Restoring U.S. Leadership in Manufacturing

Manufacturing is a critical sector for American economic well-being. The value chains in the American economy that rely on manufactured goods account for 25% of employment, over 40% of gross domestic product (GDP), and almost 80% of research and development (R&D) spending in the United States. Yet U.S. leadership in manufacturing is eroding. U.S. manufacturing employment plummeted by one-third—and 60,000 U.S. factories were closed—between 2000 and 2010 (Bonvillian and Singer, Advanced Manufacturing: The New American Innovation Policies, MIT Press, 2018, 52, 265.) Only some 18% of the production jobs lost in the United States during the Great Recession were recovered in the following decade, and production output only returned to its pre–Great Recession levels in 2018. This hollowing out of U.S. manufacturing has been largely driven by international competition, particularly from China. China passed the United States in 2011 as the largest global manufacturing power in both output and value added. The nations have literally traded places: China now has 31% of world manufacturing output while the U.S. has dropped to 16%. The U.S. has not just lost leadership in low-price commodity goods: As part of its massive trade deficit in 2023 of $733 billion in overall manufactured goods, the U.S. ran a deficit of $218 billion in advanced technology goods.

Declining U.S. manufacturing has sharply curtailed a key path to the middle class for those with high school educations or less, thereby exacerbating income inequality nationwide. As a country, we are increasingly leaving a large part of our working class behind an ever-advancing upper middle class. The problems plaguing the domestic manufacturing sector are multifold: American manufacturing productivity is historically low; the supporting ecosystem for small and midsized manufacturers has thinned out so they are slow to adopt process and technology innovations; manufacturing firms lack access to financing when they seek to scale up production for new innovations; manufacturing is poorly supported by our workforce-education system; and we have disconnected our innovation system from our production systems.

The United States can address many of these problems through concerted efforts in advanced manufacturing. Advanced manufacturing means introducing new production technologies and processes to significantly lower production costs and raise efficiency. This would reposition the United States to better compete internationally. Advanced manufacturing also requires that we reconnect innovation with production. A milestone in advanced manufacturing came in 2012, when the federal government established the first of 17 Advanced Manufacturing Institutes with two more planned. Each institute in this network is organized around developing new advanced technologies, from 3D printing to digital production to biofabrication. Each also represents a collaboration among industry, government, and academic institutions. Three federal agencies invest a total of approximately $200 million per year in the institutes—an amount matched by industry and states. 

The manufacturing institutes have proven successful to date. But they cannot reboot American manufacturing alone; other efforts are needed. Key U.S. trading partners and competitors spend far more on maintaining their manufacturing base and investing in advanced manufacturing compared to their GDP than the U.S. does. To restore U.S. leadership in manufacturing and rebuild manufacturing as a route to quality jobs for Americans, the federal government must double down on advanced manufacturing nationwide. Specifically, the next administration should:

More detail on these and related recommendations is provided below. 

Challenge

Obstacles facing U.S. manufacturing

The United States faces multiple obstacles related to manufacturing:

From 2000 to 2010, U.S. manufacturing employment fell precipitously, from about 17 million to under 12 million. While employment declined in all manufacturing sectors, those most prone to globalization (such as textiles and furniture) were especially affected. This is largely attributable to China’s competitive entry into manufacturing, which experts have estimated caused the loss of 2.4 million U.S. manufacturing jobs.

The U.S. manufacturing decline has adversely affected economic well-being in numerous historically industrialized regions—especially for the men without college degrees who have long led U.S. manufacturing employment. Full-year employment of men with a high school diploma but without a college degree dropped from 76% in 1990 to 68% in 2013, and the share of these men who did not work at all rose from 11% to 18%. While real wages have grown over recent decades for men and women with college degrees, they fell for men without college degrees. These trends have affected the working class overall and are particularly worrying for the socioeconomic mobility of minority populations in the United States. African Americans and Hispanics have long comprised a significant portion of the manufacturing workforce, and manufacturing jobs have long been a critical route to enter the middle class. With manufacturing’s decline, this avenue upward has significantly narrowed. While post-COVID workforce shortages slightly improved the economic position of the working class for the past two years, a deep gulf of economic inequality remains.

Opportunity

Although lagging behind countries such as Germany, Japan, Korea, Taiwan, and China in manufacturing innovation, the United States is still a world leader on R&D innovation overall. There is a valuable opportunity to leverage domestic capabilities in R&D innovation to bolster manufacturing capabilities in. A variety of cutting-edge technologies—including new sensor and control systems, big data and analytics, robotics, artificial intelligence (AI), complex simulation and modeling, advanced materials and composites, biofabrication, mass customization (the ability to produce small customized lots at mass-production costs through 3D printing and computerized controls), nanofabrication, and photonics—have potential applications in manufacturing. Using such technologies to create new advanced-manufacturing paradigms could transform manufacturing efficiency, productivity, and returns on investment. 

A national advanced manufacturing initiative would yield multiple benefits. Investment in advanced manufacturing could restore U.S. manufacturing leadership and therefore help employment; in addition, certain advanced-manufacturing technologies (e.g., 3D printing) could re-localize supply chains and generate additional jobs. Pursuing innovative manufacturing methods could improve production cost efficiency, enabling the United States to compete successfully with nations where labor costs are lower. Production innovation will also generate better products and create new product markets. Finally, robust domestic manufacturing capabilities are increasingly understood to be essential to national security. Advanced manufacturing constitutes a “leap ahead”: If the U.S. could lead on the mix of these new innovative technologies and related processes, it could again be a manufacturing leader. 

Plan of Action

A manufacturing transformation requires the following steps:

Recommendation 1. Create a new White House Office of Advanced Manufacturing to coordinate across agencies and develop a strategic plan for positioning the United States as a world leader in advanced manufacturing.

The White House Office of Advanced Manufacturing should work with the National Economic Council and the President’s Council of Advisors for Science and Technology (PCAST)—as well as industry, university, and government leaders—to develop a public/private national advanced manufacturing strategic plan. Staffing and support could come from Manufacturing USA (the network organization for the institutes) and the three federal agencies that fund the institutes (DOD, DOE, and DOC), as well as from other involved agencies. The plan should:

The strategy should also establish a mechanism and timeline for periodic updating of the plan.

Recommendation 2. Create a New Financing Mechanism for Scale-Up of Advanced Manufacturing

While venture capital has been a major force financing innovation in the U.S., it is now focused overwhelmingly on software, biotech, and various services sectors, not on “hard tech” – innovations that must be manufactured. This means there are few mechanisms to scale up manufacturing production in the U.S. 

Shifting to advanced manufacturing requires scale-up financing to support it. This is particularly a problem for small and midsized manufacturers who are reluctant to take the risk of significant investments in new advanced manufacturing technologies. We have a number of models for scale-up financing: The CHIPS Act, to reestablish U.S. manufacturing of advanced semiconductor chips because of national security concerns, provided grant authority of $39 billion for new fabrication facilities as well as low-cost financing and investment tax credits. Operation Warp Speed in 2020 used guaranteed contracts to COVID-19 vaccine makers to reduce their risks and assure production. Senator Chris Coons and colleagues have proposed an industrial finance corporation for innovative manufacturing. The DOD in 2022 created a new Office of Strategic Capital for technology scale up, although it appears focused more on national security rather than broader economic security goals. The Biden Administration proposed repurposing an established federal bank, the Ex-Im Bank, to provide manufacturing scale-up support along with its long-standing export financing role. The DOE’s Loan Programs Office has since 2005 provided financing for scale-up of new energy technologies. In addition, states have often provided financing to firms to support regional job creation. 

There are a range of possible manufacturing scale-up mechanisms. Because it is an existing bank fluent with industry lending and risk, Ex-Im appears a logical contender for significant expansion of its program into manufacturing scale-up financing. It has a broad authorization that would enable it to do so and has embarked on initial lending in this area. This uses the capability of an existing institution and avoids having to create a new one. Applying this and other mechanisms with expanded lending authority for advanced manufacturing scale up could be a solution to this serious manufacturing system gap. 

Recommendation 3. Improve the Advanced Manufacturing Institute Program 

A key part of the manufacturing transformation involves improving the federally funded advanced manufacturing institute program, also called Manufacturing USA (a.k.a. the institutes). The institutes, which were formed to help close the gap between R&D innovation and production innovation, involved the critical actors required for developing advanced manufacturing technologies: industry, universities, community colleges, and federal, state, and local government. 

Established based on recommendations from the industry- and university-led Advanced Manufacturing Partnership (AMP) in 2012, the 17 institutes are designed to create new production paradigms in different production areas, shared across the supply chains of large and small firms and across industry sectors. The institutes are partially funded by federal agencies: nine are funded by the Department of Defense (DOD), seven by the Department of Energy (DOE), and one (plus the two upcoming institutes funded through the CHIPS Act) by the Department of Commerce (DOC). Total federal funding for the institutes is currently approximately $200 million per year. Each federal dollar is typically matched by about two dollars from industry and state governments. 

Why institutes? One key reason is that the great majority of the U.S. manufacturing sector firms are small and midsized, producing nearly half of U.S. output, that—as noted above—typically do not perform in-house R&D and have difficulty accessing the production innovation they need to compete. Challenges facing small and midsize manufacturing firms became even greater in the 2000s, when U.S. manufacturing output stagnated and factories closed. Moreover, even larger firms with R&D capabilities need to collaborate to share the major risks and costs of transitioning to new production paradigms. The institutes address these challenges and needs by acting as test beds—providing a range of industries and firms with opportunities to collaborate on, test, and prove prototypes for advanced production technologies and processes. The institutes also help fill manufacturing talent gaps, training technical workers to use advanced technologies and to develop processes and routines for introducing advanced technologies into established production systems. And, as noted, they can bring the critical actors together (industry, academia, government). Any manufacturing technology program to work has to connect these actors. 

In short, the manufacturing institutes help fill gaps in the U.S. manufacturing innovation system by: 

Although technology development is a long-term project, the institutes have already delivered some notable results. Institute-supported achievements to date include:

These successes notwithstanding, the current institute program cannot solve the systemic problems plaguing U.S. manufacturing. The next administration should dramatically scale up and expand the role of the institutes as part of an effort to usher in a new era of advanced manufacturing nationwide.

The institutes’ collaborative, cost-shared, public/private model is designed to engage all critical stakeholders. But with U.S. manufacturing contributing $2.3 trillion to GDP, federal spending of just $200 million annually to support the institutes (even if those funds are matched by industry and state governments) will not make a large impact. Specific recommendations for the institutes are:

Increase funding for the Manufacturing USA institute program 

The institutes are delivering successes, but they are not funded at a level commensurate with their important role. The level of seed funding has significantly declined in the institutes supported by the DOE and DOD. While the DOC’s single institute has kept up its funding level, the others have faced reductions in the federal share after their initial terms of five years. This has limited, in particular, their programs with small and midsized companies and in workforce education. The federal investment per institute needs to return to well above the $50–70 million level initially awarded per institute over their initial five years. Given what our international competitors are investing, an institute program of at least $500 million a year is needed. The new national strategic plan for advanced manufacturing (described above) could guide funding requests. 

Action steps

The next president should seek additional funding for additional institutes, with a goal of increasing the total federal support for institutes of $500 million The next president should also ask other federal agencies with significant research budgets and mission stakes in the industrial economy—such as the National Aeronautics and Space Administration (NASA), the U.S. Department of Agriculture (USDA), and the Department of Health and Human Services (HHS)—to consider sponsoring institutes. Funding levels per institute should be determined by a combination of institute performance, national-strategy recommendations, and the particulars of proposed projects.

Instead of term-limiting institutes, the agencies have been establishing a formal process for determining whether an institute’s term should be extended, but they need to provide funding at least comparable to the institute’s initial term

The institutes were initially established with five-year fixed terms. But the job of the institutes is not done in five years—addressing the deep structural issues in U.S. manufacturing innovation will require sustained effort over decades. Continuing federal seed funding is still needed at least at levels of their initial five-year terms to leverage private sector investment. However, the agencies have been going in different directions on subsequent funding. Congress has recognized that the institutes should not face fixed terms. But this does not mean that all institute terms should be automatically renewed. The federal government should extend those that are working well, end those that aren’t, and require improvements in others. Like any experiment, the institutes will engender successes and failures. The institute network needs a governance process that recognizes that. 

Two of the three federal agencies that currently fund and oversee the institutes—DOD, and DOC—have been implementing performance metrics aligned with the strategic goals of the institutes. DOD and DOC have developed a formal evaluation process that each institute must go through when it approaches the end of its term and applies for term renewal. DOE is now following their lead, subject to availability of funding. This review process was specifically recommended by a National Academies study. Agencies should consider elements such as an institute’s progress on its technology-development roadmaps, the impact of its current and planned technology development, the reach of its workforce-education efforts, involvement of small and midsized firms, and continued support from and cost-sharing by industry and states. The evaluation process and criteria should be carefully developed such that they can be conducted by an impartial, third-party expert review team. Finally, the evaluation process should be as consistent as possible across the entire institute network.

Where the evaluation concludes that an institute is making adequate progress, the evaluation team should recommend that its funding be renewed for an additional five-year term. If progress is inadequate, the institute could be terminated or recommended for renewal contingent on specific improvements. In cases where an inadequate institute has responsibility for an essential technology area, the evaluation team could also recommend seeking different leadership and organizational changes. All evaluations—even those for institutes deemed to be making adequate progress—could provide recommendations for improvements.

It is not enough to establish a formal review process; if an institute is performing well, it should be extended for an additional term at funding levels at least comparable to the funding level it received for its initial term. The agencies have gone in different directions on this key point. DOC has extended its institute with full funding; DOD and DOE provide only limited funding to the extent that it is available. Given the gravity of U.S. manufacturing problems, this needs to change. 

Action steps

When institutes are meeting their mission goals, they should extend their terms at funding levels at least comparable to what these institutes initially received. 

Use the institutes to strengthen industry supply chains by bringing all supply-chain participants into demonstration facilities

Most of the institutes have established hands-on and virtual demonstration and design facilities accessible to small and midsized firms participating in the institutes. These facilities are important because smaller firms are less likely to adopt new production technologies unless they can see how those technologies would work within production lines, train employees in using new technologies, and estimate the potential efficiency gains new technologies could yield for them.

But many advanced-manufacturing technologies—such as digital-production technologies—cannot be implemented unless adopted by all participants in a given supply chain. The institutes need to bring in participants of industrial supply chains in addition to individual firms in order to disseminate advanced-manufacturing technologies most successfully.

Action steps

The institutes should develop programs whereby larger manufacturers can bring in other participants in their supply chains as new technologies become ready for adoption. Manufacturing USA should support supply-chain-level demonstration and testing using institute demonstration facilities. NIST’s Manufacturing Extension Partnership (MEP) programs should be asked to assist in these efforts given their access to small manufacturing firms. In general, the new administration should support expanded collaboration and system-wide thinking at the implementation stage of advanced-manufacturing technologies and ensure that new technologies and processed developed at institutes move deep into the supply chain, not just to larger firms.

Network the manufacturing institutes to package their different technology advances to be integrated and readily useable by manufacturers

Because companies will want to adopt a series of new technologies, collaboration across the institutes will likely be essential to improving workforce education. Cross-institute collaboration will also help private-sector participants build “factories of the future” that integrate multiple advanced-manufacturing technologies. The role of Manufacturing USA needs to be expanded to support collaboration in these areas as well as cost sharing, dissemination of best practices in intellectual property, membership organization, involvement of small and midsized firms, and joint access to facilities and equipment. Yet agency cooperation to sustain the network has been limited at the time when the need for a collaborative network is becoming clearer. Companies, particularly smaller companies, don’t want individual stovepiped technologies. They want robotics and digital production technologies and analytics plus new areas such as 3D printing—and they need to be interoperable. They don’t want one-off technologies. Presenting manufacturers with integrated packages of technologies with demonstrated efficiency increases will be key to adoption. Similarly, companies would like workforce skills packaged and integrated across new technology fields. 

