of mechanisms that permit people to take a
substantial amount of risk, as long as it is their own risk. So
I think that is a real question.
I happen to believe that, with regard to math and science,
the very fact that you are out doing exciting things will, in
fact, inspire a lot of math and science enthusiasm. When the
Aldridge Commission was meeting, one of the people who
testified before the Aldridge Commission was the head of DARPA,
Tony Tether. And he made a statement in the course of his
testimony that said that the thing that caused the excitement
about space in the 1960's was we all wanted to go. Well, if you
do a prize program that gives everybody the sense that we are
back in that era where we all might have a chance to go, Peter
referenced this in his testimony, that will do more to inspire
enthusiasm in math and science than nearly any other thing we
could do.
Dr. Diamandis. I appreciate Admiral Steidle's--referencing
the work that we did with NASA. We are very proud of that. And
in fact, safety is something which we believe can come out of
existing rules and regulations. And we require teams to abide
by all local, regional, and federal rules. So in the case of
the FAA, that means they have to get a launch license and get
proper insurance. But we don't try and create a new set of
safety rules for them. These people are working within
technologies and areas that are existing. And the concern is,
again, I think, that the Centennial Challenge, as in any
government prize, is the focus needs to be on the rule-making
in the beginning. They have to be very clear and then allow
them to go in a variety of different directions. Again,
remember that you don't want to preclude those pesky bicycle
mechanics from Dayton, Ohio from going and strapping on wings.
You know. The solution is going to come out of very out-of-the-
way locations if we really want those breakthroughs. So we
can't confuse safety with risk too much.
On the education side, I think there are fundamental prizes
that can be created that really have amazing implications for
science and math. I will give you one example. I remember that
much of the Mars data that we have collected over the years
lays fallow. Only 10 percent ever gets looked at. Imagine, if
you would, if you had prizes for kids to say put all of that
data online and then prizes each year for the person who finds
the most interesting discovery. I think you would have kids
going back after high school, instead of watching TV, they
would be mining the Internet looking for new discoveries on
Martian data or Jovian data to win $10,000 which would put them
through college. There are very fascinating things you can do.
Mr. Forbes. Thank you, Mr. Chairman.
Chairman Rohrabacher. Mr. Udall. And it is the intent of
the Chairman, we have about eight minutes now before the vote,
and Mr. Udall will have his questions and then we will probably
adjourn.
Public vs. Private Prizes and Return on Investment
Mr. Udall. Thank you, Mr. Chairman.
I want to thank the panel. This has been fascinating and a
really exciting topic. I was going to try and finish in time to
leave Dr. Burgess a minute or two, but he seems to need to get
to the Floor.
I was wondering, and the entire panel maybe wants to think
about this, but if NASA were to go ahead and offer this
significant--or have the option of offering these significant
prize monies for a series of projects yet to be determined,
would that perhaps dry up the private sector's interest in
additional prize-based competitions? And that also--what is the
ROI, the return on investment, for the people who have offered
this prize? Is there a return on investment they determined? Is
it a psychic return? Is it a ``Let us create excitement''? Or
is there actually a financial return that the organizers of
this anticipate?
Dr. Diamandis. I--to answer your first question, I think
that, quite frankly, private industry would love to work with
NASA to amplify. The more prizes, the more money, the better,
especially if they are an organized fashion building toward
larger and larger goals, as Mr. Walker suggested. So I think it
would not dry it up at all. I think, in fact, it may be the
role of private industry to help take on more of the risk that
the government might not be able to in more audacious prizes.
The return is clearly psychic return and making their
personal dreams come true. We have, on our board, a number of
billionaires and multi-millionaires who have given us the funds
to make this happen. I give, as an example, that the America's
Cup each year, the average team on the America's Cup spends $60
million to $80 million per ship and for a zero cash prize. When
Larry Ellison backs his vehicle, it is ego money. A prize
basically credentials something as being worth doing. That is
where--the more money, the more worth it is doing in the eyes
of the public. And then it attracts two flavors of money. It
attracts ego money and sponsorship money. There are $20 billion
a year spent each year in sponsorship, which goes to car racing
and football and baseball and so forth. None of it goes toward
building rockets, at least not until recently. So before, if
you wanted to build a rocket, if Burt Rutan--he would have to
go and prove a marketplace, prove a return on investment for
that. Now, by putting up a prize, he doesn't have to have an
ROI. He can say, ``Paul Allen, do you want to be known for
history--historical purposes,'' yet again? Or in our case, we
are in negotiations with other sponsors now. A lot of people,
the Chairman of HP, who was on the Aldridge Commission report,
came up to me after the presentation and said, ``HP wants to be
involved in the X-Prize in supporting the next follow-on
activities. How can we get''--it is great. It will bring
corporate America into the picture and allow us to have that
fun and bring that excitement back to the public.
Mr. Udall. Anybody else on the panel want to comment on
that particular question?
I know Bob Walker and I think, you know, that must mean
that people writing $10 million checks, that is like a Member
of Congress writing a $10 personal check. You know, they just
dash off that $10 million check----
Mr. Walker. But, no, I would just echo what Peter just told
you. I mean, I think that it is clear that there are people
who, for reasons of personal satisfaction, of being a part of
history, are prepared to make large investments if they think
that it is a worthwhile activity. And the more of a of
worthwhile activity that you can put on this, and a prize does
that, the more likely you are to attract that kind of
investment into the marketplace.
Mr. Udall. Similar to many other, and this isn't charity,
per se, but charitable impulses we all have that the feelings
you have about having supported something worthwhile with a
mission that is beyond your own self interest is exciting.
Talk a little bit about the companies involved competing
for the prize. Now what kind of return on investment are they
looking for? Is it publicity? Is it actual opening of markets?
How do you read that, Dr. Diamandis?
Dr. Diamandis. Yes, thank you, sir.
I have been told by at least half of the teams out there
that the X-Prize allowed them to take risks and do things they
could not do before. When they went out after money to support
their efforts, their dreams of private space flight, they were
laughed at before. When the X-Prize--we had the support of NASA
at our inception, 20 astronauts, the FAA. When we kicked off
the X-Prize on May 18 of '96, we brought the government,
private sector, the Lindbergh family all together and
credentialed this idea and made it possible for these teams now
to go out and go after it. Their long-term goal is a billion-
dollar marketplace. Their long-term goal is to be the first
Canadian, Argentinean, Romanian private launch into--or
American, of course, private launch into space. So it is the
history books married with the billion-dollar marketplace. What
the X-Prize has done is said, ``Hey, this is not silly. This is
doable. This is worth going after.'' And so that is the--we are
sort of a seed current, if you would.
Mr. Udall. I see my time has expired. If I would, I would
like to ask unanimous consent to ask further questions of the
panel, and particularly just pursue how we keep the
relationship between the researchers at the university and the
non-profit sector engaged in the basic research we are doing as
we also put these prizes forth.
So I want to thank the Chairman and thank the panel.
Chairman Rohrabacher. Thank you very much.
And let me apologize personally to my fellow colleagues
that myself and Sheila Jackson Lee took extra time in our
questions and answers in the beginning and that time could have
been used for other colleagues who--one of whom didn't get a
chance to ask questions at all. And so, in the future, even the
Chairman should understand that by not sticking to that five
minutes, we are cutting other people off. And the Chairman will
try harder next time. But this is, of course, a very--been a
fascinating hearing.
And I want to thank the panelists for testifying today. And
each one of you made a major contribution to our understanding
of this issue.
If there is no objection, the record will remain open for
additional statements and questions, as we just mentioned, from
members of the panel. And we would hope that those questions
would be given within--and answers would be given quickly back,
but within two weeks. So without objection, so ordered.
And I now, again, thank you personally for your
participation. And let us look to the future. And you have
given us a lot of food for thought, but a lot of enthusiasm,
and that is what it takes to build a better world. Thank you
very much. The hearing is now adjourned.
[Whereupon, at 11:38 a.m., the Subcommittee was adjourned.]
Appendix:
----------
Answers to Post-Hearing Questions
Responses by Rear Admiral Craig E. Steidle, USN (Ret.), Associate
Administrator for Exploration Systems, National Aeronautics and
Space Administration (NASA)
Questions submitted by Chairman Dana Rohrabacher
Q1. Please describe how NASA plans to address the following issues
related to conducting a program of prizes:
Q1a. How will issues of liability be treated? Will the Federal
Government assume any legal risks associated with private companies
competing for a prize?
A1a. NASA is seeking specific legislative authority in the Agency's FY
2005 authorization bill which was submitted to the Congress on March
19, 2003. This proposed authority would allow NASA to conduct contests
for larger prizes, similar to the authority recently obtained by DARPA.
Section 323 of the authorization bill is entitled, ``Authority for
Competitive Prize Award Program to Encourage Development of Advanced
Space and Aeronautical Technologies.'' Section 323 would require
potential prize recipients to assume liability for all associated
risks.
NASA will also require all prize competitors to register. As part
of the registration process, competitors will be required to sign
waivers and disclaimers consistent with Section 323 described above.
Competitions requiring flight demonstrations will be regulated by
the FAA, which will ensure public health and safety. These requirements
will be published in the Challenge rules, and competitors will be
required to adhere to those rules in order to fly.
Q1b. How will issues of intellectual property (IP) be treated? Will
the IP rights for the technologies of a winning prize reside with the
government, or with the prize winner?
