Prepared Statement by Molly Macauley at a House Science Committee Hearing on NASA Aerospace Prizes

Molly K. Macauley ¹Senior Fellow,

Resources for the Future, Washington, DC 20036

macauley@rff.org

Mr. Chairman and distinguished members of the Committee, thank you for inviting me to meet with you
today. My name is Molly K. Macauley and I am a senior fellow at Resources for the Future, a nonpartisan
research organization established in 1952 upon the recommendation of the presidentially appointed Paley
Commission. Researchers at RFF conduct independent analyses of issues concerned with natural resources
and the environment. I emphasize that the views I present today are mine alone. Resources for the Future
takes no institutional position on legislative, regulatory, judicial, or other public policy matters.

My research interests are space policy issues with a focus on economics. My areas of study include: space
transportation and space transportation vouchers; economic incentive-based approaches, including auctions,
for the allocation of the geostationary orbit and the electromagnetic spectrum; management of space debris;
the public and private value of remote sensing information; the roles of government and the private sector
in commercial remote sensing; and the economic viability of satellite solar power for both terrestrial power
generation and as a power plug in space for space-based activities. This research has taken the form of
books, lectures, and published articles. My research on these topics is funded by grants from the National
Aeronautics and Space Administration, the Federal Aviation Administration, and Resources for the Future.
My comments on today’s discussion of space prizes are funded solely by my discretionary budget at
Resources for the Future.

Before offering my comments I’d like to make two introductory points.

The first is that for years, we have searched for the “silver bullet” that would propel our nation back into
space by way of the shuttle and space station for the multiple pursuits of scientific exploration on one hand
and a vibrant commercial space industry on the other. There is no lack of ingenuity in ideas for both of
these goals. But critics of NASA’s plans – regardless of the specific details involved — assert that they take
too much time and money away from more pressing societal needs. And, critics of commercial space
activities assert that such projects carry unique risks, take too much time to develop, and take too much
time before they earn any money.
Obviously, priority determines the allocation of budgets in both the private and government sectors of the
economy. There is “ample” money in general but competing priorities for spending it. Risk, long lead
times, and long payback periods cannot be blamed as a death knell of space because significant investment takes place in other high risk, highly uncertain industries including pharmaceutical development,
information technology-related hardware and software, and hybrid autos.

A second introductory comment summarizes my conclusions. Prizes, although not a silver bullet for
invigorating enthusiasm for space or elevating its priority in spending decisions, could nonetheless
complement government’s existing approaches to inducing innovation — procurement contracts and peer-
reviewed grants. Even if an offered prize is never awarded because competitors fail all attempts to win, the
outcome can shed light on the state of technology maturation. In particular, an unawarded prize can signal
that even the best technological efforts aren’t quite ripe at the proffered level of monetary reward. Such a
result is important information for government when pursuing new technology subject to a limited budget.
The remainder of my testimony addresses these topics: previous experiences of using prizes to encourage
innovation, including prizes in aviation, automobiles, and rocketry; use of prizes in the current era of heavy
government involvement in R&D (most experience with prizes pre-dated “big government”); and
advantages and disadvantages of prizes compared with procurement contracts and peer-reviewed research
grants. The concluding sections draw from these observations to offer comments about NASA prizes.

I. Observations about the history of using prizes to encourage innovation

Prizes have a long history of encouraging innovation, and a look back at these contests can offer insights
into what might be expected from NASA prizes. The following examples highlight use of prizes in basic
and applied research in chemistry, autos, and aviation. Another example, rocketry, is a case in which prizes
were scarcely used.

Soda alkali. One of the earliest documented uses of prizes took place in the 1780s when the
French Academy offered 100,000 francs to whomever could produce a soda alkali from sea salt. The
competition successfully led to a process that became the basis of the modern chemical industry.²

