[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]






                     PRIZES TO SPUR INNOVATION AND
                        TECHNOLOGY BREAKTHROUGHS

=======================================================================

                                HEARING

                               BEFORE THE

                SUBCOMMITTEE ON RESEARCH AND TECHNOLOGY

              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 9, 2014

                               __________

                           Serial No. 113-71

                               __________

 Printed for the use of the Committee on Science, Space, and Technology






[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]





       Available via the World Wide Web: http://science.house.gov




                                  ______

                         U.S. GOVERNMENT PRINTING OFFICE 

88-141PDF                     WASHINGTON : 2014 
-----------------------------------------------------------------------
  For sale by the Superintendent of Documents, U.S. Government Printing 
  Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800 
         DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
                          Washington, DC 20402-0001














              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

                   HON. LAMAR S. SMITH, Texas, Chair
DANA ROHRABACHER, California         EDDIE BERNICE JOHNSON, Texas
RALPH M. HALL, Texas                 ZOE LOFGREN, California
F. JAMES SENSENBRENNER, JR.,         DANIEL LIPINSKI, Illinois
    Wisconsin                        DONNA F. EDWARDS, Maryland
FRANK D. LUCAS, Oklahoma             FREDERICA S. WILSON, Florida
RANDY NEUGEBAUER, Texas              SUZANNE BONAMICI, Oregon
MICHAEL T. McCAUL, Texas             ERIC SWALWELL, California
PAUL C. BROUN, Georgia               DAN MAFFEI, New York
STEVEN M. PALAZZO, Mississippi       ALAN GRAYSON, Florida
MO BROOKS, Alabama                   JOSEPH KENNEDY III, Massachusetts
RANDY HULTGREN, Illinois             SCOTT PETERS, California
LARRY BUCSHON, Indiana               DEREK KILMER, Washington
STEVE STOCKMAN, Texas                AMI BERA, California
BILL POSEY, Florida                  ELIZABETH ESTY, Connecticut
CYNTHIA LUMMIS, Wyoming              MARC VEASEY, Texas
DAVID SCHWEIKERT, Arizona            JULIA BROWNLEY, California
THOMAS MASSIE, Kentucky              ROBIN KELLY, Illinois
KEVIN CRAMER, North Dakota           VACANCY
JIM BRIDENSTINE, Oklahoma
RANDY WEBER, Texas
CHRIS COLLINS, New York
BILL JOHNSON, Ohio
                                 ------                                

                Subcommittee on Research and Technology

                   HON. LARRY BUCSHON, Indiana, Chair
STEVEN M. PALAZZO, Mississippi       DANIEL LIPINSKI, Illinois
MO BROOKS, Alabama                   FEDERICA WILSON, Florida
RANDY HULTGREN, Illinois             ZOE LOFGREN, California
STEVE STOCKMAN, Texas                SCOTT PETERS, California
CYNTHIA LUMMIS, Wyoming              AMI BERA, California
DAVID SCHWEIKERT, Arizona            DEREK KILMER, Washington
THOMAS MASSIE, Kentucky              ELIZABETH ESTY, Connecticut
JIM BRIDENSTINE, Oklahoma            ROBIN KELLY, Illinois
CHRIS COLLINS, New York              EDDIE BERNICE JOHNSON, Texas
BILL JOHNSON, Ohio
LAMAR S. SMITH, Texas















                            C O N T E N T S

                             April 9, 2014

                                                                   Page
Witness List.....................................................     2

Hearing Charter..................................................     3

                           Opening Statements

Statement by Representative Larry Bucshon, Chairman, Subcommittee 
  on Research and Technology, Committee on Science, Space, and 
  Technology, U.S. House of Representatives......................     5
    Written Statement............................................     5

Statement by Representative Daniel Lipinski, Ranking Minority 
  Member, Subcommittee on Research and Technology, Committee on 
  Science, Space, and Technology, U.S. House of Representatives..     6
    Written Statement............................................     7

Statement by Representative Lamar S. Smith, Chairman, Committee 
  on Science, Space, and Technology, U.S. House of 
  Representatives................................................     8
    Written Statement............................................     9

Statement by Representative Eddie Bernice Johnson, Ranking 
  Member, Committee on Science, Space, and Technology, U.S. House 
  of Representatives.............................................    10
    Written Statement............................................    11

                               Witnesses:

Mr. Christopher Frangione, Vice President of Prize Development, 
  XPRIZE
    Oral Statement...............................................    12
    Written Statement............................................    15

Mr. Donnie Wilson, Founder and CEO, Elastec American Marine
    Oral Statement...............................................    22
    Written Statement............................................    23

Mr. Narinder Singh, Co-Founder and Chief Strategy Officer, 
  Appirio and President, [topcoder]
    Oral Statement...............................................    28
    Written Statement............................................    30

Dr. Sharon Moe, President, American Society of Nephrology
    Oral Statement...............................................    37
    Written Statement............................................    39

Discussion.......................................................    44

 
         PRIZES TO SPUR INNOVATION AND TECHNOLOGY BREAKTHROUGHS

                              ----------                              


                        WEDNESDAY, APRIL 9, 2014

                  House of Representatives,
            Subcommittee on Research and Technology
               Committee on Science, Space, and Technology,
                                                   Washington, D.C.

    The Subcommittee met, pursuant to call, at 10:04 a.m., in 
Room 2318 of the Rayburn House Office Building, Hon. Larry 
Bucshon [Chairman of the Subcommittee] presiding.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Chairman Bucshon. The Subcommittee on Research and 
Technology will come to order.
    Good morning, everyone. Welcome to today's hearing entitled 
``Prizes to Spur Innovation and Technology Breakthroughs.'' In 
front of you are packets containing the written testimony, 
biographies, and truth-in-testimony disclosures for today's 
witnesses.
    I now recognize myself for five minutes for an opening 
statement.
    Earlier this year, our Subcommittee held a hearing about 
the scientific activities at the Smithsonian Institution. 
Curators from the Smithsonian brought the original check that 
was given to Charles Lindbergh for winning the Orteig Prize in 
1927 when he flew nonstop from New York to Paris in his 
airplane ``The Spirit of St. Louis.'' The Orteig prize--similar 
to prizes we will be discussing today--was a $25,000 prize 
financed by a New York hotel owner to the first aviator to make 
the nonstop flight from New York to Paris. The impact of 
Lindbergh's flight was significant and helped spawn an interest 
in aviation and grow the emerging aviation industry.
    Today, scientific prize challenges still play an important 
role in spurring innovation and the federal government and 
private sector are crucial to sustaining these challenges.
    As a cardiothoracic surgeon, prize competitions in medical 
research are of particular interest to me. Rising healthcare 
costs are becoming a burden to American families. One example 
where cost containment is crucial affects the 450,000 Americans 
who suffer from end-stage renal disease, commonly known as 
kidney failure. One of our witnesses today, Dr. Sharon Moe who 
comes to us from the Indiana University School of Medicine, 
will discuss the effects a prize competition in kidney 
innovation to find cost-effective alternatives to 
transformative dialysis might have on the disease.
    Last month, I introduced H.R. 4186, the Frontiers in 
Innovation, Research, Science, and Technology--or FIRST--Act. 
The FIRST Act contains language that will provide the guidance 
necessary to help make this and other potential prizes come to 
fruition. We must ensure federal investment is also leveraging 
private sector investment in prize competitions.
    Our witnesses today will showcase some of the important 
efforts that are currently underway and we will be hearing from 
a major prize organization, a prize winner, a crowd-source 
prize expert, and a prize proposer. I got that all out. I hope 
that the work from these witnesses will inspire and produce the 
next Charles Lindbergh, transform fields, and develop important 
technological breakthroughs.
    I look forward to hearing from our distinguished witnesses 
and having a productive discussion.
    [The prepared statement of Mr. Bucshon follows:]

      Prepared Statement of Subcommittee on Chairman Larry Bucshon

    I am pleased to call to order this morning's Subcommittee on 
Research and Technology hearing that will examine prizes funded by both 
the private sector and the federal government to spur innovation and 
technology breakthroughs.
    Earlier this year, our subcommittee held a hearing about the 
scientific activities at the Smithsonian Institution. Curators from the 
Smithsonian brought the original check that was given to Charles 
Lindbergh for winning the Orteig Prize in 1927 when he flew non-stop 
from New York to Paris in his airplane ``The Spirit of St. Louis.'' The 
Orteig prize -similar to the prizes we will be discussing today- was a 
$25,000 prize financed by a New York hotel owner to the first aviator 
to make the non-stop flight from New York City to Paris. The impact of 
Lindbergh's flight was significant and helped spawn an interest in 
aviation and grow the emerging aviation industry.
    Today, scientific prize challenges still play an important role in 
spurring innovation and the federal government and private sector are 
crucial to sustaining these challenges.
    As a cardio thoracic surgeon, prize competitions in medical 
research are of particular interest to me. Rising healthcare costs are 
burdening to American families. One example where cost containment is 
crucial affects the 450,000 Americans who suffer from End-State Renal 
Disease (ESRD), commonly known as kidney failure. One our witnesses 
today, Dr. Sharon Moe who comes to us from the Indiana University 
School of Medicine, will discuss the effects a prize competition in 
kidney innovation to find cost effective alternatives to transformative 
dialysis might have on the disease.
    Last month, I introduced H.R. 4186, the Frontiers in Innovation, 
Research, Science and Technology, or FIRST, Act. The FIRST Act contains 
language that will provide the guidance necessary to help make this and 
other potential prizes come to fruition. We must ensure federal 
investment is also leveraging private sector investment in prize 
competitions.
    Our witnesses today will showcase some of the important efforts 
that are currently underway and we will be hearing from a major prize 
organizations, a prize winner, a crowd-source prize expert and a prize 
proposer. I hope that the work from these witnesses will inspire and 
produce the next Charles Lindbergh, transform fields, and develop 
important technological breakthroughs.
    I look forward to hearing from our distinguished witnesses and 
having a productive discussion.

