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FYI Number 37: April 2, 2002

Report and Hearing Address Proposed ATP Reforms

"The ATP Program, with appropriate reforms, can play a useful role in the Federal science and technology portfolio." - Commerce Department Report on ATP Program

The Commerce Department's Advanced Technology Program (ATP) has been controversial since it was first authorized in 1988. The ATP provides competitive, cost-shared grants to the private sector to help support early-stage, high-risk R&D on emerging technologies that promise widespread benefit to industry and the nation. The dispute over the program was described by Christopher Hill of George Mason University at a March 14 hearing: "ATP's major problem is that it operates at the nexus of the debate over the appropriate role of the federal government in support of commercial industrial innovation." Many unsuccessful attempts have been made in Congress to eliminate funding for it (see FYI #80, 2000), and the FY 2003 budget request would cut ATP funding by 41.5 percent from the FY 2002 level, to $107.9 million.

In February, Commerce Secretary Donald Evans proposed six program reforms for Congress to consider, in a report entitled "The Advanced Technology Program: Reform with a Purpose." The six proposed reforms, with explanatory quotes from the report, follow:

REFORM #1: Institutions of higher education should be allowed to lead ATP joint ventures. In the past 20 years, the report notes, "American universities have become increasingly active in undertaking sophisticated commercially-focused, high-risk research," and "ATP should leverage the growing capabilities that universities now offer."

REFORM #2: Universities and other non-profit members of ATP joint ventures should be permitted "to negotiate for rights in intellectual property resulting from these ventures." The report says "current ATP legislation restricts how intellectual property can be shared with universities participating as subcontractors or in joint venture arrangements" and "universities often see this feature of ATP as putting them at a competitive disadvantage."

REFORM #3: Fortune-500 size companies (generating more than $2.5 billion annually) should be allowed to participate "only as a part of a joint venture. This would enhance the Program's ability to ensure broad diffusion of results.... By partnering with large firms, universities and small- and medium-sized firms also would benefit from the larger firms' marketing and technological insights."

REFORM #4: Recipients of ATP awards should be required "to pay an annual royalty to the Federal government of 5 percent of any gross revenues derived from a product or invention supported by or created as a result of ATP funding." This money would be reinvested in the program, to a limit of 500 percent of the original ATP funding.

REFORM #5: The program should "explicitly restrict project support of later-stage commercial projects.... ATP's project selection criteria and operational procedures should be strengthened to ensure that the Program only supports projects that can be expected to remove scientific or technological barriers to product development..."

REFORM #6: ATP should "conduct a study of its evaluation boards to determine if additional non-proprietary input from non- governmental sources would assist the Program in better assessing whether a specific technology is being adequately supported by the private sector."

Looking ahead to both the appropriations cycle and reauthorization of the Commerce Department's Technology Administration, the House Science Subcommittee on Environment, Technology and Standards heard from Commerce Department officials and users of NIST's industrial services programs at a March 14 hearing. Most of the hearing focused on the proposed budget reductions of 41.5 percent to the ATP and 87.9 percent to the Manufacturing Extension Partnership (MEP). While subcommittee members seemed willing to reserve judgment on the budget and reforms proposed for ATP, they expressed particular concern over the impacts of reductions to MEP funding. NIST Director Arden Bement said the budget request reflected "not so much a judgment on the effectiveness of the programs in question," as the need to give priority to NIST's role in homeland security and counter- terrorism.

Michael Wojcicki, president of the Modernization Forum, and Birgit Klohs, president of The Right Place program, described the benefits of MEP centers to jobs and the manufacturing base both regionally and state-wide. They testified that loss of federal support would result in the shutting down of many centers, while others would shift their emphasis away from small manufacturers to larger companies that could pay more for their services. The national MEP system would be damaged and the program's goals no longer fulfilled, they said.

Commenting on the proposed ATP reforms, Christopher Hill, a professor and vice provost at George Mason University, agreed that letting universities lead joint ventures and have access to intellectual property rights were reasonable reforms. But he urged that large firms not be limited only to joint participation with smaller firms, since, he said, participating companies are merely a means to accomplish the program's purpose of promoting development and widespread application of key new technologies. Hill strongly took issue with the recommendation for recouping five percent of revenues from successful projects. This, he said, assumes that the federal investment will always lead to an identifiable product and profit for participants. It also might encourage firms to save the most promising ideas for non-ATP projects and "hide" evidence of success, thus damaging the program's success rate. There is an alternative to recoupment that captures the broader benefits to whole industries, he declared; it is the federal tax system.

Subcommittee members pressed the Commerce Department officials on what criteria the Administration used to justify the ATP and MEP budget reductions. Rep. Lynn Rivers (D-MI) charged that, like grade school students, Administration officials did not "show your work" in explaining how they arrived at those funding decisions. Bement said that the request for ATP would allow the program to meet its ongoing obligations and fund about $34.7 million in new awards next year, while Congress considered the proposed program reforms. Under Secretary for Technology Phillip Bond said there were indications that large firms might help support some MEP centers, but acknowledged that no companies had yet made such a commitment. "Be prepared," warned full committee chairman Sherwood Boehlert (R-NY), "we're going to treat [the programs] better than the request." Added subcommittee chairman Ehlers, "Congress is likely to work its will on this." He said he expected the ATP and MEP programs to be continued, although possibly with some changes to both.

Audrey T. Leath
Media and Government Relations Division
American Institute of Physics
fyi@aip.org
(301) 209-3094

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