Autos. Prizes also figured prominently in the development of the automobile, with dozens of
popular, well-publicized auto races beginning in the 1890s, mostly in Europe. One of the notable contests
in the United States – the “Great Chicago Auto Race ” — is credited with giving birth to the American auto
industry. In 1895, H.H. Kohlstaat, publisher of the Chicago Times- Herald, sponsored this competition to
test the overall utility, cost, speed, economy of operation, and general appearance of cars.³
Kohlstaat was surprised at the number of letters and telegrams he received expressing interest in
participating in the contest. The auto business had seemed centered in Europe, yet he found that there were
widespread efforts underway in the U.S. Most of the inventors were simply unaware of the work of the
others. Unlike previous road races, the contest placed only secondary emphasis on the outcome of the race
itself- rather, the awards were for evaluating performance of characteristics of the cars. Entrants included
individual inventors as well as the R.H. Macy Company and the De La Vergne Refrigerating Company.
Macy’s had been importing German-built Benz cars and hoped to sell them in Chicago after publicity from
the race.
Only six cars ultimately participated — many competitors were discouraged by a large snowstorm the night
before the race. Two cars finished the race, but four entries won cash awards: the first place finisher,
inventor Frank Duryea, earned $2000 (about $50,000 in 2004 dollars) for his auto’s speed, power,
compactness, and overall race performance; the other finisher won $1,500 for performance and overall
economy. The Macy entry, which did not finish the race, and another entrant won $500 each for general
performance. A fifth entrant got a special gold medal for safety; the absence of noise, vibration, heat or odor; and general excellence of design and workmanship. Duryea later went on to become the biggest
producer of autos in the U.S., building 13 cars in 1896 (the cars were hand-built; mass production of autos
was years away).

Aviation⁴. Another notable and frequent use of prizes – and much of the inspiration for the X-prize —
was in the early history of aviation. Between roughly 1908 and 1915, the heyday of privately sponsored
competitions for distance, elevation, and speed jumpstarted the aviation industry. Three dozen or so
individual prizes during this period – at roughly the rate of four or more annually – fostered innovations
that decidedly gave birth to the industry. Some general observations about aviation prizes include:

1. Prizes were usually offered for incremental improvements. For example, the first couple of prizes
were for flights of 25 meters and 100 meters, then for over 1000 feet in elevation. Subsequent prizes
were for longer distances, higher elevation, and faster time.

2. Prizes were almost without exception offered by private individuals and companies, not by
governments. Sponsors were mostly wealthy entrepreneurs such as Raymond Orteig, a New York hotel
owner; Jacques Schneider, a wealthy French industrialist; Ralph Pulitzer, the son of newspaper
publisher Joseph Pulitzer; James D. Dole, a Hawaiian planter; Eduoard and Andre Michelin,
executives of what was to become the Michelin Tire Company; and James Gordon Bennett, the
publisher of the New York Herald. Prizes were also offered by the French Aero Club, which
undertook private fundraising to obtain the prize money; the French Champagne industry; the Harvard
Aeronautical Society; the Daniel Guggenheim Fund; the Daily Mail of London; and the New York
World. Governments funded military planes to race in competitions after World War I but didn’t
supply the prize money.

3. Big air meets were popular during 1909 – 1911 but then they either continued without much publicity
or became less profitable. Many meets continued as annual races into the 1930s – the meets were not
competitions for “be the first to…” but were for speed and demonstrations of skill.

4. There were prizes that were never awarded or that were awarded only after a long extension of the
competition deadline. For example, the Orteig prize, awarded to Charles Lindbergh in 1927, was
originally offered in 1919 for a period of up to five years, but the deadline was extended.

5. Prizes were offered for generally specified objectives like distance, speed, or minimum number of
refueling and maintenance stops. Prize guidelines typically did not include stipulations about the
technological approach or other engineering characteristics.

6. In at least one documented instance, a company underwrote a competitor in exchange for advertising
the company’s product (consumer soft drinks) on his plane.

7. Prize amounts varied widely – in 2004 dollars, the amounts ranged from about $200,000 to over $1
million. The typical amount was around $300,000. Later prizes were almost always for more difficult
achievements, but prize monies didn’t increase accordingly. The amounts do not seem correlated with
the difficulty of the achievement required to win – but this observation may be biased by the paucity of
detailed information about the prizes.

8. Accidents and fatalities were common – but did not lead to standdowns in holding competitions.

9. Whether contestants sought commercial gain from their innovation is not clear from the available
records about the prizes. Some winners – but by far the minority — became founding fathers of a
product line of aircraft – such as Louis Bleriot, Glenn Curtiss, Henri Farman, and Igor Sigorsky.

