95-36: The Advanced Technology Program

Wendy H. Schacht

Specialist in Science and Technology
Resources, Science, and Industry Division

Updated August 10, 1999

Summary

The Advanced Technology Program (ATP) was created by P.L. 100-418, the Omnibus Trade and Competitiveness Act of 1988, to encourage public-private cooperation in the development of pre-competitive technologies with broad application across industries. Administered by the National Institute of Standards and Technology (NIST), a laboratory of the Department of Commerce, this activity has been targeted for elimination as a means to cut federal spending. Mechanisms that do not involve direct government funding have been considered as alternatives to facilitate commercial technology development. However, strong support by the Clinton Administration led to continued ATP funding in FY1997 and FY1998, although at reduced levels. Appropriations for FY1999 were 3% above the previous year. The President's FY2000 budget request has $238.7 million for ATP, an increase of 21%. H.R. 1744, as introduced, would authorize $190.7 million. S. 1217, passed by the Senate, appropriates $226.5 million for the program, 15% above FY1999; however, H.R. 2670, the House appropriations bill, as passed, does not include any funding for ATP.

Program Rationale

Title V of the Omnibus Trade and Competitiveness Act (P.L. 100-418) established the Advanced Technology Program. This effort grew out of concerns over the competitiveness of American companies in the global marketplace. While numerous factors affect the rate of technical progress in an economy, what was seen as critical is how quickly and successfully science and technology are transformed into new or better products, processes, or services. The commercialization and diffusion of goods and services stood out as significant problems in the ability of U.S. industries to compete.

Underlying the structure of ATP is an effort to foster cooperation among government, industry, and academia to facilitate the generation of new technologies and techniques for the commercial market. While opponents argue that joint ventures stifle competition, proponents assert that they are designed to accommodate the strengths and responsibilities of the various sectors. Collaborative projects attempt to utilize and integrate what the participants do best and to direct these R&D activities toward the goal of meeting marketplace demands. Joint endeavors are seen as reducing risks and costs while permitting work that crosses traditional boundaries of expertise and experience.

Program Operation

The Advanced Technology Program was designed ". . .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 large segments of an industry," as noted in the Conference Report to accompany the bill. Placed within NIST, in recognition of the laboratory's on-going relationship with industry, ATP provides 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 have many applications across industries. Awards, based on technical and business merit, are made for work that is high-risk and past the basic research stage but not yet ready for commercialization. However, market potential is an important consideration in project selection. Reviewers for scientific and technical criteria are generally federal and academic experts. Business plan assessments are performed by individuals from the private sector.

Awards are for either product or process (manufacturing) technology development. Individual firms are restricted to funding of $2 million over 3 years. Money is only to be used for direct R&D costs. Large firms must provide at least 60% of total (direct and indirect) projects costs; small and medium-sized companies are not required to cost-share direct costs. Joint ventures may receive up to 5 years of financing for any amount limited only by availability. In such cases, the private sector must provide more than 50% of funding. While universities and federal laboratories can participate in collaborative work, the grant from ATP is made solely to companies. P.L. 102-245 modified the original law and required that the recipient of an ATP award be a firm that is U.S.-owned ("a company that has a majority ownership or control by individuals who are citizens of the United States") or a business that is incorporated in the United States and has a parent company established in a country which affords American firms reciprocal opportunities.

In its first year, FY1991, ATP was funded at $36 million. Appropriations increased to $48 million in FY1992, $67.9 million in FY1993, and $199.5 million in FY1994. For FY1995, financial support expanded significantly to $431 million. However, P.L. 104-6 rescinded $90 million of this amount. Funding for FY1996 was $221 million with a small increase to $225 million in FY1997 but reduced to $218 million by P.L. 105-18. For FY1998, P.L. 105-119 appropriated $192.5 million. P.L. 105-277 provided $197.5 million in FY1999 support for ATP, 3% above the previous year. This figure reflects a $6 million recission contained in the same law that accounts for "deobligated" funds resulting from early termination of certain projects. In the FY2000 budget, the President requested $238.7 million for the program, an increase of 21% over the current year. As introduced, H.R. 1744 would authorize funding of $190.7 million, 3% below FY1999. S. 1217, passed by the Senate, appropriates $226.5 million for the program, 15% above FY1999. However, H.R. 2670, as passed by the House, includes no appropriations for ATP. The report to accompany the House bill states that ". . .the program has not produced a body of evidence to overcome those fundamental questions about whether the program should exist in the first place."