A1b. The assignment or licensing of intellectual property rights will
be specific to the rules of each prize competition.
When Challenges seek to encourage the development of private sector
capabilities that NASA or other users can purchase in the future, most
or all intellectual property ownership rights will remain with the
competitors and no licenses will be required to be granted to the
Federal Government.
When Challenges are aimed at developing novel innovations that NASA
can incorporate in government systems, NASA will require the
competitors, in the rules of the competition, to grant NASA a license
to use those innovations (e.g., inventions and trade secrets) in NASA
applications. Rights to use inventions and trade secrets in non-NASA
applications will remain with the competitors.
Q1c. Why will NASA centers, FFRDCs, and federal employees not be
allowed to compete for prizes?
A1c. NASA assumes as the baseline for all Centennial Challenge
competitions that federal employees, including FFRDC employees, will be
ineligible for competition. This means that all Centennial Challenges
will be open to teams composed of members of industry, academia, non-
profit organizations, students, and unaffiliated individuals (or any
combination thereof).
There are several reasons for establishing this baseline. They
include:
Program Goals and Effectiveness--A key goal of Centennial
Challenges is to leverage new sources of innovation. NASA has
multiple, existing mechanisms for tapping federal R&D talent.
Conflicts of Interest--Where federal employees are involved in
the development or review of the rules for a particular prize
competition or involved in the administration or judging of a
competition, there is the potential for real or perceived
conflicts-of-interest. Where federal organizations are involved
in both competing for Challenges and in the formulation or
administration of the same Challenges, potentially expensive
and burdensome ``firewalls'' between the Challenge formulators,
reviewers, and judges and the Challenge competitors would have
to be erected. These would likely pose a large and unreasonable
overhead burden to Centennial Challenges.
Fairness and Accountability--All competitors will be required
to use their own resources to compete in a Challenge. They will
not be allowed to use taxpayer funds they are receiving for
other work, through contracts or grants, to compete in a
Challenge. By their very nature, federal employees and
facilities cannot meet this criterion--they are fully funded
(or almost completely funded in the case of some FFRDCs) by the
taxpayer. Although theoretically a federal employee could
contribute to a team during their non-work hours, ensuring the
accountability of these federal employees would represent a
large and unreasonable overhead burden to Centennial
Challenges.
Unless transparently, fairly, and equitably distributed, the
use of federal capabilities by winning teams could also open
Centennial Challenges to charges by the losing teams that the
winning team had unfair access to federal capabilities.
Prize Award--If a federal organization won a Challenge, it is
not clear how the purse would be awarded. Claims could be made
that the team members, their federal organization, and/or the
Treasury should all receive the purse.
This baseline can and will be examined on a case-by-case basis
during the development of rules for individual Challenges. Where access
to federal expertise or facilities is deemed critical to winning a
particular Challenge competition, it will be the responsibility of the
Centennial Challenges Manager to work with the relevant federal
organizations to make their capabilities available to competing teams
on a transparent, fair, and equitable basis.
Q2. In his testimony, Dr. Diamandis said that the goal of a prize is
not to develop technology to put directly into use in the space
program, but rather to develop new ways of thinking--``to invent the
transistor, not to perfect the process leading to a Pentium Chip.'' But
presumably NASA must run its programs using mature technology.
Q2a. How does NASA plan to take a winning idea and turn it into a
mature technology that the space program can use?
A2a. Centennial Challenges will include prize competitions that span
the spectrum of technology development, from operational space
missions, to atmospheric flight demonstrations, to ground
demonstrations of major subsystems, to component-level technology
breakthroughs.
Examples of candidate Challenges for operational space missions
include competitions for: a lunar robotic soft lander, a micro re-entry
vehicle, an orbital aero-assist demonstration, and a solar sail.
Examples of candidate Challenges for atmospheric flight
demonstrations include competitions for: advances in general aviation,
an autonomous unmanned aerial vehicle for cargo transport, a long
duration unmanned aerial vehicle, and a hybrid airship.
Examples of candidate Challenges for ground demonstrations of major
subsystems include: a precision planetary descent and landing system,
an autonomous drilling system, a telerobotic construction system, a
robotic Earth analog sample return system, and a human lunar all-
terrain vehicle.
Examples of candidate Challenges for component-level technology
breakthroughs include competitions for: a mobile power storage
breakthrough, a radiation shielding breakthrough, advances in
deployable telescope technology, an advanced astronaut glove, advances
in lunar resource processing techniques, advances in beamed power
technology, and advances in materials.
In all cases, relevant users of the capability to be demonstrated
in a Challenge will have a role in the development of the winning
criteria and rules for that Challenge. By design, all Challenges will
be structured so that the resulting capability is ready for the next
level of technology maturation.
Q2b. Does NASA plan to offer contracts to the winners of a prize, such
as to develop his or her idea further to meet NASA's specifications? Or
would such a job more likely fall to one of the major aerospace
contractors?
A2b. Winning a prize does not mean that someone will receive a
contract. However, NASA may develop requirements based on information
and ideas obtained from prize competitions that may be used to develop
future solicitations. Any such Request for Proposals would comply with
the requirements of the Competition in Contracting Act (CICA).
Q3. To what degree does NASA plan to depend solely on prizes for the
development of technologies that are essential to exploration, such as
technologies that would be required for either long-duration space
flight or extended human missions to the Moon?
A3. There are no plans within NASA to depend on prizes for the
development of immediate need ``critical path'' technologies that are
essential to exploration.
Centennial Challenges is part of a portfolio of technology
investments that support the Vision for Space Exploration and ongoing
NASA missions. Prize competitions are a small part of that portfolio
that allow NASA to tap new sources of innovation and generate technical
solutions that would go unexplored in standard procurement processes.
Centennial Challenges complements, but does not replace, standard
technology development mechanisms.
Q4. Dr. Macauley testified that prizes have been offered successfully
in the past to develop incremental technologies, but that was before
government began to invest so heavily in R&D.
Q4a. Is it better for NASA to offer both large and small prizes, or
should it focus only on larger prizes? Would the cost of judging and
otherwise administering small purse prizes outweigh the value of the
prize itself and make such prizes not worthwhile?
A4a. NASA has many pathways for incremental technology development,
including contracts, grants, and in-house development. Prize
competitions should complement, not replicate, these existing
procurement tools. Prizes should be focused on competitions that can
produce advances and innovations that would otherwise go unexplored in
standard technology development processes.
``Incremental technology'' development does not necessarily equate
with either a ``small prize'' or a ``large prize.'' Small prizes, if
focused on breakthroughs in component-level technologies, can provide
revolutionary advances. Therefore, even if the cost of judging and
administering a small purse prize exceeds the dollar value of the
prize, the value of the technological breakthrough to NASA may clearly
justify the expenditure. An example of such a revolutionary innovation
is the marine chronometer, which was developed to win the 18th century
British Longitude Prize. Likewise, large prize purses for major
subsystem ground demonstrations, atmospheric flight demonstrations, or
operational space missions could, if not properly structured, result
only in incremental advances.
Through Centennial Challenges, we intend to invest in both smaller
prizes focused on component-level technology breakthroughs as well as
larger prizes for major subsystem demonstrations, atmospheric flight
demonstrations, and operational space missions that push innovation
across a range of technologies. The response to question 2a) above
covers each of these categories in detail.
The key to producing innovation in any prize competition is to
define the winning criteria for the competition in a way that forces
competitors to develop and demonstrate innovative capabilities to win
the prize. For example, if NASA offered a prize competition for a soft
lunar robotic landing where the winning criteria and purse size were
very similar to the requirements and costs of NASA's lunar Surveyor
landers from the 1960s, we could expect relatively few innovations from
competitors for that prize. However, if NASA offered a substantially
smaller purse and required that the competitors also access another
area of the lunar surface via penetrator, rover, reusable lander, or
second lander, the competitors would have to develop new, innovative,
and less costly approaches to lunar surface landings and access that
are true breakthroughs over existing capabilities.
Q4b. How should it be decided whether prizes or contracts/grants are
the appropriate tool for stimulating innovation for small, discrete
technologies (such as the development of an improved astronaut glove)?
A4b. Prize plans must be coordinated with NASA's overall approach to
advancing the Agency's mission goals. Other mechanisms include
contract, grants, cooperative agreements, and Space Act agreements.
NASA will regularly examine and update our planning for Centennial
Challenges based on the procurement plans of other Agency programs.
NASA will comply with all applicable statutes and regulations regarding
the use of procurement contracts, including 31 USC 6303, which requires
agencies to use a procurement contract if the ``principal purpose'' of
the agreement is to acquire property or services for the direct benefit
or use of the U.S. Government.
Identifying strong candidate Challenges involves other important
criteria beyond the applicability of a prize competition to the
technology or capability in question. Specifically, we are applying six
base criteria when examining the suitability and relative strengths of
candidate Challenges.
The Simpler, the Better--We are seeking Challenges with
winning criteria that are objective, transparent, simple, and
unbiased. Challenges that require complex rules, expensive
testing and verification, or and/or qualitative judging are
less desirable.
Relevance to NASA Programs--We are seeking Challenges where
the capabilities that would be developed and demonstrated in
the course of the competitions have strong relevance to
programs in one or more NASA Mission Directorates.
