Prize Authority – From Prize to What?

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In selecting the right approach or right instrument to pursue innovation and find the pathway to a fielded capability, prize competitions under 10 U.S.C. 2374a are an under-utilized resource. Section 2374a is found in Chapter 139 of Title 10 of the U.S. Code. That is the same Chapter that contains sections 2371, 2371b and 2373, commonly referred to as other transactions. In section 867 of the National Defense Authorization of 2018 Congress directed the Secretary of Defense to create a preference for using those provisions of law to conduct science, technology and prototype programs. The Secretary of Defense and leadership would do well to comply with that Congressional mandate. In addition, those authorities can be used in conjunction with section 2374a – prize competitions. Combining these authorities, or stacking, can create an effective pathway to fielding new capabilities.

Section 2374a was enacted as part of the National Defense Authorization Act of 2000 in October 1999 (it was the last legislative provision that I drafted and advocated as General Counsel of DARPA). Compared to later enactments, for NASA (51 U.S. Code, sec. 20144) and government-wide under the America COMPETES Act (15 U.S. Code, sec. 3719), it is relatively short and simple.

§2374a. Prizes for advanced technology achievements

(a) Authority.-The Secretary of Defense, acting through the Assistant Secretary of Defense for Research and Engineering and the service acquisition executive for each military department, may carry out programs to award cash prizes and other types of prizes that the Secretary determines are appropriate to recognize outstanding achievements in basic, advanced, and applied research, technology development, and prototype development that have the potential for application to the performance of the military missions of the Department of Defense.
(b) Competition Requirements.-Each program under subsection (a) shall use a competitive process for the selection of recipients of cash prizes. The process shall include the widely-advertised solicitation of submissions of research results, technology developments, and prototypes.
(c) Limitations.-(1) No prize competition may result in the award of a prize with a fair market value of more than $10,000,000.
(2) No prize competition may result in the award of more than $1,000,000 in cash prizes without the approval of the Under Secretary of Defense for Research and Engineering.
(3) No prize competition may result in the award of a solely nonmonetary prize with a fair market value of more than $10,000 without the approval of the Under Secretary of Defense for Research and Engineering.
(d) Relationship to Other Authority.-A program under subsection (a) may be carried out in conjunction with or in addition to the exercise of any other authority of an official referred to in that subsection to acquire, support, or stimulate basic, advanced and applied research, technology development, or prototype projects.
(e) Acceptance of Funds.-In addition to such sums as may be appropriated or otherwise made available to the Secretary to award prizes under this section, the Secretary may accept funds or nonmonetary items from other departments and agencies of the Federal Government, from State and local governments, and from the private sector, to award prizes under this section. The Secretary may not give any special consideration to any private sector entity in return for a donation.
(f) Use of Prize Authority.-Use of prize authority under this section shall be considered the use of competitive procedures for the purposes of section 2304 of this title.

Several DOD organizations have conducted prize competitions, often called challenges. What has been missing is exploitation of key provisions, namely subsections (d) and (e). These expressly permit prize competitions to be conducted in conjunction with other authorities – such as prototyping authority (section 2371b). Additionally, prize competitions can be conducted collaboratively with other government organizations or private entities. Both provisos are potentially powerful.

In selecting any approach or award instrument for spurring innovation or conducting research and development the first question is, what problem are we trying to solve?  What is the problem, the knowledge gap, or technology gap that we are trying to address? Understanding that, allows formation of goals and the beginning of a strategy. What is the best way to achieve the goal?

Prize competitions address certain kinds of problems well. They can help us understand the art of the possible. They can direct the interest of industry and academia to problems they might not otherwise have addressed, and interest segments of industry not otherwise interested in defense issues. A 1999 National Academy of Sciences study on Federally sponsored inducement prizes provides additional examples. Now, twenty years later the National Academy has just conducted another workshop about inducement prizes which should result in a new report soon. I made presentations to the Academy committees studying the subject both then and recently.

Because of subsection (d) DOD’s prize competitions can potentially be more powerful than other versions of prize competitions. A prize competition can be structured so that in addition to a cash prize or prizes competitors are eligible for award of a prototype project under section 2371b. This would further develop its entry in the prize competition. A successful prototype project can in turn lead to non-competitive follow on production award. A prize competition is a competitive procedure for purposes of section 2371b. It even rates as competition for purposes of a FAR-based procurement contract.

Keep in mind that a prototype project following a prize competition need not be a project that embodies the entire entry in the competition. For example, if the competition involves a robotic system, the entire system need not be the subject of additional development as a prototype. Possibly just a sensor, software, or some other component might be the subject of the prototype project. An example is the super-efficient refrigerator program sponsored by electric utilities in the 1990’s. The winning entry was never marketed in the form that won the competition, but all the components of the winning system were commercialized in various products.

DOD organizations interested in innovation and ways to rapidly transition technology developments into fielded capabilities should study the potential of section 2374a to support that mission. Prize competitions can be integrated into a comprehensive approach to drive technologies across the spectrum of R&D into new capabilities to support the warfighting mission.

Successful models of government-industry collaboration exist that can be adapted to prize competitions. In the Integrated High-Performance Turbine Technology (IHPTET) Program the entire domestic gas turbine industry, seven companies from huge to modest in size, was brought together to advance the state of the art with respect to ceramic components for jet engines. There was equal cost-sharing between industry and government with industry providing leadership in selecting projects to be funded. Another example was a collaboration between DARPA and the Electric Power Research Institute (EPRI) through which no funds changed hands, but a joint solicitation/challenge was issued to industry resulting in “yours, mine and ours” funding. That is, projects funded entirely by government, entirely by industry, or jointly. Prize competitions can be structured in these and other ways. Always ask, what is the problem to be solved and what is the best way to address it?

Another legal authority in common use is the Partnership Intermediary (15 U.S.C. 3715). PI’s (or PIA) often issue challenges. These can be the competitive process of a government funded prize competition. The prize competition can, as suggested above, be the lead-in to award of a prototype project and possibly follow-on production.

Once shaking off the idea that “business as usual” is the only way to go the universe of possible approaches to over coming “takes too long, costs too much” is expansive. Once beyond rule following, education in the available legal authorities and thinking are powerful enablers.

written by Richard L. Dunn