CHIPS and Science Funding Gaps Continues to Stifle Scientific Competitiveness

The bipartisan CHIPS and Science Act sought to accelerate U.S. science and innovation, to let us compete globally and solve problems at home. The multifold CHIPS approach to science and tech reached well beyond semiconductors: it authorized long-term boosts for basic science and education, expanded the geography of place-based innovation, mandated a whole-of-government science strategy, and other moves.

But appropriations in FY 2024, and the strictures of the Fiscal Responsibility Act in FY 2025, make clear that we’re falling well short of CHIPS aspirations. The ongoing failure of the U.S. to invest comes at a time when our competitors continue to up their investments in science, with China pledging 10% growth in investment, the EU setting forth new strategies for biotechnology and manufacturing, and Korea’s economy approaching 5% R&D investment intensity, far more than the U.S.

Research Agency Funding Shortfalls 

In the aggregate, CHIPS and Science authorized three research agencies – the National Science Foundation (NSF), the Department of Energy Office of Science (DOE SC), and the National Institute of Standards and Technology (NIST) – to receive $26.8 billion in FY 2024 and $28.8 billion in FY 2025, representing substantial growth in both years. But appropriations have increasingly underfunded the CHIPS agencies, with a gap now over $8 billion (see graph).

appropriations have increasingly underfunded the CHIPS agencies, with a gap now over $8 billion

The table below shows agency funding data in greater detail, including FY 2023 and FY 2024 appropriations, the FY 2025 CHIPS authorization, and the FY 2025 request.

The National Science Foundation is experiencing the largest gap between CHIPS targets and actual appropriations following a massive year-over-year funding reduction in FY 2024. That cut is partly the result of appropriators rescuing NSF in FY 2023 with over $1 billion in supplemental spending to support both NSF base activities and implementation of the Technology, Innovation and Partnerships Directorate (TIP). While that spending provided NSF a welcome boost in FY 2023, it could not be replicated in FY 2024, and NSF only received a modest boost in base appropriations. As a result, the full year-over-decline for NSF amounted to over $800 million, which will likely mean cutbacks in both core and TIP (the exact distribution is to be determined though Congress called for an even-handed approach). It also means a CHIPS shortfall of $6.5 billion in both FY 2024 and FY 2025.

The National Institute of Standards and Technology also requires some additional explanation. Like NSF, NIST received some supplemental spending for both lab programs and industrial innovation in FY 2023, but NIST also has been subject to quite substantial earmarks in FY 2023 and FY 2024, as seen in the table above. The presence of earmarks in FY 2024 meant, in practice, a nearly $100 million reduction in funding for core NIST lab programs, which cover a range of activities in measurement science and emerging technology areas.

The Department of Energy’s Office of Science fared better than the other two in the omnibus with a modest increase, but still faces a $1.5 billion shortfall below CHIPS targets in the White House request. 

Select Account Shortfalls

National Science Foundation

Core research. Excluding the newly-created TIP Directorate, purchasing power of core NSF research activities in biology, computing, engineering, geoscience, math and physical sciences, and social science dropped by over $300 million between FY 2021 and FY2023. If the FY 2024 funding cuts are distributed proportionally across directorates, their collective purchasing power would have dropped by over $1 billion all-in between FY 2021 and the present, representing a decline of more than 15%. This would also represent a shortfall of $2.9 billion below the CHIPS target for FY 2024, and will likely result in hundreds of fewer research awards.

STEM Education. While not quite as large as core research, NSF’s STEM directorate has still lost over 8% of its purchasing power since FY 2021, and remains $1.3 billion below its CHIPS target after a 15% year-over-year cut in the FY 2024 omnibus. This cut will likely mean hundreds of fewer graduate fellowships and other opportunities for STEM support, let alone multimillion-dollar shortfalls in CHIPS funding targets for programs like CyberCorps and Noyce teacher scholarships. The minibus did allocate $40 million for the National STEM Teacher Corps pilot program established in CHIPS, but implementing this carveout will pose challenges in light of funding cuts elsewhere.