Right Level of Difficulty--We are seeking Challenges where
there are multiple pathways to developing the desired
capability and where it would be hard to decide which pathway
is the right one through a standard contract or grant selection
process. Challenges that are too easy or impossible to achieve
are not desirable.
Follow-On Opportunities--Historically, the most successful
prize competitions are those that are aligned with some future
economic opportunity for the competitors. All other things
being equal, Challenges that will produce a capability that can
be applied to a future NASA program, another aerospace market,
or that have synergy with Earth-based applications are more
desirable.
Competitor and Sponsor Interest--Interest from potential
competitors and/or from potential sponsors of the competing
teams is a strong indicator that a particular prize competition
is good candidate and properly constructed. Interest from
potential co-sponsors of the prize purse itself (i.e., other
organizations in the government, industry, and academia with
R&D interests coincident with NASA's) is another strong
indicator.
Public Excitement--Historically, the most successful prize
competitions produce excitement among the public, media, and
educators that, in turn, incentivize competitors and sponsors
to compete to earn their share of the fame associated with
winning the prize. Challenges with greater potential to
generate public excitement are more desirable.
No one Challenge will meet all of these criteria perfectly.
However, NASA is using these criteria to cull the best candidate
Challenges from the hundreds of ideas that have been generated
internally and externally for future Centennial Challenge competitions.
We intend to carefully develop the rules for each of our prize
competitions using inputs from a variety of sources, including:
Requests for Information (RFIs) to potential competitors, internal and
external independent expert review boards, and inputs from workshops
and other public venues. In fact, inputs from over 200 participants on
over 30 candidate prize competitions from our first annual Centennial
Challenges Workshop are available on the Internet at
www.centennialchallenges.nasa.gov.
It is important to note that we have received more viable Challenge
candidates than we will have the resources to pursue. At the end of the
process, the Centennial Challenges Manager, in consultation with senior
NASA management, must make judgments regarding the relative importance,
attractiveness, and timing of candidate Challenges to achieve a
relevant, strong and balanced prize competition program that can be
implemented within available resources.
It is also important to note that NASA may want to pursue
Challenges that overlap with but complement other procurements. For
example, we are examining a candidate Challenge for a soft lunar
robotic landing, which would complement our Lunar Exploration Program
with entrepreneurial missions demonstrating innovative approaches to
lunar surface access and exploration that might not otherwise be
pursued.
Q5. How would a prize contest differ from NASA releasing a request for
information (RFI), such as what was done for a Hubble robotic servicing
mission? How should the decision be made as to whether a particular
objective is better suited to a prize competition or to more
traditional approaches? Would the largest difference between the two
methods be the lead-time required for the development of a technology
through a prize contest as compared to that of the traditional route?
A5. In the case of the Hubble robotic servicing mission, an RFI was
used to obtain information from the private sector on what capabilities
are present in the market place. A request for information (RFI) seeks
information that the Government does not have that may be used by the
Government to establish requirements or other aspects of a follow-on
procurement, such as a Request for Proposals (RFP). An RFI may lead to
a contract when the Agency requires an immediate need critical path
technology, as was the case with the Hubble Robotic servicing
capability.
A prize competition is a promise to deliver an award to a team or
individual for the demonstration of a desired capability consistent
with the competition rules. A prize competition does not inquire about
existing capabilities present in the market place. Rather, a prize
competition provides incentives for the creation of new capabilities.
Although a prize competition could lead to the development of a
given capability in a shorter amount of time as compared to a standard
procurement, that is not guaranteed and therefore is not a factor in
deciding whether to pursue a prize competition versus a standard
procurement. Two significant advantages of a prize competition are
that: 1) NASA only pays once the desired capability has been
demonstrated, instead of paying for a proposal that may or may not
result in the desired capability; and 2) all competitors are allowed to
compete until the very end of the contest, which allows innovative
approaches to be explored that would otherwise not be pursued in a
standard procurement. NASA established Centennial Challenges not to
achieve greater efficiencies in the procurement or development process
(although that may happen). NASA established Centennial Challenges as a
tool for tapping new sources of innovation and generating technical
solutions that would go unexplored in standard procurement processes.
Questions submitted by Representative Nick Lampson
Q1. Who owns the intellectual property for developments achieved in
the prize program?
A1. The assignment or licensing of intellectual property rights will be
specific to the rules of each prize competition.
When Challenges seek to encourage the development, of private
sector capabilities that NASA or other users can purchase in the
future, most or all-intellectual property ownership rights will remain
with the competitors and no licenses will be required to be granted to
the Federal Government.
When Challenges are aimed at developing novel innovations that NASA
can incorporate in government systems, NASA will require the
competitors, in the rules of the competition, to grant NASA a license
to use those innovations (e.g., inventions and trade secrets) in NASA
applications. Rights to use inventions and trade secrets in non-NASA
applications will remain with the competitors.
Q2. What criteria will you use to determine which technologies to
leave to prize contestants and which to develop through more
traditional methods, such as contracts?
A2. Prize plans must be coordinated with NASA's overall approach to
advancing the Agency's mission and goals. Other mechanisms include
contract, grants, cooperative agreements and Space Act agreements. NASA
will use procurement contracts if the ``principal purpose'' of the
agreement is to acquire property or services for the direct benefit or
use of the U.S. Government. A prize competition is used where NASA
wants to stimulate new ideas from external sources in the private
sector and incentivize multiple competitors. Prize competitions will
not be used when the Agency has an immediate need for a critical path
technology essential to exploration.
Identifying strong candidate Challenges involves other important
criteria beyond the applicability of a prize competition to the
technology or capability in question. Specifically, we are applying six
base criteria when examining the suitability and relative strengths of
candidate Challenges.
The Simpler, the Better--We are seeking Challenges with
winning criteria that are objective, transparent, simple, and
unbiased. Challenges that require complex rules, expensive
testing and verification, or and/or qualitative judging are
less desirable.
Relevance to NASA Programs--We are seeking Challenges where
the capabilities that would be developed and demonstrated in
the course of the competitions have strong relevance to
programs in one or more NASA Mission Directorates.
Right Level of Difficulty--We are seeking Challenges where
there are multiple pathways to developing the desired
capability and where it would be hard to decide which pathway
is the right one through a standard contract or grant selection
process. Challenges that are too easy or impossible to achieve
are not desirable.
Follow-On Opportunities--Historically, the most successful
prize competitions are those that are aligned with some future
economic opportunity for the competitors. All other things
being equal, Challenges that produce a capability that can be
applied to a future NASA program, another aerospace market, or
that have synergy with Earth-based applications are more
desirable.
Competitor and Sponsor Interest--Interest from potential
competitors and/or from potential sponsors of the competing
teams is a strong indicator that a particular prize competition
is good candidate and properly constructed. Interest from
potential co-sponsors of the prize purse itself (i.e., other
organizations in the government, industry, and academia with
R&D interests coincident with NASA's) is another strong
indicator.
Public Excitement--Historically, the most successful prize
competitions produce excitement among the public, media, and
educators that, in turn, incentivize competitors and sponsors
to compete to earn their share of the fame associated with
winning the prize. Challenges with greater potential to
generate public excitement are more desirable.
No one Challenge will meet all of these criteria perfectly.
However, NASA is using these criteria to cull the best candidate
Challenges from the hundreds of ideas that have been generated
internally and externally for future Centennial Challenge competitions.
We intend to carefully develop the rules for each of our prize
competitions using inputs from a variety of sources, including:
Requests for Information (RFIs) to potential competitors, internal and
external independent expert review boards, and inputs from workshops
and other public venues. In fact, inputs from over 200 participants on
over 30 candidate prize competitions from our first annual Centennial
Challenges Workshop are available on the Internet at
www.centennialchallenges.nasa.gov.
It is important to note that we have received more viable Challenge
candidates than we will have the resources to pursue. At the end of the
process, the Centennial Challenges Manager, in consultation with senior
NASA management, must make judgments regarding the relative importance,
attractiveness, and timing of candidate Challenges to achieve a
relevant, strong and balanced prize competition program that can be
implemented within available resources.
It is also important to note that NASA may want to pursue
Challenges that overlap with but complement other procurements. For
example, we are examining a candidate Challenge for a soft lunar
robotic landing, which would complement our Lunar Exploration Program
with entrepreneurial missions demonstrating innovative approaches to
lunar surface access and exploration that might not otherwise be
pursued.
Q3. What specific results does NASA expect to achieve with the prizes
contemplated in the FY 2005 budget request? What metrics have been
established to determine if the goals are accomplished?
A3. If NASA gets the requested legislative authority, NASA plans to
initiate at least four, and up to eight, new prize competitions in FY
2005. These candidate Challenges include competitions for: advances in
deployable telescope technology, a mobile power storage breakthrough, a
radiation shielding breakthrough, an advanced astronaut glove, advances
in lunar resource processing techniques, a precision planetary descent
and landing system, and an autonomous unmanned aerial vehicle for cargo
transport.
NASA also plans to announce three annual Challenges in FY 2005.
These candidate Challenges include competitions for advances in power
beaming, materials, and general aviation. NASA will also initiate a
parallel outreach program that conducts small prize competitions to
encourage primary and secondary students to pursue careers in science,
technology, engineering, and mathematics.