    Chairman Bucshon. At this point, I now recognize the 
Ranking Member, the gentleman from Illinois, Mr. Lipinski, for 
an opening statement.
    Mr. Lipinski. Thank you, Mr. Chairman. Thank you for 
holding this hearing and I thank our witnesses for being here 
this morning.
    Prize challenges inspire and help spur technological 
advancement by tapping into the strength of American ingenuity, 
and both the public and private sectors are increasingly making 
use of this tool to accelerate innovation. Recent prize 
competitions have challenged inventors to build fuel-efficient 
vehicles, develop technology to clean up oil spills, and to 
create algorithms for faster mobile applications. Prize 
competitions, including the one that the Chairman mentioned, 
spurred Charles Lindbergh to make the first nonstop 
transatlantic flight. It can also be credited with producing 
breakthroughs in aviation, navigation, food preservation, and 
many other advances in the modern world.
    For years, I have been a strong supporter of using prizes 
to incentivize advancement of emerging technologies, so I like 
to feel I was on the cutting-edge here in Congress on this 
issue. In 2007, I introduced the H-Prize Act along with a 
Republican colleague on this Committee, and that bill was 
incorporated into the Energy Independence and Security Act, 
which became law. And actually that originally was introduced 
in Congress before that in 2005.
    So that language that got incorporated into the bill 
authorized the Department of Energy to conduct prize challenges 
for the development of hydrogen as a transportation fuel. In 
2010, I put language in the House NSF Reauthorization Bill 
giving prize competition authority to that agency. And the 
final version of COMPETES contained prize authority for all 
federal agencies. I am glad to know that in Fiscal Year 2012 
several agencies conducted 27 prize competitions under this 
authority. I would also add that DOE is taking another look at 
hydrogen energy, and I am hopeful that this will involve a new 
prize competition using these authorities to supplement the 
current work.
    With today's budget climate, the federal government has to 
consider alternative financing tools for R&D funding outside of 
the established research grant paradigm in order to meet 
research goals. One benefit of prize challenges is that the 
prize is awarded only once the challenge has been met. This 
allows agencies to incentivize high-risk, high-reward research 
that generally constitutes a very small percentage of federally 
funded research. Prize competitions also attract participants 
who do not typically seek government grants or contracts. This 
brings in a diversity of ideas from people of different 
disciplines and educational backgrounds and levels.
    I would be interested in hearing from the witnesses about 
how their organizations encourage competitors to take advantage 
of this diversity and to learn from their peers. Also, I would 
be interested to hear how the witnesses reach out to students 
to encourage a culture of science learning through prize 
competitions.
    Fundamentally, the federal government supports scientific 
and technological breakthroughs with sustained investments in 
basic research. Prize competitions cannot replace our tried and 
true model for funding R&D but they can serve as another tool 
in the toolbox. I am looking forward to hearing from our 
witnesses what they have learned in designing and participating 
in competitions and how the federal government might further 
collaborate with these types of organizations so we can 
continue as leaders in innovation.
    I want to thank all of our witnesses for being here. I look 
forward to their testimony.
    Thank you, Mr. Chairman, and with that I yield back.
    [The prepared statement of Mr. Lipinski follows:]

Prepared Statement of Subcommittee Ranking Minority Member Dan Lipinski

    Mr. Chairman, thank you for holding this hearing, and thank you to 
our witnesses for being here this morning.
    Prize challenges inspire and help spur technological advancement by 
tapping into the strength of American ingenuity, and both the public 
and private sectors are increasingly making use of this tool to 
accelerate innovation. Recent prize competitions have challenged 
inventors to build fuel efficient vehicles, develop technology to clean 
up oil spills, and to create algorithms for faster mobile applications. 
Prize competitions, including the famous 1927 Orteig Prize that spurred 
Charles Lindberg to make the first non-stop transatlantic flight, can 
be credited with producing breakthroughs in aviation, navigation, food 
preservation and many other advances in the modern world.
    For years, I have been a strong supporter of using prizes to 
incentivize advancement of emerging technologies. In 2007, I introduced 
the H-Prize Act along with a Republican colleague on this Committee and 
that bill was incorporated into the Energy Independence and Security 
Act which became law. My bill authorized the Department of Energy to 
conduct prize challenges for the development of hydrogen as a 
transportation fuel. In 2010 I put language in the House NSF 
reauthorization bill giving prize competition authority to that agency 
and the final version of the COMPETES Reauthorization contained prize 
authority for all federal agencies. I am glad to know that in fiscal 
year 2012 seven agencies conducted 27 prize competitions under this 
authority. I would also add that DOE is taking another look at hydrogen 
energy, and I am hopeful that this will involve a new prize competition 
using these authorities to supplement their current work. With today's 
budget climate the Federal Government has to consider alternative 
financing tools for R&D funding outside of the established research 
grant paradigm in order tomeet research goals.
    One benefit of prize challenges is that the prize is awarded only 
once a challenge has been met; this allows agencies to incentivize 
high-risk, high-reward research that generally constitutes only a very 
small percentage of federally funded research. Prize competitions also 
attract participantswho do not typically seek government grants or 
contracts.
    This brings in a diversity of ideas from people of different 
disciplines and educational backgrounds and levels. I would be 
interested in hearing from the witnesses about how their organizations 
encourage competitors to take advantage of this diversity and to learn 
from their peers. Also, I would be interested to hear how the witnesses 
reach out to students to encourage a culture of science learning 
through prize competitions. Fundamentally, the federal government 
supports scientific and technological breakthroughs with sustained 
investments in basic research. Prize competitions cannot replace our 
tried and true model for funding R&D, but they can serve as another 
tool in the toolbox. I am looking forward to hearing from our witnesses 
what they have learned in designing and participating incompetitions, 
and how the federal government might further collaborate with these 
types of organizations so that we can continue as leaders in 
innovation.
    I want to thank all of the witnesses for being here, and I look 
forward to their testimony. Thank you Mr. Chairman, I yield back.

    Chairman Bucshon. Thank you, Mr. Lipinski.
    I now recognize the Chairman of the full Committee, the 
gentleman from Texas, Mr. Smith.
    Chairman Smith. Thank you, Mr. Chairman.
    Scientific prizes have long played a role in advancing 
technology. They encourage creative thinking, spur innovation, 
and expand our economy. The Longitude Prize of 1714, offered by 
the British Government, resulted in the marine chronometer and 
drastically improved shipping safety. Napoleon Bonaparte's 1800 
Food Preservation Prize resulted in the development of canning 
food as we now know it.
    A top priority of the Science Committee is to encourage 
such innovation and technological advancements. To maintain our 
competitive advantage, we must continue to support fundamental 
research and development that encourages the creation and 
design of next generation technologies. But there are many 
other technological problems that could be solved by taking a 
different approach with the use of prizes. These include 
transforming kidney dialysis treatments, developing better 
surface oil cleanup technologies, and generating a potential 
cure for Alzheimer's disease. Prizes also engage the brightest 
minds to solve a problem--scientists, entrepreneurs, inventors 
and yes, even teenagers.
    A great example of creative problem solving was illustrated 
recently when a 14-year-old student in Pennsylvania came up 
with a simple way to save the federal government hundreds of 
millions of dollars. He figured out that by changing the type 
of font used by government workers, the federal government 
could save more than $130 million each year. This great idea 
was the product of a science fair.
    Prizes also encourage individual incentive so the burden of 
risk, as well as the opportunity for success, is on the team or 
individual competitor. This will encourage more people to 
engage in high-risk, high-reward research.
    Federal science agencies have not fully utilized their 
prize competition authority to pursue breakthroughs in areas 
such as healthcare, advanced manufacturing, and agriculture. 
The FIRST Act improves federal science prize authority. It 
allows federal science agencies to better partner with the 
private sector to maximize the value of every taxpayer dollar 
invested in research and development.
    In the words of one witness, Mr. Christopher Frangione, 
``Policymakers can continue this great progress in prize-based, 
public-private partnerships by supporting prize language such 
as that included in the FIRST Act.''
    Mr. Chairman, I do want to thank our witnesses for being 
here today. I want to thank them for their excellent written 
testimony, which I have seen, and apologize to them. I have to 
give a speech at 10:30 over in the Capitol so I am going to 
have to excuse myself.
    But let me just say in conclusion that I think there is 
much progress we can make in giving out these prizes. For 
instance, the National Science Foundation I think last year 
only awarded seven for $10,000 each. That is not really 
stepping up to the level that we would like to see them do, for 
example.
    And there are other ways that we can encourage individuals 
to participate and there are other ways that we can encourage 
government agencies to offer these prizes as well. They just do 
an immense amount of good. I remember in one instance--and I 
forget; maybe it had to do with the flying prize--where 
individuals actually spent 10 times more than the prize trying 
to get the prize just because it was sort of natural 
competitive instincts because of a desire to try to achieve a 
breakthrough and perhaps even be successful on the profit side 
as well. So prizes do a lot of good in a lot of ways.
    Thank you, Mr. Chairman, and I yield back.
    [The prepared statement of Mr. Smith follows:]

     Prepared Statement of Full Committeee Chairman Lamar S. Smith

    Thank you, Chairman Bucshon, for holding today's hearing.
    Scientific prizes have long played a role in advancing technology. 
They encourage creative thinking, spur innovation and expand our 
economy.
    The Longitude Prize of 1714, offered by the British government, 
resulted in the marine chronometer and drastically improved shipping 
safety. Napoleon Bonaparte's 1800 Food Preservation Prize resulted in 
the development of canning food as we now know it.
    A top priority of the Science Committee is to encourage such 
innovation and technological advancements. To maintain our competitive 
advantage, we must continue to support fundamental research and 
development that encourages the creation and design of next generation 
technologies.
    But there are many other technological problems that could be 
solved by taking a different approach with the use of prizes. These 
include transforming kidney dialysis treatments, developing better 
surface oil cleanup technologies, and generating a potential cure for 
Alzheimer's disease. Prizes also engage the brightest minds to solve a 
problem-scientists, entrepreneurs, inventors and yes, even teenagers.
    A great example of creative problem solving was illustrated 
recently when a 14-year-old student in Pennsylvania came up with a 
simple way to save the federal government hundreds of millions of 
dollars.
    He figured out that by changing the type of font used by government 
workers the federal government could save more than $130 million each 
year. This great idea was the product of a science fair.
    Prizes also encourage individual incentive, so the burden of risk, 
as well as the opportunity for success, is on the team or individual 
competitor. This will encourage more people to engage in high-risk, 
high-reward research.
    Federal science agencies have not fully utilized their prize 
competition authority to pursue breakthroughs in areas such as health 
care, advanced manufacturing and agriculture.
    The FIRST Act improves federal science prize authority. It allows 
federal science agencies to better partner with the private sector to 
maximize the value of every taxpayer dollar invested in research and 
development.
    In the words of one witness, Mr. Christopher Frangione, 
``Policymakers can continue this great progress in prize-based, public-
private partnerships by supporting prize language such as that included 
in the FIRST Act.''
    I thank our witnesses for being here this morning and I look 
forward to their testimony.

