A year after announcing that it would seek to reform the controversial Advanced Technology Program, the Bush administration recently announced six proposed changes that, administration officials say, would make ATP more faithful to its original purpose of fostering the development of commercial technologies before they are sufficiently developed to be able to attract private capital.
The ATP, which has a budget of $185 million for this year and has been proposed by Bush for $108 million next year, is administered by the Commerce Department's National Institute of Standards and Technology (Gaithersburg, MD). Projects in laser and optoelectronic technology are among those funded by ATP, and the Laser and Electro-Optics Manufacturers' Association is among the program's supporters.
Republicans on Capitol Hill long have objected to ATP, arguing that it amounts to government interference in the private sector. In his first budget proposal after taking office, Bush said that he would reevaluate the program.
"ATP funding has had a beneficial impact," concluded that reevaluation, which was issued by the Commerce Department in February. "The ATP Program, with appropriate reforms, can play a useful role in the federal science and technology portfolio."
Two such reforms would be to rewrite the legislation that created the ATP to allow universities to lead ATP projects and to allow universities to share in the intellectual-property rights of the results from ATP projects. The Commerce Department also proposed requiring any company with more than $2.5 billion in annual revenues to participate in ATP only as part of a joint venture. Also, recipients of ATP awards would pay the federal government an annual 5% royalty on gross revenues from ATP projects, until the project had paid back five times its original grant amount, and the ATP's legislation would be revised to explicitly bar grants for "later-stage commercial projects." The sixth reform would direct ATP to study whether it needs more advice from outside the government on the availability of private-sector capital for various ATP applicants.
Some of the proposed changes seem unlikely to stir much criticism, such as the expanded opportunities for universities to participate in ATP. Lewis M. Branscomb of Harvard University, for example, told a Senate committee in April that he strongly supports the university-related changes. Many universities, he said, decline to participate in ATP because, unlike other federally funded research, they can obtain no intellectual-property rights from ATP.
Royalty presents problems
But the royalty requirement appears much more controversial. Christopher T. Hill, the vice provost for research at George Mason University (Fairfax, VA), told a congressional hearing this spring that the royalty requirement would effectively change ATP from a grant program to a loan program.
"It would impose what in other circumstances would be considered a usurious rate of interest," Hill told lawmakers. Further, he warned that, because the royalties would be channeled back into ATP, ATP managers would be driven to favor low-risk projects rather than the high-risk projects for which ATP was intended.
The royalty would "introduce a perverse incentive into the ATP projects election process," agreed Harvard's Branscomb. "ATP should "focus on its role as an R&D program. . . and take every opportunity to leverage the most important sources of radical, interesting technical ideas. It is time to stop treating ATP as an experiment."
Another problem with the royalty, some say, would be in calculating it. "Often an ATP is focused on a specific, high-risk technical hurdle associated with a key component, process or subsystem," Scott Donnelly, senior vice president for global research at General Electric, told a Senate hearing. "This component is then part of a larger system. The component may only be a small percentage of the total system cost. How could anyone agree on a fair and consistent formula to calculate the royalty fee owed to the government?"
Not everyone on Capitol Hill is satisfied to revise ATP; some still want to eliminate it. In April, Sen. John McCain (R-Ariz.) and Rep. Richard Gephardt (D-Mo.) introduced legislation that would create a nine-member federal commission to propose corporate tax subsidies to be eliminated. The ATP was clearly on McCain's hit list. He asked: "Why should the Commerce Department spend $211 million a year on the Advanced Technology Program to give research grants to consortiums of some of the largest and richest high-tech companies in this nation?" Gephardt, by contrast, presumably has other corporate tax subsidies in mind; in January, he called for an expansion of the ATP.