Over the long-term, NASA plans to track and report on the funding
leveraged by Centennial Challenges. Historically, competitors for a
prize competition collectively spend at least several times the value
of the prize purse in pursuit of the prize. On average, we should meet
this historical performance. NASA will also track funding leveraged
where it co-sponsors a prize competition with another NASA program or
external organization (i.e., other organizations in the government,
industry, and academia with R&D interests coincident with NASA's).
Over the long-term, NASA will track and report on the innovations
and capabilities created through Centennial Challenge competitions as
well as any competitions that we find to provide useful lessons for us.
Although these qualitative assessments will be more anecdotal in
nature, the lessons learned will be important to the development of
future Challenges.
Questions submitted by Representative Mark Udall
Q1. NASA's Centennial Challenge prize program is aimed at developing
technologies needed for NASA's exploration initiative.
A1. It is important to note that while the focus of Centennial
Challenges is on supporting the Exploration Systems Mission
Directorate, NASA does intend to pursue prize competitions that support
other mission areas, including the Science Directorate and the
Aeronautics Directorate.
Q1a. What happens if either no one is interested in competing for the
prize or no one comes up with a winning approach? What will NASA do?
When will NASA make a decision on whether or not to suspend a
particular prize approach?
A1a. The rules for all prize competitions conducted under Centennial
Challenges will include two expiration dates.
The first expiration date will allow NASA to end a prize
competition if an adequate number of competitors have not registered by
that date. For example, if we judge that at least two competing teams
are needed to ensure a strong competitive field for a particular
Challenge, but only one team has registered at the end of the first
year of the competition, NASA would reserve the right to end the
competition at the end of the first year.
The second expiration date will allow NASA to end a prize
competition if no competitor has achieved the winning criteria within
the time allowed for the competition. For example, if we offered a
prize for a soft lunar robotic landing within five years, but no team
had successfully placed a lander on the surface of the Moon at the end
of five years, NASA would end the competition at the end of the fifth
year.
These expiration dates will ensure that NASA has the flexibility to
recover from a defective set of competition rules and redirect prize
funding towards a new competition. However, it is our intention to
never have to exercise these expiration dates. We intend to carefully
develop the rules for each of our prize competitions using inputs from
a variety of sources, including: requests for information (RFIs) to
potential competitors, internal and external independent expert review
boards, and inputs from workshops and other public venues. In fact,
inputs from over 200 participants on over 30 candidate prize
competitions from our first annual Centennial Challenges Workshop are
available on the Internet at www.centennialchallenges.nasa.gov.
Q2. What do you consider the biggest impediments to carrying out a
successful prize program?
A2. The single largest hurdle to an effective Centennial Challenges
program is obtaining specific legislative authority to conduct
competitions with large prize purses over multiple years. Without this
authority, NASA's use of prize competitions will be severely limited
and sub-optimized.
The number and type of prize competitions that NASA could pursue
would be greatly decreased without this authority. Most of the
candidate prize competitions we are considering for FY 2005 and beyond
would require prize purses in the million-dollar range and above to
attract a strong field of competitors. Most of these prizes will also
require multiple years of competition before a winner emerges. (For
reference, the ongoing X-PRIZE competition was started in 1996--a nine-
year competition with a $10 million purse, which was won on October 4,
2004.) Examples of candidate prize competitions requiring this
authority include full space missions, such as competitions for: a
lunar robotic soft lander, a micro re-entry vehicle, an orbital aero-
assist demonstration, and a solar sail demonstration. Examples also
include atmospheric flight demonstrations, major subsystem
demonstrations, and component-level technology breakthroughs, such as
competitions for: a mobile power storage breakthrough, a radiation
shielding breakthrough, a precision planetary descent and landing
system, an autonomous drilling system, a telerobotic construction
system, a robotic Earth analog sample return system, a human lunar all-
terrain vehicle, and a long duration unmanned aerial vehicle. With
specific authority to conduct competitions with large prize purses and
to treat prize purse funding as no-year funding, as was provided in
2002, NASA will be able to pursue a robust Centennial Challenges. Since
FY 2001, in anticipation of enactment of prize authority, NASA's annual
appropriations acts have included an administrative provision stating:
``Funds for announced prizes otherwise authorized shall remain
available, without fiscal year limitation, until the prize is claimed
or the offer is withdrawn.''
Answers to Post-Hearing Questions
Responses by the Hon. Robert S. Walker, Chairman, Wexler & Walker
Public Policy Associates
Questions submitted by Chairman Dana Rohrabacher
Q1. If NASA were to establish a program of prizes, how should issues
of liability be treated? Should the Federal Government assume any legal
risks associated with private companies competing for a prize? Would
your answer be different if an outside entity (such as a private
foundation or an endowment) was in charge of designing, administering
and judging prize contests, rather than NASA?
A1. Given the level of risk that must be assumed and that prize
competitors would be willing to take, I do not believe the Federal
Government should assume liability responsibility. Given the open-ended
nature of prize competition, there would be an opportunity for
fraudulent claims if such legal risks were assumed.
While I do not pretend to be an expert of how the X-Prize
Competition has handled the issue of liability, clearly the use of an
outside entity to sponsor the government's prize competition could use
a similar approach.
Q2. If NASA were to establish a program of prizes, how should issues
of intellectual property (IP) be treated? Should the IP rights for the
technologies of a winning prize reside with the government, or with the
prize winner? If with the prize winner, what rights, if any, should the
government retain? Should the prize winners ever be required to share
IP that NASA would need? Would your answer be different if an outside
entity was in charge of prize contests?
A2. Part of the reason why possible prize competitors find such
programs appealing is their ability to capitalize on their work even if
they do not when or even if the prize money does not cover their actual
expenses. Therefore, it is vital that intellectual property remain with
the competitors, including the winner. NASA should have the ability to
draw upon the expertise and technology based upon the inside knowledge
gained with the prize program, but should properly pay for any
technology actually included in NASA projects.
Q3. If NASA or another federal entity was in charge of running a
program of prize contests, should the Federal Government be allowed to
receive private funds in addition to federally appropriated funds? If
so, what conflicts of interest might arise and how could they be
prevented? Conversely, if a private foundation or outside entity was in
charge of running such a program, should the Federal Government be
allowed to contract with or provide funds to this entity?
A3. Multiplier money is very desirable whether the program is sponsored
directly by NASA or by an outside entity. My preference would be to
create an outside entity that clearly would be able to accept non-
federal dollars, but would also be able to utilize appropriated money.
Such an outside entity, probably a foundation, would avoid the conflict
of interest issues.
Q4. What are the advantages and disadvantages for having either an
outside private entity or a federal entity other than NASA in charge of
running a program of prize contests, rather than NASA itself? What
would the proper balance be between NASA's role and the outside
entity's role in the designing, administering and judging of prize
contests? Should NASA have any role in these areas?
A4. I would favor creating an outside entity, preferably a tax-free
foundation, to administer any large prize program. For small prizes,
aimed at limited technology development, it may be appropriate for NASA
to directly offer prizes aimed at specific needs, but in general I
believe a prize foundation is the best policy route. The advantages I
see for the outside prize entity are as follows:
1. Eliminate most conflict of interest problems
2. Would be able to take both public and private money
3. Could be subjected to NASA oversight
4. Could accept risks not normally open to government
agencies.
Q5. Should NASA centers, FFRDCs and federal employees be allowed to
compete for prizes?
A5. Prize competition should be for non-federal personnel. In other
words, I do not believe the centers, as presently constituted, should
be included in prize competition. However, if the center transformed to
FFRDCs, employees of the FFRDCs should be eligible for prize awards.
Q6. What recommendations do you have to minimize the possibility that
the judging of a prize contest is not biased towards a particular
solution? Do you believe NASA should or should not participate in the
judging of such contests?
A6. The possibility of having prize awards dependent on judging
decisions should be minimized as much as possible. The best way to
accomplish this is to set prize criteria based upon clear objectives
and with a specific time limit. No real judging is necessary if the
winner is the first to meet the specified objectives within the
timeframe indicated.
Q7. In his testimony, Dr. Diamandis said that the goal of a prize is
not to develop technology to put directly into use in the space
program, but rather to develop new ways of thinking--``to invent the
transistor, not to perfect the process leading to a Pentium Chip.'' But
presumably NASA must run its programs using mature technology.
Q7a. How could NASA take a winning idea and turn it into a mature
technology that the space program can use?
Q7b. Should NASA offer contracts to the winners of a prize, such as to
develop his or her idea further to meet NASA's specifications? Or
should such a job more likely fall to one of the major aerospace
contractors?
A7a,b. Prizes are not meant to produce mature technologies. They
produce unique ideas for addressing real goals. Therefore, NASA must
see the outcome of prize competition as a variety of ways to address a
specific goal with one winner, but multiple future choices. The winner
should expect no more than to collect the prize--no guarantee of a
future contract. But NASA should look upon the contest as a learning
experience, which allows it to infuse new thinking into its more
traditional contracting process.
Q8. What should NASA provide in order to attract participants to a
prize contest? Should the winner of a prize contest expect to have a
future business relationship with NASA? Should there be a guaranteed
government contract for the winner of a prize, such as the delivery of
cargo into orbit or to ISS? Is it necessary that there be some evidence
of a future market for prizes to be effective?
A8. Prizes are not inherently a mechanism for developing contract
relationships. Winners and participants in the contest should expect no
more than the ability to retain the intellectual property they have
created. On the other hand, NASA should no be precluded from forming a
business relationship with prize contenders if they have something
specific to offer to ongoing NASA efforts.