To date, 431 projects have been funded; 146 are joint ventures. Approximately $1,384 million in federal funds have been matched by over $1,419 million in financing from the private sector. Over one-half of the awardees (including 68% in the latest round) are small businesses or cooperative efforts led by such firms. The first four competitions (ending August 1994) were general in nature. The following year, in response to large increases in federal funding, NIST restructured part of ATP to focus on various groups of projects in "well-defined" programmatic areas designed for long-range support. These were selected in conjunction with industry. Awards were made in the focused categories of: information infrastructure for healthcare (16); DNA diagnostic tools (13); component-based software R&D (11); computer-integrated electronics manufacturing (1); and manufacturing composite structures (15). In the general competition 32 awards were distributed. During 1995, ATP provided support for: manufacturing composite structures (7); information infrastructure for healthcare (10); DNA diagnostic tools (7); component-based software (7); motor vehicle manufacturing (15); digital data storage (6); digital video in information networks (6); catalysis and biocatalysis technologies (9); vapor-compression refrigeration (7); integrated manufacturing applications (4); and materials processing for heavy manufacturing (8). Seventeen general awards were made. Only one general competition was held in FY1996. For FY1997, funding was made available in the areas of information infrastructure for healthcare (6), motor vehicle manufacturing technology (10), digital data storage (6), component-based software (6), and technologies for the integration of manufacturing applications (6), as was a general competition (18). A new program area, tissue engineering (12), was also selected. The latest awards (FY1998) included DNA diagnostic tools (7), digital video in information networks (5), catalysis and biocatalysis (4), photonics manufacturing (10), premium power (13), microelectronics manufacturing infrastructure (9), selective-membrane platforms (5), adaptive learning systems (3), and the general competition (23). For FY1999, NIST is holding one competition open to all areas of technology.

Results

Several evaluations of the Advanced Technology Program have been conducted but are limited because of the small number of projects which have reached their completion dates. Typically, it takes 5 to 7 years to produce marketable results from R&D. As a result of two preliminary studies, NIST concluded the program had stimulated research that would not have been done without the federal support; that R&D cycles within companies have been abbreviated; and that "valuable business alliances" had been created.⁽¹⁾ However, in a May 1995 report, the General Accounting Office (GAO) argued that these conclusions can not be adequately substantiated by the information provided in the NIST study on which they are based.⁽²⁾ Acknowledging that it was too early to determine the long-term impact of ATP, the GAO report stated that judgements should not be made based on the results of Setting Priorities and that some of the indicators utilized ". . .may create false expectations of the program's economic success." NIST has vigorously defended its methodology.

In a report examining award winners and "near winners" during the first 4 years of ATP, GAO found the program funded projects that both would not have progressed without this federal support and those that would have been financed by the private sector.⁽³⁾ 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 NIST commissioned inquiry into 125 ATP award recipients looked at the effects of the program on individual companies.⁽⁴⁾ Of the firms studied, 122 indicated that ATP had a positive impact; the three which were dissatisfied identified problems with joint venture efforts. Over 90% reported shortened R&D cycles and accelerated progress. Similar numbers of firms indicated that ATP had stimulated productive collaborative activities among companies. Approximately three-fourths of the respondents noted that their competitive standing had improved since participation in the program; "[t]o a `great' or `moderate extent,' 75% of this group related the change in status to the ATP award."

In October 1997, NIST released a study of 28 early award winners that found participation in the ATP effort resulted in the significant acceleration of technology development within the firm.⁽⁵⁾ New technology time cycles were often cut in half, leading to major cost savings for many of the companies. This was seen as a result of ATP requirements for planing and management; long-term commitments, ability to attract additional capital because of federal support, encouragement of collaboration, and expanded resources. In addition, most firms were able to apply time cycle improvements arising from the program to other technology development efforts.

Based on information provided by ATP participants, the author of a December 1997 NIST report found evidence of broad national economic benefits, acceleration of the R&D process, decreases in the time necessary to bring a product to market, expanded collaborative efforts, increased private sector investments in high risk technology development, and facilitated commercialization as a result of the program.⁽⁶⁾ According to the study, these findings confirm earlier conclusions and demonstrated ". . .that the ATP is making solid progress towards achieving its mission of economic growth through technological advancement."

A recent examination of all 38 projects completed by March 1997 (performed under contract for NIST) found the work had ". . .produced a number of scientific discoveries, contributed to the U.S. knowledge base, and produced a number of breakthrough technologies."⁽⁷⁾ Of the projects funded, 66% would not have been undertaken without federal support while the remaining companies noted their efforts were accelerated by one and a half years or more because of ATP funding. Of the completed activities, 24 had taken a new product or service to the marketplace or were using a new process technology. In addition, 60% of the 27 individual small companies more than doubled in size from pre-ATP operations.