TIP Programs. FY 2023 funding fell over $800 million shy of the CHIPS target for the new technology directorate, which had been envisioned to grow rapidly but instead will now have to deal with fiscal retrenchment. Several items established in CHIPS remain un- or under-funded. For instance, NSF Entrepreneurial Fellowships have received only $10 million from appropriators to date out of $125 million total authorized, while Centers for Transformative Education Research and Translation – a new initiative intended to research and scale educational innovations – has gotten no funding to date. Also underfunded are the Regional Innovation Engines (see below).

Department of Energy

Microelectronics Centers. While the FY 2024 picture for the Office of Science (SC) is perhaps not quite as stark as it is for NSF – partly because SC didn’t enjoy the benefit of a big but transient boost in FY 2023 – there remain underfunded CHIPS priorities throughout. One more prominent initiative is DOE’s Microelectronics Science Research Centers, intended to be a multidisciplinary R&D network for next-generation science funded across the SC portfolio. CHIPS authorized these at $25 million per center per year.

Fission and Fusion. Fusion energy was a major priority in CHIPS and Science, which sought among other things expansion of milestone-based development to achieve a fusion pilot plant. But following FY 2024 appropriations, the fusion science program continues to face a more than $200 million shortfall, and DOE’s proposal for a stepped-up research network – now dubbed the Fusion Innovation Research Engine (FIRE) centers – remains unfunded. CHIPS and Science also sought to expand nuclear research infrastructure at the nation’s universities, but the FY 2024 omnibus provided no funding for the additional research reactors authorized in CHIPS.

Clean Energy Innovation. CHIPS Title VI authorized a wide array of energy innovation initiatives – including clean energy business vouchers and incubators, entrepreneurial fellowships, a regional energy innovation program, and others. Not all received a specified funding authorization, but those that did have generally not yet received designated line-item appropriations. 

NIST

In addition to the funding challenges for NIST lab programs described above – which are critical for competitiveness in emerging technology – NIST manufacturing programs also continue to face shortfalls, of $192 million in the FY 2024 omnibus and over $500 million in the FY 2025 budget request.

Regional Innovation

As envisioned when CHIPS was signed, three major place-based innovation and economic development programs – EDA’s Regional Technology and Innovation Hubs (Tech Hubs), NSF’s Regional Innovation Engines (Engines), and EDA’s Distressed Area Recompete Pilot Program (Recompete) – would be moving from exclusively planning and selection into implementation phases as well in FY25. But with recent budget announcements, some implementation may need to be scaled back from what was originally planned, putting at risk our ability to rise to the confluence of economic and industrial challenges we face.

EDA Tech Hubs. In October 2023, the Biden-Harris administration announced the designation of 31 inaugural Tech Hubs and 29 recipients of Tech Hubs Strategy Development Grants from nearly 400 applicants. These 31 Tech Hubs designees were chosen for their potential to become ​​global centers of innovation and job creators. Upon announcement, the designees were then able to apply to receive implementation grants of $40-$70 million to each of approximately 5-10 of the designated Tech Hubs. Grants are expected to be announced in summer 2024.

The FY 2025 budget request for Tech Hubs includes $41 million in discretionary spending to fund additional grants to the existing designees, and another $4 billion in mandatory spending – spread over several years – to allow for additional Tech Hubs designees and strategy development grants. CHIPS and Science authorized the Hubs at $10 billion in total, but the program has only received 5% of this in actual appropriations to date. The FY25 request would bring total program funding up to 46% of the authorization. 

The ambitious goal of Tech Hubs is to restore the U.S. position as a leader in critical technology development, but this ambition is dependent on our ability to support the quantity and quality of the program as originally envisioned. Without meeting the funding expectations set in CHIPS, the Tech Hubs’ ability to restore American leadership will be vastly limited. 

NSF Engines. In January 2024, NSF announced the first NSF Engines awards to 10 teams across the United States. Each NSF Engine will receive an initial $15 million over the next two years with the potential to receive up to $160 million each over the next decade.

Beyond those 10 inaugural Engines awards, a selection of applicants were invited to apply for NSF Engines development awards, with each receiving up to $1 million to support team-building, partnership development, and other necessary steps toward future NSF Engines proposals. NSF’s initial investment in the 10 awardee regions is being matched almost two to one in commitments from local and state governments, other federal agencies, private industry, and philanthropy. NSF previously announced 44 Development Awardees in May 2023.

To bolster the efforts of NSF Engines, NSF also announced the Builder Platform in September 2023, which serves as a post-award model to provide resources, support, and engagement to awardees. 