Q9. Dr. Macauley testified that prizes have been offered successfully
in the past to develop incremental technologies, but that was before
government began to invest so heavily in R&D.
Q9a. Is it better for NASA to offer both large and small prizes, or
should it focus only on larger prizes? Would the cost of judging and
otherwise administering small purse prizes outweigh the value of the
prize itself and make such prizes not worthwhile?
Q9b. How should it be decided whether prizes or contracts/grants are
the appropriate tool for stimulating innovation for small, discrete
technologies (such as the development of an improved astronaut glove)?
A9a,b. While I am not opposed to the concept of small prizes for
incremental technology development, I am concerned that the fairly
precise nature of such prizes might end up looking more like a contract
than a prize. I am more interested in large prizes with the potential
for significant technology backwash that will be valuable even if no
one actually wins the prize. For example, the annou8ncement of a
specific date for manned spacecraft race around the Moon with a
substantial monetary prize could inspire the type of technology
competition that would revolutionize the industry.
Q10. To what degree should NASA plan to depend solely on prizes for
the development of technologies that are essential to exploration, such
as technologies that would be required for either long-duration space
flight or extended human missions to the Moon?
A10. The prizes NASA offers should seek to encourage development of
technologies that fit the agencies exploration goals. But rather than
specifying the technologies NASA believes are relevant, the prizes
should be broad enough to allow substantial innovation. Prizes should
not be the sole approach to technology development but rather the high-
risk component that creates unique technology pathways.
Q11. How would a prize contest differ from NASA releasing a request
for information (RFI), such as what was done for a Hubble robotic
servicing mission? How should the decision be made as to whether a
particular objective is better suited to a prize competition or to more
traditional approaches? Would the largest difference between the two
methods be the lead-time required for the development of a technology
through a prize contest as compared to that of the traditional route?
A11. RFI's tend to be a means of pinging the traditional NASA
contractor and supply chain. Prizes are a way of getting
entrepreneurial involvement, which does not want to be encumbered by
federal rules and regulations. By putting time limits in the prize
criteria, NASA should be able to encourage some early adopter activity
that will benefit the whole of the space exploration programs, and come
from the inventors, developers and financiers not normally involved in
NASA procurement.
Questions submitted by Representative Nick Lampson
Q1. The Aldridge Commission report stated, ``Given the complexity and
challenges of the new vision, the Commission suggests that a more
substantial prize might be appropriate to accelerate the development of
enabling technologies. As an example of a particularly challenging
prize concept, $100 million to $1 billion could be offered to the first
organization to place humans on the Moon and sustain them for a fixed
period before they return to Earth.''
Q1a. How would such a prize work in practice, for example, should $1
billion be put in a special account and the rest of NASA's budget for
human exploration of the Moon be cut be an equivalent amount or even
eliminated entirely?
Q1b. Given that small unmanned spacecraft missions currently cost a
$100 million or more, how credible is it to believe that any
organization could carry off a human lunar mission for $100 million--or
even $1 billion?
Q1c. By logical extension, should Congress consider curtailing the
funding for the President's space exploration initiative and instead
just put $500 million to $1 billion in a prize fund annually over the
next decade as a prize for the first organization to land humans on
Mars and return them safely?
A1a,b,c. The question of how to specifically designate money to the
prize account was one that the Commission felt was better left to the
Congress to determine. My personal view is that the creation of a
foundation capable of receiving appropriated money would be the way to
go. For large prizes the appropriations into the account could take
place over several years and would not have to impact ongoing NASA
programs in any substantial way. For NASA, the advantage would be that
for modest investments on appropriated money for prize activity,
technology development worth substantially more could be undertaken.
Another potential approach would be to appropriate money only once
the prize criteria had been met. Clearly, this would involve a good
faith commitment, but if no one achieved prize success, no money would
have to be allocated. Meantime, the Nation would still benefit from the
technology development in pursuit of the prize even with an
unsuccessful outcome.
The Commission found that the value of the prize has little or no
relationship to the amounts that will be spent in pursuit of it,
providing that the goal is significant. Aviation prizes in the past and
the X-Prize experience show a willingness to pursue big goals for the
glory of the victory. Estimates range from between $100-$400 million
spent in pursuit of the X-Prize. Burt Rutan will almost certainly have
spent at least three times what the X-Prize is worth in his effort.
Therefore, the prize is a device to encourage activity and the thought
of the Commission was that the first $1 billion dollar prize in history
might just get considerable attention and substantial activity even
toward a goal as big and expensive as a lunar mission.
Prizes should not be seen as a replacement of regularized NASA
mission planning and execution. Instead, prizes are a means to achieve
unique innovation with risks far larger than NASA is capable of taking.
Curtailing NASA funding in lieu of prize competition would handicap the
agency in favor of a total risk approach to space exploration. Prudence
calls for a combined approach that accepts the risks inherent in prize
competition but also preserves the inherent scientific and
technological assets that NASA embodies
Question submitted by Representative Mark Udall
Q1. What do you consider to be the biggest impediments to carrying out
a successful prize program?
A1. The biggest impediment to a prize program will be the reluctance to
accept the substantial risks that must accompany the pursuit of prizes.
Competitors are unlikely to fit the profile of typical NASA
contractors, nor are they likely to want to be burdened by volumes of
federal rules and regulations. In order for prizes to work, they must
remain relatively unencumbered by standard government practices and
therefore are likely to be technologically risky.
While financial risk should be mitigated by offering payment only
upon success, the fact that government money is encouraging high-risk
activity could become controversial.
The other problem I see is finding and appropriate funding
mechanism. Since prizes do not easily fit inside the typical
appropriations cycle, unique policies will have to be developed that
assume appropriate budgetary restraints but also assure the
availability of prize money when success is achieved.
Answers to Post-Hearing Questions
Responses by Dr. Peter H. Diamandis, Chairman and CEO, X-Prize
Foundation
Questions submitted by Chairman Dana Rohrabacher
Q1. If NASA were to establish a program of prizes, how should issues
of liability be treated? Should the Federal Government assume any legal
risks associated with private companies competing for a prize? Would
your answer be different if an outside entity (such as a private
foundation or an endowment) was in charge of designing, administering
and judging prize contests, rather than NASA?
A1. The government should not be accepting any additional liability
risks. The existing FAA, DOT, and DOC licensing methods should be used
where appropriate. The X-PRIZE Foundation utilizes liability release
forms that must be signed by each team. The use of an outside
administrative organization, like the X-PRIZE Foundation, could help to
appropriately shield the government.
Q2. If NASA were to establish a program of prizes, how should issues
of intellectual property (IP) be treated? Should the IP rights for the
technologies of a winning prize reside with the government, or with the
prize winner? If with the prize winner, what rights, if any, should the
government retain? Should the prize winners ever be required to share
IP that NASA would need? Would your answer be different if an outside
entity was in charge of prize contests?
A2. The government should not claim any intellectual property rights
from any of the teams. The teams need to be provided with the greatest
impetus to commercialize their IP and inter-revenue generating
business. At most, the government should request that prize winner
agree to license the technology through NASA or the DOD. If agreed
upon, this license should be issued at its best commercial rate.
Q3. If NASA or another federal entity was in charge of running a
program of prize contests, should the Federal Government be allowed to
receive private funds in addition to federally appropriated funds? If
so, what conflicts of interest might arise and how could they be
prevented? Conversely, if a private foundation or outside entity was in
charge of running such a program, should the Federal Government be
allowed to contract with or provide funds to this entity?
A3. The idea of obtaining private funds to supplement a government
prize purse is extremely important. The best way to accomplish this is
to allow an outside private entity, such as the X-PRIZE Foundation or
its equivalent, to run the competition and solicit sponsors that would
co-fund a prize jointly with the government. A private entity with
expertise in this area would be far more effective than the government
in leveraging sponsor dollars.
Q4. What are the advantages and disadvantages for having either an
outside private entity or a federal entity other than NASA in charge of
running a program of prize contests, rather than NASA itself? What
would the proper balance be between NASA's role and the outside
entity's role in the designing, administering and judging of prize
contests? Should NASA have any role in these areas?
A4. There are numerous advantages to allowing an outside private entity
to run the competition. These include:
A) The competition would be viewed as being judged more fairly
if the government was not running it. An outside party would
not be biased to any preconceived technology solutions. This
will result in more teams joining the competition.
B) An outside private entity can more aggressively market the
competition through co-promotions with sponsors, television
programming and public relation campaigns. NASA is limited by
law on its ability to promote itself and its programs.
C) A private entity, like the X-PRIZE Foundation, which is
already administrating prize programs, could significantly
benefit from economies of scale in using its pre-existing skill
set. This includes experiences and/or skills in the following
arenas: public relations; team/participant management; judging
panel selection and procedures; rules development; web and
television marketing; sponsorship solicitation, etc. These
could all be applied to promote and develop the government
prizes as well as existing prizes.
Q5. Should NASA Centers, FFRDCs and federal employees be allowed to
compete for prizes?
A5. Yes. They should be allowed to compete for the prizes. However,
they should neither be using government funds nor be restricted by
government rules and regulations. The whole concept of the prize is to
allow non-traditional solutions to be achieved at a low cost. The
employees of an FFRDC should be allowed to form teams and compete, but
they should be privately funded.