    Chairman Bucshon. Thank you, Mr. Chairman.I now recognize 
the Ranking Member of the full Committee, the gentlelady from 
Texas, Ms. Johnson.
    Ms. Johnson. Thank you very much and good morning. Thank 
you for holding this hearing to explore the use of prize 
competitions to spur innovation and technology breakthroughs.
    We are all very aware of the economic climate and budget 
constraints that the nation is facing. While tough choices have 
to be made, cuts to our federal R&D enterprise weakens the 
country's ability to be a leader in innovation. Our competitors 
have the same tough budget choices to make, yet they are not 
just maintaining their R&D investments but doubling and 
tripling them. Though they are no substitute for the sustained 
investment and long-term national outlook that traditional 
federal R&D funds provide, prize competitions could play a more 
prominent role in how the government funds R&D than they have 
in the past.
    The broad federal prize authority granted to all federal 
agencies in the 2010 COMPETES reauthorization supports 
agencies' increased use of prizes to incentivize more high-
risk, high-reward research and reach out to a new audience of 
researchers and innovators across all areas of science and 
technology. NASA has established itself as a leader in public 
sector prize competition. In a survey of nearly 3,000 
competitors for NASA prizes, 81 percent reported that they had 
never before responded to NASA or other government requests for 
proposals.
    And we ought to pull ahead of the competition. We must 
create opportunities for creative minds from all corners of our 
nation to make the next scientific or technological 
breakthrough. Prize competitions are yet another effective tool 
to tap into our Nation's brain power.
    Two of our witnesses here today have spent years perfecting 
the design of prize competitions, and I am interested in 
learning how they develop specifications and parameters for 
challenges while still encouraging what may seem to be the pie-
in-the-sky ideas.
    Henry Ford once said, ``If I had asked people what they 
wanted, they would have said faster horses.'' Finding the next 
Model T is critical to our Nation's competitiveness, and I look 
forward to exploring how public-private collaborations and 
prize competitions might help.
    I thank our witnesses for being here, for their testimony, 
and thank you, Mr. Chairman. I yield back.
    [The prepared statement of Ms. Johnson follows:]

                 Prepared Statement of Full Committeee
                  Ranking Member Eddie Bernice Johnson

    Good morning, I would like to thank the Chairman for holding 
today's hearing to explore the use of prize competitions to spur 
innovation and technology breakthroughs.
    We are all very aware of the economic climate and budget 
constraints that the nation is facing. While tough choices have to be 
made, cuts to our federal R&D enterprise weaken the country's ability 
to be a leader in innovation. Our competitors have the same tough 
budget choices to make, yet they are not just maintaining their R&D 
investments, but doubling and tripling down.
    Though they are no substitute for the sustained investment and 
long-term national outlook that traditional federal R&D funding 
provides, prize competitions could play a more prominent role in how 
the government funds R&D than they have in the past. The broad federal 
prize authority granted to all federal agencies in the 2010 COMPETES 
Reauthorization supports agencies' increased use of prizes to 
incentivize more high-risk, high-reward research and reach out to a new 
audience of researchers and innovators across all areas of science and 
technology.
    NASA has established itself as a leader in public-sector prize 
competitions. In a survey of nearly 3,000 competitors for NASA prizes, 
81% reported that they had never before responded to NASA or other 
government requests for proposals. If we are to pull ahead of the 
competition, we must create opportunities for creative minds from all 
corners of our nation to make the next scientific or technological 
breakthrough. Prize competitions are yet another effective tool to 
tapinto our nation's brainpower.
    Two of our witnesses here today have spent years perfecting the 
design of prize competitions, and I am interested in learning how they 
develop specifications and parameters for challenges while still 
encouraging what may seem to be ``pie-in-the-sky'' ideas. Henry Ford 
once said, ``if I had asked people what they wanted, they would have 
said faster horses.'' Finding the next Model T is critical for our 
nation's competitiveness, and I look forward to exploring how 
publicprivatecollaborations in prize competitions might help. I thank 
our witnesses for their testimony.
    Thank you Mr. Chairman, I yield back.

    Chairman Bucshon. Thank you, Ms. Johnson.
    If there are Members who wish to submit additional opening 
statements, your statements will be added to the record at this 
time.
    At this time I would like to introduce our witnesses. Our 
first witness today is Mr. Christopher Frangione, the Vice 
President of Prize Development at XPRIZE. In his role, Mr. 
Frangione works with all departments of XPRIZE, prize sponsors, 
and other prize stakeholders to develop prize strategy. Prior 
to joining XPRIZE, Mr. Frangione ran a market assessment 
practice at a boutique management consulting firm where he 
consulted to CEOs of major engineering companies on issues 
related to strategy. Mr. Frangione has leadership experience 
across the energy industry, including serving as Manager of 
Operations and Business Development at Green Mountain Energy 
Company. In that role, he managed a regional market and defined 
new business opportunities, policies, and strategies for the 
retail renewable energy company. Mr. Frangione received his 
bachelor of arts in environmental policy from Colby College and 
a master's of business administration and a master's of 
environmental management from Duke.
    Our second witness today is Mr. Donnie Wilson, Chairman and 
CEO of Elastec/American Marine, one of the largest 
manufacturers of pollution control products in the world, 
exporting equipment to over 100 countries. Mr. Wilson has over 
20 years of experience in the design and production of oil 
spill products. Mr. Wilson has provided training and 
supervision to global clients for the collection and recovery 
of oil spills. Mr. Wilson served as the lead onsite burn 
coordinator during the Deepwater Horizon oil spill in the Gulf 
of Mexico in 2010, supervising more than 400 offshore 
controlled burns. During the spill, there was a void in 
mechanical equipment to recover high volumes of oil, prompting 
the Wendy Schmidt Oil Cleanup X Challenge. Elastec/American 
Marine won with its patented groove disc skimmer winning the $1 
million first-place prize out of 350 global entrants. Welcome.
    Our third witness today is Mr. Narinder Singh. As the 
President of the [topcoder] community and Chief Strategy 
Officer at Appirio, Mr. Singh is responsible for overseeing the 
company's strategy, technology, and crowdsourcing initiatives. 
A co-founder of Appirio, Mr. Singh brings nearly 20 years of 
software and business experience and plays a role in keeping 
Appirio at the forefront of cloud, social, and mobile 
technology. Prior to joining Appirio--am I pronouncing that 
correctly--Mr. Singh worked in the office of the CEO as a part 
of a corporate strategy group. However, he began his career 
with Accenture at Center for Strategic Technology. Mr. Singh 
holds a bachelor of science from Northwestern University and an 
MBA from the Wharton School. He has won numerous awards for 
business and technology leadership, including the San Francisco 
Business Times 40 under 40 in 2013.
    And our final witness is Dr. Sharon Moe, President-elect of 
the American Society of Nephrology and a Stuart A. Kleit 
Professor of Medicine at the Indiana University School of 
Medicine. She is also a Division Director for Nephrology in the 
Department of Medicine at Indiana University School of Medicine 
and Section Chief for Nephrology at their Roudebush VA Medical 
Center. Dr. Moe is the principal investigator for several 
ongoing clinical and basic research studies in the field of 
vascular calcification and bone and mineral metabolism and 
kidney disease. Her research is funded by the Veterans Affairs 
Department, the National Institutes of Health, and 
pharmaceutical companies. She has authored over 140 scientific 
manuscripts, teaching manuscripts, and textbook chapters. Dr. 
Moe received her medical degree from the University of Illinois 
College of Medicine in Chicago in 1989, as I did in 1984. She 
completed her internship and residency at the Department of 
Internal Medicine at Loyola University Medical Center in 
Maywood, Illinois.
    Thanks again for all our witnesses for being here this 
morning. It is a pleasure to have you.
    As our witnesses should know, spoken testimony is limited 
to five minutes each, after which the Members of the Committee 
will have five minutes each to ask questions.
    I now recognize Mr. Frangione for five minutes to present 
his testimony.

