OSTP Examines the Use of Prizes to Spur Innovation

Prize competitions have played a prominent role in the Obama administration's innovation policy since the launch of the federal challenge.gov site in 2010. By announcing national Grand Challenges and allowing federal agencies to create their own prize competitions to encourage work in strategic areas, the administration has been able to generate interest and valuable contributions from a wide variety of untapped sources of innovation.

A new report from the Office of Science and Technology Policy (OSTP) examines the use of prizes to achieve ambitious national goals over the past few years, and presents a number of ways this approach could be improved. The report may be of use to states and regions interested in implementing their own prize-based innovation competitions.

A 2009 report, Strategy for American Innovation, outlined the Obama administration's intent to use prize competitions to focus national attention on key challenges, drawing on examples such as the Ansari X Prize, the Netflix Prize and the GoldCorp Challenge. The administration unveiled challenge.gov in September 2010 as a one-stop shop where entrepreneurs and others could could get information about public sector prizes. Since its launch, the site has featured more than 150 prize competitions from 40 federal agencies. Most of those competitions have been introduced since the passage of the America COMPETES Reauthorization Act, which significantly expanded the authority of agencies to create new competitions and made the process much easier.

While the Ansari X Prize and other competitions may have been the direct inspiration for the administration's tactic, the approach also has its roots in the world of online user-generated content. The report outlines a number of benefits of the prize strategy, most of which center on a public competition's ability to democratize problem-solving and to draw contributions from unexpected sources. Benefits include:

• Setting an ambitious goals without having to predict which team or approach will succeed;
• Reaching beyond the existing pool of people working on a problem;
• Introducing out-of-discipline perspectives; and,
• Increasing cost-effectiveness.

The report notes the value of the COMPETES Act in making prize competitions a central tool of each federal agency. Without clear and streamlined authority to institute new competitions, agencies would not make as frequent use of the approach and the benefits would be much more limited. Federal agencies now are implementing their own policies that will allow them to be more flexible and responsive in the use of prizes. States interested in the prize model should note that the approach requires significant agency independence and a clear legal route to introducing new competitions.

Read Implementation of Federal Prize Authority: Progress Report