Q6. What recommendations do you have to minimize the possibility that
the judging of a prize contest is not biased towards a particular
solution? Do you believe NASA should or should not participate in the
judging of such contests?
A6. The best way to prevent a bias towards a particular solution is
twofold:
1) Set clearly defined rules that state the end goal without
inclusion of any bias towards a particular technology solution.
2) Design the managing and judging entity to be independent of
the government.
I think it is appropriate to have one judge from NASA on the
judging panel, but it is paramount that the judges be comprised of a
mix of individuals from private industry or universities. Potential
judges should also be selected from experts in the appropriate
technology arena.
Q7. In your testimony, you said that the goal of prize is not to
develop technology to put directly into use in the space program, but
rather to develop new ways of thinking--``to invent the transistor, not
to perfect the process leading to a Pentium Chip.'' But presumably NASA
must run its programs using mature technology.
Q7a. How could NASA take a winning idea and turn it into mature
technology that the space program can use?
A7a. The way that NASA can turn a winning idea into mature technology
is to set the prize rules to meet that specific objective. For example,
instead of a challenge involving a lunar rover that might be tested on
Earth, establish a prize that requires a lunar rover to be tested on
the Moon. Require it to be tested to the extent that NASA needs it. The
challenge could be something like, ``Go 10 miles in two days,'' for
example. Allow the end result of the prize to demonstrate the
functionality of the technology. A good example of this is Burt Rutan's
demonstration of hybrid rockets as human-rated propulsion systems.
Q7b. Should NASA offer contracts to the winners of a prize, such as to
develop his or her idea further to meet NASA's specifications? Or
should such a job more likely fall to one of the major aerospace
contractors?
A7b. NASA should offer the prize winners either a contract to provide
the technology or an offer to license it from them for development by
an existing contractor. That decision should rest with the prize
winner. After all, they have just demonstrated the technology that NASA
would like to make use of. Why not give them an opportunity to do it
again and continue to learn? The alternative of turning it over to
larger prime contractors would only result in higher cost; it is also
likely that they will not have as much experience as the prize winner
themselves.
Q8. What should NASA provide in order to attract participants to a
prize contest? Should the winner of a prize contest expect to have a
future business relationship with NASA? Should there be a guaranteed
government contract for the winner of the prize, such as the delivery
of cargo into orbit or to ISS? Is it necessary that there be some
evidence of a future market for prizes to be effective?
A8. Many of the teams that would compete for NASA prizes, quite
frankly, would not want to do business with the government. They are
pursuing the prize for two reasons: 1) the cash prize and 2) the
publicity. Also, they most likely view it as an opportunity to
demonstrate the technology for personal business reasons. The best
thing that NASA could offer would be a substantial cash prize and very
high visibility. The contract or option to license the technology is
important, but I think secondary to the first two. NASA must allow the
team to retain all the intellectual property. This would be a non-
starter if NASA tried to take ownership of any of the technology.
Q9. Dr. Macauley testified that prizes have been offered successfully
in the past to develop incremental technologies, but that was before
government began to invest so heavily in R&D.
Q9a. Is it better for NASA to offer both large and small prizes, or
should it focus only on larger prizes? Would the cost of judging and
otherwise administering small purse prizes outweigh the value of the
prize itself and make such prizes not worthwhile?
A9a. As the X-PRIZE Foundation recommended in its study to NASA in
2003, it is our belief that NASA should offer a full range of prizes.
These should include, at any one time, two to three grand prizes for
such things as private flight to orbit, robots landing on the Moon, or
asteroid sample return missions. There should be a full spectrum of
prizes funneling down to the high school level. For example, students
could do mining research based on Mars Lander data stored on computer
archives. The goal here should be to get entrepreneurs and
entrepreneurially minded companies to begin looking at prizes as a way
to both supplement their income and create excitement and publicity for
the space arena.
Q9b. How should it be decided whether prizes or contracts/grants are
the appropriate tool for stimulating innovation for small, discrete
technologies (such as the development of an improved astronaut glove)?
A9b. Not all technology challenges make good prizes. A technology
challenge that make a good prize must have a human story involved with
it. Heroic challenges and even the potential for failure intrigues the
public. The topic must be of interest to the television-minded audience
and the media world. Therefore, a challenge must be created in the
context of a human feat. For example, an improved astronaut glove used
while participating in a competitive sport or the use of teams
competing against each other using these gloves to accomplish certain
objectives. Regardless of the actual technology challenge being
presented, the human factor must be incorporated to attract human
attention.
Q10. To what degree should NASA plan to depend solely on prizes for
the development of technologies that are essential to exploration, such
as technologies that would be required for either long-duration space
flight or extended human missions to the Moon?
A10. NASA needs to take dual courses with regards to critical
technology.
It is completely reasonable that NASA should always continue to
utilize a prime contractor for its mission critical technologies.
However, for each of these technology areas that are most expensive and
lacking innovation, it is appropriate for NASA to set aside some
percentage (five or ten percent of the budget) for prizes. If, for
example, a new landing technology to land on the Moon is required,
rather than just contract with Boeing, NASA should initiate a Lunar
Landing Prize with specific mission parameters. This would allow
certain companies that could never compete against Boeing, in the
contractual sense, to gain an opportunity at proving new ideas.
Q11. How would a prize contest differ from NASA releasing a request
for information (RFI), such as what was done for a Hubble robotic
servicing mission? How should the decision be made as to whether a
particular objective is better suited to a prize competition or to more
traditional approaches? Would the largest difference between the two
methods be the lead-time required for the development of a technology
through a prize contest as compared to that of the traditional route?
A11. This is perhaps the most important element. The difference between
a prize and an RFI lies in the fact that in a prize, NASA does not get
to judge which approach makes sense or which approach has the best
technology. It simply judges who completed the task first successfully.
The existing mature bureaucracy in NASA (and I say that in the kindest
way) will prejudge which technology is too risky and what is most
likely to work. Contracts will be awarded to the latter. NASA would
never have allowed for The Spirit of St. Louis or SpaceShipOne with
that type of selection process.
The most important thing NASA can do here is to set a very clear
and concise set of rules independent of technology and then to judge
who does it first. Providing the largest cash prize possible will serve
to motivate the most number of creative approaches to engage the
challenge.
Regarding what should be attacked as an RFI versus a prize: Prizes
are most suited to fit those concepts which have very complex and
multi-variable solutions. Good prize candidates are also those that
have the opportunity for media, publicity, heroism, and a follow on
line of business once the technology has been proven. RFIs can be used
for soliciting solutions for known problems or known technologies where
a price capability is sought that is well within the state of practice.
Question submitted by Representative Mark Udall
Q1. What do you consider to be the biggest impediments to carrying out
a successful prize program?
A1. NASA needs to provide cash, use of its name and logo, and allowance
for a flexible entrepreneurial approach that might seem contrary to
NASA's existing way of doing business. There needs to exist an
opportunity for Nike, Apple and Virgin Atlantic to exploit a prize
competition. Reality television shows should be generated that captures
the minds and hearts of 50 million Americans. This blatant
commercialism will make the difference between a prize program being
stagnant, boring and nonfunctional to one that will capture the
attention of nine-year-old kids and media CEOs across the country, if
not the world.
Answers to Post-Hearing Questions
Responses by Dr. Molly K. Macauley, Senior Fellow, Resources for the
Future
Questions submitted by Chairman Dana Rohrabacher
Q1. If NASA were to establish a program of prizes, how should issues
of liability be treated? Should the Federal Government assume any legal
risks associated with private companies competing for a prize? Would
your answer be different if an outside entity (such as a private
foundation or an endowment) was in charge of designing, administering
and judging prize contests, rather than NASA?
A1. The issue of liability is indeed important and because (unlike the
X-Prize), a NASA-sponsored prize involves both (1) government as
sponsor and potential user and (2) the private sector or others (maybe
government labs, for instance) as competitors, liability rules probably
need to be developed by a mix of government and private sector
attorneys. Models are probably available as used for other government
contracting or peer-reviewed research awards. Liability of course has
many aspects. For instance, there is liability for safety, performance,
and property right infringement, and among these categories, concerns
such as safety liability during development of the innovation
(presumably this would rest with the inventor) or safety liability
during use (presumably this would rest with the government when it
makes use of the invention, or with other parties when they are making
use of the invention). From an economics perspective, the assignment of
liability can add cost to the competitor or add cost to the taxpayer,
and the assignment confers different incentives for bearing risk. I'd
be happy to work with any legal teams who become involved in designing
liability guidelines.
Q2. If NASA were to establish a program of prizes, how should issues
of intellectual property (IP) be treated? Should the IP rights for the
technologies of a winning prize reside with the government, or with the
prize winner? If with the prize winner, what rights, if any, should the
government retain? Should the prize winners ever be required to share
IP that NASA would need? Would your answer be different if an outside
entity was in charge of prize contests?
A2. As the case with liability addressed in question (1) above, issues
of IP also bring with them differences in ``who bears the cost'' and in
incentives created for competitors and the government. Perhaps a
workable solution is for IP to rest with the inventor, and the
government or other customers use the invention under a fee-for-use or
royalty payment. In other words, the prize money itself is a one-time
award made to the winner for success, and any subsequent use by
government or other customers requires a fee. The fee could be a one-
time payment if the invention is a one-shot process or product, or it
could be a per-use fee for a product or service with multiple uses.
