The Technology Innovation Program

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P.L. 110-69 created the Technology Innovation Program (TIP) at the National Institute of
Standards and Technology (NIST) to replace the Advanced Technology Program (ATP). The
FY2008 Consolidated Appropriations Act, P.L. 110-161, provides $65.2 million for the program
(with an additional $5 million in unobligated FY2007 balances from ATP). The President’s
FY2009 budget request contains no funding for TIP. The FY2009 appropriations bill ordered
reported from the House Committee on Appropriations provides $65.2 million for the program; S.

3182, as reported from the Senate Committee on Appropriations, includes $65 million for TIP.

Introduc tion ..................................................................................................................................... 1
Backgr ound ..................................................................................................................................... 1
A Different Approach......................................................................................................................4
Issues and Observations..................................................................................................................4
Author Contact Information............................................................................................................6

The America COMPETES Act, P.L. 110-69, authorized a new Technology Innovation Program
(TIP) to replace the Advanced Technology Program (ATP) at the National Institute of Standards
and Technology (NIST). The FY2008 Consolidated Appropriations Act, P.L. 110-161, provides
funding for TIP. This effort is designed “ ... to support, promote, and accelerate innovation in the
United States through high-risk, high-reward research in areas of critical national need,”
according to the authorizing legislation. NIST published the final rule prescribing the policies and
procedures for the TIP activity on June 25, 2008 (15 C.F.R. Part 296). The intent of the program
is to provide grants to small and medium-sized firms for individual projects or joint ventures with
other research organizations to undertake work that:
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Small or medium-sized for-profit firms are eligible for individual project awards of up to $3
million over three years. Collaborative research ventures including small or medium-sized
companies, national laboratories, universities, or other non-profit research institutions may be
funded for a total of up to $9 million over five years. A competitive, merit-based process is to be
used to make grants of up to 50% of total project costs.
The FY2008 Consolidated Appropriations Act, P.L. 110-161, provides $65.2 million (with an
additional $5 million in unobligated balances from the FY2007 ATP appropriation). This is 17.6%
less than FY2007 funding for the Advanced Technology Program which TIP replaces. According
to NIST, the major portion of this FY2008 support will be used to meet previous ATP funding
commitments. The President’s FY2009 budget request does not contain any financial support for
TIP. The FY2009 appropriations bill ordered reported from the House Committee on
Appropriations provides $65.2 million for the program; S. 3182, as reported from the Senate
Committee on Appropriations, includes $65 million for TIP. These figures are similar to current
fiscal year funding.

The Advanced Technology Program,² which was replaced by the Technology Innovation
Program, was established by Title V of the Omnibus Trade and Competitiveness Act (P.L. 100-
418). ATP was intended “to serve as a focal point for cooperation between the public and private
sectors in the development of industrial technology” and to help solve “problems of concern to

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large segments of an industry,” as noted in the Conference Report to accompany the bill. Placed
within the National Institute of Standards and Technology (NIST), in recognition of the
laboratory’s ongoing relationship with industry, ATP provided seed funding to single companies
or to industry-led consortia of universities, businesses, and/or government laboratories for
development of generic (broad-based), pre-competitive technologies that had applications across
industries. Awards, based on technical and business merit, were for high-risk work past the basic
research stage but not yet ready for commercialization. Market potential was an important
consideration in project selection.
Awards were for either product or process technology development. Individual firms were
restricted to funding of $2 million over three years. Money was to be used only for direct R&D
costs. Large firms provided at least 60% of total (direct and indirect) projects costs; small and
medium-sized companies were not required to cost-share direct costs. Joint ventures could
receive up to five years of financing for any amount, limited only by availability. In such cases,
the private sector provided more than 50% of funding. While universities and federal laboratories
could participate in collaborative work, the ATP grant was made solely to companies.
According to NIST, through the end of 2007, 824 projects had been funded, of which about 28%
were joint ventures. Approximately $2.4 billion in federal funds have been matched by $2.2
billion from the private sector. Small businesses or cooperative efforts led by such firms made up
almost 68% of the awardees. (The legislation creating TIP, P.L. 110-69, requires that the Director
of NIST “ ... continue to provide support originally awarded under the Advanced Technology
Program, in accordance with the terms of the original award and consistent with the goals of the
Technology Innovation Program.”)
Continued support for the Advanced Technology Program was a major funding issue. Opponents
of the program cited it as a prime example of “corporate welfare,” whereby the federal
government invests in applied research activities that, they emphasize, should be conducted by
the private sector. Others defended ATP, arguing that it assisted businesses (and small
manufacturers) in developing technologies that, while crucial to industrial competitiveness, would
not or could not be developed by the private sector alone.
The National Institute of Standards and Technology undertook numerous analyses of ATP; the
General Accounting Office (GAO, now the Government Accountability Office) also studied the
program. In its first evaluation (1994), NIST concluded the program had stimulated research that
would not have been done without the federal support; that R&D cycles within companies have ³
been abbreviated; and that “valuable business alliances” had been created. However, in a May