The FY25 request level for NSF Engines is $205 million, which will support up to 13 NSF Regional Innovation Engines. While this $205 million would be a welcome addition – especially in light of the funding risks and uncertainty in FY24 mentioned above – total funding to date is considerably below CHIPS aspirations, accounting for just over 6% of authorized funding. 

EDA Recompete. The EDA Recompete Program, authorized for up to $1 billion in the CHIPS and Science Act, aims to allocate resources towards economically disadvantaged areas and create good jobs. By targeting regions where prime-age (25-54 years) employment lags behind the national average, the program seeks to revitalize communities long overlooked, bridging the gap through substantial and flexible investments.

Recompete received $200 million in appropriations in 2023 for the initial competition. This competition received 565 applications, with total requests exceeding $6 billion. Of those applicants, 22 Phase 1 Finalists were announced in December 2023. 

Recompete Finalists are able to apply for the Phase 2 Notice of Funding Opportunity and are provided access to technical assistance support for their plans. In Phase 2, EDA will make approximately 4-8 implementation investments, with awarded regions receiving between $20 to $50 million on average.

Alongside the 22 Finalists, Recompete Strategy Development Grant recipients were announced. These grants support applicant communities in strategic planning and capacity building. 

Following a shutout in FY 2024 appropriations, Recompete funding in the FY25 request is $41 million, bringing total funding to date to $241 million or just over 24% of authorized funding.

Congress will soon have the chance to rectify these collective shortfalls, with FY 2025 appropriations legislation coming down the pike soon. But the November elections throw substantial uncertainty over what was already a difficult situation. If Congress can’t muster the votes necessary to properly fund CHIPS and Science programs, U.S. competitiveness will continue to suffer.

How to Unlock the Potential of the Advanced Research Projects Agency Model

Summary

America faces a host of daunting problems that demand forward-looking solutions. Addressing these challenges will require us to unleash the full potential of our research and development community, leveraging new approaches to innovation that break through both technical and institutional barriers and initiate wholly new capabilities. The Advanced Research Projects Agency (ARPA) model has resulted in exactly this kind of high-impact innovation in defense, intelligence, and energy. This model can be applied to other critical societal challenges such as climate, labor, or health. But an ARPA must have the right core elements if it is to create the fresh solutions the country needs.

The ARPA model is distinctly different from other federal agencies in mission, operations, and culture. ARPA organizations are part of a much broader ecosystem that spans from research to implementation. Their role is to create breakthrough, paradigm-shifting solutions and capabilities. In order to position a new ARPA for success, Congress, the Administration, and the agency’s founding leaders must understand the unique properties of an ARPA and the process by which ARPAs approach and manage risk to develop game-changing advances.

To establish a strong foundation for a new ARPA to do this work, Congress and the Administration will need to address four factors:

Over the course of a few years, a new ARPA can grow into a powerfully effective organization with people, practices, and culture honed to create breakthroughs. If well implemented, new ARPAs can be extraordinary additions to our R&D ecosystem, providing unimagined new capabilities to help us meet our most essential societal challenges.

Challenge and Opportunity

America faces some daunting problems today. Many millions of Americans are unable to access our nation’s rich opportunities, leaving all of us poorer without their contributions. Dozens of other countries have longer life spans and lower infant mortality rates, although we spend more per capita on healthcare than any other country. We are not yet on track to contain the damages of a changing climate or to manage its impacts. Global competition has resulted in more and more U.S. research advances being used to create jobs elsewhere. R&D alone won’t solve any of these problems. But every one of these challenges demands creative new solutions.

However, America’s phenomenally productive R&D ecosystem—with its half a trillion dollars spent annually by the public and private sectors—is not aimed at these large, society-wide challenges. How do we create a generational shift in our innovation ecosystem so that it contributes as much to meeting this century’s challenges as it did for those of the last century? What can we learn from our successful R&D history, and what approaches can we adapt to address the problems that we now face?

One part of the answer lies in the Advanced Research Projects Agency (ARPA) model for innovation. This kind of innovation knocks down both technical and institutional barriers to create transformational new capabilities. ARPA organizations are part of a much broader ecosystem, spanning from research to implementation, in which their role is to create breakthrough solutions and capabilities that fundamentally change what we define as possible. In pursuit of revolutionary advances, they accept and manage a level of risk for which companies and other government agencies have no incentive.