Q3. If NASA or another federal entity was in charge of running a
program of prize contests, should the Federal Government be allowed to
receive private funds in addition to federally appropriated funds? If
so, what conflicts of interest might arise and how could they be
prevented? Conversely, if a private foundation or outside entity was in
charge of running such a program, should the Federal Government be
allowed to contract with or provide funds to this entity?
A3. There are examples of successful public-private cooperation in
other development activities--for instance, in some (but not all) urban
redevelopment projects, or in the early days of the Communications
Satellite Corporation, which was a quasi-private sector entity. Perhaps
a useful rule of thumb is to garner as much private sector involvement
as possible, in funding as well as in administration of the prize. This
rule would enable the government to act strictly as customer during the
competition and once the prize is awarded.
Q4. What are the advantages and disadvantages for having either an
outside private entity or a federal entity other than NASA in charge of
running a program of prize contests, rather than NASA itself? What
would the proper balance be between NASA's role and the outside
entity's role in the designing, administering and judging of prize
contests? Should NASA have any role in these areas?
A4. As suggested in the answer to question (3) above, making as much
use of the private sector as possible probably best maintains the
spirit and, as important, the desirable incentive structure of the
prize, in order to bring out as many new ideas as possible,
unencumbered by too much administration or restrictions. NASA must play
a role, since the agency is spending taxpayers' money, but that role
can be limited to specifying the goal of the prize, the prize amount,
and the time limits on the competition; providing the prize money; and
judging the competition (again, since the agency is responsible for
managing taxpayers' money).
Q5. Should NASA centers, FFRDCs and federal employees be allowed to
compete for prizes?
A5. A significant amount of creative, entrepreneurial talent resides at
the centers, FFRDCs, and among federal employees. For this reason, a
prize designed to find the ``best and brightest'' competitors should
have as few restrictions on participation as possible.
Q6. What recommendations do you have to minimize the possibility that
the judging of a prize contest is not biased towards a particular
solution? Do you believe NASA should or should not participate in the
judging of such contests?
A6. As noted in question (4), since NASA is serving as steward of
taxpayers' money, the agency needs to play a role in judging. If there
is a concern about possible bias in judging, competitors will need to
take this into account in their decisions to compete. In all fairness,
even the private sector can bring bias to judging.
Q7. In his testimony, Dr. Diamandis said that the goal of a prize is
not to develop technology to put directly into use in the space
program, but rather to develop new ways of thinking--``to invent the
transistor, not to perfect the process leading to a Pentium Chip.'' But
presumably NASA must run its programs using mature technology.
Q7a. How could NASA take a winning idea and turn it into a mature
technology that the space program can use?
A7a. It seems that both process technology (say, a new algorithm) and
product technology is required for furthering space exploration, and
since the history of prizes suggests an interest on the part of
competitors in competing for both ``basic'' research development as
well as product development, perhaps prizes should not be limited to
only ``mature'' technology.
Q7b. Should NASA offer contracts to the winners of a prize, such as to
develop his or her idea further to meet NASA's specifications? Or
should such a job more likely fall to one of the major aerospace
contractors?
A7b. The contracting mechanism that is used after a successful
competition probably doesn't matter for the integrity of the prize.
Q8. What should NASA provide in order to attract participants to a
prize contest? Should the winner of a prize contest expect to have a
future business relationship with NASA? Should there be a guaranteed
government contract for the winner of a prize, such as the delivery of
cargo into orbit or to ISS? Is it necessary that there be some evidence
of a future market for prizes to be effective?
A8. The history of prizes suggests that none of these provisions
matters except for the prize itself (the award money).
Q9. You testified that prizes have been offered successfully in the
past to develop incremental technologies, but that was before
government began to invest so heavily in R&D.
Q9a. Is it better for NASA to offer both large and small prizes, or
should it focus only on larger prizes? Would the cost of judging and
otherwise administering small purse prizes outweigh the value of the
prize itself and make such prizes not worthwhile?
A9a. NASA might consider experimenting with a variety of sizes of
prizes--the overarching objective might simply be to provide an
incentive for creative approaches to a variety of NASA requirements. A
couple of disadvantages of prizes are that they don't provide up-front
money, so competitors are limited in the cash flow or need to find
financial backers, and that if a prize is not awarded, NASA has ``lost
time'' during the duration of the prize competition. However, an
unawarded prize may mean that the technology is simply not ready, and
wouldn't be ready even if NASA had funded the technology development by
means of traditional contracts or research awards. Prizes don't
necessarily remedy the inherent uncertainty of innovation.
Q9b. How should it be decided whether prizes or contracts/grants are
the appropriate tool for stimulating innovation for small, discrete
technologies (such as the development of an improved astronaut glove)?
A9b. The history of prizes suggests that prizes may be useful for all
kinds of innovation--so, NASA can experiment with prizes, with the
caveats noted in the answer to question (9), above.
Q10. To what degree should NASA plan to depend solely on prizes for
the development of technologies that are essential to exploration, such
as technologies that would be required for either long-duration space
flight or extended human missions to the Moon?
A10. See answer to question (9), above. Prizes don't provide initial
cash to inventors, and prizes don't guarantee innovation. For critical
technologies, NASA may need to provide cash up-front--and even then,
success isn't guaranteed.
Q11. How would a prize contest differ from NASA releasing a request
for information (RFI), such as what was done for a Hubble robotic
servicing mission? How should the decision be made as to whether a
particular objective is better suited to a prize competition or to more
traditional approaches? Would the largest difference between the two
methods be the lead-time required for the development of a technology
through a prize contest as compared to that of the traditional route?
A11. As I understand it, an RFI doesn't imply funding, whereas a prize
does promise an award if the competition is successful. Perhaps I
misunderstand the RFI process. As noted in answers to previous
questions, prizes might be offered for a wide range of types of
innovation--discrete products, new processes, etc.
Questions submitted by Representative Mark Udall
Q1. An area of focus for NASA's proposed prize program is seeking
``revolutionary advances in fundamental technologies.'' On the one
hand, a prize program might attract innovators who haven't
traditionally been involved in NASA R&D activities. On the other hand,
a prize program might wind up eliminating the participation of
researchers from universities or other not-for-profit associations, who
typically are dependent on ongoing research grants to support
themselves and their graduate students' research activities.
Q1a. Are you concerned that an R&D approach built on prizes could
potentially limit the opportunities for university researchers?
A1a. Prizes have the disadvantage of not providing up-front cash for an
inventor. A university researcher may find this less of a disadvantage
than a private-sector entrepreneur not affiliated with a university, if
the university researcher can do the research for the prize as part of
research covered by university overhead or teaching allocations.
Q2. What factors other than the size of the prize are likely to
attract potential investors to participate in an inducement prize
offering? For example, is winning the prize sufficient (because of the
publicity involved) or must there be a market for the product that
results from the competition?
A2. The history of prizes suggests that the prize alone is sufficient.
The challenging decision is how much to offer as the prize--presumably,
the amount reflects the value of the potential innovation to NASA.
Q3. What do you consider to be the biggest impediments to carrying out
a successful prize program?
A3. Perhaps the biggest impediment is figuring out how large to make
the prize (the amount of prize money). The calculation involves
figuring out how much the innovation ``means'' to NASA--and such
valuation questions are always challenging.
Answers to Post-Hearing Questions
Responses by Dr. Douglas Holtz-Eakin, Director, Congressional Budget
Office
Questions submitted by Chairman Dana Rohrabacher
Q1. If NASA were to establish a program of prizes, how should issues
of liability be treated? Should the Federal Government assume any legal
risks associated with private companies competing for a prize? Would
your answer be different if an outside entity (such as a private
foundation or an endowment) was in charge of designing, administering
and judging prize contests, rather than NASA?
A1. General and sector-specific health and safety regulation, the
criminal code, and the civil tort system all provide private firms with
incentives to take care in their activities. In this context, the
activities of prize competitors, whether overseen by the government, an
outside agent acting on the government's behalf, or a private entity,
would be unlikely to merit extraordinary treatment with regard to
liability. The activities that propose the greatest risk, those
associated with space launch, are already the subject of direct federal
regulation and licensing.
Q2. If NASA were to establish a program of prizes, how should issues
of intellectual property (IP) be treated? Should the IP rights for the
technologies of a winning prize reside with the government, or with the
prize winner? If with the prize winner, what rights, if any, should the
government retain? Should the prize winners ever be required to share
IP that NASA would need? Would your answer be different if an outside
entity was in charge of prize contests?
A2. A prize competition intends to call forth effort to achieve program
goals. In that context, whether National Aeronautics and Space
Administration (NASA) or an outside entity were conducting a prize
competition, the question of how intellectual property rights are
treated is a question about how risks and rewards are divided between
the government and prize seekers. One approach applied to rights
created under government contracts is for the government to obtain a
royalty-free license for use of those rights necessary for governmental
purposes and for the contractor to retain the rights for other uses. An
array of other arrangements are also possible. Broadly speaking and
with all other rewards held constant, if more of the intellectual
property rights to inventions or innovations made in the pursuit of a
government-sponsored prize remain with the successful contestant, then
contestants' incentive to expend effort is increased. If the government
lays claim to more of the intellectual property rights, then the
contestants' incentive to expend effort is less.