Action steps

The next administration should expand the role of Manufacturing USA to help the institutes, participating companies, and the workforce as a whole confront the challenges of implementing advanced manufacturing. In particular integrating multiple advanced-manufacturing technologies from multiple institutes to be offered to manufacturers as a package will be key.

Recommendation 4. Bring the strength of the U.S. early-stage R&D innovation system to bear on advanced manufacturing

Federal R&D agencies do not have significant research portfolios around advanced manufacturing technologies and processes, contributing to a serious innovation gap in U.S. manufacturing. While federal research agencies have made massive contributions to information technologies and life science advances, for example, they have not focused on manufacturing technologies. Given our societal challenge in manufacturing, they need to develop this approach. These new research efforts must be connected to and involve industry to help identify the most significant technology opportunities. Because the institutes work on applied and later-stage research, they rely on “feeder systems” for early-stage research. When the institutes aren’t connected closely enough to early-stage research systems—when they have limited knowledge of what research is being carried out and limited capacity to inform the research agenda—they risk “stranded technology” problems. In other words, they will be limited in their ability to capitalize on new results and/or to keep developing concepts progressing. The incoming administration should strive to better link the federal basic-research system (including DOD’s 6.1–6.3-level research programs, NSF’s engineering and computing research and its new directorate for Technology, Innovation and Partnerships, and DOE research at ARPA-E, OS, and EERE) both to industry and to the institutes and their technology focus areas. 

Action steps

The next administration should work through OSTP, with its agency-convening authority, to require federal entities responsible for basic research to develop and implement significant research portfolios around advanced manufacturing. Industry should advise and participate in this research. In addition, OSTP, in cooperation with the proposed White House Advanced Manufacturing Office, should form joint R&D agency and manufacturing institute planning and roadmapping processes to support the institutes’ technology focus areas. Such an effort will assist agencies in developing and highlighting research activities that complement the institutes’ technology-development activities, and vice versa. 

Recommendation 5. Link new manufacturing technologies emerging from the R&D agencies and the manufacturing institutes to acquisition by the Department of Defense 

DOD has a massive annual procurement program; this program could be used to introduce advanced production technologies and processes that could help DOD lower costs and improve system performance. DOD has done this before. When computer numerically controlled (CNC) equipment was developed at MIT in the 1950s, DOD saw that it could significantly improve the precision and performance in missiles and other technologies. It therefore required its manufacturing suppliers to adopt CNC equipment and helped finance its introduction at these firms. Application at these firms spread CNC equipment to virtually all manufacturers today. We could use this same approach today to get advanced manufacturing technologies in place.

DOD did not select the technology focus areas for its nine manufacturing institutes by accident; these technologies support its industrial base and new systems need them. Thus, the institutes are critical for ensuring that DOD possesses the domestic capacity to produce new innovations at scale. Technologies produced by non-DOD-funded institutes are often relevant to DOD as well. For example, the power electronics coming out of a DOE-funded institute will yield not only improved energy efficiency but improved electronics and power systems in general, which are important to DOD. Another DOE-funded institute is developing advanced composites that could significantly improve DOD operating platforms.

Unlike other agencies, DOD not only has a major acquisition system, but it is connected to its R&D system—it can research, develop, and build new technologies. Most private-sector manufacturing firms, particularly smaller firms, tend to be risk- and cost-averse and are hence often reluctant to lead on production in new areas. DOD can fill this gap by using its acquisition system to support testing, design prototyping, and initial procurement for new technologies coming out of the institutes. This would benefit the nation by jump-starting deployment of emerging innovations and would benefit DOD by providing the agency with early access to technologies not yet available on the private market. 

Action steps

The incoming administration should direct DOD to (1) review its relevant demonstration, testing, and acquisition processes so they can be used for implementing advanced manufacturing technologies, (2) identify specific options for the agency to leverage these processes to procure emerging manufacturing technologies it needs, including from the institutes, and (3) identify changes to existing regulations and systems that would help link DOD acquisition with advanced manufacturing innovation emerging from R&D agencies, industry and institutes. ( For example, DOD may be able to reinstitute a form of its industrial/modernization incentive program or apply its Defense Production Act Title III authorities.) The next administration should then take prompt action to implement recommendations arising from the review. 

Recommendation 6. Work to create a new workforce education system designed to prepare workers for jobs in advanced manufacturing

Germany has long gained productivity improvements from a famously well-trained manufacturing workforce based on an apprenticeship system. In contrast, U.S. companies have generally tried to get productivity gains from capital plant and equipment investments and ignored the workforce side. German firms understand, however, that productivity gains from new equipment will soon spread worldwide, while a gain from a high-quality workforce will be enduring and provide a long-term competitive edge. Like Germany, the U.S. needs both inputs. 

Unfortunately, American workforce-education systems are largely broken. The U.S. has a deep disconnect between the education system and workplaces, which lies at the heart of many of its workforce problems. (See detailed discussion of these issues and corresponding recommendations in Bonvillian and Sarma, Workforce Education.) Other causes include:

Complicating efforts to establish new and improved workforce-education systems is the fact existing systems depend heavily on actors in complex, established “legacy” sectors that are hard to change. At the federal level, only a modest NSF program in Advanced Technological Education (ATE), through community colleges, provides education and training in advanced manufacturing. The manufacturing institutes are also developing workforce education efforts at both the technician and engineering levels, but these are also modest in scope. NIST’s Manufacturing Extension Partnership is encouraging new workforce programs for its SME participants. Neither the Department of Labor (DOL) nor the Department of Education (DOEd), however, has a program dedicated to education or training in advanced manufacturing. These existing programs need to be strengthened. The institutes, for example, through their unique blend of academic, public, and private-sector participation, are well positioned to help build a skilled advanced-manufacturing workforce. The institutes also have the deep technical expertise needed to effectively guide the content and structure of new workforce-education manufacturing modules in emerging technologies. 

If the U.S. wants to adopt advanced manufacturing, its workforce must be ready for it. This requires rebuilding much of workforce education. Reforms are needed at all levels. Community colleges must introduce advanced manufacturing curricula, create short programs more adapted to upskilling workers already in the workforce, establish certificates around particular skills that stack toward degrees, and turn around low completion rates. At the federal level, disconnected Labor and Education Department programs need to be integrated and efforts to expand registered apprenticeship programs accelerated. At the industry level, firms must collaborate with each other and with community colleges to build new training and apprenticeship programs, including youth apprenticeships starting in high school. Solutions will have to be pursued in the U.S. federal system, since education is largely state and local government-led. These federal agencies need to improve community college funding and support, integrate advanced manufacturing programs across community colleges, promote apprenticeships and work closely with area firms on reforms and curricula. 

Action steps

The White House Office of Advanced Manufacturing (OAM) proposed above, working with Manufacturing USA, DOD, DOL, DOEd, NSF ATE, and NIST, should launch a coordinated effort to identify best practices in workforce education at the involved agencies, institutes, and elsewhere, including for online education. OAM and Manufacturing USA should also develop an education “commons” of shared advanced-manufacturing courses, modules, and materials. OAM, the workforce education agencies noted above and Manufacturing USA should ensure that current and future workforce-education efforts are coordinated for a unified cross-agency effort. Working with existing manufacturing skills standards groups, OAM and these agencies will likely also need to establish standards for certifications in advanced manufacturing fields, so that certifications can be earned at one place and recognized at another. Manufacturing USA Institutes can play an important role because of their expertise in their specific technology areas. Expert teams will need to be assembled to develop these training resources and standards, as well as to evaluate their effectiveness. Because workforce education tends to suffer from the “tragedy of the commons”—many want it but few want to pay for it—the incoming administration should support federal funding for all of the above efforts and ensure that relevant participating agencies include these efforts in their budget requests. 

Recommendation 7. Develop an ongoing assessment of advanced production capabilities in critical technologies emerging in other nations

In 2023, pursuant to the CHIPS and Science Act, NSF sponsored a study commission to develop a pilot program to assess international innovation and manufacturing capability in critical technology sectors. The U.S. doesn’t undertake such a systematic critical technology assessment, and it has become a major gap in our capabilities and understanding. We are integrated into an  international economy that we helped create and now face massive trade deficits in manufactured and advanced technology goods. The U.S. is failing to track our increasingly innovative competitors and their implementation of emerging technologies. In effect, in a highly competitive world the U.S. is flying blind. The report provides a framework for undertaking this kind of assessment. Adoption of a critical technology assessment of competitor nations and the U.S.’s comparative status is important to both national and economic security; we need a benchmarking system on where we stand and the new approaches others are adopting that we need to pursue. 

If located in the intelligence or defense agencies, this would help ensure longer-term sustainable support, and these agencies could also collaborate with key non-defense agencies. Since national security is now so closely tied to economic security, this is an appropriate role for intelligence or defense organizations. It is important to have a sustained assessment effort led by a talented staff team that can build expertise in the complex assessment process, which is also connected to draw on university and industry experts.

Action steps

The next administration should direct the Director of National Intelligence or DOD (working with DOC, NSF, and DOE, which also have relevant technical capabilities) to conduct an ongoing assessment of the progress of other leading nations in critical technologies and advanced manufacturing. The assessment should examine the strategic goals, internal organization, and funding levels of international advanced-manufacturing initiatives. Such an assessment should emphasize aspects of advanced manufacturing where the U.S. industrial base, including from a national security perspective, has a significant stake in future technology, such as advanced materials, semiconductors and computing, composites, photonics, functional fibers, power electronics, biofabrication, and a suite of digital tools that are finding applications in manufacturing and other sectors (e.g., AI, machine learning, the Internet of Things, robotics, simulations and modeling, data analytics, and quantum sensors and computing). Such an assessment would help us understand the status of critical elements of its industrial base and inform the focus areas and technology-development agendas of the various institutes and agencies. The assessment would also benefit the United States as a whole by guiding national manufacturing strategy and ensuring that the institutes are used to maximize the country’s global competitiveness in manufacturing.

Implementation

The need to bolster the U.S. manufacturing has become a political imperative for both parties. Many aspects of the recommendations detailed above could be implemented quickly by presidential directives and would not require legislation. Increasing funding for the institutes and advanced manufacturing generally is, of course, the exception. But congressional approval for increased advanced manufacturing funding seems likely. Despite the sharp political divides of the past decade, Congress overwhelmingly passed bipartisan legislation in 2014 authorizing the institutes and amended that legislation in 2019—a strong political signal of political support around this issue. Congress has also been willing to back advanced manufacturing in appropriations bills each year. A bipartisan congressional manufacturing caucus, and deep understanding by a number of key congressional figures of issues related to advanced manufacturing, provide a solid foundation of expected legislative-branch support for executive-branch actions to further advanced manufacturing.

Conclusion

Production plays a disproportionate role in U.S. economic well-being. As international competitors move rapidly on advanced manufacturing while U.S. manufacturing capabilities stagnate, the U.S. economy is increasingly vulnerable. These are national security issues as well as economic security issues, and the two are increasingly merged. Public-private models, (particularly Manufacturing USA and the manufacturing institutes), organized around advanced manufacturing, offer a promising model for helping reverse these trends and restoring U.S. leadership in manufacturing. The institutes bring together the key actors: industry, universities, community colleges, and government (federal, state, and local). But the institutes as they now stand simply do not have the capacity to affect the U.S. manufacturing sector at the scale needed. 

The recommendations detailed here provide the next administration with a roadmap for launching a nationwide effort to strengthen advanced manufacturing—an effort that builds on the institutes’ successes and significantly expands their capabilities, roles, and impacts. Briefly summarized, the recommendations are:

Douglas Brinkley’s book American Moonshot tells how, in 1961, President Kennedy mobilized the American public around a new space mission. The mission was rationalized in part on Cold War competition but also on the dramatic mission-related technology advances—from communication satellites to STEM education to computing—that the president argued would (and did) boost the economy. The direct tie between advanced manufacturing and the future of the American economy is, frankly, far more visible to the public than the space race. Strong presidential leadership could unify public support around a shared goal of manufacturing leadership and building quality jobs in a period of political fracture. There is a dramatic competitive aspect: China has already passed the United States on manufacturing output while we as a nation play catch-up, and China’s increased economic power and the corresponding. decline in the U.S. share of world manufacturing output have important implications for the future of democracy and world leadership. Furthering advanced manufacturing in the United States also involves rethinking and rebuilding our workforce-education systems, another potentially highly popular imperative. And, finally, advanced manufacturing includes not only government but industry, universities, community colleges, and nonprofits as well. In short, advanced manufacturing can unite nearly all American institutions—and nearly all Americans.

This action-ready policy memo is part of Day One 2025 — our effort to bring forward bold policy ideas, grounded in science and evidence, that can tackle the country’s biggest challenges and bring us closer to the prosperous, equitable and safe future that we all hope for whoever takes office in 2025 and beyond.

Kickstarting Collaborative, AI-Ready Datasets in the Life Sciences with Government-funded Projects

In the age of Artificial Intelligence (AI), large high-quality datasets are needed to move the field of life science forward. However, the research community lacks strategies to incentivize collaboration on high-quality data acquisition and sharing. The government should fund collaborative roadmapping, certification, collection, and sharing of large, high-quality datasets in life science. In such a system, nonprofit research organizations engage scientific communities to identify key types of data that would be valuable for building predictive models, and define quality control (QC) and open science standards for collection of that data. Projects are designed to develop automated methods for data collection, certify data providers, and facilitate data collection in consultation with researchers throughout various scientific communities. Hosting of the resulting open data is subsidized as well as protected by security measures. This system would provide crucial incentives for the life science community to identify and amass large, high-quality open datasets that will immensely benefit researchers.

Challenge and Opportunity 

Life science has left the era of “one scientist, one problem.” It is becoming a field wherein collaboration on large-scale research initiatives is required to make meaningful scientific progress. A salient example is Alphafold2, a machine learning (ML) model that was the first to predict how a protein will fold with an accuracy meeting or exceeding experimental methods. Alphafold2 was trained on the Protein Data Bank (PDB), a public data repository containing standardized and highly curated results of >200,000 experiments collected over 50 years by thousands of researchers.

Though such a sustained effort is laudable, science need not wait another 50 years for the ‘next PDB’. If approached strategically and collaboratively, the data necessary to train ML models can be acquired more quickly, cheaply, and reproducibly than efforts like the PDB through careful problem specification and deliberate management. First, by leveraging organizations that are deeply connected with relevant experts, unified projects taking this approach can account for the needs of both the people producing the data and those consuming it. Second, by centralizing plans and accountability for data and metadata standards, these projects can enable rigorous and scalable multi-site data collection. Finally, by securely hosting the resulting open data, the projects can evaluate biosecurity risk and provide protected access to key scientific data and resources that might otherwise be siloed in industry. This approach is complementary to efforts that collate existing data, such as the Human Cell Atlas and UCSD Genome Browser, and satisfy the need for new data collection that adheres to QC and metadata standards.

In the past, mid-sized grants have allowed multi-investigator scientific centers like the recently funded Science and Technology Center for Quantitative Cell Biology (QCB, $30M in funding 2023) to explore many areas in a given field. Here, we outline how the government can expand upon such schemes to catalyze the creation of impactful open life science data. In the proposed system, supported projects would allow well-positioned nonprofit organizations to facilitate distributed, multidisciplinary collaborations that are necessary for assembling large, AI-ready datasets. This model would align research incentives and enable life science to create the ‘next PDBs’ faster and more cheaply than before.  