Issues and Observations

There have been efforts in the past several years to terminate the Advanced Technology Program, including bills which would have eliminated the entire Department of Commerce. These actions, along with additional attempts to withdraw government support for other technology development efforts, appear to reflect a philosophy that eschews direct federal financing of private sector R&D efforts aimed at the 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 which would occasion a better investment environment for industry to expand their innovation-related efforts would, proponents argue, be preferable to government funding.

This signaled a change from the past during which a varied approach toward facilitating technological advancement had evolved. Legislative initiatives over the past 15-20 years have resulted in a body of laws, programs, and policies which 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 federal funding for ATP, the Small Business Innovation Research Program, and the now terminated Technology Reinvestment Project of the Department of Defense. These cost-shared programs have been supported, in part, because of their potential contribution to the country's national or economic security.

The mix of approaches was developed with bipartisan support in Congress. Under former President Reagan, public-private cooperation in research and development was promoted by the executive branch. The Bush Administration adopted a policy in which the government's role was ". . .to support the development of generic or enabling technologies at the pre-competitive stage of R&D." The Clinton Administration has expanded this concept to include additional direct federal funding to achieve increased commercialization of the results of R&D. The Advanced Technology Program reflects these ideas; thus the discussions over its proposed elimination have called into question many of the underlying assumptions which shaped the environment within which industry works toward technological advancement.

Proposals to terminate or severely limit ATP and other federally funded technology efforts 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 which technologies are worthy of investment. They prefer mechanisms that enhance the market's opportunities and abilities to make such choices. It is also 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 maintain that reliance on indirect measures can be wasteful, inefficient, and ineffective and can compromise other goals of public policy in the hope of stimulating innovative performance. Advocates argue that it is important to put the nation's scarce resources to work on those technologies which will have the greatest promise as determined by industry and supported by its willingness to match federal funding. They assert that the government serve as a catalyst for companies to cooperate and undertake important new work which would not have been possible without federal participation.

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. Among the questions which might be expected to be explored are: Should the government directly fund industrial R&D not directly tied to agency missions? Is the R&D supported by ATP critical to U.S. interests? Would this R&D be performed without federal financing? What benefits have accrued and do these benefits justify the costs? Are there other ways to generate these benefits? Is there industrial support for this program or is there a preference for other types of measures?

Critics view ATP as a means for a federal agency to select commercial firms and/or technologies for support. They maintain that the absence of market-generated decisions will result in technologies that can not be utilized productively by participating companies. Such a program encourages selection of well written proposals rather than assistance for truly important technologies. On the other hand, proponents stress that ATP is market driven and that the technical areas for investment have been developed in conjunction with industry. In addition, companies have to put up significant amounts of funding and survive a rigorous business review; procedures which make the Advanced Technology Program different from other federal efforts.

Perhaps most crucial to the debate is the way cooperative R&D is viewed. Today, American companies appear to be more competitive in the global marketplace than they were when the Omnibus Trade and Competitiveness Act was being considered in 1988. While there are many factors that have contributed to this improving situation, proponents of joint R&D efforts, such as the Advanced Technology Program, point to the benefits derived from increased technical collaboration and the development and application of the resulting new technologies and production processes. A question remains whether or not direct federal funding for such programs is the most effective or efficient means to secure these outcomes. Is the approach embodied in ATP the preferable one, or could other mechanisms such as permanent tax credits for R&D; changes in capital gains treatment; and/or liability and regulatory reform be more effective?

Footnotes

1. ^(back)National Institute of Standards and Technology, Setting Priorities and Measuring Results at the National Institute of Standards and Technology, January 31, 1994.

2. ^(back)General Accounting Office, Performance Measurement, Efforts to Evaluate the Advanced Technology Program, GAO/RCED-95-68, May 1995.

3. ^(back)General Accounting Office, Measuring Performance: The Advanced Technology Program and Private-Sector Funding, GAO/RCED-96-47, Jan, 1996.

4. ^(back)Silber and Associates., Company Opinion About the ATP and Its Early Effects, 30 January, 1995.

5. ^(back)Laidlaw, Frances Jean, Acceleration of Technology Development by the Advanced Technology Program: The Experience of 28 Projects Funded in 1991, 23 October, 1997. http://www.atp.nist.gov/www/eao/ir-6047.htm..

6. ^(back)National Institute of Standards and Technology, Advanced Technology Program: Development, Commercialization, and Diffusion of Enabling Technologies, by Jeanne W. Powell, December 1997.

7. ^(back)National Institute of Standards and Technology, Advanced Technology Program Performance of Completed Projects, Status Report Number 1 by William F. Long, March 1999, vii.