            TESTIMONY OF MR. CHRISTOPHER FRANGIONE,

          VICE PRESIDENT OF PRIZE DEVELOPMENT, XPRIZE

    Mr. Frangione. Thank you. Thank you to the Committee, 
Ranking Members and Chairman, for the opportunity to testify 
today. And we welcome at XPRIZE the attention that the 
Committee is giving prizes as an economically efficient tool to 
incentivize innovation.
    XPRIZE is a 501(c)(3) nonprofit organization founded in 
1995 and we are the global leader in prize competitions. Our 
mission is to bring about radical breakthroughs for the benefit 
of humanity and to inspire the formation of new industries and 
to revitalize broken industries or stuck industries.
    To date, we have awarded four prizes worth over $23 
million, including our $10 million Ansari XPRIZE for suborbital 
spaceflight, and we have four active prizes worth over $44 
million, including a handheld health diagnostic to diagnose 15 
disease states and vital signs, the Qualcomm Tricorder XPRIZE. 
And in most of these competitions, we collaborated with the 
U.S. Government, whether it be in a financial mechanism or just 
in a partnership.
    As you have heard from everybody's statements already, 
prizes are powerful tools for innovation. And, as Ranking 
Member Lipinski said, you know, the most important of which 
include leveraging your investment, democratizing innovation, 
and reducing risk. And if you look at leveraging your 
investment, you heard it up there earlier, but if you put out a 
$5 million grant, you are going to get $5 million worth of 
work. In a prize competition, the teams are spending their own 
money to compete, so if you put out a $5 million prize, you 
expect to get $20-50 million worth of work. In a time of fiscal 
constraint, this is a huge benefit.
    In terms of democratizing innovation, a prize does not care 
if somebody has had 20 years of experience or 20 days of 
experience as long as they can accomplish the goal you set out. 
And, most likely, you would have never given a grant or 
contract to these people that are competing for our 
competitions because 1) it would have been too risky for you; 
2) you would have gone to your known solver community; 3) you 
would have never known they existed; and 4) they didn't know 
they were interested in competing. They didn't know they had 
the expertise.
    And somebody brought up the question of high school 
students. We actually had a group of high school students in 
our Progressive Insurance Automotive XPRIZE and we have a group 
of high school students in that Qualcomm Tricorder XPRIZE, that 
handheld health diagnostic.
    And in terms of reducing risk, prizes are great in that 
they only pay the winner. So you put out a prize purse and 
these people are competing against each other to achieve that 
prize, so they are willing to take huge risks that really lead 
to disruptive innovations, risks that the people that you are 
going to give your normal grants or contracts to are not going 
to take because they don't want to let you down and you don't 
want them to take because you are on the hook for all the 
money.
    So we say at XPRIZE that the impact does not begin at the 
launch of the prize but at its award and that we want to make 
it extremely simple and rewarding for teams to compete. So we 
focus heavily on marketing and education. We focus heavily on 
recruiting teams and we focus heavily on supporting those teams 
so that they can all enter the marketplace at the end of the 
competition and be successful and change the world.
    In terms of private-public partnerships, we believe that 
they are the key to success in prize competitions. One example 
in one of our competitions in that Qualcomm Tricorder XPRIZE 
where we have actually partnered with the FDA, and it is not a 
financial partnership. The FDA is assisting teams in preparing 
for future regulatory clearance for post-competition while the 
prize competition is actually helping the FDA maximize its own 
readiness for new regulatory submissions in the direct-to-
consumer medical marketplace. And that is great. We also 
partnered with the Department of Energy in our Progressive 
Insurance Automotive XPRIZE. That was a financial partnership 
where they gave us $10 million to help support the competition.
    We believe that the private and public sectors must work 
together to utilize every tool available. As you heard up 
there, tools are not--prizes are not the solution; they are one 
tool in the innovation toolkit that complements the other tools 
we have. And understanding how and when prizes work will ensure 
that they are used most effectively and efficiently.
    The federal government, since 2010, not only under America 
COMPETES but more broadly, has launched 300 competitions 
through 55 agencies. And in 2012--or, excuse me, 2013, 25 
agencies self-reported a total of 87 prizes, which is an 85 
percent increase year-over-year.
    Congress can use policy as a driver for innovation by 
including language that you have in your current bill, 
supportive of prizes, and we believe that that language sends a 
strong signal to federal agencies and also the private sector 
that prizes are a good innovation tool.
    So we look forward to continuing the dialogue with the 
Committee and Congress as a whole about the power of prizes. 
Thank you.
    [The prepared statement of Mr. Frangione follows:

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Chairman Bucshon. Thank you very much.
    I now recognize Mr. Wilson for five minutes for his--to 
present his testimony.

                TESTIMONY OF MR. DONNIE WILSON,

                        FOUNDER AND CEO,

                    ELASTEC AMERICAN MARINE

    Mr. Wilson. Thank you, Committee, for the opportunity to be 
here.
    As you can imagine, winning the $1 million XPRIZE makes us 
a leading fan of this competition.
    My company has been manufacturing oil spill equipment for 
20 years. We have been exporting globally to over 100 countries 
during that time.
    On April 20th, 2010, approximately 42 miles offshore of the 
Southwest Pass, the Deepwater Horizon drilling rig exploded, 
causing the worst oil spill in U.S. history. The Deepwater 
Horizon incident prompted the XPRIZE Foundation and Wendy 
Schmidt was invited to be involved in the oil spill recovery 
XPRIZE challenge.
    It was going to be a daunting task what they requested from 
industry to produce a skimmer that is capable of 2,500 gallons 
per minute recovery at 70 percent efficiency, three times the 
industry standard. So as we would all agree, XPRIZE always asks 
for audacious challenges. When we saw the challenge, we were 
not sure that we wanted to enter because it was much larger 
than any skimmer we had built. At that time it was 400 gallons 
a minute is our--was our current design.
    What was interesting for us in this challenge was not only 
the $1 million opportunity but to be able to prove that we 
could build the best skimmer in the world from the cornfields 
and oilfields of southern Illinois, 1,000 miles from the 
nearest coast. So I would agree that people that are not 
typically involved in such contests can be when you do it 
through competition.
    Three hundred and forty-nine teams from around the world 
took part in the challenge. Ten finalists from five nations 
were involved. This was done at the Ohmsett facility in New 
Jersey, which is funded by the government and a fantastic 
place. Anyone ever gets a chance to go, they should. It is 
cutting-edge and the only place in the world that this could be 
done.
    The Wendy Schmidt oil spill challenge brought together 
teams throughout the industry and were looking for new, fresh 
ideas.
    It is hard to describe the benefits of such a prize because 
of the competition and what it can do to encourage people to 
think outside the box. There were contestants from all over the 
world, some doing things from their garage in Alaska to very 
focused competitors from different countries. To date, we 
have--we are starting to commercialize this product and we have 
sold nearly $3 million worth of product in three different 
continents and we will be introducing versions of this X 
SKIMMER design in the coming months.
    This competition gave Elastec/American Marine the faith and 
financial incentive to develop a new technology to keep our 
world clean, and I am pleased to comment about that today. 
Thank you.
    [The prepared statement of Mr. Wilson follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Chairman Bucshon. Thank you very much.
    I now recognize Mr. Singh for five minutes to present his 
testimony.

                TESTIMONY OF MR. NARINDER SINGH,

             CO-FOUNDER AND CHIEF STRATEGY OFFICER,

               APPIRIO AND PRESIDENT, [TOPCODER]

    Mr. Singh. Chairman, Ranking Members of the Subcommittee, 
Members of the Subcommittee, I thank you for the invitation to 
speak before you.
    My testimony here today will seek to expand even your view 
of prizes and show how we can act bigger by thinking smaller.
    In 2006, myself and three others formed Appirio. Today, we 
have over 900 people with headquarters in San Francisco and 
Indianapolis. We have received numerous awards on ``Best Places 
to Work,'' innovation awards. We were named the World Economic 
Forum Technology Pioneer in 2012.
    [topcoder] enables that. It is a community of over 620,000 
designers, developers, and data scientists, and it is based on 
prizes. We use this community to crowdsource hundreds of 
projects for commercial companies across the world, including 
private sector organizations like Comcast and Ferguson. What we 
do is we break down large projects into smaller pieces and we 
use prizes against each of those and hold many competitions. As 
a result, we run 5 to 10,000 competitive challenges each year. 
Our average prize amount for these challenges ranges from a few 
hundred to a few thousand dollars.
    For example, recently with [topcoder], Appirio helped the 
research organization of a large pharmaceutical company improve 
the performance of software that runs Genome Wide Association 
Studies, or GWAS. GWAS is an approach to rapidly scanning 
markers across complete set of DNA. We reduced the time it took 
for them to run this from 10 hours to less than 30 seconds. 
What is remarkable is that the core of this advancement was 
driven by a series of about a dozen contests with about only 
$50,000 in prizes. The firm plans to share this with the 
scientific community and it will completely change the way 
research is done with GWAS.
    In government, we have partnered with NASA and Harvard 
Business School to create the NASA Tournament Lab at HBS. This 
lab focuses on creating insights on the optimal design of 
contest and also how the federal government can be more 
effective in using them. So essentially not only do we have to 
achieve results but we have got a bunch of researchers from 
Harvard peering over our shoulders while we do it.
    So we have used this concept repeatedly of stringing 
together a series of smaller challenges to create some 
outstanding outcomes. So, for example, we used a set of 
challenges to reduce the time it took for NASA to optimize 
medical safety supplies on space excursions from 3 hours to 30 
seconds. We have created a mobile application for International 
Space Station that will help astronauts manage their nutrition 
and health, and it was developed through a series of 18 
challenges for less than $60,000 in prize money, and it is in 
final testing for spaceflight now.
    We also just launched the NASA Asteroid Grand Challenge on 
[topcoder] with Harvard and Planetary Resources to improve the 
detection algorithms of detecting asteroids. It consists of a 
series of 10 related challenges and we hope for a similar leap 
forward in accuracy of algorithms, and the total prize will be 
under $100,000.
    We have also worked with other government agencies through 
NASA's Center of Excellence for Collaborative Innovation. One 
of the projects was for the Center of Medicare and Medicaid 
Services seeking to modernize the CMS infrastructure for the 
State of Minnesota so that healthcare providers could register 
more easily. This project spanned 11 months, had more than 140 
challenges on [topcoder], and the total cost including labor 
was about $1.5 million. Research from Harvard Business School 
and the NASA Tournament Lab shows that done through traditional 
approaches, it would have been $7.5 million or nearly five 
times as much.
    I believe in large prizes and their capability to create 
entire markets by--proven by my colleagues from XPRIZE. But 
breaking problems down allows for giant leaps forward to occur 
inside of existing markets. And by breaking problems down, we 
can increase the power of prizes to be applied to a much wider 
set of activities.
    To do so, we do need more scalable rules for government. 
For example, it appears in the current language of FIRST that 
it would require private-sector judges to disclose their 
financials. For challenges to a few hundred to a few thousand 
dollars, this is an onerous burden, especially given that, for 
example, all of our reviews are publicly available and often 
evaluated by a computer program.
    More than anything I have said here today, the one thing I 
feel confident about is that the rate of change of advancement 
of technology will not slow down. 3-D printing, robotics, 
biotech, artificial intelligence, and even wearables, many 
other domains are just getting started. More than ever, we will 
need the ability to quickly and efficiently tap into the right 
skills instantaneously.
    So the nature of our economic system is built upon a free 
market and for a good reason. In most cases it is the most 
efficient way. Crowdsourcing taps into the power of the market, 
but also democratizes participation beyond a few select firms 
that can compete in large institutions and allows anybody to 
jump in and to try their hands. Crowdsourcing itself is an 
innovation, but in this context, even more importantly it 
allows you to keep pace with innovation.
    I want to thank the Committee for the opportunity to share 
my perspectives and would be happy to take any questions.
    [The prepared statement of Mr. Singh follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Chairman Bucshon. Thank you very much.
    I now recognize Dr. Moe for her testimony.

