Prizes as Incentives for Public-Private Partnerships

In recent years, there has been a renaissance in "incentive prizes" – which reward contestants for achieving a specific future goal.
The Ansari X Prize, for example, provided a purse of $10 million for the first team to fly a privately built spaceship to 100 kilometers twice in one week, and the X Prize Foundation has launched prize competitions for lunar landers, super-efficient cars, and a device that can sequence 100 human genomes in 10 days. The Sunlight Foundation launched a Data.Gov Challenge with a prize purse to the creators of the most compelling applications that provide easy access to and understanding of government data. Government agencies such as DARPA, NASA, and the Department of Energy are backing prizes in unmanned ground vehicles, high-efficiency lighting, and green aviation. A broader range of prizes (and different goals and models for incentive prizes) are described in a recent report by McKinsey.
Under some circumstances, prizes have a number of advantages over traditional grants and contracts, and can allow the government to:
  • Only pay for results.
  • Establish a bold and important goal without having to choose the path or the team that is most likely to succeed.
  • Attract new entrants such as small entrepreneurial firms.
  • Stimulate private sector investment that is larger than the size of the purse.
  • Capture the public imagination and change the public’s perception of what is possible.
The Open Government Initiative is interested in exploring how the government might partner with foundations, non-profits, philanthropists, and the private sector to support additional high-impact prizes, and to harness the power and reach of "innovation marketplaces" to achieve important goals.   For example, one non-profit is offering a $1 million reward for techniques for measuring the progression of Lou Gehrig’s disease that could accelerate the development of new drugs. Some prizes are more modest, such as the $5,000 prize offered by the Chicago Chamber of Commerce for the best ideas to reduce greenhouse gases by increasing mass transit ridership.
What prizes do you think the government should consider sponsoring?  Give us your comments at the OSTP blog.
Thomas Kalil is Deputy Director for Policy with the Office of Science and Technology Policy and author of a 2006 paper for the Hamilton Project on prizes.

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