Plan of Action 

Existing initiatives have developed processes for creating open science data and successfully engaged the scientific community to identify targets for the ‘next PDB’ (e.g., Chan Zuckerberg Initiative’s Open Science program, Align’s Open Datasets Initiative). The process generally occurs in five steps:

  1. A multidisciplinary set of scientific leaders identify target datasets, assessing the scale of data required and the potential for standardization, and defining standards for data collection methods and corresponding QC metrics.
  2. Collaboratively develop and certify methods for data acquisition to de-risk the cost-per-datapoint and utility of the data.
  3. Data collection methods are onboarded at automation partner organizations, such as NSF BioFoundries and existing National Labs, and these automation partners are certified to meet the defined data collection standards and QC metrics.
  4. Scientists throughout the community, including those at universities and for-profit companies, can request data acquisition, which is coordinated, subsidized, and analyzed for quality.
  5. Data becomes publicly available and is hosted in a stable, robustly maintained database with biosecurity, cybersecurity, and privacy measures in perpetuity for researchers to access. 

The U.S. Government should adapt this process for collaborative, AI-ready data collection in the life sciences by implementing the following recommendations:  

Recommendation 1. An ARPA-like agency — or agency division — should launch a Collaborative, AI-Ready Datasets program to fund large-scale dataset identification and collection.

This program should be designed to award two types of grants:

  1. A medium-sized “phase 1” award of $1-$5m to fund new dataset identification and certification. To date, roadmapping dataset concepts (Steps 1-2 above) has been accomplished by small-scale projects of $1-$5M with a community-driven approach. Though selectively successful, these projects have not been as comprehensive or inclusive as they could otherwise be. Government funding could more sustainably and systematically permit iterative roadmapping and certification in areas of strategic importance.
  2. A large “phase 2” award of $10-$50m to fund the collection of previously identified datasets. Currently, there are no funding mechanisms designed to scale up acquisition (Steps #3-4 above) for dataset concepts that have been deemed valuable and derisked. To fill this gap, the government should leverage existing expertise and collaboration across the nonprofit research ecosystem by awarding grants of $10-50m for the coordination, acquisition, and release of mature dataset concepts. The Human Genome project is a good analogy, wherein a dataset concept was identified and collection was distributed amongst several facilities.

Recommendation 2. The Office of Management and Budget should direct the NSF and NIH to develop plans for funding academics and for-profits traunched on data deposition.

Once an open dataset is established, the government can advance the use and further development of that dataset by providing grants to academics that are traunched on data deposition. This approach would be in direct alignment with the government’s goals for supporting open, shared resources for AI innovation as laid out in section 5.2 of the Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence. 

Agencies’ approaches to meeting this priority could vary. In one scenario, a policy or program could be established in which grantees would use a portion of the funds disbursed to them to pay for open data acquisition at a certified data provider. Analogous structures have enabled scientists to access other types of shared scientific infrastructure, such as the NSF’s ACCESS program. In the same way that ACCESS offers academics access to compute resources, it could be expanded to offer academic access to data acquisition resources at verified facilities. Offering grants in this way would incentivize the scientific community to interact with and expand upon open datasets, as well as encourage compliance through traunching. 

Efforts to support use and development of open, certified datasets could also be incorporated into existing programs, including the National AI Research Resource, for which complementary programs could be developed to provide funding for standardized data acquisition and deposition. Similar ideas could also be incorporated into core programs within NSF and NIH, which already disburse funds after completion of annual progress reports. Such programs could mandate checks for data deposition in these reports.

Conclusion 

Collaborative, AI-Ready datasets would catalyze progress in many areas of life science, but realizing them requires innovative government funding. By supporting coordinated projects that span dataset roadmapping, methods and standards development, partner certification, distributed collection, and secure release on a large scale, the government can coalesce stakeholders and deliver the next generation of powerful predictive models. To do so, it should combine small-sized, mid-sized, and traunched grants in unified initiatives that are orchestrated by nonprofit research organizations, which are uniquely positioned to execute these initiatives end-to-end. These initiatives should balance intellectual property protection and data availability, and thereby help deliver key datasets upon which new scientific insights depend.

This action-ready policy memo is part of Day One 2025 — our effort to bring forward bold policy ideas, grounded in science and evidence, that can tackle the country’s biggest challenges and bring us closer to the prosperous, equitable and safe future that we all hope for whoever takes office in 2025 and beyond.

Frequently Asked Questions
What is involved in roadmapping dataset opportunities?

Roadmapping dataset opportunities, which can take up to a year, requires convening experts across multiple disciplines, including experimental biology, automation, machine learning, and others. In collaboration, these experts assess both the feasibility and impact of opportunities, as well as necessary QC standards. Roadmapping culminates in determination of dataset value — whether it can be used to train meaningful new machine learning models.

Why should data collection be centralized but redundant?

To mitigate single-facility risk and promote site-to-site interoperability, data should be collected across multiple sites. To ensure that standards and organization holds across sites, planning and documentation should be centralized.

How should automation partners be certified?

Automation partners will be evaluated according to the following criteria:



  • Commitment to open science

  • Rigor and consistency in methods and QC procedures

  • Standardization of data and metadata ontologies


More specifically, certification will depend upon the abilities of partners to accommodate standardized ontologies, capture sufficient metadata, and reliably pass data QC checks. It will also require partners to have demonstrated a commitment to data reusability and replicability, and that they are willing to share methods and data in the open science ecosystem.

Should there be an embargo before data is made public?

Today, scientists have no obligation to publish every piece of data they collect. In an Open Data paradigm, all data must eventually be shared. For some types of data, a short, optional embargo period would enable scientists to participate in open data efforts without compromising their ability to file patents or publish papers. For example, in protein engineering, the patentable product is the sequence of a designed protein, making immediate release of data untenable. An embargo period of one to two years is sufficient to alleviate this concern and may even hasten data sharing by linking it to a fixed length of time after collection, rather than to publication. Whether or not an embargo should be implemented and its length should be determined for each data type, and designed to encourage researchers to participate in acquisition of open data.

How do we ensure biosecurity of the data?

Biological data is a strategic resource and requires stewardship and curation to ensure it has maximum impact. Thus, data that is generated through the proposed system should be hosted by high-quality providers that adhere to biosecurity standards and enforce embargo periods. Appropriate biosecurity standards will be specific to different types of data, and should be formulated and periodically reevaluated by a multidisciplinary group of stakeholders. When access to certified, post-embargo data is requested, the same standards will apply as will export controls. In some instances, for some users, restricting access may be reasonable. For offering this suite of valuable services, hosting providers should be subsidized through reimbursements.

Launch the Next Nuclear Corps for a More Flexible Nuclear Regulatory Commission

The Nuclear Regulatory Commission (NRC), the Nation’s regulator of civilian nuclear technologies, should shift agency staff, resources, and operations more flexibly based on emergent regulatory demands. The nuclear power industry is demonstrating commercialization progress on new reactor concepts that will challenge the NRC’s licensing and oversight functions. Rulemaking on new licensing frameworks is in progress, but such regulation will fall short without changes to the NRC’s staffing. Since the NRC is exempt from civil service laws under the Atomic Energy Act (AEA) of 1954, the agency should use AEA flexible hiring authorities to launch the Next Nuclear Corps, a staffing program to shift capacity based on emergent, short-term workforce needs. The NRC should also better enable hiring managers to meet medium-term workforce needs by clarifying guidance on NRC’s direct hire authority.

Challenge and Opportunity

Policymakers, investors, and major energy users, such as data centers and industrial plants, are interested in new nuclear power because it promises unique value. New nuclear power technologies could add either additional base load or variable power to electrical systems. Small modular or micro reactors could provide independent power to military bases, many of which are connected to power grids and vulnerable to disruption. Local governments can stimulate economies with high-paying and safe jobs at nuclear plants. The average nuclear power plant also has the lowest lifecycle greenhouse gas emissions compared to other available electricity-generating technologies, including wind, solar, and hydropower. Current efforts to expand nuclear power are different from those of the 1970s and 1980s, the most recent decades of significant building. Proposals today include building plants designed similarly to plants of those decades or even restarting power operations at up to three closed plants; but more activity is focused on commercializing advanced and small modular reactors, diverse concepts incorporating innovations in reactor design, fuel types, and safety systems. The government has partnered with private companies to develop and demonstrate advanced reactors since the inception of nuclear technology in the 1950s, but today several companies demonstrate advanced technical and business progress toward commercialization. 

Innovation in nuclear power challenges the NRC’s status-quo approaches to licensing and oversight. Rulemaking on new regulatory frameworks is necessary and in progress, but changes to the agency’s staffing and operations are also needed. Over time, Congress, the President, and the Commission itself have adjusted the agency’s operations in response to shifts in international postures, comprehensive national energy plans, and accidents or emerging threats at nuclear plants, but the NRC’s ability to respond to sudden changes in the nuclear industry is a long-standing challenge. To become more flexible, NRC initiated Project Aim in 2014 after expectations of significant industry growth, spurred in part by tax incentives in the Energy Policy Act of 2005, were not realized due to record-low natural gas prices. More recent assessments from the Government Accountability Office (GAO) and NRC Office of Inspector General (OIG) acknowledge the challenge of workload forecasting in an unpredictable nuclear industry, but counterintuitively, some recommendations focus on improving the ability to workforce plan two years or more in advance. Renewed expectations of growth, spurred by interest from policymakers and energy customers, reinforces a point from the 2015 Project Aim final report that, “…effectiveness, efficiency, agility, flexibility, and performance must improve for the agency to continue to succeed in the future.”

Congress also called on the NRC to become more responsive to current developments as expressed in legislation enacted with bipartisan support. Across the Fiscal Responsibility Act of 2023 and the ADVANCE Act of 2024, Congress requires the NRC to update its mission statement to better reflect the benefits of civilian nuclear technology, establish regulatory frameworks for new technology, streamline environmental review, incentivize licensing of advanced nuclear technologies, and position itself and the United States as a leader in civilian nuclear power. Meeting expectations requires significant operational and workforce changes. Since NRC is exempt from civil service laws and operates an independent competitive merit system, widespread changes to the agency’s hiring practices will be determined by future Commissioners, including the President’s selection of Chair (and by extension, the Chair’s selection of the Executive Director for Operations (EDO)), and modifications to agreements between the NRC and the Office of Personnel Management (OPM). In the meantime, NRC is well equipped to increase hiring flexibility using authorities from existing law and regulations.

Plan of Action

Recommendation 1. The NRC EDO should launch the Next Nuclear Corps, a staffing program dedicated to shifting agency capacity based on short-term workforce needs.

The EDO should hire a new director to lead the Corps. The Corps director should report to the EDO and consult with the Office of the Chief Human Capital Officer (OCHCO) and division heads to develop Corps positions to address near-term priorities in competency areas that do not require in-depth training. Near-term priorities should be informed by the NRC’s existing yearly capacity assessments, but the Corps director should also rely on direct expertise and insights from branch chiefs who have a real-time understanding of industry activity and staffing challenges.

Recommendation 2. Hiring for the Corps should be executed under the special authority to appoint directly to the excepted service under 161B(a) of the Atomic Energy Act (AEA).

The ADVANCE Act of 2024 created new categories of hires to fill critical needs related to licensing, oversight, and matters related to NRC efficiency. The EDO should execute the Corps under the new authorities in section 161B(a) of the AEA as it provides clear direction and structure for the EDO to make personnel appointments outside of the NRC’s independent competitive merit system described in Management Directive 10.1. 161B(a)(A) provides up to 210 hires at any time and 161B(a)(B) provides up to 20 additional hires each fiscal year which are limited to a term of four years. The standard service term should be one year as near-term workforce needs may be temporary because of the nature of the position or uncertainty in future demand.

The EDO should adopt the following practices to allow renewals of some positions from the prior year without reaching the limits described in the AEA:

Recommendation 3. The EDO should update Management Directives 10.13 and 10.1 to contain or reference the standard operating procedure for NRC’s mirrored version of OPM’s Direct Hire Authority.

The proposed Corps addresses emergent, short-term capacity needs, but internal policy clarity is needed to solve medium-term hiring challenges for hard-to-recruit positions. As far back as 2007, NRC hiring managers and human resources reported that DHA was highly desired for hiring flexibility. The NRC OIG closed Recommendation 2.1 from Audit of the U.S. Nuclear Regulatory Commission’s Vacancy Announcement Process in June 2024 because NRC updated Standard Operating Procedure for Direct Hire Authority with more details. However, management directives are the primary policy and procedure documents that govern the NRC’s internal functions. The EDO should update management directives to formally capture or reference this procedure so that NRC staff are better equipped to use DHA. Specifically, the EDO should:

Conclusion

The potential of new nuclear power plants to meet energy demand, increase energy security, and revitalize local economies depends on new regulatory and operational approaches at the NRC. Rulemaking on new licensing frameworks is in progress, but the NRC should also use AEA flexible hiring authorities to address emergent, short-term workforce needs that may be temporary based on shifting industry developments. The proposed Corps structure allows the EDO to quickly hire new staff outside of the agency’s competitive merit system for short-term needs while preserving flexibility to renew appointments if the capacity needs continue. For permanent hard-to-recruit positions, the EDO should clarify guidance for hiring managers on direct hire authority. The NRC is well equipped with existing authorities to meet emergent regulatory demand and renewed expectations of nuclear power growth.

This action-ready policy memo is part of Day One 2025 — our effort to bring forward bold policy ideas, grounded in science and evidence, that can tackle the country’s biggest challenges and bring us closer to the prosperous, equitable and safe future that we all hope for whoever takes office in 2025 and beyond.

Frequently Asked Questions
What types of jobs would be filled by the Corps?

The Corps director should create positions informed by the expertise and insights from agency leaders who have a real-time understanding of industry activity and present staffing challenges. Positions should cover all career levels and cover competency areas that do not require in-depth internal training or security clearances. The Corps should fill new positions created for special roles in support of other staff or teams, such as special coordinators, specialists, and consultants.

How is this different from the Presidential Management Fellows Program or similar programs?

The Corps is not a graduate-level fellowship or leadership development program. The Corps is specifically for short-term, rapid hiring based on emergent capacity needs that may be temporary based on the nature of the need or uncertainty in future demand.

Can Corps hires transition to permanent positions?

The Corps structure includes flexibility for a limited number of renewals, but it is not intended to recruit for permanent positions. Supervisors and hiring managers could choose to coordinate with the OCHCO to recruit off-boarding Corps members to other employment opportunities.

What is the recruiting strategy for the Corps?

The Corps director can identify talent through existing NRC recruiting channels, such as job fairs, universities, and professional associations, however, the Corps director should also establish new recruiting efforts through more competitive channels. Because the positions are temporary, the Corps can recruit from more competitive talent pools, such as talent seeking long term careers in private industry. Job seekers with long-term ambitions in the private nuclear sector and the NRC could both benefit from a one- or two-year period of service focused on a specific project.

Ready for the Next Threat: Creating a Commercial Public Health Emergency Payment System

There are many examples of groundbreaking success in the development of life-saving vaccines, diagnostics, and therapeutics to which we can point in the response to the COVID-19 pandemic, such as the introduction of mRNA vaccines and the accelerated path to its authorization through Operation Warp Speed. However, in anticipation of future known and unknown health security threats, including new pandemics, biothreats, and climate-related health emergencies, our answers need to be much faster, cheaper, and less disruptive to other operations. One path to a more permanent state of readiness is to create a commercial public health emergency payment system to use the full power of commercial healthcare reimbursement, providing clear and tunable market signals to catalyze investment in anticipation and in response to public health emergencies.