Rocketry. The success of prizes in fueling innovation in autos and aviation sharply contrasts with the
history of rocketry and space travel.5 With one exception, the earliest efforts in rocket development never
attracted prize money. Research grants rather than prizes typically financed studies of rockets – although
even research grants were rare in the early decades. Konstantin Tsiolkovsky, Robert Goddard, and Hermann Oberth – the fathers of space travel – worked independently in self-financed home-based or
academic laboratories. Tsiolkovsky received a grant of 899 rubles in 1899 from the Russian Academy of
Science. Goddard, after making multiple requests (with the urging of Lindbergh), was given grants of
$5000 and later, $3,500, from the Smithsonian Institution during 1917-1920.

In 1927, some forty years after the first serious, scholarly articles on rocketry had been published, Robert
Esnault-Pelterie, a well-known airplane inventor, and his friend, banker Andre Louis-Hirsch, established a
5000-franc prize. The prize was to be awarded annually to the author of the most outstanding work on
astronautics.

Public interest in rocketry was generally cool to lukewarm – in fact, “talk of rockets and space travel was
viewed as crackpot by the public and as unscientific by most scientists.” ⁶ Newspaper reporters, seizing
upon some of Goddard’s writing about how rockets could get to the Moon, sensationalized the statements
and referred sarcastically to Goddard as the “moon man.” The American Interplanetary Society—a
professional organization that was a forerunner of the American Institute of Aeronautics and Astronautics –
– changed its name to the American Rocket Society because interplanetary travel was so ridiculed.

For a long time, the early rocket scientists were unaware of each other’s work, separated by geography and
language. Beginning in the 1920’s and 1930’s, rocket and interplanetary societies formed in Western
Europe and the U.S., researchers began regularly to report results in professional journals, and many
experimental studies of rockets began under the auspices of defense agencies abroad (but not in the U.S).
At this time, research in rocketry was best organized in Russia, where the Soviets created a government
bureau for interplanetary flight, staged an exhibition on rocket technology, and published conference papers
and a nine-volume encyclopedia. Research programs in Germany and France were also active in both
theoretical studies and experimental testing of rocket components.

In the U.S., the Guggenheim Foundation was funding some of Goddard’s research, but as late as 1940 the
Army and Navy remained generally uninterested (although the Army was conducting some limited research
on rocket propellants). The Air Corps responded to one of Goddard’s proposals for support by writing that
the Corps “was deeply interested in the research work being carried out … under the auspices of the
Guggenheim Foundation (but) does not, at this time, feel justified in obligating further funds for basic jet
propulsion research and experimentation.”⁷ By 1945, the U.S. government rocket program was more fully
developed, with large expenditures and production facilities coordinated across the military services by
President Roosevelt’s National Defense Research Committee.

Some observations. These experiences show the usefulness of prizes in fundamental research (soda
alkali) and in advancing technology (autos and aviation). Of course, the counterfactual question of “would
innovation have come about in the absence of prizes,” and if so how fast and at what cost, is equally
important — but hard to answer. These experiences also took place before the rise of government’s heavy
hand in R&D (more on this in a later section below).

The absence of prizes in rocketry also raises questions. Several reasons could explain the difference
between the role of prizes in spurring aviation and the virtual absence of prizes in the early development of
space technology. The industrialists and media who funded aviation prizes appeared to be responding to an
enthusiastic public in seeking publicity for derring-do involving human flight, and at least in one case
(maybe more, if documentation were more complete), the chance to use a plane as a flying billboard by
advertising consumer products on the fuselage. Public perception of rocketry was incredulous, less
enthusiastic and as noted, even marked by ridicule.

Rocketry, perhaps more so than aviation, was the “stuff” of science fiction. Visible success- a rocket that
successfully launches high and far – was also more difficult to achieve than success in aviation during these
formative years. In addition, far fewer individuals were experimenting with rockets – thus, many fewer
contestants might have stepped up to rocketry prizes were they to have been offered. Finally, a reason for using prizes in aviation might at first glance be the potential for commercializing the technology, but as
noted earlier, this motive is far from obvious. A commercial profit motive in competing for aviation prizes
per se (as distinguished from using the plane as a flying billboard for consumer products) is not evident in
the written record – most of the competitions were “one-shot” (although, again as noted, some aviation
product lines were spawned). More generally, the technological advances encouraged by aviation prizes
were each incremental but taken together built a foundation for the evolving commercial aviation industry.