            TESTIMONY OF DR. SHARON MOE, PRESIDENT,

                 AMERICAN SOCIETY OF NEPHROLOGY

    Dr. Moe. Chairman Bucshon, Congressman Lipinski, and 
Members of the Committee, my name is Dr. Sharon Moe and I am 
President of the American Society of Nephrologist, better known 
as ASN. I am a kidney doctor in Indianapolis, Indiana, and 
Professor of Medicine, Director of the Division of Nephrology 
at the Indiana University School of Medicine. I thank the 
Committee for calling this hearing to discuss the role of prize 
competitions in promoting innovation. We would like to put 
forth the innovation in dialysis as a worthy topic for a prize.
    With nearly 15,000 physicians, scientists, nurses, and 
other healthcare professionals, ASN leads the fight against 
kidney disease. Kidney disease is the 8th leading cause of 
death the United States. It is a silent killer that destroys 
lives and places a staggering burden on our society. Of the 
more than 20 million Americans with kidney disease, nearly 
450,000 have progressed to complete kidney failure and rely on 
Medicare End-Stage Renal Disease Program for lifesaving 
dialysis. The ESRD program costs $35 billion annually and 
covers all Americans, regardless of age or disability. Despite 
this spending, kidney care has not advanced in the 25 years 
that I have been practicing nephrology. ASN believes that a 
prize competition is an optimal way to promote innovation, 
reduce costs, and improve patient outcomes and quality of life.
    Dialysis keeps patients alive but it doesn't come close to 
replacing normal kidney function. It does not return patients 
to full health or allow them to pursue full-time employment. 
Innovation has been stymied by a lack of competition among 
payers and a payment system that doesn't support novel 
therapies. If Congress uses a prize competition to signal that 
it wants alternatives to currently available dialysis care, I 
believe the private sector will produce life-changing, cost-
saving alternatives to dialysis.
    I have a 48-year-old patient who epitomizes the need for 
innovation, 48. He survived cancer but damage from the 
radiation treatment caused kidney failure. He is on dialysis, 
still awaiting a kidney transplant despite three years on the 
list. He tried dialyzing at night so he could continue to work 
but was too sick to function. He had to quit work and go on 
disability. He recently told me, Doc, I just can't take it 
anymore. I hate the needles. I hate feeling bad all the time. I 
can't work. It seems like a transplant will never happen. I 
would like to stop dialysis. Will you be my doctor while I die? 
A 48-year-old went from working full-time to contemplating 
death over dialysis in just one year. That is because the few 
options available to him have not significantly advanced in the 
last 25 years.
    This reality is in stark contrast to dramatic therapeutic 
advances for other chronic diseases. We have developed insulin 
pumps that deliver accurate insulin doses, implantable 
defibrillators that shock the heart back to function, and 
robotic surgery to minimize hospital stays and pain after 
gallbladder and prostate surgery, just to name a few.
    In contrast, dialysis machines have become smaller, 
computerized, and more portable so that some patients can 
dialyze at home. However, patients still endure getting stuck 
with two needles three times a week at minimum and their blood 
being filtered through for an average of 12 hours a week.
    We need breakthroughs, not incremental changes to old 
technology. A prize competition that helps harness the power of 
the private sector can spur the scientific and technological 
breakthroughs to deliver improved technology for kidney 
replacement therapy. The FIRST Act would help pave the way for 
such an incentive by providing the guidance that federal 
agencies need to make prize competitions a reality. We need to 
transform dialysis or prevent the need for it altogether.
    Prize competitions are a powerful lever, as you have heard, 
that would draw a diverse group of inventors, scientists, and 
investors to innovate and develop better alternatives. Such 
innovation would improve the lives of thousands of Americans on 
dialysis covered by the Medicare ESRD program and offer hope to 
the 20 million Americans facing the possibility of dialysis in 
the future.
    I appreciate the opportunity to testify and would welcome 
any questions. Thank you.
    [The prepared statement of Dr. Moe follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Chairman Bucshon. Thank you very much.
    At this time I would like to recognize the newest Member of 
the Subcommittee and the full Committee of Science, Space, and 
Technology, Mr. Johnson from Ohio. Welcome to the Committee and 
to the Subcommittee.
    Mr. Johnson. Well, Mr. Chairman, it is good to join. 
Science and technology is a passion of mine as a patent holder 
myself and an innovator, which is a long way from the mule farm 
that I grew up on, by the way, so I am excited about being here 
and I look forward to working with all of our colleagues to 
move things along.
    Chairman Bucshon. Thank you.
    I would like to thank the witnesses for your testimony. It 
is fascinating testimony from all of you.
    Reminding Members that the Committee rules limit 
questioning to five minutes, and the Chair at this point will 
open the round of questions. I recognize myself for five 
minutes.
    Dr. Moe, more specifically, how does the legislative 
language in the FIRST Act advance and help scientific prize 
competitions do you think?
    Dr. Moe. I think there is a lot of interest in prize 
competitions, but as we have talked to committees and 
organizations, there is some confusion as to what their role is 
and how they can actually go about competing or being part of a 
prize competition. And so I think that will actually enable 
more associations such as our ASN to go together with 
Congressional offices, with Committees, with other Committees 
on the Hill to actually improve the ability to conduct a prize.
    I think a prize, particularly in our field, is important. A 
lot of these have not been in the healthcare field and I think 
that is really an important problem, particularly when we look 
at dialysis patients and the cost that is to society and the 
fact that we are not really bringing these people--we are not 
really advancing the technology that we can do in other areas 
of medicine and we have done in other areas of medicine.
    Chairman Bucshon. Mr. Frangione, do you want to make some 
comments about that?
    Mr. Frangione. Sure. I think the America COMPETES did a 
great job giving broad authority to agencies to do prizes, but 
every agency is interpreting it a little bit differently.
    Dr. Moe. Yes.
    Mr. Frangione. And any clarification that can encourage 
agencies to use it in a more systematic way or a more universal 
way would be extremely helpful.
    And there are a couple of things that we think are 
important in a prize. If you throw a prize, just like if you 
throw a party, nobody is going to come unless you invite them, 
right? And so we actually actively go out and recruit teams. We 
go to conferences and we talk and we market and that really 
helps draw teams in. And I think that is an important thing for 
the agencies to understand.
    The other really important thing is supporting the teams 
during the competition. We don't give them money to compete but 
we give them the support. We connect them with potential 
funders. We teach them how to do business plans because, as 
everybody knows, the best innovators aren't necessarily the 
best business people and we want every single team out there to 
be successful after the prize competition is over in that 
market.
    So the key is really ensuring that you support the 
competition as it is occurring, the teams, the marketing, the 
media, the education. Otherwise, you are going to have one or 
two people show up to compete and you are not going to get the 
results that a prize can bring you.
    Chairman Bucshon. So what principles do you use to select 
the prize targets and find appropriate sponsors? And can you go 
over what some of the best practices to develop these public-
private prize----
    Mr. Frangione. Sure.
    Chairman Bucshon. --partnerships might be?
    Mr. Frangione. Sure. So we--when we design a prize, we 
crowdsource our prizes, not from the general public but we end 
up interviewing anywhere from 50 to 150 experts. We spend six 
to nine months just designing a prize because once you launch 
it, you don't really have the opportunity to change the rules, 
right, because the teams are spending their own money at that 
point in time. So we believe in really making sure you reach 
out to all potential stakeholder groups, including the 
potential competing teams to make sure you get those targets 
right.
    Somebody said earlier, you know, how do you put a big 
moonshot out there, a big, audacious goal and get the teams to 
compete, right? So you do that by understanding where the 
market is going in ten years and trying to make it go there in 
three years and you do it by supporting them.
    So I think the best practices that we see in designing is 
really understanding the true market failures. As a doctor, you 
know, you don't--you want to cure the disease, not the 
symptoms, so you have to dig down. What are those market 
failures? Have a prize aligned with those market failures, make 
sure you are not presupposing a solution, and opening it up to 
the world.
    Chairman Bucshon. Thank you.
    Mr. Wilson, what characteristics or key criteria for your 
winning your competition and what recommendations would you 
have to make competitors in the future--help them win 
competitions? I mean what were the--kind of the things that you 
all did to make yourselves successful in winning your 
competition?
    Mr. Wilson. Well, I would like to go back to an earlier 
comment that when we looked at the competition we wanted to 
know is it put together well. Our industry is rather niche so 
we might see something that would be very strange, you know, 
recovery rates or speeds or something that would sort of derail 
our opportunity. So putting the effort into establishing a good 
contest, knowing the details, getting experts involved would be 
very important to us so that we know we are putting our best 
foot forward in a contest.
    The other interesting part is when you do something this 
audacious, the general public is probably not going to believe 
you. If I just did this myself and could find somebody to 
actually publicize it, they would say, well, you guys are nuts. 
How did you do that? So when you have a contest, there is so 
much emphasis on the goal and the end result that everybody 
assumes that if you got there, you certainly got there based on 
good performance. Those are characteristics that were important 
to us.
    Chairman Bucshon. So people that--competing for prizes 
should look into the quality of the prize and whether the 
organization offering it has the ability to hold a good 
competition. That is the bottom line it sounds like.
    At this point I yield to Mr. Lipinski for five minutes.
    Mr. Lipinski. Thank you, Mr. Chairman.
    The first thing I want to ask, does anyone have any 
experience themselves or can anyone talk about what they have 
heard, what they have learned about any of the prize 
competitions that any agencies--federal agencies are doing? I 
was just wondering are there--is there anything that is not 
being done right now or you think should be done differently 
with the way these prize competitions have been done up to this 