Challenge and Opportunity

There are two key problems we have yet to solve. First, how do we break out of the panic/neglect cycle of investments in emergency medical countermeasures (MCMs), i.e invest more in prevention and preparedness than in response? Secondly, how can we avoid any friction in capital (both public and private) once there is an emergency, while preserving the ability to fine tune incentives as needs evolve?

Many of the most promising and impactful tools applicable to emerging infectious diseases and public health emergency (PHE) management more broadly (e.g. wastewater surveillance, home testing, vaccinations, improved indoor air quality), face strong headwinds due to small, poorly defined, and/or unstable markets, significantly reducing private investment in them and relying on seemingly stochastic public investments by a fragmented set of federal, state, and local agencies.

Additionally, there is a prevailing assumption within the health security community that it operates largely outside the commercial U.S. healthcare system due to lack of private incentives (as opposed to, for instance, the development and use of cancer therapies). This, however, reflects a policy decision and not fundamental underlying market demand. And yet there remain two key realities to contend with: pandemic-related demand is largely unpredictable, and we have, thus far, been unable to effectively amortize pandemic costs into interpandemic periods.

U.S. health care insurers process more than nine  billion claims for payment each year  – a process which features a sophisticated, standardized accounting system that is widely understood by the entire healthcare industry; it is also a powerful signal of future market expectations that drives private and public R&D investment decisions.

Plan of Action 

The U.S. government should create a prospective healthcare reimbursement code set that can anticipate the need for any product or service in the context of PHEs, including MCMs and infrastructure-based countermeasures. The goal would be to provide clear market signals and pull incentives, to encourage and accelerate development and appropriate utilization of medical countermeasures (diagnostics, vaccines, therapies, early warning detection, and others). This would complement other strategies, such as advanced R&D investments made by federal funding agencies including the Biomedical Advanced Research & Development Authority (BARDA). Creating clear reimbursement pathways would likely immediately attract private investment in MCMs in ways that are notoriously difficult currently and help enable rapid response to public health emergencies.

The development and management of this reimbursement system should be housed within the Centers for Medicare and Medicaid Services (CMS), and would require introduction of legislation clearly authorizing CMS to pay for products and services under EUA and use of prospective payment policies. 

There are a variety of additional benefits to using a payment system like this for emergency response. This system could be a unique and core source of surveillance data, through conditions of payment policies, that can be used to provide intelligence and manage evolving emergencies such as outbreaks and pandemics, significantly reducing the need for additional data collection systems – need which proved to be a major bottleneck during COVID-19. Prospective codesets are not common in public and private insurance, but the existence of them would likely serve as a new and powerful tool for private investment in a capability that would be certain to have public health benefit were it to exist.

We propose that reimbursable services be categorized into three tiers.

Tier 1. Existing and prospective medical products/services under FDA EUA

This is the set of regulated medical products that would typically be considered for emergency use authorization by the FDA. It can include infectious disease diagnostics, vaccinations, and therapeutics. It can even include the use of repurposed generic drugs to mitigate potential drug shortages.

Tier 2. Existing public health products/services typically not requiring FDA approvals, but may have other regulatory hurdles

There are a variety of products and services not considered medical products but nonetheless play critical roles not only in response but in prevention of public health emergencies. Many of these technologies struggle to find stable markets in which to operate and are relegated to the sidelines. This includes genomic surveillance, remnant sample sequencing, or other surveillance testing capabilities, early warning systems, use of commercial wearables as a check engine light for possible infection prior to symptom onset. Many of these technologies need to be “always on” to be most effective.

Tier 3. Prospective public health products/services typically not requiring FDA approvals, but may have other regulatory hurdles

This category deviates from current models of healthcare reimbursement, because it is comprised of interventions that are carried out by service providers outside of healthcare delivery, but which nonetheless have high impact potential. This can include indoor air quality upgrades, or wastewater detection. Again, the commercialization of indoor air quality is in part impeded by poorly defined markets. 

Value-based care models

While the above items are largely “fee for service” payment models, we can also envision the use of value-based care models here, focusing on community outcomes and providing flexibility to communities or other systems to achieve them. This can include models to prevent hospitalization due to PHE (e.g. COVID-19), prevent community transmission (could be directed at local public health agencies or other agents), herd immunity vaccination rates, etc.

Conclusion 

One of the biggest frustrations amongst the life science and medical device communities in the COVID-19 response was that the government was not clear about target product profiles and advanced market commitments for the full range of products and services needed. These types of systems, if implemented early, would have sent clear and powerful signals to the market that would have quickly unlocked the necessary private sector investment needed to expedite product development needed for the response. Using the already widely adopted and understood commercial healthcare reimbursement system to incentivize and pay for prospective emergency product development and delivery is a novel, powerful, and turnkey approach to pandemic preparedness. 

This action-ready policy memo is part of Day One 2025 — our effort to bring forward bold policy ideas, grounded in science and evidence, that can tackle the country’s biggest challenges and bring us closer to the prosperous, equitable and safe future that we all hope for whoever takes office in 2025 and beyond.

From Strategy to Impact: Establishing an AI Corps to Accelerate HHS Transformation

To unlock the full potential of artificial intelligence (AI) within the Department of Health and Human Services (HHS), an AI Corps should be established, embedding specialized AI experts within each of the department’s 10 agencies. HHS is uniquely positioned for—and urgently requires—this investment in AI expertise, as it plays a pivotal role in delivering efficient healthcare to millions of Americans. HHS’s responsibilities intersect with areas where AI has already shown great promise, including managing vast healthcare datasets, accelerating drug development, and combating healthcare fraud. 

Modeled after the success of the Department of Homeland Security (DHS)’s existing AI Corps, this program would recruit top-tier professionals with advanced expertise in AI, machine learning, data science, and data engineering to drive innovation within HHS. While current HHS initiatives like the AI Council and AI Community of Practice provide valuable strategic guidance, they fall short in delivering the on-the-ground expertise necessary for meaningful AI adoption across HHS agencies. The AI Corps would fill this gap, providing the hands-on, agency-level support necessary to move beyond strategy and into the impactful implementation intended by recent federal actions related to AI. 

This memo uses the Food and Drug Administration (FDA) as a case study to demonstrate how an AI Corps member could spearhead advancements within HHS’s agencies. However, the potential benefits extend across the department. For instance, at the Centers for Disease Control and Prevention (CDC), AI Corps experts could leverage machine learning for more precise outbreak modeling, enabling faster, more targeted public health responses. At the National Institutes of Health (NIH), they could accelerate biomedical research through AI-driven analysis of large-scale genomic and proteomic data. Similarly, at the Centers for Medicare and Medicaid Services (CMS), they could improve healthcare delivery by employing advanced algorithms for patient data analytics, predicting patient outcomes, and enhancing fraud detection mechanisms.

Challenge and Opportunity

AI is poised to revolutionize not only healthcare but also the broad spectrum of services under HHS, offering unprecedented opportunities to enhance patient outcomes, streamline administrative processes, improve public health surveillance, and advance biomedical research. Realizing these benefits and defending against potential harms demands the effective implementation and support of AI tools across HHS. The federal workforce, though committed and capable, currently lacks the specialized expertise needed to fully harness AI’s potential, risking a lag in AI adoption that could impede progress.

The public sector is responding well to this opportunity since it is well positioned to attract leading experts to help leverage new technologies. However, for federal agencies, attracting technical experts has been a perennial challenge, resulting in major setbacks in government tech projects: Of government software projects that cost more than $6 million, only 13% succeed. 

Without introducing a dedicated AI Corps, existing employees—many of whom lack specialized AI expertise—would be required to implement and manage complex AI tools alongside their regular duties. This could lead to the acquisition or development of AI solutions without proper evaluation of their suitability or effectiveness for specific use cases. Additionally, without the necessary expertise to oversee and monitor these systems, agencies may struggle to ensure they are functioning correctly and ethically. As a result, there could be significant inefficiencies, missed opportunities for impactful AI applications, and an increased reliance on external consultants who may not fully understand the unique challenges and needs of each agency. This scenario not only risks undermining the effectiveness of AI initiatives but also heightens the potential for errors, biases, and misuse of AI technologies, ultimately hindering HHS’s mission and objectives.

HHS’s AI Strategy recognizes the need for AI expertise in government; however, its focus has largely been on strategic oversight rather than the operational execution needed on the ground, with the planned establishment of an AI Council and AI Community of Practice prioritizing policy and coordination. While these entities are crucial, they do not address the immediate need for hands-on expertise within individual agencies. This leaves a critical gap in the hands-on expertise required to safely implement AI solutions at the agency level. HHS covers a wide breadth of functions, from administering national health insurance programs like Medicare and Medicaid to conducting advanced biomedical research at the NIH, with each agency facing distinct challenges where AI could provide transformative benefits. However, without dedicated support, AI adoption risks becoming fragmented, underutilized, or ineffective.

For example, at the CDC, AI could significantly improve infectious disease surveillance systems, enabling more timely interventions and enhancing the CDC’s overall preparedness for public health crises, moving beyond traditional methods that often rely on slower, manual analysis. Furthermore, the Administration for Children and Families (ACF) could leverage AI to better allocate resources, improve program outcomes, and support vulnerable populations more effectively. There are great opportunities to use machine learning algorithms to accelerate data processing and discovery in fields such as cancer genomics and personalized medicine. This could help researchers identify new biomarkers, optimize clinical trial designs, and push forward breakthroughs in medical research faster and more efficiently. However, without the right expertise, these game-changing opportunities could not only remain unrealized but also introduce significant risks. The potential for biased algorithms, privacy breaches, and misinterpretation of AI outputs poses serious concerns. Agency leaders may feel pressured to adopt technologies they don’t fully understand, leading to ineffective or even harmful implementations. Embedding AI experts within HHS agencies is essential to ensure that AI solutions are deployed responsibly, maximizing benefits while mitigating potential harms.

This gap presents an opportunity for the federal government to take decisive action. By recruiting and embedding top-tier AI professionals within each agency, HHS could ensure that AI is treated not as an ancillary task but as a core component of agency operations. These experts would bring the specialized knowledge necessary to integrate AI tools safely and effectively, optimize processes, and drive innovation within each agency.

DHS’s AI Corps, launched as part of the National AI Talent Surge, provides a strong precedent for recruiting AI specialists to advance departmental capabilities. For instance, AI Corps members have played a vital role in improving disaster response by using AI to quickly assess damage and allocate resources more effectively during crises. They have also enhanced cybersecurity efforts by using AI to detect vulnerabilities in critical U.S. government systems and networks. Building on these successes, a similar effort within HHS would ensure that AI adoption moves beyond a strategic objective to a practical implementation, with dedicated experts driving innovation across the department’s diverse functions.

Case Study: The Food and Drug Administration (FDA)

The FDA stands at the forefront of the biotechnology revolution, facing the dual challenges of rapid innovation and a massive influx of complex data. Advances in gene editing, personalized medicine, and AI-driven diagnostics promise to transform healthcare, but they also present significant regulatory hurdles. The current framework, though robust, struggles to keep pace with these innovations, risking delays in the approval and implementation of groundbreaking treatments.

This situation is reminiscent of the challenges faced in the 1980s and 1990s, when advances in pharmaceutical science outstripped the FDA’s capacity to review new drugs, leading to the so-called “drug lag.” The Prescription Drug User Fee Act of 1992 was a pivotal response, streamlining the drug review process by providing the FDA with additional resources. However, the continued reliance on scaling resources may not be sustainable as the complexity and volume of data increase.

The FDA has begun to address this new challenge. For example, the Center for Biologics Evaluation and Research has established committees like the Artificial Intelligence Coordinating Committee and the Regulatory Review AI Subcommittee. However, these efforts largely involve existing staff who must balance AI responsibilities with their regular duties, limiting the potential impact. Moreover, the focus has predominantly been on regulating AI rather than leveraging it to enhance regulatory processes.

Placing an AI expert from the HHS AI Corps within the FDA could fundamentally change this dynamic. By providing dedicated, expert support, the FDA could accelerate its regulatory review processes, ensuring timely and safe access to innovative treatments. The financial implications are significant: the value of accelerated drug approvals, as demonstrated by the worth of Priority Review Vouchers (acceleration of four months = ~$100 million), indicates that effective AI adoption could unlock billions of dollars in industry value while simultaneously improving public health outcomes.

Plan of Action

To address the challenges and seize the opportunities outlined earlier, the Office of the Chief Artificial Intelligence Officer (OCAIO) within HHS should establish an AI Corps composed of specialized experts in artificial intelligence, machine learning, data science, and data engineering. This initiative will be modeled after DHS’s successful AI Corps and tailored to the unique needs of HHS and its 10 agencies.

Recommendation 1. Establish an AI Corps within HHS.

Composition: The AI Corps would initially consist of 10 experts hired to temporary civil servant positions, with one member allocated to each of HHS’s 10 agencies, and each placement lasting one to two years. These experts will possess a range of technical skills—including AI, data science, data engineering, and cloud computing—tailored to each agency’s specific needs and technological maturity. This approach ensures that each agency has the appropriate expertise to effectively implement AI tools and methodologies, whether that involves building foundational data infrastructure or developing advanced AI applications.

Hiring authority: The DHS AI Corps utilized direct hiring authority, which was expanded by the Office of Personnel Management under the National AI Talent Surge. HHS’s AI Corps could adopt a similar approach. This authority would enable streamlined recruitment of individuals into specific AI roles, including positions in AI research, machine learning, and data science. This expedited process would allow HHS to quickly hire and onboard top-tier AI talent.

Oversight: The AI Corps would be overseen by the OCAIO, which would provide strategic direction and ensure alignment with HHS’s broader AI initiatives. The OCAIO would also be responsible for coordinating the activities of the AI Corps, setting performance goals, and evaluating outcomes.

Budget and Funding

Estimated cost: The AI Corps is projected to cost approximately $1.5 million per year, based on an average salary of $150,000 per corps member. This estimate includes salaries and operational costs such as training, travel for interagency collaboration, and participation in conferences. 

Funding source: Funding would be sourced from the existing HHS budget, specifically from allocations set aside for digital transformation and innovation. Given the relatively modest budget required, reallocation within these existing funds should be sufficient. 

Recruitment and Training

Selection process: AI Corps members would be recruited through a competitive process, targeting individuals with proven expertise in AI, data science, and related fields. 

Training: Upon selection, AI Corps members would undergo an intensive orientation and training program to familiarize them with the specific needs and challenges of HHS’s various agencies. This also includes training on federal regulations, ethics, and data governance to ensure that AI applications comply with existing laws and policies.

Agency Integration

Deployment: Each AI Corps member would be embedded within a specific HHS agency, where they would work closely with agency leadership and staff to identify opportunities for AI implementation. Their primary responsibility would be to develop and deploy AI tools that enhance the agency’s mission-critical processes. For example, an AI Corps member embedded at the CDC could focus on improving disease surveillance systems through AI-driven predictive analytics, while a member at the NIH could drive advancements in biomedical research by using machine learning algorithms to analyze complex genomic data.

Collaboration: To ensure cross-agency learning and collaboration, AI Corps members would convene regularly to share insights, challenges, and successes. These convenings would be aligned with the existing AI Community of Practice meetings, fostering a broader exchange of knowledge and best practices across the department.

Case Study: The FDA

AI Corps Integration at the FDA

Location: The AI Corps member assigned to the FDA would be based in the Office of Digital Transformation, reporting directly to the chief information officer. This strategic placement would enable the expert to work closely with the FDA’s leadership team, ensuring that AI initiatives are aligned with the agency’s overall digital strategy.