1995 report, GAO argued that these conclusions can not be adequately substantiated by the ⁴

information provided in the NIST study on which they were based. Acknowledging that it was
too early to determine the long-term impact of ATP, the GAO report stated that some of the
indicators NIST utilized “may create false expectations of the program’s economic success.”
NIST vigorously defended its methodology.

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Additional studies funded by NIST found that ATP shortened R&D cycles by half and accelerated
technological progress within the firm; stimulated productive collaborative activities among
companies and between firms and universities; facilitated commercialization; and increased ⁵
private sector investment in high risk technology development. An April 2000 progress report ⁶
reinforced these earlier findings. This study indicated that “participants in 261 projects have
identified more than 1,200 different applications (or uses) of the technologies under
development,” and that the majority of these are new solutions to market needs or improvements
in existing products or processes. Product cycles are being reduced, and while 24% of
respondents said that they would not have undertaken the project without ATP funding, most
others noted that the R&D would have been significantly slower without such support. NIST
found that “organizations are pursuing different R&D than they would have undertaken without
ATP funding,” and that this work is more technically advanced and risky. The ATP financing also
stimulated additional private sector money in these technical areas than otherwise would be the
case. Over half of the companies are now able to make a new or improved product. In March
2000 testimony, Raymond Kammer, then director of NIST, stated that approximately 120 new
technologies have been commercialized. According to NIST, more than 60% of ATP projects have ⁷
resulted in commercial products and processes available in the marketplace.
The concern over whether ATP supports projects that could reasonably attract private sector
investment has been an issue throughout the life of the program. In a report examining award
winners and “near winners” during the first four years of ATP, GAO found the program funded
both projects that would not have progressed without this federal support and those that would ⁸
have been financed by the private sector. Half of the awardees stated that they would have
continued without ATP financing. Of the “near winners,” 50% pursued their efforts in the absence
of federal money but took longer to achieve their goals. According to GAO, while 63% of the
applicants did not look elsewhere for funds, about half of the applicants who did “were told by
prospective funders that their projects were either too risky or ‘precompetitive’—characteristics
that fulfill the aims of ATP funding.” Respondents also noted that the program facilitated
development of joint ventures to pursue ATP activities.
A study undertaken by the American Enterprise Institute concluded that ATP “has had only
limited success” in choosing projects that could not raise private sector funds. According to the
authors, this has occurred because companies are not interested in pursuing R&D that fails to
complement work performed for profit. In addition, the ATP selection criteria focus on
commercial sales and job creation, not on projects for which there are “broad social benefits” and
insufficient private investment. An April 2000 report by GAO, reinforced by May 26, 2005

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testimony, noted that “two inherent factors in ATP’s current award selection process—the need to
guard against conflicts of interest and the need to protect proprietary information—make it
unlikely that ATP can avoid funding research already being pursued by the private sector in the ⁹
same time period.”