point? Does anyone have any comments on that?
    Mr. Frangione. So I can't speak specifically about specific 
agencies or specific prizes. I think there is a couple key 
things that will make them be better, part of which was already 
talked about, marketing and media and recruiting teams.
    Mr. Lipinski. Um-hum.
    Mr. Frangione. I think the other important thing is to not 
legislate a specific prize, right? You want to legislate the 
ability to do prizes and give them the tools--give the agencies 
the tools to do them in a consistent manner. But we want to 
make sure that we don't legislate a specific prize because, as 
I said, designing it--and as Donnie also said, designing it is 
really important. So if it is legislated that it has to meet 
these goals, those goals may be totally wrong.
    And the other thing that is important for the agency is 
when they put out an RFP or an RFI to design a prize, they also 
have to recognize that they can't put the goals in the RFP and 
say you have to meet these goals if you design this prize 
because you want to be able to throw out those goals that you 
want to find the right prize to design.
    So I think it is more--I think a lot of agencies are doing 
a really good job, NASA's Centennial Challenges, DOE has done a 
great job. I think it is more just knowing what other tools fit 
within the prize tool that could help them be more successful. 
So nobody is doing a bad job; they are just not taking full 
advantage of the prizes.
    Mr. Singh. Congressman, I would say there is a Yogi Berra 
quote that I like. It is ``In theory there is no difference 
between theory and practice. In practice, there is.'' And it 
kind of applies to how things tend to work. For example, we 
have been very effective with running challenges with certain 
agencies. However, a lot of times the overall preparation, some 
of the things that Chris was describing, require us to then 
sometimes get in a situation where we have to contract with the 
government in a normal way, right?
    And for us as a commercial organization, we don't focus on 
government as a sector. We look at the challenge as a way of 
saying this is a more efficient mechanism of engaging with 
government. But if we then get pulled into the rest of the 
cost-plus world of how things work, our tendency is to say, you 
know what, let's go look for commercial customers or let's find 
some third party to try to deal with government for us. And so 
we end up in a situation where unless we have got really great 
support from an agency that is willing to navigate all sorts of 
rules for us, that we will choose not to enter and engage in 
that area because of the friction of the engagement.
    Mr. Lipinski. Mr. Singh, you had talked about the--how you 
sort of--you separate bigger--you separate it into smaller 
pieces what you are trying to, you know, then pull together to 
come up with a solution to a problem. Is there--does the 
federal government--have you seen agencies doing that or could 
it be done better?
    Mr. Singh. Yes. So the challenge I described with NASA that 
we just launched around detecting asteroids, like who doesn't 
want to find asteroids? So that challenge is actually already 
broken down into 10 parts. And so the first three or four parts 
of that is to define the problem statement. We do kind of a 
test data set with the community so we make sure the problem is 
set up right. We break it down into certain components, and 
then the main event, so to speak, is like the sixth or seventh 
challenge along the way and then there is a refinement.
    So we have done that pattern with NASA and the NASA 
Tournament Lab at HBS quite successfully. And they have 
actually gotten to where they understand how to break those 
down as well or better than we do now. And so it is a matter 
of--I think it gives us more surface area. It is not a way of 
discovering a new industry but it is certainly a way of 
exponential leaps forward in existing problem areas.
    Mr. Lipinski. And are there areas that you think--Dr. Moe 
said that--you say you think this could be used better in 
healthcare. Are there areas that have not--other areas you 
think the federal government has not--federal agencies have not 
gotten into that they could use these prize competitions in? 
And are there areas that the federal government probably cannot 
serve a good role--that these prize competitions will not serve 
a good role in trying to solve?
    Mr. Singh. That is to me. So I think a couple things. Right 
now, the federal government is using prizes .0000001 percent, 
so there is a certainly opportunity for expansion without a 
doubt.
    I think the key piece that I was saying is that I believe 
and what XPRIZE is doing with creating these large incentive 
pools. I think the micro challenges give you an opportunity to 
increase the surface area of the kinds of problems government 
can work on, so all of a sudden it is not just the exponential 
pieces but it is building applications, it is building things 
in order of magnitude cheaper or faster. And so it give you an 
opportunity to apply it in more places and I think that is a 
great complement.
    There are certainly areas where this will never work, 
particularly where the data is too sensitive or there is 
information where it is so difficult to break the problem down 
that you can't do it. So there are limitations, but I think we 
are not even close to approaching those yet, so there is a lot 
of opportunity to expand and try this in other places.
    Mr. Lipinski. All right. Thank you very much. I yield back.
    Chairman Bucshon. Thank you. I now recognize Mr. Massie, 
five minutes.
    Mr. Massie. Thank you, Mr. Chairman.
    I have got questions--I am sure this is well thought out, 
but I have questions about how intellectual property 
interweaves with some of these XPRIZEs or prizes in general. So 
could you just give us a quick statement on that, Mr. 
Frangione, and then I have some questions specifically.
    Mr. Frangione. Sure. So in an XPRIZE competition, because 
we believe the teams are competing for the market at the end of 
the day, they are not competing for that check, we don't hold 
any of their IP, nor do our sponsors. And that is extremely 
important to us. First of all, we are 501(c)(3) nonprofit; we 
can't do it. But also we would see fewer and fewer teams 
compete if that is the case. And that is an important thing for 
the government to understand because often the government likes 
to hold the IP. And so you should look at more innovative ways 
of licensing IP versus holding it or saying, you know what, 
this is a challenge that is important enough. You keep your IP. 
Because again, if you keep their IP, they are competing for a 
$10 million check and then you are not going to have as many 
competitors. They would rather compete for the multibillion-
dollar market that is there at the end of the day.
    Mr. Massie. So that might explain why we are getting 4 or 
10 times as much----
    Mr. Frangione. Oh, absolutely.
    Mr. Massie. --investment because----
    Mr. Frangione. Absolutely.
    Mr. Massie. --all of the participants claim the right to 
their IP?
    Mr. Frangione. Sure. Right. So we are building the market 
that then they get to go enter into. They are helping us build 
it, but together we are building it.
    Mr. Massie. So the prize just kind of puts them over the 
edge and sort of--it is not the straw that breaks the camel's 
back but it is the last little incentive that causes them to go 
after it?
    Mr. Frangione. Absolutely.
    Mr. Massie. So--but if there is a $10 million prize out 
there--and this is back to IP--so, for instance, a patent is 
not a right to do something; it is a right to exclude somebody 
from doing something.
    Mr. Frangione. Um-hum. Um-hum.
    Mr. Massie. So to what extent can participants use in-house 
IP--which I assume that they could; I mean that would make 
sense--but if they are coming up with the XPRIZE, are they 
allowed to use other intellectual property from other 
portfolios? And do they have to license it as a condition of 
winning the prize----
    Mr. Frangione. So----
    Mr. Massie. --or to win the prize?
    Mr. Frangione. So every team competing is its own company 
so they have to follow whatever rules any company has to follow 
to license technology or to build a new technology or to get a 
patent or license the patent, right? So that all sort of takes 
care of itself. We--you know, we make sure that our competitors 
follow all normal business rules, follow--you know, we can take 
competitors from around the world but we can't take any 
competitors that the United States has sanctions against, 
right? So it is the same idea, right? They have to follow all 
their applicable business laws where they are located and where 
we are located.
    Mr. Massie. But if they are going to use somebody else's 
goose that lays golden eggs, they have to license it?
    Mr. Frangione. Absolutely. Absolutely. And we see, 
interestingly enough, prizes are about competition but we see a 
lot of collaboration. In our Google Lunar, our $30 million 
XPRIZE to land a lunar on the Moon, the teams are all merging, 
right, because they will say, oh, you have this technology and 
I don't have that so let's merge and compete as one team. And 
you see people jumping from other teams. So it is a really 
great model to not only get competition but----
    Mr. Massie. It sounds like a great model, but as we start 
to understand it in Congress----
    Mr. Frangione. Yeah.
    Mr. Massie. --and propose it as a--you know, the prize 
incentive as a way to direct research and to spend taxpayer 
dollars----
    Mr. Frangione. Right.
    Mr. Massie. --ultimately, I am worried that the public 
won't appreciate that, that we are paying for somebody--giving 
them a prize and then the taxpayer doesn't necessarily hold 
rights to the intellectual property and the intellectual 
property is not public domain, although----
    Mr. Frangione. Right.
    Mr. Massie. --I wouldn't argue----
    Mr. Frangione. Yes.
    Mr. Massie. --that making it public domain is actually a 
good way to have it promoted. I think it is quite the opposite. 
But----
    Mr. Frangione. So you can--like I said, you can hold the 
IP, you can do most-favored nation pricing, you can do 
licensing. There are lots of ways you can get around that. We 
actually have a competition we are probably going to launch 
this year that the solutions are open source because we believe 
it is as important to the world. And the teams know going in 
that their solutions are going to be open source at the end. 
Great. So I think you shouldn't let that get in the way of 
encouraging agencies to use it because there is such a broad 
spectrum of what they can do with that IP and that licensing 
and you just have to find that sweet spot to maximize the 
number of competitors while also maximizing the benefit to the 
U.S. taxpayer.
    Mr. Massie. Right. Because if there is no intellectual 
property protection, they are going to have a hard time getting 
the dollars to back the idea.
    Mr. Frangione. Exactly.
    Mr. Massie. Final question for anybody that wants to 
answer, are there any problems that our federal government 
faces where you say, gee, they need to do a prize there and 
they could--we could solve that? Yes, Dr. Moe.
    Dr. Moe. Clearly, kidney disease is a major burden and----
    Mr. Massie. Okay.
    Dr. Moe. --the key is is that dialysis--I mean you could 
break it down. You could do so many different prizes. You can 
do an implantable kidney. You could even just take the current 