Key responsibilities

Process improvement: The AI Corps member would collaborate with FDA reviewers to identify opportunities for AI to streamline regulatory review processes. This might include developing AI tools to assist with data analysis, automate routine tasks, or enhance decision-making capabilities.

Opportunity scoping: The expert would engage with FDA staff to understand their workflows, challenges, and data needs. Based on these insights, the AI Corps member would scope and propose AI solutions tailored to the FDA’s specific requirements.

Pilot projects: The AI Corps member would lead pilot projects to test AI tools in real-world scenarios, gathering data and feedback to refine and scale successful initiatives across the agency.

Conclusion

Establishing an AI Corps within HHS is a critical step toward harnessing AI’s full potential to enhance outcomes and operational efficiency across federal health agencies. By embedding dedicated AI experts within each agency, HHS can accelerate the adoption of innovative AI solutions, address current implementation gaps, and proactively respond to the evolving demands of the health landscape.

While HHS may currently have less technological infrastructure compared to departments like the Department of Homeland Security, targeted investment in in-house expertise is key to bridging that gap. The proposed AI Corps not only empowers agencies like the FDA, CDC, NIH, and CMS to enhance their missions but also sets a precedent for effective AI integration across the federal government. Prompt action to establish the AI Corps will position HHS at the forefront of technological innovation, delivering tangible benefits to the American public and transforming the way it delivers services and fulfills its mission.

This action-ready policy memo is part of Day One 2025 — our effort to bring forward bold policy ideas, grounded in science and evidence, that can tackle the country’s biggest challenges and bring us closer to the prosperous, equitable and safe future that we all hope for whoever takes office in 2025 and beyond.

Frequently Asked Questions
How will the AI Corps avoid becoming just another bureaucratic layer?

The AI Corps is designed to be the opposite of bureaucracy—it’s about action, not administration. These experts will be embedded directly within agencies, working alongside existing teams to solve real-world problems, not adding paperwork. Their mission is to integrate AI into daily operations, making processes more efficient and outcomes more impactful. By focusing on tangible results and measurable improvements, the AI Corps will be judged by its ability to cut through red tape, not create it.

What if AI Corps members are too ahead of the curve for existing agency cultures?

Innovation can present challenges, but the AI Corps is designed to address them effectively. These experts will not only bring technical expertise but also serve as facilitators who can translate advanced AI capabilities into practical applications that align with existing agency cultures. A key part of their role will be to make AI more accessible and understandable, ensuring it is valuable to all levels of staff, from frontline workers to senior leadership. Their success will depend on their ability to seamlessly integrate advanced technology into the agency’s everyday operations.

Why focus on AI when there are so many other pressing health issues?

AI isn’t just another tool; it’s a force multiplier that can help solve those other pressing issues more effectively. Whether it’s accelerating drug approvals at the FDA or enhancing public health responses across HHS, AI has the potential to improve outcomes, save time, and reduce costs. By embedding AI experts within agencies, we’re not just addressing one problem—we’re empowering the entire department to tackle multiple challenges with greater efficiency and impact.

What’s in it for the AI experts? Why would top talent join the AI Corps?

For top AI talent, the AI Corps offers a unique opportunity to make a difference at a scale that few private-sector roles can match. It’s a chance to apply their skills to public service, tackling some of the nation’s most critical challenges in healthcare, regulation, and beyond. The AI Corps members will have the opportunity to shape the future of AI in government, leaving a legacy of innovation and impact. The allure of making a tangible difference in people’s lives can be a powerful motivator for the right kind of talent.

Why not outsource AI talent or rely on consultants instead of building in-house expertise?

While outsourcing AI talent or using consultants can offer short-term benefits, it often lacks the sustained engagement necessary for long-term success. Building in-house expertise through the AI Corps ensures that AI capabilities are deeply integrated into the agency’s operations and culture. A notable example illustrating the risks of overreliance on external contractors is the initial rollout of HealthCare.gov. The website faced significant technical issues at launch due to coordination challenges and insufficient in-house technical oversight, which hindered public access to essential healthcare services. In contrast, recent successful government initiatives—such as the efficient distribution of COVID-19 test kits and the timely processing of economic stimulus payments directly into bank accounts—demonstrate the positive impact of having the right technical experts within government agencies.

How will the AI Corps collaborate with existing IT and data teams within agencies?

Collaboration is crucial to the AI Corps’ success. Instead of working in isolation, AI Corps members will integrate with existing IT and data teams, bringing specialized AI knowledge that complements the teams’ expertise. This partnership approach ensures that AI initiatives are well-grounded in the agencies’ existing infrastructure and aligned with ongoing IT projects. The AI Corps will serve as a catalyst, amplifying the capabilities of existing teams rather than duplicating their efforts.

Could the AI Corps inadvertently lead to job displacement within agencies?

The AI Corps is focused on augmentation, not replacement. The primary goal is to empower existing staff with advanced tools and processes, enhancing their work rather than replacing them. AI Corps members will collaborate closely with agency employees to automate routine tasks and free up time for more meaningful activities. A 2021 study by the Boston Consulting Group found that 60% of employees view AI as a coworker rather than a replacement. This reflects the intent of the AI Corps—to build capacity within agencies and ensure that AI is a tool that amplifies human effort, fostering a more efficient and effective workforce.

What does success look like for the HHS AI Corps program after one or two years?

Success for the AI Corps program means that each HHS agency has made measurable progress toward integrating AI and related technologies, tailored to their specific needs and maturity levels. Within one to two years, agencies might have established robust data infrastructures, migrated platforms to the cloud, or developed pilot AI projects that address key challenges. Success also includes fostering a culture of innovation and experimentation, with AI Corps members identifying opportunities and creating proofs of concept in low-risk environments. By collaborating across agencies, these experts support each other and amplify the program’s impact. Ultimately, success is reflected in enhanced capabilities and efficiencies within agencies, setting a strong foundation for ongoing technological advancement aligned with each agency’s mission.

Transforming the Carceral Experience: Leveraging Technology for Rehabilitation

Despite a $182 billion annual cost, the U.S. correctional system perpetuates itself: At least 95% of all state prisoners will be released from prison at some point, yet more than 50% of them reoffend within three years. 

A key driver of high recidivism is the systemic negligence of the carceral experience. While much attention is given to interventions post-release, rehabilitation inside correctional facilities is largely invisible to the public. This dynamic results in approximately 2 million incarcerated persons being locked in a “time capsule”—the world passes them by as they serve their sentences. This is a missed opportunity, as simple interventions like accessing educational resources and maintaining family contact during incarceration can cut recidivism by up to 56%. Reduced recidivism translates into more robust workforce, safer communities, and higher political participation. The new administration should harness the momentous bipartisan interest in criminal justice reform, audit the condition and availability of rehabilitative resources in prisons and jails, invest in digital and technology infrastructure, and sustainably end mass incarceration through building meaningful digital citizenship behind bars. 

Challenge and Opportunity

In the post-COVID-19 world, robust and reliable technology and digital infrastructure are prerequisites for any program and resource delivery. However, the vast majority of U.S. correctional facilities still lack adequate technology infrastructure, with cascading effects on the availability of in-prison programs, utilization of digital resources, and incarcerated people’s transition to the free world. 

As many other institutions quickly embrace new technology, prisons lag behind. In Massachusetts, prisons struggle to provide even basic rehabilitative, educational, and vocational training programs due to a shortage of hardware devices, such as tablets and Chromebooks, and insufficient staffing. Similarly, in Florida, internet access is constrained by legislation and exacerbated by a lack of funding. Many prisons are forced to limit or entirely cancel programs when in-person visits are inaccessible, due to either COVID-19 restrictions or simply insufficient transportation options for resource providers. Consequently, only 0.5% of incarcerated individuals are enrolled in educational courses. The situation is equally dire in juvenile detention centers from California to Louisiana, where poor access to educational opportunities contributes to low graduation rates, severely limiting future employment prospects for at-risk youths.

Despite these systemic challenges, there is a strong, bipartisan recognition of the need to improve conditions within the carceral system—and therefore a unique opportunity for reform. 

The Federal Communications Commission (FCC) has passed the most comprehensive regulations on incarcerated people’s communication services, setting rate caps for various means of virtual communications. Electronic devices, such as tablets and Chromebooks, are gradually being accepted in correctional facilities, and they carry education resources and entertainment. Foundationally, federal investments in broadband and digital equity present a generational opportunity for correctional facilities and incarcerated people. These investments will provide baseline assessment of the network conditions and digital landscape in prisons, and the learnings can lay the very foundation to enable incarcerated people to enter the digital age prepared, ready to contribute to their communities from the day they return home.

This is just the beginning. 

Plan of Action

Recommendation 1. Invest in technology infrastructure inside correctional facilities.

A significant investment in technology infrastructure within correctional facilities is the prerequisite to transforming corrections. 

The Infrastructure Investment and Jobs Act (IIJA), through the Broadband Equity, Access, and Deployment (BEAD) and Digital Equity (DE) programs, sets a good precedent. BEAD and DE funding enable digital infrastructure assessments and improvements inside correctional facilities. These are critical for delivering educational programs, maintaining family connections, and facilitating legal and medical communications. However, only a few corrections systems are able to utilize the funding, as BEAD and DE do not have a specific focus on improving the carceral system, and states tend to prioritize other vulnerable populations (e.g., the rural, aging, veteran populations) over the incarcerated. Currently incarcerated individuals are difficult to reach, so they are routinely neglected from the planning process of funding distribution across the country. 

The new administration should recognize the urgent need to modernize digital infrastructure behind bars and allocate new and dedicated federal funding sources specifically for correctional institutions. The administration can ensure the implementation of best practices through grant guidelines. For example, it could stipulate that prior to accessing funding, states have to conduct a comprehensive network assessment, including speed and capacity tests, a security risk analysis, and a thorough audit of existing equipment and wiring. Further, it could mandate that all new networks built or consolidated using federal funding be vendor-neutral, ensuring robust competition among service providers down the road. 

Recommendation 2. Incentivize mission-driven technology solutions.

Expanding mandatory access to social benefits for incarcerated individuals will incentivize mission-driven technology innovation and adoption in this space.

There have been best practices on how to do so at both the federal and state levels. For example, the Second Chance Pell restored educational opportunities for incarcerated individuals and inspired the emergence of mission-driven educational technologies. Another critical federal action was the Consolidated Appropriations Act of 2023 (specifically, Section 5121), which mandated Medicaid enrollment and assessment for juveniles, thereby expanding demand for health and telehealth solutions in correctional facilities. 

The new administration should work with Congress to propose new legislation that mandates access to social benefits for those behind bars. Specifically, access to mental health assessment, screening, and treatment, as well as affordable access to communication with families and loved ones on the outside, will be critical to successful rehabilitation and reentry. Additionally, it should invest in robust research focusing on in-prison interventions. Such projects can be rare and more costly, given the complexity of doing research in a correctional environment and the dearth of in-prison interventions. But they will play a big part in establishing the basis for data-driven policies.

Recommendation 3. Remove procurement barriers for new solutions and encourage pilots.

Archaic procurement procedures pose significant barriers to competition in the correctional technology industry and block innovative solutions from being piloted. 

The prison telecommunications industry, for example, has been dominated by two private companies for decades. The effective duopoly has consolidated the market by entering into exclusive contracts with high percentages of kickback and so-called “premium services.” These procurement and contracting tactics minimize healthy competition from new entrants of the industry. 

Some states and federal agencies are trying to change this. In July 2024, the FCC ruled out revenue-sharing between correctional agencies and for-profit providers, ending the arms race of higher commission for good. On a state level, California’s RFI initiative exemplifies how strategic procurement processes can encourage public-private partnerships to deliver cutting-edge technology solutions to government agencies.

The administration should take a strong stance by issuing an executive order asking all Federal Bureau of Prisons facilities, including ICE detention centers, to competitively procure innovative technology solutions and establish pilots across its institutions, setting an example and a playbook for state corrections to follow. 

Recommendation 4. Invest in need assessments, topic-specific research and development of best practices through National Science Foundation and Bureau of Justice Assistance. 

Accurate needs assessments, topic-specific research, development of best practices, and technical assistance are all critical to smooth delivery and implementation. 

The Department of Justice, through the Bureau of Justice Assistance (BJA), offers a range of technical assistance (TA) programs that can support state and local correctional facilities in implementing these technology and educational initiatives. Programs such as the Community-based Reentry Program and the Encouraging Innovation: Field-Initiated Program have demonstrated success in providing the necessary resources and expertise to ensure these reforms are effectively integrated. 

However, these TA programs tend to disproportionately benefit correctional facilities where significant programs are already in place but are less useful for “first timers,” where taking that first step is hard enough.

The new administration should work with the National Science Foundation (NSF) and the BJA to systematically assess and understand challenges faced by correctional systems trying to take the first step of reform. Many first-timer agencies have deep understanding of the issues they experience (“program providers complain that tablets are not online”) but limited knowledge on how to assess the root causes of the issues (multiple proprietary wireless networks in place). 

The NSF can bring together subject matter experts to offer workshops to correctional workers on network assessments, program cataloging, and human-centered design on service delivery. These workshops can help grow capacity at correctional facilities. The NSF should also establish guidelines and standards for these assessments. In addition to the TA efforts, the BJA could offer informational sessions, seminars, and gatherings for practitioners, as many of them learn best from each other. In parallel to learning on the ground, the BJA should also organize centralized task forces to oversee and advise on implementation across jurisdictions, document best practice, and make recommendations. 

Conclusion

Investing in interventions behind the walls is not just a matter of improving conditions for incarcerated individuals—it is a public safety and economic imperative. By reducing recidivism through education and family contact, we can improve reentry outcomes and save billions in taxpayer dollars. A robust technology infrastructure and an innovative provider ecosystem are prerequisites to delivering outcomes. As 95% of incarcerated individuals will reenter society one day, it is vital to ensure that they can become contributing members of their communities. These investments will create a stronger workforce, more stable families, and safer communities. Now is the time for the new administration to act and ensure that the carceral system enables rehabilitation, not recidivism.

Creating a National Exposome Project

The U.S. government should establish a public-private National Exposome Project (NEP) to generate benchmark human exposure levels for the ~80,000 chemicals to which Americans are regularly exposed. Such a project will revolutionize our ability to treat and prevent human disease. An investment of $10 billion over 20 years would fuel a new wave of scientific discovery and advancements in human health. To date, there has not been a systematic assessment of how exposures to these environmental chemicals (such as pesticides, solvents, plasticizers, medications, preservatives, flame retardants, fossil fuel exhaust, and food additives) impact human health across the lifespan and in combination with one another. 

While there is emerging scientific consensus that environmental exposures play a role in most diseases, including autoimmune conditions and many of the most challenging neurodegenerative diseases and cancers, the lack of exposomic reference data restrains the ability of scientists and physicians to understand their root causes and manage them. The biomedical impact of creating a reference exposome would be no less than that of the Human Genome Project and will serve as the basis of technological advancement, the development of new medicines and advanced chemicals, and improved preventative healthcare and the clinical management of diseases. 

Challenge and Opportunity

The Human Genome Project greatly advanced our understanding of the genetics of disease and helped accelerate a biotech revolution, creating an estimated $265 billion economic impact in 2019 alone. However, genetics has been unable to independently explain the root causes of the majority of diseases from which we suffer, including neurodegenerative diseases like Alzheimer’s and Parkinson’s and many types of cancer. We know exposures to chemicals and pollution are responsible for or mediate the 70–90% of disease causation not explained by genetics. However, because we lack an understanding of their underlying causal factors, many new medicines in development are more palliative than curative. If we want to truly prevent and cure the most intractable illnesses, we must uncover the complex environmental factors that contribute to their pathogenesis.