The first ARPA, the Defense Advanced Research Projects Agency (DARPA), was launched in 1958 at the height of the Cold War. DARPA shifted military capabilities from mass bombing to precision strike with GPS, stealth technologies, and integrated combat systems. These innovations recast defense systems, changed military outcomes, and shaped geopolitics over decades. Meanwhile, DARPA’s programs in enabling technologies also seeded artificial intelligence, developed advanced microelectronics, and started the internet. In recent years, DARPA programs have built the first ship able to navigate from the pier and cross oceans without a single sailor on board,1 created a radical new approach to reconfigurable military capabilities to outpace global adversaries,2 developed the first systems—now in operation by the Port Authority of New York and New Jersey—for cities to continuously monitor for dangerous nuclear and radiological materials,3 and created a rapid-response mRNA vaccine platform4 that enabled the astonishingly fast development5 of today’s mRNA vaccines for COVID-19.

We are also starting to show that the ARPA model can be successfully adapted to other national purposes. In 2006, the Intelligence Advanced Research Projects Activity (IARPA) was formed to serve the intelligence community. One of IARPA’s programs has developed methods to overcome individual cognitive biases by weighting and synthesizing the judgments of many analysts. This approach provides important gains in prediction and is a new paradigm for forecasting events in a complex world. In 2009, the Advanced Research Projects Agency–Energy (ARPA-E) launched in the Department of Energy. Its programs have created new power semiconductors, new battery technologies, and new methods to improve appliance efficiency, making vital contributions to our clean energy future. Both ARPAs have invigorated R&D communities by connecting them to hard, important problems and giving them a pathway to drive impact.

Implementing the ARPA model to meet other critical challenges could have enormous impact. Indeed, President Biden has already proposed ARPAs for health and climate,6 and others have advanced visions for ARPAs for agriculture,7 labor8 and education. In addition, the Endless Frontier Act9 takes inspiration from the ARPA model in its vision for an expanded technology function at NSF to address economic competitiveness.

Behind each call for an “ARPA for X” is a yearning for R&D that throws open new doors to radically better solutions. But the ARPA model is very different from other federal agencies and unlocking its potential will require much more than affixing the name. The starting point is an understanding of how ARPAs generate their outsized advances.

Though specifics vary according to the mission of a new ARPA, the essential operating model is based on these elements:

ARPA Programs

An ARPA generates major advances through intelligently managed risk-taking. The fundamental unit of work for an ARPA is a solutions-oriented R&D program that aims at achieving a previously unimaginable goal. Each program has a fixed term, typically 3-5 years, and each is designed, executed, and transitioned by an ARPA program manager.

Design

The program manager designs the program to achieve a bold goal—one that may seem impossible but that, if demonstrated, could catalyze a major advance. They build a rigorous plan to achieve the goal. A set of questions known as the Heilmeier Catechism10 (from an iconic DARPA director in the 1970s) guides program development:

These questions are easy—even obvious—to ask, but surprisingly difficult to answer well. Program managers typically grapple with them over 6-12 months to design a strong program, and agency leaders use them to guide their judgement about the potential of a new program for approval. The questions also guide program execution.

Execution

Once a program is launched, the program manager contracts with whichever organizations are needed to achieve the program’s goal. That typically means companies, universities, nonprofits, other parts of government, and other organizations with the talent and capacity to conduct the necessary R&D. Contracting this work has the obvious benefit that the ARPA doesn’t have to hire staff and provide facilities for this R&D. But even more important is the fact that this approach mobilizes individuals and organizations. Over the course of the program, these participants become a community that not only delivers the program vision but can help drive it forward beyond the term of the ARPA program.

The work of the program is to weave the threads of research from multiple domains together with lessons from the reality of use and practice in order to develop and demonstrate prototype systems or capabilities. The program rigorously evaluates how well its innovation works, how it works in specific environments, and how it can be scaled. 

An ARPA program often draws on basic research and often generates fresh research, but research is an input rather than the objective. Unlike the management of basic research, these programs drive to a specific goal. They may sometimes resemble product development, but for a prototype product that serves a public purpose rather than a visible market opportunity. Often, they require a much higher degree of risk than product development because they reach for a barely feasible goal. 

