Ending Corporate Welfare: Time to Phase Out the Advanced Technology Program

Ending Corporate Welfare:

Time to Phase Out the Advanced Technology Program

        The U.S. Government has spent over $1.5 billion since 1990 on the Advanced Technology Program (ATP) to subsidize business research and development of "high risk, high payoff" commercial technologies. But ATP has failed to demonstrate that it is a necessary and efficient use of public funds. Conceived in a bygone era when the U.S. worried about losing out in international economic competition, ATP is obsolete at a time when the U.S. dominates global technological expansion. Beneath its ambitious rhetoric, ATP functions mainly as a corporate welfare program, providing substantial subsidies to some of the wealthiest U.S. companies.

        The FY 2001 budget requested $198.6 million in appropriations for ATP. However, both the House Science Committee and House-passed Commerce-State-Justice Appropriations bill (H.R. 4690) recommended that no funds be provided. As Congress moves toward a Conference on the final number, it should at the very least insist that no new projects be funded. With an anticipated carryover of $44 million from FY 2000 funds, it would require no more than $86.5 million in new money to support project administration ($45.2 million) and fulfillment of existing project commitments ($85.3 million).

        ATP should be phased out because:

1. Alternative, mainly private, funding has consistently been available for approximately half the ATP-funded projects.

        Unlike many "public goods" such as AIDS or malaria research, improved nutrition, environmental protection, energy conservation and national defense, there exists a lucrative private market for high tech products and services. Therefore, industry has powerful financial incentives to finance research and development for such products. Since the early 1990s, surveys sponsored by the Commerce Department's National Institute of Standards and Technology (NIST) -- which administers ATP -- and the General Accounting Office (GAO) have found that about half the projects would have gone ahead without ATP funds, though at a somewhat slower rate.

  • Based on a survey of early award recipients, a 1993 NIST consultant's report indicated that 14 out of 26 would have pursued the same technological R&D without an ATP award, although at a different level of effort. [GAO, "Performance Measurement: Efforts to Evaluate the Advanced Technology Program," May 1995, pp. 4, 20-21]
  • Based on a survey of both award recipients and near-winners, a 1996 GAO report indicated that approximately half of each group had intended to pursue "essentially the same project" with other funds if they didn't receive ATP support. Indeed, half of the near-winners carried out their projects with other funds (mainly private), although at a slower schedule. [GAO, "Measuring Performance: The Advanced Technology Program and Private-Sector Funding," January 1996, pp. 3-4, 23-24, 30-31, 43]
  • A 1999 report by a NIST consultant on completed projects found that only about half -- 21 of 38 -- reported they required ATP grants to get off the ground. Eleven others indicated that they would have completed their projects without the program, though at a slower pace with a "typical lag"of two years. And six projects failed to provide any information [William F. Long, "Advanced Technology Program," NIST, Department of Commerce, March 1999, p. 15]

2. ATP's capacity to select innovative and economically successful projects is limited because it cannot obtain information on competing private industry initiatives that may be equal or superior.

  • An April 2000 GAO study concludes that "inherent factors" in award selection -- the need to avoid consultants who may have conflicts of interest and companies' zealousness in protecting proprietary information -- "make it unlikely that ATP can avoid funding research already being pursued by the private sector in the same time period." [GAO, "Advanced Technology Program: Inherent Factors in Selection Process Could Limit Identification of Similar Research," April 2000, p.5].
  • Focusing on three representative ATP projects, GAO determined that their research goals were similar to those of projects being undertaken by other firms, although their technical approaches were different. One project failed to solve its technical problems, was beaten out by a competitor and went bankrupt. The other two appeared somewhat more successful, but have not yet proven their technological or commercial superiority over numerous U.S. rivals. [GAO, April 2000, pp. 23-34]
  • Further evidence of ATP's dubious capacity to select winning technologies comes from the 1999 NIST consultant's study of 38 completed projects. It found that 50% of projects engaged in no patent activity for technologies developed with ATP funding. Similarly, none of the six companies whose projects entailed software technology had registered any copyrights for such technology. In these cases, it appeared that government money had thus far gone for naught. [William F. Long, "Advanced Technology Program," NIST, U.S. Department of Commerce, March 1999, p. 11]

3. ATP's ambition to have a broad economic impact on America's international competitiveness was always doubtful -- the program was dwarfed by overall U.S. Research and Development spending -- but recent jumps in industry R&D have made the program more clearly irrelevant.

  • U.S. industry was projected to spend $169 billion on R&D in 1999, all but $13 billion on applied research and development, which is the focus of ATP's relatively puny $200 million annual effort.
  • Business R&D has skyrocketed over the decade that ATP has been in existence. When ATP got under way in 1990, industry was spending only $81 billion on R& D. Powered by business, real U.S. R&D expanded at an annual rate of 6.1% from 1995-99, far above the 2.0% annual increase of 1985-90 and the 1.0% of 1990-95. [National Science Foundation, "Research and Development in Industry: 1998", Table E-1, and "R&D as a Percentage of GDP Continues Upward Climb," October 4, 1999, available at www.nsf.gov/sbe/srs/nprdr/start.htm]

4. A significant portion of ATP funds go to giant corporations that are already leading the U.S. economy in R&D spending.

  • Despite a legislative mandate to not fund research programs that would be conducted "in the absence of financial assistance under the Program," ATP has been funding numerous projects submitted by the biggest business spenders on R&D. In fact, during the 1990s, ATP has doled out substantial research subsidies to 8 of the 20 corporations that spent the most on R&D in 1997 (the most recent year for which statistics are available).
  • For example, IBM ranked #3 in R&D at $4.3 billion in 1997. Yet IBM is the lead company in three of ATP's 16 most expensive projects, which received a total of $38.5 million. Moreover, it is sole, lead or participating member of 11 other ATP projects.
  • General Motors, #1 in R&D ($8.2 billion), was the sole or lead company in 2 projects ($9 million) and a participant in 10 more. Ford, #2 in R&D ($6.3 billion), was the sole or lead company in two ATP projects ($11.6 million) and participated in 8 others. General Electric, #14 ($1.5 billion) was sole or lead partner in 5 projects ($10.3 million) and participated in 8 more. Other top 20 R&D corporate spenders that benefited from ATP were Motorola, Lucent, and Boeing. [National Science Foundation, "U.S. Corporate Research and Development, Volume 2: Company Information on Top 500 Firms in R&D;" available at www.nsf.gov; "Funded Projects," available at www.atp.nist.gov;]

        As Congress moves to finalize appropriations and set priorities for the nation, it should phase out ATP, which shows all the signs of being not a necessary and efficient mechanism of national economic improvement but a wasteful example of corporate welfare.