Federal prize competitions offer unique entrepreneurial opportunities to solve real problems

Combining the adages “necessity is the mother of invention” and “two heads are better than one,” the best innovations often arise by broadening the community of minds focused toward addressing a particular problem or need. The Obama Administration took the concept of funding open innovation competitions toward specific issues to heart, encouraging federal agencies to use prizes and challenges as much as practical. Going a step further, Congress enacted legislation in 2011 to make it easier for federal agencies to use the cost-effective tool and the practice was maintained during the four years of the Trump Administration. With early signs suggesting the incoming Biden administration will see a return of many key policymakers and themes from his Democratic predecessor, there may also be a renewed focus on using challenges and problem-solving prize competitions to spur innovation and prosperity coming out of the pandemic. A recent Department of Energy press release adds further weight to this hypothesis and provides a good opportunity for prospective grant seekers to begin to familiarize themselves with the concept in anticipation future federal funding rounds.

The Department of Energy’s Office of Energy Efficiency and Renewable Energy (EERE) highlighted the benefits of its earlier prize competitions that engaged the private sector and general public in innovative, real-world, government-funded problem solving. The EERE press release provides a small sample of success stories, demonstrating the approach’s ability to leverage private sector knowledge to solve challenges and spur entrepreneurial innovation, ultimately leading to job creation, economic growth and public benefit.

The challenge concept is currently utilized by a wide range of federal departments (e.g. USDA, DOD, DOE, HHS, NASA, the National Geospatial-Intelligence Agency, the National Science Foundation, etc.). Challenges provide agency leaders with a flexible mechanism to fund promising technology research and development projects aimed at solving specific and timely agency problems or to address future challenges faced by agencies, broadly-conceived, at the frontiers of science and technology. It leverages the creativity of the private sector and general public to develop potential solutions to these problems and to foster entrepreneurship among the participants. The challenge approach reduces the burden on participants to meet strict, predetermined technical specifications and requirements for their technology solutions and encourages entrepreneurship by offering participants a low-risk environment to navigate the very early stages of concept validation, design, and development.

There are, however, a number of limitations or parameters built into the challenge concept to prevent the federal government from spending too much funding toward proposed solutions that do not pan out for one reason or another (unfeasible, inefficient, fraudulent use of funds, etc.). For instance, there is a statutory limit on the size of the available prize purses in each competition and eligibility is restricted to domestic, non-federal participants.

Alternately there are incentives in the challenge legislation intended to attract private sector participation: the government forgoes all rights to any intellectual property developed during a competition, preserving the right of participants to further develop and potentially commercialize their technologies. However, many challenges are designed to require open-source and publicly-available solution development to allow for greater participation.

While limited to domestic entities, eligibility allows for participation by individuals and teams of individuals at private, nonprofit, and academic organizations of all sizes. Cooperation and partnership building among the various federal agencies and private sector partners is also strongly encouraged to promote creativity and shared learning.

Extending beyond the federal funding environment, challenges and problem-focused prize competitions may provide a replicable format for state and local governments, institutions of higher education, and nonprofit entrepreneurial support organizations to stretch their funding for research and entrepreneurship. The challenge model’s flexibility to leverage the creative innovation of the public to solve specific and rapidly evolving problems could prove a significant boon to local economies as they recover from the pandemic-induced global recession. Visit Challenge.gov to view all open challenges and to learn more about the concept.