An ARPA program aims to demonstrate that a powerful new approach can work despite the risk inherent in trying something radically different. This requires actively managing the multiple efforts within the ARPA program. An ARPA program manager accelerates lines of work that show great promise and redirects or stops work that is not yielding results. They nimbly reallocate resources to keep wringing out risk and driving to the program’s objective.  

Transition

In parallel, the program manager engages the decision makers who can advance, adopt, implement, and fully scale the results of the program. If the breakthrough will require commercialization, that could include additional companies, investors, and entrepreneurs. If full-scale implementation requires changes in policies and practices, that means engaging regulators, policy makers, and community organizations. Understanding the needs and realities of implementers is important from the early stages of program design. It is sometimes the case that these implementers are skeptical about the program’s bold goal at the start. As the program unfolds, they are invited to program reviews and demonstrations. The program strives to address their concerns and may even provide support for their internal analyses, evaluations, and trials. When these engagements work well, the ARPA program manager is able to bring implementers along on the journey from wild dream to demonstrated reality. Successful transition starts when they change their minds about what’s possible. And the ultimate societal impact of the ARPA program comes when these implementers have fully scaled the ARPA breakthrough. 

A fully successful program ends with a convincing demonstration of a new capability; a community that can carry it forward; and decision makers who are ready to support and fund implementation in products, services, policies, and practices.

ARPA program managers

None of this can happen without exceptionally capable program managers. An ARPA organization hires program managers on fixed terms to design, manage, and transition these high-impact programs. ARPA leadership coaches program managers, helps build partnerships and remove obstacles, and approves and oversees all programs. But it puts enormous responsibility and authority on the shoulders of program managers. 

ARPA program managers come from backgrounds in companies, universities, nonprofits, and other parts of government, and they serve at different times in their careers. They bring a “head in the stars, feet on the ground” blend of these key characteristics: 

ARPA portfolios

ARPA leadership approves a series of individual programs, constructing and managing a full portfolio that is diversified to maximize total impact despite the risk inherent in each program. Every program learns, not all succeed, and failure is accepted as integral to the mission.

Plan of Action 

Based on these core elements of a successful ARPA model, we offer four recommendations for policy makers as they establish new ARPA organizations. 

Purpose

Clearly and succinctly define the vital national purpose for the new ARPA. An ARPA exists to create breakthroughs for an important public need. For DARPA, this is national security. For ARPA-E, it is economic and energy security, and for IARPA, it is national intelligence. 

Operations

Set up the agency to function autonomously, with its own budget, staff and organization, and operating practices. An ARPA is a deliberate counterpoint to work already underway, originating from a recognition that something more and different is needed to achieve our national goals. An ARPA will not succeed if it is tightly integrated into its parent organization. Ironically, it may be more difficult to start a successful new ARPA in an area that already has robust federal research, because of the inclination to fit the square-peg ARPA into round-hole traditional research methods. The ARPA model is completely different than our well-honed approach to sponsoring fundamental research. The ARPA solutions-driven approach would not work well for greatly needed and highly valued basic research, and conversely, funding methods for fundamental research will not lead to ARPA-scale breakthroughs for our societal problems. This work is different, and it will require different people, different practices, and a different culture to succeed. 

Independent funding is also necessary. To develop a portfolio of programs with the potential for high impact, an ARPA requires funding that is sufficient to achieve its programs’ objectives. ARPA programs are sized not just to generate a new result, but to convincingly demonstrate a new approach, often across a variety of circumstances, in order to prove that the method can succeed and scale. 

The agency’s chain of command and Congressional authorizers and appropriators provide important oversight. However, the ARPA organization itself must bear the responsibility for designing, selecting, managing, and transitioning its programs. A new ARPA should report directly to the cabinet secretary to maintain independence and secure the support needed to achieve its mission. 

Authorities

Give the new ARPA flexible hiring and contracting authorities to draw new and extraordinary talent to the nation’s challenges. Flexible hiring mechanisms have proven to be very valuable in allowing ARPAs to attract the rare combination of expertise, vision, and execution required in great program managers. In addition, program managers must be able to contract with exceptional people and teams in companies, universities, nonprofits, and other government entities to achieve their aggressive program goals. ARPAs have used flexible contracting mechanisms to move fast and work effectively with all kinds of organizations, not just those already designed to work with government.