In addition to the social and economic benefits that would come from reducing our society’s disease burden, American leadership in exposomics would also strengthen the foundation of our biomedical innovation ecosystem, making the U.S. the premier partner for what is likely to be the most advanced health-related research field in this century. 

Three key trends are converging to make now the best time to act: First, the costs of chemical sensors and the data and analytics infrastructure to manage them have fallen precipitously over the last two decades. Second, a few existing small scale exposomic projects offer a blueprint for how to build the NEP. Third, advancements in artificial intelligence (AI) and machine learning are making possible entirely new tools to make causal inferences from complex environmental data, which can inform research into treatments and policies to prevent diseases. 

Plan of Action 

To bring the National Exposome Project to life, Congress should appropriate $10 billion over 20 years to Department of Health and Human Services (HHS) to establish a National Exposomics Project Office within the Office of the HHS Secretary, whose director reports directly to the HHS Secretary. The NEP director should be given authority to establish partnerships with HHS agencies (National Institutes of Health, Centers for Disease Control, Advanced Research Projects Agency for Health, Food and Drug Administration) and other federal agencies (Environmental Protection Agency, Commerce, Defense, Homeland Security, National Science Foundation), and to fund and enter into agreements with state and local governments, academic, and private sector partners. The NEP will operate through a series of public-private cores that each are responsible for one of three pillars.

Recommendation 1. Create a reference human exposome

Through partnerships with industry, government, and academic partners, the NEP would generate comprehensive data on the body burden of chemicals and the corresponding biological responses in a representative sampling of the U.S. (>500,000 individuals). This would likely require collecting bio samples (such as blood, saliva, etc.) from participating individuals, performing advanced chemical analysis on the samples using technologies such as high- resolution mass spectrometry, and following up over the study with the participants to observe which health conditions emerge. Critically, bio samples will need to be collected repeatedly over time and bio-banked in order to ensure that the temporal aspect of exposures (such as whether someone was exposed to a particular chemical as a child or as an adult) is included in the final complete data set.

High-throughput toxicological data using microphysiological systems with human cells and tissues could also be generated on a priority list (~1000) of chemicals of concern to understand their potential harm or benefit.

These data would inform a reference standard for particular chemical exposures, which would contain the distribution of exposure levels across the population, the potential health hazards associated with a particular exposure level, and the potential combinations of exposures that would be of concern. This information could ultimately be integrated into patient electronic health records for use in clinical practice. 

Recommendation 2. Develop cutting-edge data and analytical standards for exposomic analysis

The NEP would develop both a data standard for collecting and making available exposomic data to researchers, companies, and the public and advanced analytics to enable high-value causal insights to be extracted from these data to enable policymaking and scientific discovery. Importantly, the data would include both biochemical data collected directly as part of this project and in-field sensor data that is already being collected at individual, local, regional, national, and global levels by trusted third-party organizations, such as air/water quality. A key challenge in understanding the connections between a set of exposures and a disease state today is the lack of data standardization. The NEP’s investments in standardization and analytics could result in a global standard for how environmental exposure data is collected, cementing the U.S. as the global leader.

Recommendation 3. Catalyze biomedical innovation and entrepreneurship 

A NEP could bolster new entrepreneurial ecosystems in advanced diagnostics, medicines, and clinical services. With access to a core reference exposome as a foundation, the ingeniousness of American entrepreneurs and scientists could result in a wellspring of innovation, creating the potential to reverse the rising incidence rates of many intractable illnesses of our modern era. One can imagine a future where exposomic tests are a part of routine physicals, informing physicians and patients exactly how to prevent certain diseases from emerging or progressing, or one where exposomic data is used to identify novel biological targets for curative therapeutics that could reverse the course of an environmentally caused disease. 

The Size of the Prize

The National Exposome Project offers great potential to catalyze biomedical entrepreneurship and innovation. 

First, the high-quality reference levels of exposures generated by the NEP could unlock significant opportunities in medical diagnostics. Already, great work is being done in diagnostics to understand how environmental exposures are driving diseases from autism to congenital heart defects in newborns. NEP would accelerate such work, enabling the early detection and monitoring of conditions that today have limited diagnostic approaches. 

Second, a deeper understanding of exposures could lead to the faster development of new medicines. One way the NEP data set could do this would be by enabling biologists to identify novel molecular targets for medicines that might otherwise be overlooked—for example, the NEP data might reveal that certain exposures are protective and beneficial for patients with a given disease, a finding that could be more deeply examined at the molecular level to identify a novel therapeutic strategy. In addition, we know that genetics is unable to explain the hundreds of failed drug trials. Exposomics could rescue many drugs that failed testing due to environmentally related nonresponse by identifying the causative agents.

Finally, we expect that the NEP would likely result in significant advances in the physical hardware and instrumentation that is used for large-scale chemical analysis and research, and in the AI-driven computational approaches that would be necessary for the data analysis. These advancements would set the U.S. up to be the leader in exposomic sequencing and analysis, much in the same way that the Human Genome Project established the U.S. as the leader in genetic sequencing. Furthermore, these technical advances would likely be useful in many domains outside of human health where chemical analysis is useful in developing new products—such as in the agriculture, industrial chemical, and energy industries. 

Conclusion 

To catalyze the next generation of biomedical innovation, we need to establish a national network of exposome facilities to track human exposure levels over time, accelerate efforts to create toxicological profiles of these chemicals, develop advanced analytical models to establish causal links to human disease, and use this foundational knowledge to further the development of new medicines and policies to reduce harmful exposure. This knowledge will transform our biomedical and healthcare industries, as well as provide a path for an improved chemical industry that creates products that are safer by design. The result will be longer health spans, reductions in mortality and morbidity, and economic development associated with spurring new startups that can create new therapies, technologies, and interventions.

This action-ready policy memo is part of Day One 2025 — our effort to bring forward bold policy ideas, grounded in science and evidence, that can tackle the country’s biggest challenges and bring us closer to the prosperous, equitable and safe future that we all hope for whoever takes office in 2025 and beyond.

Frequently Asked Questions
Who is likely to push back on this proposal, and how can that hurdle be overcome?

Anyone concerned with large government initiatives may object to the proposed budget for this project. While we acknowledge the investment needed is substantial, the upside to the public is enormous, borne out both in direct economic development benefits in new exposomic industries created as a result and in the potential demystification of a large portion of currently unexplained diseases that afflict us.


Industries responsible for manufacturing products that potentially expose populations to suspected harmful chemicals may also push back on this effort. As a response, we believe that there is abundant misinformation fueled by underpowered or poorly designed studies on chemicals, including those with more harmful reputations than data supports. A more systemic data set and a newly created industry that gives people more complete, personalized, and real-time data on exposure can not only support debunking myths but also expand the set of possible actions to mitigate exposure, taking us out of a continued cycle of finger-pointing. Indeed, such a systematic approach should reveal many positive associations with modern chemicals and health outcomes, such as preservatives reducing food-borne illness or antibiotics reducing microbial-based disease.

What accountability and evaluation measures will be included?

Governance and accountability will be critical to ensure proper stewardship of taxpayer dollars and responsible engagement with the complex set of stakeholders across the country. We therefore propose creating an external advisory committee made up of community members, industry representatives, and key opinion leaders to provide oversight over the project’s design and execution and advice and recommendations throughout all stages to the NEP director.

What is the first step to get this proposal off the ground? Is there a pilot version that could be advanced to demonstrate proof of concept?

The first steps to realizing this vision have actually already begun. ARPA-H, the agency responsible for high-risk, high-reward research and development for health, has begun to fund some foundational exposomic work. National Institutes of Health’s All of Us program has also set a foundation for what might be possible in regards to large-scale bio-banking studies. However, to have the needed impact at scale, the NEP needs to be launched on a much bigger scale, outside of existing programs, and focus on spurring economic development and the creation of new industries.

What has doomed similar efforts in the past and how will your proposal avoid those pitfalls?

Some of the most important factors that determine success of ambitious efforts like this are the specifics of the legislative authority, the leadership/governance structure, and how much appropriations can be made available upfront. Further, while collaboration across agencies is clear, establishing clear decision-making structure with the proper oversight is critical. This is why we believe creating a dedicated program office, with a clear leader who reports directly to a member of the cabinet, endowed with the necessary authorities including Other Transactions Authority, is key to success.

Fixing Impact: How Fixed Prices Can Scale Results-Based Procurement at USAID

The United States Agency for International Development (USAID) currently uses Cost-Plus-Fixed-Fee (CPFF) as its de facto default funding and contracting model. Unfortunately, this model prioritizes administrative compliance over performance, hindering USAID’s development goals and U.S. efforts to counter renewed Great Power competition with Russia, the People’s Republic of China (PRC), and other competitors. The U.S. foreign aid system is losing strategic influence as developing nations turn to faster and more flexible (albeit riskier) options offered by geopolitical competitors like the PRC. 

To respond and maintain U.S. global leadership, USAID should transition to heavily favor a Fixed-Price model – tying payments to specific, measurable objectives rather than incurred costs – to enhance the United States’ ability to compete globally and deliver impact at scale. Moreover, USAID should require written justifications for not choosing a Fixed-Price model, shifting the burden of proof. (We will use “Fixed-Price” to refer to both Firm Fixed Price Contracts and Fixed Amount Award Grants, wherein payments are linked to results or deliverables.) 

This shock to the system would encourage broader adoption of Fixed-Price models, reducing administrative burdens, incentivizing implementers (of contracts, cooperative agreements, and grants) to focus on outcomes, and streamlining outdated and inefficient procurement processes. The USAID Bureau for Management’s Office of Acquisition and Assistance (OAA) should lead this transition by developing a framework for greater use of Firm Fixed Price (FFP) contracts and Fixed Amount Award (FAA) grants, establishing criteria for defining milestones and outcomes, retraining staff, and providing continuous support. With strong support from USAID leadership, this shift will reduce administrative burdens within USAID and improve competitiveness by expanding USAID’s partner base and making it easier for smaller organizations to collaborate. 

Challenge and Opportunity

Challenge

The U.S. remains the largest donor of foreign assistance around the world, accounting for 29% of total official development assistance from major donor governments in 2023. Its foreign aid programs have paid dividends over the years in American jobs and economic growth, as well as an unprecedented and unrivaled network of alliances and trading partners. Today, however, USAID has become mired once again in procurement inefficiencies, reversing previous trends and efforts at reform and blocking – for years – sensible initiatives such as third country national (TCN) warrants, thereby reducing the impact of foreign aid for those it intends to help and impeding the U.S. Government’s (USG) ability to respond to growing Great Power Competition.

Foreign aid serves as a critical instrument of foreign policy influence, shaping geopolitical landscapes and advancing national interests on the global stage. No actor has demonstrated this more clearly than the PRC, whose rise as a major player in global development adds pressure on the U.S. to maintain its leadership. Notably, China has increased its spending of foreign assistance for economic development by 525% in the last 15 years. Through the Belt & Road Initiative, its Digital Silk Road, alternative development banks, and increasingly sophisticated methods of wielding its soft power, the PRC has built a compelling and attractive foreign assistance model which offers quick, low-cost solutions without the governance “strings” attached to U.S. aid. While it seems to fulfill countries’ needs efficiently, hidden costs include long-term debt, high lifecycle expenses, and potential Chinese ownership upon default. 

By contrast, USAID’s Cost-Plus-Fixed-Fee (CPFF) foreign assistance model – in which implementers are guaranteed to recover their costs and earn a profit – mainly prioritizes tracking receipts over achieving results and therefore often fails to achieve intended outcomes, with billions spent on programs that lack measurable impact or fail to meet goals. Implementers are paid for budget compliance, regardless of results, placing all performance risk on the government. 

The USG invented CPFF to establish fair prices where no markets existed. However, its use has now extended far beyond this purpose – including for products and services with well-established commercial markets. The compliance infrastructure necessary to administer USAID awards and adhere to the documentation/reporting requirements favors entrenched contractors – as noted by USAID Administrator Samantha Power – stifles innovation, and keeps prices high, thereby encumbering America’s ability to agilely work with local partners and respond to changing conditions. (Note: USAID typically uses “award” to refer to contracts, cooperative agreements, and grants. We use “award” in this same manner to refer to all three procurement mechanisms. We use “Fixed-Price Awards” to refer to fixed-price grants and contracts. “Fixed Amount Awards,” however, specifically refers to a fixed-price grant.)

In light of the growing Great Power Competition with China and Russia – and threats by those who wish to undermine the US-led liberal international order – as well as the possibility of further global shocks like COVID-19 or the war in Ukraine, USAID must consider whether its current toolset can maintain a position of strategic strength in global development. Furthermore, amid declining Official Development Assistance (ODA) – 2% year-over-year – and a global failure to meet the UN Sustainable Development Goals (SDGs), it is critical for USAID to reconcile the gap between its funding and lack of results. Without change, USAID funding will largely continue to fall short of objectives. The time is now for USAID to act.

Opportunity

While USAID cannot have a de jure default procurement mechanism, CPFF has become the de facto default procurement mechanism, but it does not have to be. USAID has other mechanisms to deploy funding at its disposal. In fact, at least two alternative award and contract pricing models exist:

  1. Time and materials (T&M): The implementer proposes a set of fully loaded (i.e., inclusive of salary, benefits, overhead, plus profit) hourly rates for different labor categories and the USG pays for time incurred – not results delivered.
  2. Fixed-Price (Firm Fixed Price, FFP, for contracts, or Fixed Amount Award, FAA/Fixed Obligation Grants, FOG, for grants): The implementer proposes a set fee and is paid for milestones or results (not receipts).

While CPFF simply reimburses providers for costs plus profit, the Fixed-Price alternatives tie funding to achieving milestones, promoting efficiency and accountability. The Code of Federal Regulations (§ 200.1) permits using Fixed-Price mechanisms whenever pricing data can establish a reasonable estimate of implementation costs. 

USAID has acknowledged the need to adapt funding mechanisms to better support local and impact-driven organizations and enhance cost-effectiveness. USAID has already started supporting these goals by incorporating evidence-based approaches and transitioning to models that emphasize cost-effectiveness and impact. As an example, in the Biden administration, USAID’s Office of the Chief Economist (OCE) issued the Promoting Impact and Learning with Cost-Effectiveness Evidence (PILCEE) award, which aims to enhance USAID’s programmatic effectiveness by promoting the use of cost-effectiveness evidence in strategic planning, policy-making, activity design, and implementation. Progress, though, remains limited. Funding disbursed based on performance milestones has remained unchanged since Fiscal Year (FY) 2016. In FY 2022, Fixed Amount Awards represented only 12.4% of new awards, or 1.4% by value. 

An October 2020 Stanford Social Innovation Review article by two USAID officials argued that the Agency could enhance its use of Fixed Amount Awards by promoting “performance over compliance”. Other organizations have already begun to make this shift: the Millennium Challenge Corporation (MCC) and The Global Fund to Fight AIDS, Tuberculosis and Malaria – among others – have invested in increasing results-based approaches and embedding different results-based instruments into their procurement processes for increased aid effectiveness.