dialysis procedure where you have needles going into an access 
that often fails, you have water system problems, you have 
hydrodynamics, you have filters, so you have membranes that 
need experiments, you could add cells to those membranes. And 
here, yet, we have done nothing in 25 years. We are still 
putting needles in, taking blood out, running it through a 
filter. I mean we have to do something like that and it is a 
perfect, perfect item. We are there from technology, we are 
there from the science level, we understand the kidney. 
Anything can be better than what we are doing now.
    Mr. Massie. I will put that on my list. My time is expired 
but I would love to hear the other answers to that question.
    Chairman Bucshon. Yeah. That is true. I have taken care of 
many, many end-stage renal patients and they--no one knew in 
the 1970s when they first developed dialysis that it would--it 
was only supposed to be for a few people, right? Nobody knew 
that the technology would advance and suddenly that is why 
people are all on the Medicare program because it was so 
expensive but nobody knew it would explode into what it is 
today--at such a big cost to the government and to the 
patients.
    With that, I recognize Ms. Kelly, five minutes.
    Ms. Kelly. Thank you, Mr. Chair, and welcome.
    Mr. Frangione and Mr. Singh, engagement in STEM education 
is critical for the future competitiveness of our Nation. Many 
experts have testified before this committee and said that 
success in the STEM fields must start at an early age and be 
seen as something achievable for all students. How have or 
might your organizations use prize competitions as a tool to 
promote STEM education and to engage diverse groups of students 
in STEM?
    Mr. Singh. Thank you, Congressman, for the question.
    So obviously for us it is the supply chain of our future, 
right, not just as a country, as a company overall. And so a 
few things that we do to promote growth overall that we are 
looking to extend into the areas that we run challenges for 
free on a weekly basis that draw 2 or 3,000 competitors. They 
take about 90 minutes. There are some code challenges. And they 
compete for readings and they compete for learning. Like people 
are trying to get better. So these are not for paid prizes but 
we invest in creating these so they are like applied 
challenges.
    So one of the things that we have done is we have run those 
in special ways for high school or college competitions as 
well. Later this year we will be making it self-service so any 
high school or college computer science teacher can go and say, 
hey, let me run my own virtual competition against our databank 
of 2,000 problems that have been accumulated over the past 
dozen years. So that is some of the things that we will go 
through and do. That really addresses though the, I would say, 
post-``I have learned to code,'' for example, stage. We are 
not--that we are not any further out. But it is really 
effective.
    I was at a high school technology conference called 
TechOlympics in Cincinnati. It is one of the largest high 
school competitions in the country, and we ran a mini 
[topcoder] tournament for the kids there. And it was exciting 
to see the winners and the like, and one of the things that 
really struck me with the computer science teacher is he was 
like, you know, we have to teach for a certain band and this is 
an area that has so much spectrum of beginner to advanced that 
no curriculum in my school can cover all my students. So this 
is such a great opportunity for me to really be able to shuffle 
those people who got a spark or interest in it to be able to 
give them a way of learning and finding an outlet for their 
creativity regardless of how old they are or where they sit.
    So those are some of the things that we are looking at. I 
think there is a lot more that we could do. One of the 
particular pieces for us is girls in STEM. Last year, we did a 
poster design contest for how to encourage girls in STEM at a 
young age. I think that is an area that we would like to invest 
and do more in in the future.
    Ms. Kelly. Thank you.
    Mr. Frangione. And so at XPRIZE we are trying to create the 
next Apollo moment, right? And hopefully that in amongst itself 
is going to excite kids into STEM education. But we recognize 
that is not, right, so we have these giant competitions out 
there to get us to the next Apollo moment but we spend a lot of 
time and effort getting kids involved either through smaller 
competitions like FIRST Robotics or other competitions that we 
support. We do a lot of documentaries. We just created a dome 
show for planetariums focused on the Moon and our Google Lunar 
XPRIZE.
    So our goal is to get kids really excited at a very young 
age, getting them in smaller competitions that they can then, 
you know, compete on, and we--but what we are realizing is--and 
it is great. We used to have these smaller competitions, and we 
still do, but we now have high school teams competing for our 
$10 million competitions. So it is almost like, okay, I guess 
we are going to go to 13-month-olds, right, with our stuff 
because the eighth graders are going to start competing for our 
competitions next. So we focus a lot on the STEM education and 
we really want to get people excited and kids excited about 
science because they are our future and we need them to be 
excited.
    Ms. Kelly. Thank you so much. I don't know if Mr. Wilson or 
Dr. Moe have a comment.
    Dr. Moe. Yeah. I think one of the things to keep in mind, 
too, is that we have shortages of various types of physicians 
in the country, and particularly nephrology is facing a true 
workforce challenge, lack of interest in our field. And kids 
today are very technological, far more than I certainly was 
going through medical school. I wanted the physiology. Kids 
today want to apply that physiology to technology, and I think 
that is where prize competitions to get those integrated is 
really important.
    We offer a course for first-year medical student at Mount 
Desert Island to go through physiology and I would love to add 
a little bit of technology to that where we can--here, here is 
what the kidney does. What if you could create a chip that 
actually puts these pieces together? And people are doing that. 
People are actually working on the kidney on a chip.
    Ms. Kelly. I don't know if you have any comments.
    Thank you. I yield back.
    Chairman Bucshon. Thank you.
    I recognize Mr. Johnson from Ohio, five minutes.
    Mr. Johnson. Thank you, Mr. Chairman. And by the way, I 
have got young grandchildren. I have got a 13-month-old that is 
already using an iPad, so there might be some value in that. I 
don't know.
    For all of you, though, in light of ongoing budget pressure 
and our current state of fiscal austerity, how can prize 
competitions conducted by the private and public sectors serve 
as an efficient and effective tool for spurring innovative 
solutions to advance high-tech industries? Now, I know this is 
kind of a 30,000 foot view, but for my first entry at the 
Committee, I want to understand--I want to get your perspective 
on that. I think it is important but I want to hear why you 
think it is important.
    Mr. Frangione. Sure. So the key to prize competitions, as 
you heard briefly, is that they push all the risk onto the 
teams so you can use a small amount of money--a small amount of 
government money--and you have to support them, right. There 
are operating costs. You can use a small amount of money to 
push the risk onto the teams so that these folks are developing 
technologies and solutions to achieve your goal.
    And in doing so, those teams are spending significantly 
more than that prize purse. The example I gave in my testimony 
is you could give out a $5 million grant and get $5 million 
worth of work or you can put out a $5 million prize and we see 
in our prize competition anywhere from 4 to 10 times leverage. 
So you are going to get $20-50 million worth of work. When you 
are talking about fiscal constraint, that is amazing.
    If you look back over history, the Lindbergh prize was a 
$25,000 prize and all the teams spent $400,000. And our Ansari 
XPRIZE, the $10 million prize, there are 27 teams from--or 26 
teams from seven nations, spent over $100 million. And the 
winning team actually spent $26 million to win $10 million. We 
don't see that a lot but we do see that big number a lot. So 
they are great tools specifically for that reason.
    Mr. Johnson. Okay. Any of the rest of you? Dr. Moe.
    Dr. Moe. Sorry. For healthcare in particular and for 
dialysis, because of the way the reimbursement system is set 
up, there is--it is not a disincentive but there isn't an 
incentive to actually do innovation. And I think by having a 
prize, that kind of goes outside of the main reimbursement 
system, outside of the main way that we do business actually is 
a way to jumpstart that. In particular, I mean a dialysis 
patient--dialysis itself is very, very expensive but these 
patients are sick, they are hospitalized, they are on over 30 
pills a day, they are on Medicare Part D. They also require 
surgeries and so their cost is beyond just the procedure. And 
so even if we can fix one of those problems with a prize, we 
can actually impact long-term cost to the government with a 
minor investment compared to the $35 billion we spent annually.
    Mr. Johnson. Sure. Mr. Singh, you have a comment?
    Mr. Singh. I was going to say I think it works because 
markets work. And what we have shown the last dozen years 
because of technology is it went from where you had done 
something to do something to where you need access. And so, for 
example, if you are fans of hotels or car services, Uber and 
Airbnb are companies that have hundreds of thousands of units 
of capacity that they don't own, but because of technology, 
they allow you to get to. And what this created is the 
opportunity for leverage.
    And so today what one person, what 10 people can do is 
tremendously transformed because of what technology has done. 
And with prizes, you allow that supply and demand of talent to 
find each other and you get the opportunity for the market to 
work in an even broader way. And so I think that applies to 
every industry.
    Mr. Johnson. What about on an efficiency spectrum? You 
know, we talk about the need for empowering American workers 
and American businesses to compete on a level playing field. 
Competition demands that companies are effective, that they are 
efficient in their operations. How do you think these science 
prizes like this sponsored by the federal government, does that 
encourage marketplace efficiency?
    Mr. Singh. I mean from my perspective, absolutely, right? I 
mean I think there is obviously the two edges to that equation, 
right? It requires investment in kind of core skills. We talked 
about STEM. We have to have the raw materials that enable us to 
be the most efficient in those areas, but absolutely, it is 
actually ruthlessly efficient, right? It works and rewards the 
best outcome, and that is something that in general can save a 
lot of money but also requires that we arm ourselves with the 
right tools to be able to participate in that kind of 
marketplace.
    Mr. Johnson. Again, all of you, do you think we have too 
many of these federally funded science prize programs, too few? 
I think I know what your answer is but----
    Dr. Moe. Few.
    Mr. Johnson. Okay. Mr. Chairman, I yield back three 
seconds.
    Chairman Bucshon. Thank you for that extra time.
    I now recognize Mr. Kilmer for five minutes.