II. What’s different now -an era of government-sponsored R&D

The climate for aviation prizes to reward technological advance pre-dated today’s complex relationship
between the private and government sectors in general and in space-related R&D in particular. The heyday
of prizes was about 1900 to 1917 – two decades in which aviation feats made the news for an attentive
public interested in the new technology, thrilled by its daredevils, and newly enamored of all modes of
transportation as the era of the auto began. The period was undoubtedly one of the most distinctive periods
in the history of innovation. The private sector reigned in almost all economic sectors. For instance, almost
100 % of public transit systems—street railroads and trolleys — were privately owned, and individuals or
private syndicates held about 85% of electric companies and 50% of water companies.

Economic growth was also rapid. Per capita income roughly doubled just after the turn of the century due
to an economy-wide increase in output. It was the era of modernization in steel mills, the beginning of
skyscrapers, and rapid urbanization. It was also the chapter of the great industrialists – Andrew Carnegie in
steel, John D. Rockefeller in oil, J.P. Morgan in finance, and railroad magnates like Jay Gould, Edward
Harriman, Collis Huntington, and Cornelius Vanderbilt These entrepreneurs and their companies did the
bulk of R&D.

Not surprisingly, government began to grow rapidly with the advent of personal and corporate income
taxes in 1913 and a corporate excise tax enacted in 1909. Government spending increased from about $500
million in 1902, to about $900 million in 1913, then to $1.8 billion in 1922 (all amounts are adjusted for
inflation). Per capita government spending increased 2 1/2 times from its level in 1902 to its level in 1922.
World War I, the Depression, and World War II brought further large increases in federal spending. Most
expenditures before 1915 were for defense, the postal service, and veterans services; by 1920, expenditures
included these activities plus growing interest on debt and financing of air and water transportation.

Increased government expenditure during this time was not, however, directed towards R&D. About the
only role of government in innovation – albeit an important role — was protecting invention by way of the
very active patent system. The large expansion of government R&D that characterizes today’s public sector
began after World War II in the form of procurement contracts and peer-reviewed research grants to
universities. At the same time, a new, so-called social contract between government and researchers
evolved to provide for freely sharing the results of research in exchange for funding.⁸

Government involvement now extends well beyond protecting intellectual property to include direct
subsidies and R&D tax credits as well as carrying out research at government laboratories or other
facilities, often in partnership with the private and academic sectors. Government’s influence is far wider
because a host of other policies, although not directed toward R&D, also significantly affect the rate and
direction of innovation. These include safety and health regulation, mandatory labor practices, and
environmental protection. Analyses evaluating the fruits of government-sponsored R&D reveal a mixed
record. The supersonic transport, the Clinch River Breeder reactor, synthetic fuels from coal, and the
photovoltaics commercialization programs are among “failures” according to most analysts.⁹ In other cases,
government investment seems to have paid off. For example, a recent National Research Council study of fossil energy research supported by the U.S. Department of Energy found that a least a handful of R&D
initiatives ranging from electronic ballasts in compact fluorescent tubes to atmospheric fluidized-bed coal
combustions were “well worth it” in that the estimated net realized economic benefits were positive.10

III. The tight coupling of government R&D funding and aerospace

Government stepped in to fund and manage civilian space activity in response to Sputnik and the Cold War
– putting a “government in charge” imprimatur on space activities. Government involvement continues —
of all federal R&D money flowing to industry, about a third goes to the aerospace sector, and of that, 98%
goes to nine companies. ¹¹ Two-thirds of R&D funding in aerospace is federally financed.¹² Not all space
developments have been publicly funded, however. There have been some important exceptions in which
large amounts of private money were invested in developing space technology. NASA and the Department
of Defense jointly funded a small amount of the development costs of the Hughes Aircraft Company to
design the Syncom satellites (the first commercial geostationary communications satellites), but most of the
funding came from the Comsat Corporation using money from common carriers and from a public stock
offering.¹³ Private money also contributed to underwriting the cost and risk of developing the launch
vehicle Pegasus and portions of the Sea Launch system. Like any industry, however, for every profitable
success there are many more financial failures. There have been unsuccessful attempts to privately finance
new space transportation systems, low-earth orbit communications networks, and some commercial earth-
observations satellite systems.

IV. Prizes, procurement contracts, and peer-reviewed research grants in the 21st century

As government grew, prize offerings tailed off not only in aviation but also in other fields. There may be
no causal link, or maybe there is one. The answer would shed some light on whether reinstituting prizes
now can be successful in inducing innovation. Part of the answer also rests with whether prizes are
compatible with or offer significant advantages compared with the ingrained contracting and grant-making
relationships between government and the private sector in space R&D. In any case, neither prizes nor, for
that matter, other traditional approaches to R&D sponsorship by way of peer-review or procurement
contracts guarantee “success” in bringing about innovation.