Q3. If NASA or another federal entity was in charge of running a
program of prize contests, should the Federal Government be allowed to
receive private funds in addition to federally appropriated funds? If
so, what conflicts of interest might arise and how could they be
prevented? Conversely, if a private foundation or outside entity was in
charge of running such a program, should the Federal Government be
allowed to contract with or provide funds to this entity?
A3. There is no reason why federal and private funds should not be
commingled when a voluntary agreement can be reached between the
government and the private sector. Conflicts of interest arise out
specific facts to which a complex set of both federal laws and agency
practices apply. It is not possible to comment on how such conflicts
might be avoided in a NASA-sponsored prize competition without a
specific set of facts outlining the details of an arrangement between
NASA and a participating private entity.
Q4. What are the advantages and disadvantages for having either an
outside private entity or a federal entity other than NASA in charge of
running a program of prize contests, rather than NASA itself? What
would the proper balance be between NASA's role and the outside
entity's role in the designing, administering and judging of prize
contests? Should NASA have any role in these areas?
A4. CBO is aware of no particular advantage or disadvantage inherent to
the choice between the government or a private entity to run a prize
competition. Any difference likely would derive from different
objectives and rules.
Q5. Should NASA centers, FFRDCs and federal employees be allowed to
compete for prizes?
A5. Permitting NASA centers and other federal employees or federally
funded research and development centers (FFRDCs) to participate in
government-sponsored prize competitions likely will affect the
incentives of both would-be private and governmental participants.
Private participants would likely be discouraged by the addition of
more competitors and any perception that a government entrant would
enjoy an edge in both resources and evaluation in a close finish. Were
governmental entities permitted to compete, they would also be subject
to an incentive effect, perhaps a positive one. Some people have long
advocated forcing government agencies to compete with private entities
in the provision of specific services as a way to both improve the
performance of government and reduce the cost of government-provided
goods or services.
Q6. In his testimony, Dr. Diamandis said that the goal of a prize is
not to develop technology to put directly into use in the space
program, but rather to develop new ways of thinking--``to invent the
transistor, not to perfect the process leading to a Pentium Chip.'' But
presumably NASA must run its programs using mature technology.
Q6a. How could NASA take a winning idea and turn it into a mature
technology that the space program can use?
Q6b. Should NASA offer contracts to the winners of a prize, such as to
develop his or her idea further to meet NASA's specifications? Or
should such a job more likely fall to one of the major aerospace
contractors?
A6a,b. Inserting new technology into NASA's enterprise depends very
much on the specifics of NASA's programs and the technologies that they
require. This problem is separate from the origins of the technology.
As is the case with intellectual property, the prospect (or lack
thereof) of future government contracts to develop an innovations will
have an incentive effect on prize competitors.
Q7. What should NASA provide in order to attract participants to a
prize contest? Should the winner of a prize contest expect to have a
future business relationship with NASA? Should there be a guaranteed
government contract for the winner of a prize, such as the delivery of
cargo into orbit or to ISS? Is it necessary that there be some evidence
of a future market for prizes to be effective?
A7. The simplest answer is cash. Although the government may offer
rewards in a variety of forms--future business, development contracts,
and favorable intellectual property rights--each of those forms has an
equivalent cash value. The larger that cash value is, the stronger the
incentive effect of the prize contest.
Q8. Dr. Macauley testified that prizes have been offered successfully
in the past to develop incremental technologies, but that was before
government began to invest so heavily in R&D.
Q8a. Is it better for NASA to offer both large and small prizes, or
should it focus only on larger prizes? Would the cost of judging and
otherwise administering small purse prizes outweigh the value of the
prize itself and make such prizes not worthwhile?
Q8b. How should it be decided whether prizes or contracts/grants are
the appropriate tool for stimulating innovation for small, discrete
technologies (such as the development of an improved astronaut glove)?
A8a,b. CBO reviewed Dr. Macauley's testimony with interest. Her
research shows that recent experience with using prizes as a means to
induce innovation is very limited. In that context, prudence might
suggest a limited and experimental use of prizes to see how they work
in the current configuration of governmental, academic, and private
entities involved in meeting NASA's demand for new technologies.
Regarding the size of prizes, it must be recognized that achieving
large, technically complex objectives will require commensurately large
awards. Consistent with an overarching principle of contest design,
prizes are likely to be most effective when the objective of the
contest can be clearly established and success can be observed in
black-and-white terms (for instance, crossing the finish line first)
rather than in shades of grey (for example, subjective evaluation of
technical merit.)
Q9. To what degree should NASA plan to depend solely on prizes for the
development of technologies that are essential to exploration, such as
technologies that would be required for either long-duration space
flight or extended human missions to the Moon?
A9. Our limited recent experience with prize contests suggests
experimentation should precede broad use. In that context, NASA's
objectives might be better achieved by using traditional contracting to
develop technologies essential to its major missions.
Q10. How would a prize contest differ from NASA releasing a request
for information (RFI), such as what was done for a Hubble robotic
servicing mission? How should the decision be made as to whether a
particular objective is better suited to a prize competition or to more
traditional approaches? Would the largest difference between the two
methods be the lead-time required for the development of a technology
through a prize contest as compared to that of the traditional route?
A10. In issuing a request for information for the Hubble robotic
servicing mission NASA took the first step in what is likely to be a
traditional procurement of the goods and services necessary to
accomplish the mission. An RFI is intended to solicit ideas and
interest from the private sector and a precursor to a request for
proposal or bid and, ultimately, a competitive award (a sole-source
award may be an alternative in some circumstances). NASA's interest in
or acceptance of the ideas or concepts submitted in response to an RFI
provides the participants no immediate reward.
Continuing with the Hubble servicing example, a prize contest that
made awards for actual performance would of course leap over an RFI and
all of the other intermediate steps, but require the government to
accept risks that it might not be prudent to take. The prize money
might be to too little or too much, the best solution may require joint
action with the government, or a wide open competition could
conceivably lead to attempts to service the Hubble that damaged the
instrument. A contest that made awards for the ``best'' idea(s) is an
alternative but has the problem of making an award based on very
subjective evaluation in the presence of incomplete information.
Concerning lead times, the basics of the technologies required to
accomplish a mission rather than the form of acquisition are likely to
drive those spans.
Questions submitted by Representative Nick Lampson
Q1. What methods other than prizes or contests do you believe would be
useful in stimulating investment in new technologies--whether space-
related or not?
A1. The success of the United States economy in producing and
developing technical innovations is well established. That success is
built on a foundation of intellectual property rights and allowing
private markets allocate resources. When government ventures into
private markets, policy-makers must be keenly aware of how a wide array
of actions, including direct spending for goods and services, tax
policy, income transfer programs and regulation, affect the innovative
process that has contributed so much to our standard of living. At the
most basic level, the best method to stimulate investment in new
technology is to allow market processes to work, intervene only when
absolutely necessary, and even then to be aware of the unintended
consequences that are often associated with government's attempt to
improve market outcomes.
Q2. Typically the Federal Government seeks a royalty-free license to
use any technology developed with federal funds.
Q2a. Would it be appropriate to require royalty-free licenses to the
government as part of a NASA prize competition?
Q2b. Would a royalty-free license requirement affect the size of the
prize that would have to be offered?
Q2c. If the government didn't require royalty-free licenses, how would
that affect the relative benefit to the government of prizes versus
contracts or grants?
A2a,b,c. Whether the government enjoys a royalty-free license to use
the technology developed in a government sponsored prize competition is
a question of how risks and rewards are divided between the government
and prize seekers. If the government agrees to pay license fees to use
inventions or innovations made in the pursuit of a government sponsored
prize, contestants' incentive to expend effort is increased. If the
government stipulates that it will not pay such fees, contestants'
incentive to expend effort is less.
Questions submitted by Representative Mark Udall
Q1. NASA already has several existing means of attracting innovative
R&D approaches. These include performance-based contracts, grants, and
acceptance of unsolicited proposals. In addition, NASA participates in
the Small Business Innovative Research (SBIR) program, which is
described as a ``highly competitive three phase award system which
provides qualified small business concerns with opportunities to
propose innovative ideas that meet the specific research and
development needs of the Federal Government.'' SBIR in particular seems
to have goals similar to NASA's proposed Centennial Challenge prize
program.
Q1a. What do you see as the relative strengths and weaknesses of each
of the approaches (grants, unsolicited proposals, performance-based
contracts, SBIR, and prizes) in encouraging innovative technologies?
Q1b. How much emphasis should NASA give to prizes versus these
existing approaches?
A1a,b. CBO has not undertaken a detailed review of the Small Business
Innovative Research (SBIR) program, which is within the National
Aeronautics and Space Administration (NASA). Broadly speaking, however,
it seems that the SBIR intends for NASA to have more involvement with
contractors than would likely be the case for a prize competition and,
unlike a prize competition open to all comers, is restricted to small
businesses only. That the most effective prize competitions are open is
a defining characteristic of the prize approach to encouraging
innovation. That suggests that where objectives like increasing small
business or minority participation in NASA's program are sought, prize
competitions are less effective than other alternatives.
Q2. What do you consider to be the biggest impediments to carrying out
a successful prize program?
A2. A successful competition must have a very clear and unambiguous
finish line and clear and well-thought-out rules. As I indicated in my
testimony, failure to have either diminishes the prospect of a
successful contest.