    Mr. Kilmer. Thank you, Mr. Chairman.
    First of all, thank you all for being here. I think this 
is--has a huge upside, a tremendous opportunity to drive 
innovation and to appeal to talented people to come up with 
good solutions.
    I will throw in just in response to Mr. Massie's question. 
I know we have been speaking with the XPRIZE folks and others 
about looking at using that--this model and working with NOAA 
to provide a prize competition around addressing the ocean 
acidification, which in my neck of the woods is a very big deal 
that affects our shellfish industry and others, sort of similar 
to the one Wendy Schmidt XPRIZE ocean health prize competition.
    A lot of the questions that I had have been asked. I guess 
I am curious just from a public policy standpoint if you can 
provide some direction to us. You know, it seems like the role 
for Congress kind of could fit a few areas. 1) you know, in 
terms of funding, kind of be encouraging, authorizing, 
appropriating for the purposes of prizes; 2) trying to 
establish some method of coordination as agencies are sort of 
contemplating doing prizes, have some sort of coordinating 
mechanism to make sure that it is done right and that they are 
not sort of reinventing the wheel when each agency contemplates 
this; and then 3) there is, you know, obviously sort of 
directing it. You know, go do a prize on this or that or, you 
know, ocean acidification or something else.
    Am I missing anything big? And then as you look at those 
sorts of levers, any advice if I airdropped you into Congress 
as to how best to approach those ways of engaging?
    Mr. Frangione. Sure. So I will take that and then I will 
pass it off.
    And funding is great. We always like more funding to the 
agencies to do prizes and helping to clarify what they can do 
and what they can't do and how they can do it. So, for example, 
I mentioned earlier we really believe you need to support the 
teams and you need to market and educate the public and the 
world and the teams. And so giving them that ability to use 
every element of a prize to make that prize most effective is 
extremely helpful.
    We also are in favor of directing to certain areas. We are 
not in favor of legislating specific metrics of prizes. That is 
when you get into big trouble because you end up possibly 
picking metrics that aren't the best metrics.
    As Donnie said earlier, you know, he really looked at the 
metrics of the competition to see if it was worthwhile. And 
there is an art and science to prize design and you need to 
allow the agencies and the public and private sector partners 
to design that in the appropriate manner.
    So I think you have got them all. I would just caution on 
how you direct the types of prizes.
    Mr. Kilmer. Thank you.
    Mr. Frangione. Um-hum.
    Mr. Singh. So I don't--I am not a public policy expert but 
I will act like the government is a really big company, which I 
do know how to deal with, okay. And so what we tell really big 
companies is we say, look, you need to create some centers of 
excellence that allow for skills to be there but you don't want 
to throttle all work through that because----
    Mr. Kilmer. Yeah.
    Mr. Singh. --even big companies are too big for things to 
go through one central location. So centers of excellence that 
allow you to cluster experience and knowledge sharing are 
important but you certainly don't want to throttle things 
through that.
    The other piece that we sometimes give advice to large 
companies is create incentives for people who do things well, 
right? So if agency--and this--in your context, if agency X 
does something well that receives an exponential return, well, 
guess what? You get to do more of that. And so what that does 
is it creates the incentive and behavior where somebody says, 
oh, it spreads around. We did something; it receives this 
return. That led to this positive outcome. And now I want to go 
to the center of excellence and learn. So if that process is 
emulatable in the government context, that is a something that 
has worked for large organizations looking to absorb new 
innovations.
    Dr. Moe. I think one of the things that can be done is to 
identify really problem areas. Obviously dialysis is one of 
those. But I think within those agencies, as part of the ASN, 
go and talk to individuals within CMS, for example, there is 
recognition that there is not enough innovation. There is 
recognition that the current payment structure is for the 
purpose of containing cost but doesn't do anything to reduce 
cost and improve innovation.
    So within those agencies, there is recognition of the need 
for something new and different, and by, you know, doing a 
prize within your various offices of who can come up with the 
best idea for a prize competition or best needed area would be 
a way to spur people to think about it. I think that is the 
important thing is to somehow encourage offices to think about 
a prize.
    Mr. Kilmer. Thank you. And to give 10 more seconds, I yield 
back. Thank you. I did better than three.
    Chairman Bucshon. There you go.
    I recognize Mr. Hultgren for five minutes.
    Mr. Hultgren. Thank you, Mr. Chairman. Thank you all for 
being here. This really is a crucial hearing for this 
Subcommittee as we continue to ensure federal government is 
playing a smart role in advancing innovation and breakthrough 
discoveries that I believe will dramatically change our world 
and make it a better world to live in.
    Prizes are an important mechanism where private sector 
partners such as yours certainly can have a dramatic effect. I 
also believe the federal government should be learning best 
practices from you as the administrators have approached prizes 
in a very different manner, having more numerous but smaller 
prizes that often serve mainly PR purposes. It is also 
important they understand how prizes work together with our 
greater federal R&D enterprise, and they both play crucial 
roles in a symbiotic relationship.
    Mr. Frangione, is that it? Sorry. Frangione. Is your 
written testimony--in your written testimony you touched on the 
multiplier effect these prizes have on R&D. Teams, I think you 
stated, spend 4 to 10 times the value of the prize in 
aggregate. Why do you think XPRIZE has been successful in 
getting people to spend more than a prize purse to win the 
prize? Is it simply the prestige of winning the prize? Also, 
how do you build prize branding so that there is prestige in 
winning your prize and thereby attract a diverse group of 
participants?
    Mr. Frangione. So there are a lot of reasons teams compete 
for our prizes. One is the prize purse obviously. Two is the 
legitimization of an industry. Nobody believed that private 
companies could put a plane in space. Only government could do 
that. And our prize legitimized that. And as Donnie said 
earlier, one of the other things is you can first go out there 
and you can market your result and say I have done this but 
nobody believes it because your company is marketing it. When 
you go through a prize competition, the prize has all these 
different stages whether it is independent third-party verified 
data that they can now use to make the products better and to 
go out and sell their product.
    Another real reason teams compete is for the competition 
resources. When we used Ohmsett where the oil spill cleanup 
XCHALLENGE was held, that cost us $1 million to rent the 
facility and $1 million in donated oil. We had 10 finalist 
teams so it is $200,000 per team and it was on a U.S. Navy base 
so you wouldn't have been able to use it anyway. So they got to 
test at an independent third-party verified testing center 
because of the competition. So the key is and the reason we are 
successful is that we provide lots of reasons for the team to 
compete that is not about that check. Once it is about that 
check, you are not going to get a lot of teams competing. So 
you have to make it rewarding and simple for them to compete. 
You have to make sure that they are all heroes so that they all 
compete for that end market at the end of the day. Once you 
limit it to a $10 million check, nobody is going to compete. 
Well, you will have a few but not a lot.
    Mr. Hultgren. Do you think it is more difficult for the 
government to build similar branding when we have so many 
different and smaller prizes?
    Mr. Frangione. I do not. I think the government can do a 
great job in this and many have. NASA's Centennial Challenges 
are doing great. USAID is investigating prizes and doing a 
fantastic job. I think the key is that you have to pull all 
these other levers in the prize--the marketing, the media, the 
competition resources--and make them rewarding for teams to 
compete.
    I think people would be excited to compete for a government 
prize, right? I mean XPRIZE is a great brand but I actually 
think it would be cooler to compete for a NASA prize. People at 
home will kill me for saying that but, you know, it is--NASA 
holds so much more stature than we do, right? So I think the 
government's brands that they have--USAID, NASA, DOE--are big 
enough amongst themselves and I do encourage them to do much 
larger prizes than they are currently doing.
    Mr. Hultgren. I don't know if you want to put the Congress 
brand on--I don't know how that would go over.
    Let me touch on again the multiplier effect these prizes 
have. I wonder if you could give the Committee any examples of 
companies that competed for prizes, did not win, but still 
started successful businesses from their work. In your 
testimony you spoke about ``disruptive innovation'' and 
``democratizing innovation.'' How does your process give 
previously overlooked teams both the experience and exposure 
they need to then enact a workable business model and attract 
private capital?
    Mr. Frangione. Sure. So for us we have lots of examples 
of--and I can't give you specifics just because I don't know 
them off the top of my head, but we have lots of examples of 
teams going out and competing. We just have so many teams it is 
hard to keep track. For example, on our oil spill technology 
prize, we had a team that was a tattoo artist and they came in 
seventh place. They didn't win any money but they still did 
better than industry standard at the time on one of the metrics 
and they are out there competing in the marketplace. 
Unfortunately, I don't know how successful they are. Maybe 
Donnie knows how successful they are now. But still, they would 
have never competed. They didn't even have an interest in the 
industry until the prize existed.
    So the key is that you don't know who the solver community 
is until you launch the prize, and that is why they are so much 
better than a traditional grant or contract in certain places. 
Basic research where there is no end market, prizes don't work. 
You need that end market. But in certain places where there is 
a big end market, prizes work really well.
    Mr. Hultgren. Well, thank you all very much. I guess I have 
only three seconds that I can yield back like my colleague from 
Ohio. So I yield back, Chairman.
    Chairman Bucshon. Thank you very much.
    At this point I would like to thank all the witnesses. This 
is a very fascinating hearing. I thank you for your valuable 
testimony and the Members for questions. The record will remain 
open for two weeks for additional comments and written 
questions from Members.
    The witnesses are excused and the hearing is adjourned. 
Thank you very much.
    [Whereupon, at 11:19 a.m., the Subcommittee was adjourned.]

                                 [all]