Much of the preceding discussion has emphasized the historical success of prizes but they have some
disadvantages. These include:

• no provision for up-front cash flow to defray expenses;
• duplication of research effort if many individuals or groups compete;
• uncertainty about whether the innovation can succeed; and
• delays in the pace of innovation if a lot of time elapses before it is determined that there are no winners.

In addition, prizes are unlikely to meet other social objectives that government sponsorship in general, or
NASA sponsorship in particular, has traditionally pursued. For example, prizes do not necessarily further
these goals that NASA has frequently set forth as success measures in its R&D policy:

• increase the number of academic researchers;
• increase the number of scientists and engineers;
• create jobs;
• influence political support by way of job creation;
• broaden the participation of traditionally underrepresented groups in science and technology; and
• prop up a particular supplier or group of suppliers to ensure choice (say, to ensure that a range of capacities is available in space transportation by dividing business among companies that offer different classes of vehicle lift)

In addition, there are some disadvantages of government-sponsored prizes compared with privately
sponsored prizes:

– Government typically cannot commit to funding beyond a fiscal year, thus limiting the timing of the prize
competition and cutting short the time that might be required for the technical achievement it awards.

– Any uncertainty about whether the prize will actually be awarded due to government budgets or changes
in administration will weaken if not eliminate incentives to compete.

– Intellectual property rights to the achievement may need to reside with the competitor to induce
participation, even though the taxpayer, by financing the prize, could fairly claim rights. It is interesting to
note that after contentious deliberations, in 1960 the U.S. government awarded the Guggenheim
Foundation and Robert Goddard’s widow $1 million in settlement for government use of more than 200 of
Goddard’s patents (Goddard died in 1945).¹⁴

Some of these disadvantages are also an outcome of traditional grants and procurement contracts. And,
grants and contracts offer some advantages over prizes. What follows summarizes some of the differences:
Asymmetry of information: The engineer/entrepreneur may have a better idea of the technical
riskiness of the R&D than the government. In this case, offering an award upon completion of rather than
in advance of research lessens the cost to the government of pursuing highly risky innovation.
Information and uncertainty. While prizes put the burden of proof on competitors, grants and
procurement contracts, by requiring up front information, can more promptly reduce (although not
eliminate) uncertainty about whether the innovation is feasible. Prizes may go un-awarded for the duration
of the competition, and only then, after this delay, might it be concluded that the technology is not yet
feasible (although other reasons may explain the lack of a winner). Using prizes can thus delay a
determination that a technology is infeasible and delay pursuit of alternative paths that might have been
more quickly pursued under a grant or contract.

Cash flow. Grants and contracts, by providing funding up-front, underwrite early stages of
innovation. Prizes, by providing an award only upon completion, could create cash-flow problems for
contestants or require them to spend time and resources to find financial support during the competition.

Who bears financial risk. Financial risk rests largely with the taxpayer under grants and contracts
and projects can fail or be terminated before providing any return to the taxpayer. Prizes do not guarantee
success but the financial risk rests with competitors and their funders rather than the taxpayer.

Safety risk. The early history of aviation is replete with accidents and fatalities in pursuit of
innovation, but efforts continued with scarcely a hiccup. The government’s approach to safety risk is
wholly different, as illustrated by the lengthy standdown of U.S. human spaceflight activities in the wake of
the Apollo 1, Challenger, and Columbia fatalities.

Duplication of effort. A prize rather than a research grant made to one firm may have the
advantage that “two (or more) chances are better than one” if there are several independent research

programs. On the other hand, from a broad view of the nation’s resources as a whole, there may be wasteful
duplication of effort if there are simultaneous research programs all pursuing the same goal.15

Awardees’ incentives. Most peer-reviewed grants result in publications and sometimes, patents.
By and large, grants are not intended for nor do they typically result in commercial products or services.
Procurement contracts can satisfy government-unique requirements or lead to commercial feasibility. The
motives for competing for prizes are less clear – in the history of aviation prizes, only a few entrants
themselves followed up with commercial product lines, but they may have collected patents (the data about
the long-term pay-offs to aviation prizes are sparse). Typically an award recipient, whether it is an
individual competing for a prize or a corporation winning a procurement contract, capitalizes any expected
commercial value of the research or innovation into their decision whether to compete.