Results Over Receipts: Similar Examples
Millennium Challenge Corporation (MCC)MCC has increasingly adopted results-based approaches and embedded results-based instruments such as performance-based contracts and awards into its Compact procurement to enhance the cost-effectiveness of its investments and of service provision. This progress includes the expansion of MCC’s portfolio to at least USD 40 million RBF programs in implementation or planning. spanning sectors such as health, energy, agriculture, utility management, gender, education, and public infrastructure in seven countries, along with far greater use of Fixed-Amount Grants paying for milestones across MCC’s wider portfolio.
The Global Fund to Fight AIDS, Tuberculosis and MalariaSince 2021, The Global Fund has supported its Principal Recipients across more than ten countries to use results-based contracts to improve results. It has created a “How to Guide and Toolkit” that offers a systematic path to design results-based contracts that avoid common traps and are compliant with The Global Fund requirements, templates, and intervention-specific guidelines for malaria bed nets mass campaigns and HIV prevention, diagnostic and treatment services for key populations.
SwitzerlandSwitzerland has increasingly shifted from traditional input-based methods to results-based approaches. A recent review found a diverse body of 51 results-based finance applications with both private and public actors by the State Secretariat of Economic Affairs (SECO) and the Swiss Agency for Development and Cooperation (SDC).

To shift USAID into an Agency that invests in impact at scale, we propose going one step further, and making Fixed-Price awards the de facto default procurement mechanism across USAID by requiring procurement officials to provide written justification for choosing CPFF. 

This would build on the work completed during the first Trump administration under Administrator Mark Green, including the creation of the first Acquisition and Assistance Strategy, designed to “empower and equip [USAID] partners and staff to produce results-driven solutions” by, inter alia, “increasing usage of awards that pay for results, as opposed to presumptively reimbursing for costs”, and the promotion of the Pay-for-Results approach to development.

Such a change would unlock benefits for both the USG and for global development, including:

  1. Better alignment of risk and reward by ensuring implementers are paid only when they deliver on pre-agreed milestones. The risk of not achieving impact would no longer be solely borne by the USG, and implementers would be highly incentivized to achieve results.
  2. Promotion of a results-driven culture by shifting focus from administrative oversight to actual outcomes. By agreeing to milestones at the start of an award, USAID would give implementers flexibility to achieve results and adapt more nimbly to changing circumstances and place the focus on performing and reporting results, rather than administrative reporting.
  3. Diversification of USAID’s partner base by reducing the administrative burden associated with being a USAID implementer. This would allow the Agency to leverage the unique strengths, contextual knowledge, and innovative approaches of a diverse set of development actors. By allowing the Agency to work more nimbly with small businesses and local actors on shared priorities, it would further enhance its ability to counter current Great Power Competition with China and Russia.
  4. Incentivization of cost efficiency, motivating implementers to reduce expenses if they want to increase their profits, without extra cost to the USG.
  5. Facilitation of greater progress by USAID and the USG toward the UN’s 2030 Agenda for Sustainable Development, in ways likely to attract more meaningful and substantive private sector partnerships and leverage scarce USG resources.

Plan of Action 

Making Fixed-Price the de facto default option for both grants and contracts would provide the U.S. foreign aid procurement process a necessary shock to the system. The success of such a large institutional shift will require effective change management; therefore, it should be accompanied with the necessary training and support for implementing staff. This would entail, inter alia, establishing a dedicated team within OAA specialized in the design and implementation of FFPs and FAAs; and changing the culture of USAID procurement by supporting both contracting and programming staff with a robust change management program, including training and strong messaging from USAID leadership and education for Congressional appropriators. 

Recommendation 1. Making Fixed-Price the de facto “default” option for both grants and contracts, and tying payments to results. 

Fixed-Price as the default option for both grants and contracts would come at a low additional cost to USAID (assuming staff are able to be redistributed). The Agency’s Senior Procurement Executive, Chief Acquisition Officer (CAO), and Director for OAA should first convene a design working group composed of representatives from program offices, technical offices, OAA, and the General Counsel’s office tasked with reviewing government spending by category to identify sectors exempt from the “Fixed-Price default” mandate, namely for work that lacks deep commercial markets (e.g., humanitarian assistance or disaster relief). This working group would then propose a phased approach for adopting Fixed-Price as the default option across these sectors. After making its recommendations, the working group would be disbanded and a more permanent dedicated team would carry this effort forward (see Recommendation 2).

Once reset, Contract and Agreement Officers would justify any exceptions (i.e., the choice of T&M or CPFF) in an explanatory memo. The CAO could delegate authority to supervising Contracting Officers or other acquisition officials to approve these exceptions. To ensure that the benefits of Fixed-Price results-based contracting reach all levels of awardees, this requirement should become a flow-down clause in all prime awards. This will require additional training for the prime award recipient’s own overseers.

Recommendation 2. Establishing a dedicated team within USAID’s OAA, or the equivalent office in the next administration, specialized in the design and implementation of FFPs and FAAs.

To facilitate a smooth transition, USAID should create a dedicated team within OAA specialized in designing and implementing FFPs and FAAs using existing funds and personnel. This team would have expertise in the choices involved in designing Fixed-Price agreements: results metrics and targets, pricing for results, and optimizing payment structures to incentivize results.

They would have the mandate and resources necessary to support expanding the use of and the amount of funding flowing through high-quality FFPs and FAAs. They would jumpstart the process and support Acquisition and Program Officers by developing guidelines and procedures for Fixed-Price models (along with sector-specific recommendations), overseeing their design and implementation, and evaluating effectiveness. As USAID will learn along the way about how to best implement the Fixed-Price model across sectors, this team will also need to capture lessons learned from the initial experiences to lower the costs and increase the confidence of Acquisition and Assistance Officers using this model going forward. 

Recommendation 3. Launching a robust change management program to support USAID acquisition, assistance, program, and legislative and public affairs staff in making the shift to Fixed-Price grant and contract management. 

Successfully embedding Fixed-Price as the default option will entail a culture shift within USAID, requiring a multi-faceted approach. This will include the retraining of Contracts and Agreements Officers and their Representatives – who have internalized a culture of administrative compliance and been evaluated primarily on their extensive administrative oversight skills – and promoting a reorganization of the culture of Monitoring, Evaluation and Learning (MEL) and Collaboration, Learning and Adaptation (CLA) to prioritize results over reporting. Setting contracting and agreements staff up for success requires capacity building in the form of training, toolkits, and guidelines on how to implement Fixed-Price models across USAID’s diverse sectors. Other USG agencies make greater use of Fixed-Price awards, and alternative training for both government and prime contractor overseers exists. OAA’s Professional Development and Training unit should adapt existing training from these other agencies, specifically ensuring it addresses how to align payments with results.

Furthermore, the broader change management program should seek to create the appropriate internal incentive structure at the Agency for Acquisition and Assistance staff, motivating and engaging them in this significant restructuring of foreign aid. To succeed at this, the mandate for change needs to come from the top, reassuring staff that the Fixed-Price model does not expose individuals, the Agency, or implementers to undue legal or financial liability.

While this change will not require a Congressional Notification, the Office of Legislative & Public Affairs (LPA) should join this effort early on, including as part of the design working group. LPA would also play a guiding role in both internal and external communications, especially in educating members of Congress and their staffs on the importance and value of this change to improve USAID effectiveness and return on taxpayer dollars. Entrenched players with significant investments in existing CPFF systems will resist this effort, including with political lobbying; LPA will play an important role informing Congress and the public.

Conclusion

USAID’s current reliance on CPFF has proven inadequate in driving impact and must evolve to meet the challenges of global development and Great Power Competition. To create more agile, efficient, and results-driven foreign assistance, the Agency should adopt Fixed-Price as the de facto default model for disbursing funds, prioritizing results over administrative reporting. By embracing a results-based model, USAID will enhance its ability to respond to global shocks and geopolitical shifts, better positioning the U.S. to maintain strategic influence and achieve its foreign policy and development objectives while fostering greater accountability and effectiveness in its foreign aid programs. Implementing these changes will require a robust change management program, which would include creating a dedicated team within OAA, retraining staff and creating incentives for them to take on the change, ongoing guidance throughout the award process, and education and communication with Congress, implementing partners, and the public. This transformation is essential to ensure that U.S. foreign aid continues to play a critical role in advancing national interests and addressing global development challenges.

This action-ready policy memo is part of Day One 2025 — our effort to bring forward bold policy ideas, grounded in science and evidence, that can tackle the country’s biggest challenges and bring us closer to the prosperous, equitable and safe future that we all hope for whoever takes office in 2025 and beyond.

Frequently Asked Questions​
How does the proposal align with the Code of Federal Regulations?

​The revisions to the Code of Federal Regulations, specifically the Uniform Guidance (2 CFR 200) provision, represent an exciting opportunity for USAID and its partners. These changes, which took effect on October 1, 2024, align with the Office of Management & Budget’s vision for enhanced oversight, transparency, and management of USAID’s foreign assistance. This update opens the door to several significant improvements in key reform areas: simplified requirements for federal assistance; reduced burdens on staff and implementing partners; and the introduction of new tools to support USAID’s localization efforts. The updated regulations will reduce the need for exception requests to OMB, speeding up timelines between planning and budget execution. This regulatory update presents a valuable opportunity for USAID to streamline its aid practices, pave the way for the adoption of the Fixed-Price model, and create a performance-driven culture at USAID. For these changes to come into full effect, USAID will need to ensure the necessary flow-down and enforcement of them through accompanying policies, guidance, and training. USAID will also need to ensure that these changes flow down and are incorporated into both prime and sub-awards.

How might adopting a Fixed-Price model support localization?

Wider adoption of Fixed-Price could expand USAID’s pool of qualified local partners, enhancing engagement with diverse implementers and facilitating more sustainable, locally-driven development outcomes. Fixed-Price grants and contracts disburse payments based on achieving pre-agreed milestones rather than on incurred costs, reducing the administrative burden of compliance. This simplified approach enables local organizations –many of which often lack the capacity to manage complex cost-tracking requirements –to be more competitive for USAID programs and to be better prepared to manage USAID awards. By linking payments to results rather than detailed expense documentation, the Fixed-Price model gives local organizations greater flexibility and autonomy in achieving their objectives, empowering them to leverage their contextual knowledge and innovative approaches more effectively. This results in a partnership where local actors can operate independently and adapt quickly to changing circumstances, without the bureaucratic burdens traditionally associated with USAID funding.

How might adopting Fixed-Price acquisition and assistance support USAID’s ability to achieve its small and disadvantaged business goals?

In the same way that Fixed-Price could help USAID diversify its partner base and increase localization, it could also help expand the Agency’s pool of qualified small businesses, enhancing engagement with diverse implementers, and facilitating more sustainable development outcomes while achieving its Congressionally mandated small and disadvantaged business utilization goals. The current extensive use of CPFF favors entrenched implementers who have already paid for the expensive administrative compliance systems it requires. Fixed-Price grants and contracts have fewer administrative burdens enabling new small businesses–many of which often lack the administrative infrastructure necessary to manage complex cost-tracking requirements–to be more competitive for USAID programs and to be better prepared to manage USAID awards.

Do any divisions or bureaus at USAID already predominantly use FAAs?

USAID’s research and development arm, Development Innovation Ventures (DIV), uses fixed-fee awards almost exclusively to fund innovative implementers. Yet proven interventions rarely transition from DIV into mainstream USAID programs. Innovators and impact-first organizations find themselves well suited for USAID’s R&D, but with no path forward due to the use of CPFF at scale.

Would switching from CPFF to Fixed-Price translate into more or fewer costs for the government?

USAID has historically relied on expensive procedures to ensure implementers are using funding in ways that align with USG policies and procedures. These concerns are reduced, however, when the government pays for outcomes (rather than tracking receipts). For example, the government would no longer need to verify whether the implementer has the proper accounting and reporting systems in place, nor would the government need to spend time negotiating indirect rates nor implementing incurred cost audits. As detailed regulations on the permissibility of specific costs under federal acquisition and assistance don’t apply to Fixed-Price awards and contracts, neither the government nor the implementer needs to spend time examining the allowability of costs. Furthermore, we expect wider use of Fixed-Price models to lead to significantly improved results per dollar spent. This means that, although there would be initial costs associated with strategy implementation, we would expect Fixed-Price to be significantly more cost-effective.

Are there existing examples of how USAID has implemented change management efforts to improve aid effectiveness?

Yes, USAID has made recent efforts to provide more effective aid by incorporating evidence-based approaches and transitioning to models that emphasize cost-effectiveness and impact. In order to do this, during the last Trump administration, USAID elevated the Office of the Chief Economist (OCE) by enlarging its size and mandate. The OCE issued the activity Promoting Impact and Learning with Cost-Effectiveness Evidence (PILCEE), which aims to enhance USAID’s programmatic effectiveness by promoting the use of cost-effectiveness evidence in strategic planning, policy-making, activity design, and implementation. Our approach of establishing a team within OAA would draw on lessons learned from the OCE approach while reducing any associated costs by not establishing an entirely new operating unit.

Building Regional Cyber Coalitions: Reimagining CISA’s JCDC to Empower Mission-Focused Cyber Professionals Across the Nation

State, local, tribal, and territorial governments along with Critical Infrastructure Owners (SLTT/CIs) face escalating cyber threats but struggle with limited cybersecurity staff and complex technology management. Relying heavily on private-sector support, they are hindered by the private sector’s lack of deep understanding of SLTT/CI operational environments. This gap leaves SLTT/CIs vulnerable and underprepared for emerging threats all while these practitioners on the private sector side end up underleveraged.

To address this, CISA should expand the Joint Cyber Defense Collaborative (JCDC) to allow broader participation by practitioners in the private sector who serve public sector clients, regardless of the size or current affiliation of their company, provided they can pass a background check, verify their employment, and demonstrate their role in supporting SLTT governments or critical infrastructure sectors. 

Challenge and Opportunity

State, local, tribal, and territorial (SLTT) governments face a significant increase in cyber threats, with incidents like remote access trojans and complex malware attacks rising sharply in 2023. These trends indicate not only a rise in the number of attacks but also an increase in their sophistication, requiring SLTTs to contend with a diverse and evolving array of cyber threats.The 2022 Nationwide Cybersecurity Review (NCSR) found that most SLTTs have not yet achieved the cybersecurity maturity needed to effectively defend against these sophisticated attacks, largely due to limited resources and personnel shortages. Smaller municipalities, especially in rural areas, are particularly impacted, with many unable to implement or maintain the range of tools required for comprehensive security. As a result, SLTTs remain vulnerable, and critical public infrastructure risks being compromised. This urgent situation presents an opportunity for CISA to strengthen regional cybersecurity efforts through enhanced public-private collaboration, empowering SLTTs to build resilience and raise baseline cybersecurity standards.

Average cyber maturity scores for the State, Local, Tribal, and Territorial peer groups are at the minimum required level or below. Source: Center for Internet Security

Average cyber maturity scores for the State, Local, Tribal, and Territorial peer groups are at the minimum required level or below. Source: Center for Internet Security

Furthermore, effective cybersecurity requires managing a complex array of tools and technologies. Many SLTT organizations, particularly those in critical infrastructure sectors, need to deploy and manage dozens of cybersecurity tools, including asset management systems, firewalls, intrusion detection systems, endpoint protection platforms, and data encryption tools, to safeguard their operations.

An example of the immense array of different combinations of cybersecurity tools that could comprise a full suite necessary to implement baseline cybersecurity controls. Source: The Software Analyst Newsletter

An example of the immense array of different combinations of cybersecurity tools that could comprise a full suite necessary to implement baseline cybersecurity controls. Source: The Software Analyst Newsletter

The ability of SLTTs to implement these tools is severely hampered by two critical issues: insufficient funding and a shortage of skilled cybersecurity professionals to operate such a large volume of tools that require tuning and configuration. Budget constraints mean that many SLTT organizations are forced to make difficult decisions about which tools to prioritize, and the shortage of qualified cybersecurity professionals further limits their ability to operate them. The Deloitte-NASCIO Cybersecurity Study highlights how state Chief Information Security Officers (CISOs) are increasingly turning to the private sector to fill gaps in their workforce, procuring staff-augmentation resources to support security control deployment, management of Security Operations Centers (SOCs), and incident response services.