The Technology Innovation Program appears to have been designed to avoid what was seen as
government funding of large firms that did not necessarily need federal support for R&D
activities. The committee report to accompany H.R. 1868, part of which was incorporated into the
final legislation, stated that TIP replaces ATP in consideration of a changing global innovation
environment focusing on small and medium-sized companies. The structure of TIP also “ ...
acknowledges the important role universities play in the innovation cycle by allowing universities ¹⁰
to fully participate in the program.”
While similar to ATP in the promotion of high-risk R&D that would be of broad-based economic
benefit to the Nation, there are several differences in the expected operation of the new
Technology Innovation Program primarily associated with the size of eligible companies.
Financial support under TIP is limited to small and medium-sized businesses whereas grants
under ATP were available to companies regardless of size. In addition, in the Advanced
Technology Program, joint ventures were required to include two separately owned for-profit
firms and could include universities, government laboratories, and other research establishments
as participants in the project but not as recipients of the grant. In the TIP initiative, a joint venture
may involve two separately owned for-profit companies but may also be comprised of one small
or medium-sized firm and a university (or other non-profit research institution). A single company
could receive up to $2 million for up to three years under ATP; under TIP, the participating
company (which must be a small or medium-sized business) may receive up to $3 million over
three years. In ATP, small and medium-sized companies were not required to cost share (large
firms provided 60% of the total cost of the project) while in TIP there is a 50% cost sharing
requirement which, again, only applies to the small and medium-sized businesses that are eligible.
There were no funding limits for the five-year funding available for joint ventures under ATP; the
TIP limits joint venture funding to $9 million for up to five years. The Advisory Board that was
created to assist in the Advanced Technology Program included industry representatives as well
as federal government personnel and representatives from other research organizations. The
Advisory Board for the Technology Innovation Program would be comprised of only private
sector members.

The effort to terminate the Advanced Technology Program, along with additional attempts to
withdraw government support for certain other technology development efforts, appear to reflect
a philosophy that eschews direct federal financing of private sector R&D efforts aimed at the

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commercialization of new technologies and production processes. Such activities are seen by
opponents as “industrial policy,” the means by which government rather than the marketplace
“picks winners and losers.” Instead, measures that would occasion a better investment
environment for industry to expand their innovation-related efforts would, proponents argue, be
preferable to government funding.
The current approach, including the new Technology Innovation Program, involves varied
mechanisms to facilitate technological advancement. Legislation has created a body of laws,
programs, and policies that involve both indirect and direct measures to stimulate technology
advancement in the private sector. Indirect incentives include a research and experimentation tax
credit; changes to the antitrust laws to encourage collaborative R&D and cooperative
manufacturing ventures; alterations of patent ownership policies to facilitate government-
industry-university interaction; and practices to promote technology transfer. Direct measures
involve, among other things, federal funding for TIP and the Small Business Innovation Research
Program. These cost-shared programs have been supported, in part, because of what proponents
argue is their potential contribution to the country’s national or economic security.
The elimination of ATP and the creation of TIP have renewed the debate over the role of the
federal government in promoting commercial technology development. In arguing for less direct
federal involvement, advocates believe that the market is superior to government in deciding
technologies worthy of investment. Mechanisms that enhance the market’s opportunities and
abilities to make such choices are preferred. It is suggested that agency discretion in selecting one
technology over another can lead to political intrusion and industry dependency. On the other
hand, supporters of direct methods argue that it is important to focus on those technologies that
have the greatest promise as determined by industry and supported by matching funds from the
private sector. They assert that the government can serve as a catalyst for cooperation.
Technological progress is important to the nation because of its contribution to economic growth
and a high standard of living. How best to achieve this continues to be debated. Critics viewed
ATP as a means for a federal agency to select commercial firms and/or technologies for support.
They maintained that the absence of market-generated decisions will result in technologies that
can not be utilized productively by participating companies. Such a program, they argue,
encourages selection of well-written proposals rather than assistance for truly important
technologies. However, proponents stressed that ATP was market driven and that the technical
areas for investment had been developed in conjunction with industry. In addition, companies
were required to put up significant amounts of funding and survive a rigorous business review;
procedures that made the ATP different from other federal efforts. Replacing ATP with the
Technology Innovation Program may be one response to criticisms that large firms should not be
recipients of this form of federal research funding, support that should be reserved for small and
medium-sized companies which do not have the financial resources available to major
corporations.

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