Basic research, technology development, and commercialization. All three approaches can
underwrite basic research, technology development, or commercialization. For example, a university
researcher with access to a laboratory may be as interested in competing for a prize as in competing for a
research grant. A private inventor may compete for an award for modest improvements in technology or
may be inspired to research more radical innovation, irrespective of commercial potential. Prizes have
been awarded for solving mathematical problems (the Wolfskehl Prize for proving Fermat’s last theorem16)
as well as for technology development with commercial potential – the motives for pursuing an award seem
varied.

Failure. All three approaches provide an opportunity to learn what “doesn’t work.” The Defense
Advanced Research Projects Agency (DARPA), for example, had no winner in its recent, $11 million
Grand Challenge race for robotic navigation of a 142-mile stretch of the Mojave Desert. DARPA admitted
that it was pessimistic about a successful finish because the technology is not yet that advanced, but also
pointed out that learning from mistakes is a way to advance technology. The agency plans to hold the
competition again in 2006. Similarly, a recent government contract for a follow-on earth observation
satellite system for the Landsat program was not awarded to any bidder because proposals did not meet all
the criteria. In these cases, failing to find a winner signaled that the technology, cost, or both was not yet
up to the expected par. The chance to learn more than this — that is, to learn more about details of
engineering design, engineering cost, and so forth – is limited, however, unless competitors are required to
share information about their approach rather than keep the information proprietary.
Because of these differences in prizes, grants, and contracts, all three approaches, taken together, can
provide a good portfolio of tools to encourage innovation. As an additional note, in all three approaches,
ownership of intellectual property needs to be determined and will affect the public and private pay-off to
the innovation.

V. NASA prizes

The candidate Centennial Challenges identified by NASA for prize awards range from very low cost
spacecraft missions, to breakthrough robotic capability, to revolutionary technology demonstrations.17
There is precedent in the history of prizes for awards to address all of these types of innovations. However,
the specific candidate challenges that NASA has identified do not include prizes for earth science – even
though the language accompanying the Challenges preamble embraces earth science. Innovation in earth
sciences might be a good prospect for prizes given the rapid pace of new sensor development and the
manifested interest of the private sector in earth observations.

It is hard to outline a formula for determining the size of the prizes- awards set too low may just miss
inducing an innovation; awards set too high result in taxpayers paying more than necessary to induce the
innovation. Not all competitors will necessarily be pursuing commercialization or an ongoing supplier
relationship, if the history of aviation prizes is a guide to motives for participation. For this reason,
potential commercial profitability may not figure in competitors’ participation decisions or be relevant to
government’s procedures for determining the size of the prize.

In any case, if a prize is offered but not awarded, the outcome may signal that the technology is simply not
yet mature enough at that price – important information for government R&D managers. For “tent pole”
technology development – that is, technology that is essential in furthering a goal – the uncertainty of
success in a prize competition weakens the usefulness of prizes (although grants and contracts do not
necessarily guarantee success either).

Shortcomings of government prize sponsorship, as noted earlier, include commitments to funding across
fiscal years, political administrations, and different Congresses. Problems also involve determining an
appropriate allocation of rights to intellectual property developed with taxpayer support but possibly of
commercial proprietary value. It would be useful for competitors to share results even if their attempt is
unsuccessful (learning by doing), but so doing could undermine expected private value and thus come full
circle to discourage participation in the competition.

Involving a broad range of expertise, including outside experts, may be an advantage in structuring
government-backed prizes. For instance, it may be desirable for a board of directors consisting of experts
outside of government to administer and judge contests. Because a prize can “ferret out” new ideas,
eligibility to compete should also be broad (the Centennial Challenges prohibit federal employees and
employees of federally funded research and development centers (FFRDCs) from competing, but much
talent in aerospace is at NASA centers and FFRDCs).

VI. Conclusions

The history of prizes is attractive enough to warrant experimenting with their use in NASA activities.
Further review of the structure of previous contests (their guidelines, funding, and results) and in particular,
their assignment of property rights would provide helpful “lessons learned” as plans proceed. But prizes
cannot fully substitute for peer-reviewed grants and procurement contracts. Even though these funding
mechanisms are far from perfect, they balance some of the disadvantages of prizes. Taken together, all of
these forms of financial support make up a portfolio of tools for encouraging innovation.