Flexible hiring and contracting authorities are extremely helpful tools for an ARPA organization. It’s worth noting, though, that flexible authorities by themselves do not an ARPA make. 

Leadership

Appoint an exceptional leadership team, hold them to a high standard for impact, and create room for them to deliver on the full potential of the ARPA model. A new ARPA’s director will be responsible for building an organization with people, practices, and culture honed for the mission of creating breakthroughs. This person must bring fresh and creative ways of looking at seemingly impossible problems, a rigorous approach to managing risk, a drive to achieve outsized impact, and an ability to lead people. A strong ethical orientation is also essential for a role that will grapple with the implications of powerful new capabilities for our society. 

The person to whom the ARPA director reports also plays an essential role. This individual must actively prevent others from trying to set the agenda for the ARPA. They enable the ARPA organization to hire program managers who don’t look like other department staff, undertake programs that conventional wisdom decries, manage programs actively, and develop a culture that celebrates bold risk-taking in pursuit of a great national purpose. They hold the ARPA organization accountable for the mission of creating breakthroughs and create room for the unconventional methods needed to realize that mission. 

Note that these four recommendations about purpose, independence, authorities, and leadership are interconnected. All are necessary to build the foundation for a successful new ARPA, and cherry-picking the easy ones will not work. 

Conclusion

A total of 87 years of experience across three different ARPA organizations have provided many lessons about how to build and run an organization that creates breakthroughs for an important national purpose. In establishing any new ARPA, both Congress and the Administration must create the space and allocate the resources that will allow it to flourish and realize its mission. 

Like its programs, a new ARPA will itself be a high-risk, high-reward experiment. If our challenges were modest, or if our current innovation methods were sufficient, there would be no need to try these kinds of experiments. But the problems we face today demand powerful new approaches. Adapting the ARPA model and aiming it at the most critical challenges ahead can create breakthroughs that redefine what is possible for our future. Let’s do everything possible to start new ARPAs on the right track/

Frequently Asked Questions
What is an Advanced Research Projects Agency (ARPA)?

ARPAs create radically better approaches to hard problems by conducting solutions-oriented R&D. The Department of Defense (DOD)’s Defense Advanced Research Projects Agency (DARPA), now in its seventh decade, conducted the pivotal R&D for new military capabilities such as stealth and precision strike and, more broadly, for new information technologies ranging from the internet to artificial intelligence. DARPA’s track record inspired the establishment of the Department of Energy’s ARPA-E and the Office of the Director of National Intelligence’s IARPA. Both of these new ARPAs are well underway, with robust portfolios of R&D programs and encouraging results. They show that it is possible to adapt DARPA’s model for different public purposes.

Who leads an ARPA? Who will this person report to?

For the independence, authority, and responsibility that a new ARPA requires, its Directorship should be a senior appointment reporting directly to the Secretary of the appropriate department. If this role is filled by a Senate-confirmed Presidential appointment, it will be important for stability to have a civil servant to serve as the Deputy Director.

How does an ARPA coordinate its work with other organizations?

ARPA leaders and program managers communicate with their entire ecosystem: other parts of government, the R&D community, and the entities that can implement and scale ARPA results. An ARPA holds the responsibility for selecting and executing its programs.

DARPA and ARPA-E create new technologies, but that’s not what we need for social problems. How does the ARPA model apply to these very different challenges?
For any new ARPA, the model needs to be adapted to its context. For example, a promising
solution for a social problem may come from implementing new insights from behavioral science.
It is helpful to think about the desired future state a program will aim to realize, and then work
backwards to the new approaches, methods, or tools that could enable it, as well as the
institutional changes that will be needed. These solutions may or may not involve technology.
How can a new ARPA be successful without a customer like the Department of Defense to procure what it creates?
For DARPA programs that create revolutionary prototypes of military systems, DOD is indeed
the customer. But the internet, miniaturized GPS receivers, microelectromechanical systems,
and new waves of artificial intelligence did not make their mark through Pentagon procurement. As part of the design of an ARPA program, the program manager needs to think
through how their advance could be adopted and fully scaled. That could involve a
government agency that procures a product or service, companies that commercialize the
results, policy makers or regulators who can design rules and laws that are more effective
because of the program’s results, and/or other avenues