Figure 3: The Top 5 Security Concerns for Nationwide Cybersecurity Review Respondents include lack of sufficient funding and inadequate availability of cybersecurity professionals. Source: Centers for Internet Security.

The Top 5 Security Concerns for Nationwide Cybersecurity Review Respondents include lack of sufficient funding and inadequate availability of cybersecurity professionals. Source: Centers for Internet Security.

What Strong Regionalized Communities Would Achieve

This reliance on private-sector expertise presents a unique opportunity for federal policymakers to foster stronger public-private partnerships. However,  currently, JCDC membership entry requirements are vague and appear to favor more established companies, limiting participation from many professionals who are actively engaged in this mission. 

The JCDC is led by CISA’s Stakeholder Engagement Division (SED) which also serves as the agency’s hub for the shared stakeholder information that unifies CISA’s approach to whole-of-nation operational collaboration. One of the Joint Cyber Defense Collaborative’s (JCDC) main goals is to “organize and support efforts that strengthen the foundational cybersecurity posture of critical infrastructure entities,” ensuring they are better equipped to defend against increasingly sophisticated threats. 

Given the escalating cybersecurity challenges, there is a significant opportunity for CISA to enhance localized collaboration between the public and  private sectors in the form of improving the quality of service delivery that personnel at managed service providers and software companies can provide. This helps SLTTs/CIs close the workforce gap, allows vendors to create new services focused on SLTT/CIs consultative needs, and boosts a talent market that incentivizes companies to hire more technologists fluent in the “business” needs of SLTTs/CIs. 

Incentivizing the Private Sector to Participate

With intense competition for market share in cybersecurity, vendors will need to provide good service and successful outcomes in order to retain and grow their portfolio of business. They  will have to compete on their ability to deliver better, more tailored service to SLTTs/CIs and pursue talent that is more fluent in government operations, which incentivizes candidates to build great reputations amongst SLTT/CI customers.

Plan of Action

Recommendation 1. Community Platform

To accelerate the progress of CISA’s mission to improve the cyber baseline for SLTT/CIs, the Joint Cyber Defense Collaborative (JCDC) should expand into a regional framework aligned with CISA’s 10 regional offices to support increasing participation. The new, regionalized JCDC should facilitate membership for all practitioners that support the cyber defense of SLTT/CIs, regardless of whether they are employed by a private or public sector entity. With a more complete community, CISA will be able to direct focused, custom implementation strategies that require deep public-private collaboration.

Participants from relevant sectors should be able to join the regional JCDC after passing background checks, employment verification, and, where necessary, verification that the employer is involved in security control implementation for at least one eligible regional client. This approach allows the program to scale rapidly and ensures fairness across organizations of all sizes. Private sector representatives, such as solutions engineers and technical account managers, will be granted conditional membership to the JCDC, with need-to-know access to its online resources. The program will emphasize the development of collaborative security control implementation strategies centered around the client, where CISA coordinates the implementation functions between public and private sector staff, as well as between cybersecurity vendors and MSPs that serve each SLTT/CI entity.

Recommendation 2. Online Training Platform

Currently, CISA provides a multitude of training offerings both online and in-person, most of which are only accessible by government employees. Expanding CISA’s training offerings to include programs that teach practitioners at MSPs and Software Companies how to become fluent in the operation of government is essential for raising the cybersecurity baseline across various National Cybersecurity Review (NCSR) areas with which SLTTs currently struggle. The training platform should be a flexible, learn-at-your-own-pace virtual learning platform, and CISA is encouraged to develop on existing platforms with existing user bases, such as Salesforce’s Trailhead. Modules should enable students around specific challenges tailored to the SLTT/CI operating environment, such as applying patches to workstations that belong to a Police or Fire Department, where the availability of critical systems is essential, and downtime could mean lives. 

The platform should offer a gamified learning experience, where participants can earn badges and certificates as they progress through different learning paths. These badges and certificates will serve as a way for companies and SLTT/CIs to understand which individuals are investing the most time learning and delivering the best service. Each badge will correspond to specific skills or competencies, allowing participants to build a portfolio of recognized achievements. This approach has already proven effective, as seen in the use of Salesforce’s Trailhead by other organizations like the Center for Internet Security (CIS), which offers an introductory course on CIS Controls v8 through the platform. 

The benefits of this training platform are multifaceted. First, it provides a structured and scalable way to upskill a large number of cybersecurity professionals across the country with a focus on tailored implementation of cybersecurity controls for SLTT/CIs. Second, the badge system incentivizes ongoing participation, ensuring that cybersecurity professionals can continue to maintain their reputation if they choose to move jobs between companies or between the public and private sectors. Third, the platform fosters a sense of community and collaboration around the client, allowing CISA to understand the specific individuals supporting each SLTT/CI organization, in the case that it needs to mobilize a team with both security knowledge and government operations knowledge around an incident response scenario.

Recommendation 3. A “Smart Rolodex”

A Customer Relationship Management (CRM) system should be integrated within CISA’s Office of Stakeholder Engagement to manage the community of cyber defenders more effectively and streamline incident response efforts. The CRM will maintain a singular database of regionalized JCDC members, their current company, their expertise, and their roles within critical infrastructure sectors. This system will act as a “smart Rolodex,” enabling CISA to quickly identify and coordinate with the most suitable experts during incidents, ensuring a swift and effective response. The recent recommendations by a CISA panel underscore the importance of this approach, emphasizing that a well-organized and accessible database is crucial for deploying the right resources in real-time and enhancing the overall effectiveness of the JCDC.

Recommendation 4. Establishment of Merit-Based Recognition Programs

Finally, to foster a sense of mission and camaraderie among JCDC participants, recognition programs should be introduced to increase morale and highlight above-and-beyond contributions to national cybersecurity efforts. Digital badges, emblematic patches, “CISA Swag” or challenge coins will be awarded as symbols of achievement within the JCDC, boosting morale and practitioner commitment to the greater mission. These programs will also enhance the appeal of cybersecurity careers, elevating those involved with the JCDC, and encouraging increased participation and retention within the JCDC initiative.

Cost Analysis

Estimated Costs and Justification

The proposed regional JCDC program requires procuring ~100,000 licenses for a digital communication platform (Based on Slack) across all of its regions and 500 licenses for a popular Customer Relationship Management (CRM) platform(Based on Salesforce) for its Office of Stakeholder Engagement to be able to access records. The estimated annual costs are as follows:

Digital Communication Platform Licenses:

CRM Platform Licenses:

Total Estimated Cost:

Buffer for Operational Costs: To ensure the program’s success, a buffer of approximately 15% should be added to cover additional operational expenses, unforeseen costs, and any necessary uplifts or expansions in features or seats. This does not take into consideration volume discounts that CISA would normally expect when purchasing through a reseller such as Carahsoft or CDW.

Cost Justification: Although the initial investment is significant, the potential savings from avoiding cyber incidents should far outweigh these costs. Considering that the average cost of a data breach in the U.S. is approximately $9.48 million, preventing even a few such incidents through this program could easily justify the expenditure. 

Conclusion

The cybersecurity challenges faced by State, Local, Tribal, and Territorial (SLTT) governments and critical infrastructure sectors are becoming increasingly complex and urgent. As cyber threats continue to evolve, it is clear that the existing defenses are insufficient to protect our nation’s most vital services. The proposed expansion of the Joint Cyber Defense Collaborative (JCDC) to allow broader participation by practitioners in the private sector who serve public sector clients, regardless of the size or current affiliation of their company presents a crucial opportunity to enhance collaboration, particularly among SLTTs, and to bolster the overall cybersecurity baseline.These efforts align closely with CISA’s strategic goals of enhancing public-private partnerships, improving the cybersecurity baseline, and fostering a skilled cybersecurity workforce. By taking decisive action now, we can create a more resilient and secure nation, ensuring that our critical infrastructure remains protected against the ever-growing array of cyber threats.

This action-ready policy memo is part of Day One 2025 — our effort to bring forward bold policy ideas, grounded in science and evidence, that can tackle the country’s biggest challenges and bring us closer to the prosperous, equitable and safe future that we all hope for whoever takes office in 2025 and beyond.

Establishing a Cyber Workforce Action Plan

The next presidential administration should establish a comprehensive Cyber Workforce Action Plan to address the critical shortage of cybersecurity professionals and bolster national security. This plan encompasses innovative educational approaches, including micro-credentials, stackable certifications, digital badges, and more, to create flexible and accessible pathways for individuals at all career stages to acquire and demonstrate cybersecurity competencies.

The initiative will be led by the White House Office of the National Cyber Director (ONCD) in collaboration with key agencies such as the Department of Education (DoE), Department of Homeland Security (DHS), National Institute of Standards and Technology (NIST), and National Security Agency (NSA). It will prioritize enhancing and expanding existing initiatives—such as the CyberCorps: Scholarship for Service program that recruits and places talent in federal agencies—while also spearheading new engagements with the private sector and its critical infrastructure vulnerabilities. To ensure alignment with industry needs, the Action Plan will foster strong partnerships between government, educational institutions, and the private sector, particularly focusing on real-world learning opportunities.

This Action Plan also emphasizes the importance of diversity and inclusion by actively recruiting individuals from underrepresented groups, including women, people of color, veterans, and neurodivergent individuals, into the cybersecurity workforce. In addition, the plan will promote international cooperation, with programs to facilitate cybersecurity workforce development globally. Together, these efforts aim to close the cybersecurity skills gap, enhance national defense against evolving cyber threats, and position the United States as a global leader in cybersecurity education and workforce development.

Challenge and Opportunity

The United States and its allies face a critical shortage of cybersecurity professionals, in both the public and private sectors. This shortage poses significant risks to our national security and economic competitiveness in an increasingly digital world.

In the federal government, the cybersecurity workforce is aging rapidly, with only about 3% of information technology (IT) specialists under 30 years old. Meanwhile, nearly 15% of the federal cyber workforce is eligible for retirement. This demographic imbalance threatens the government’s ability to defend against sophisticated and evolving cyber threats.

The private sector faces similar challenges. According to recent estimates, there are nearly half a million unfilled cybersecurity positions in the United States. This gap is expected to grow as cyber threats become more complex and pervasive across all industries. Small and medium-sized businesses are particularly vulnerable, often lacking the resources to compete for scarce cyber talent.

The cybersecurity talent shortage extends beyond our borders, affecting our allies as well. As cyber threats from adversarial nation states become increasingly global in nature, our international partners’ ability to defend against these threats directly impacts U.S. national security. Many of our allies, particularly in Eastern Europe and Southeast Asia, lack robust cybersecurity education and training programs, further exacerbating the global skills gap.

A key factor contributing to this shortage is the lack of accessible, flexible pathways into cybersecurity careers. Traditional education and training programs often fail to keep pace with rapidly evolving technology and threat landscapes. Moreover, they frequently overlook the potential of career changers and nontraditional students who could bring valuable diverse perspectives to the field.

However, this challenge presents a unique opportunity to revolutionize cybersecurity education and workforce development. By leveraging innovative approaches such as apprenticeships, micro-credentials, stackable certifications, peer-to-peer learning platforms, digital badges, and competition-based assessments, we can create more agile and responsive training programs. These methods can provide learners with immediately applicable skills while allowing for continuous upskilling as the field evolves.

Furthermore, there’s an opportunity to enhance cybersecurity awareness and basic skills among all American workers, not just those in dedicated cyber roles. As digital technologies permeate every aspect of modern work, a baseline level of cyber hygiene and security consciousness is becoming essential across all sectors.

By addressing these challenges through a comprehensive Cyber Workforce Action Plan, we can not only strengthen our national cybersecurity posture but also create new pathways to well-paying, high-demand jobs for Americans from all backgrounds. This initiative has the potential to position the United States as a global leader in cyber workforce development, enhancing both our national security and our economic competitiveness in the digital age.

Evidence of Existing Initiatives

While numerous excellent cybersecurity workforce development initiatives exist, they often operate in isolation, lacking cohesion and coordination. ONCD is positioned to leverage its whole-of-government approach and the groundwork laid by its National Cyber Workforce and Education Strategy (NCWES) to unite these disparate efforts. By bringing together the strengths of various initiatives and their stakeholders, ONCD can transform high-level strategies into concrete, actionable steps. This coordinated approach will maximize the impact of existing resources, reduce duplication of efforts, and create a more robust and adaptable cybersecurity workforce development ecosystem. This proposed Action Plan is the vehicle to turn these collective workforce-minded strategies into tangible, measurable outcomes.

At the foundation of this plan lies the NICE Cybersecurity Workforce Framework, developed by NIST. This common lexicon for cybersecurity work roles and competencies provides the essential structure upon which we can build. The Cyber Workforce Action Plan seeks to expand on this foundation by creating standardized assessments and implementation guidelines that can be adopted across both public and private sectors.

Micro-credentials, stackable certifications, digital badges, and other innovations in accessible education—as demonstrated by programs like SANS Institute’s GIAC certifications and CompTIA’s offerings—form a core component of the proposed plan. These modular, skills-based learning approaches allow for rapid validation of specific competencies—a crucial feature in the fast-evolving cybersecurity landscape. The Action Plan aims to standardize and coordinate these and similar efforts, ensuring widespread recognition and adoption of accessible credentials across industries.

The array of gamification and competition-based learning approaches—including but not limited to National Cyber League, SANS NetWars, and CyberPatriot—are also exemplary starting points that would benefit from greater federal engagement and coordination. By formalizing these methods within education and workforce development programs, the government can harness their power to simulate real-world scenarios and drive engagement at a national scale.

Incorporating lessons learned from the federal government’s previous DoE CTE CyberNet program, the National Science Foundation’s (NSF) Scholarship for Service Program (SFS), and the National Security Agency’s (NSA) GenCyber camps—the Action Plan emphasizes the importance of early engagement (the middle grades and early high school years) and practical, hands-on learning experiences. By extending these principles across all levels of education and professional development, we can create a continuous pathway from high school through to advanced career stages.

A Cyber Workforce Action Plan would provide a unifying praxis to standardize competency assessments, create clear pathways for career progression, and adapt to the evolving needs of both the public and private sectors. By building on the successes of existing initiatives and introducing innovative solutions to fill critical gaps in the cybersecurity talent pipeline, we can create a more robust, diverse, and skilled cybersecurity workforce capable of meeting the complex challenges of our digital future.

Plan of Action 

Recommendation 1. Create a Cyber Workforce Action Plan.

ONCD will develop and oversee the plan, in close collaboration with DoE, NIST, NSA, and other relevant agencies. The plan has three distinct components:

1. Develop standardized assessments aligned with the NICE framework. ONCD will work with NIST to create a suite of standardized assessments to evaluate cybersecurity competencies that:

2. Establish a system of stackable and portable micro-credentials. To provide flexible and accessible pathways into cybersecurity careers, ONCD will work with DoE, NIST, and the private sector to help develop and support systems of micro-credentials that are:

3. Integrate more closely with more federal initiatives. The Action Plan will be integrated with existing federal cybersecurity programs and initiatives, including:

This proposal emphasizes stronger integration with existing federal initiatives and greater collaboration with the private sector. Instead of creating entirely new credentialing standards, ONCD will explore opportunities to leverage widely adopted commercial certifications, such as those from Google, CompTIA, and other private-sector leaders. By selecting and promoting recognized commercial standards where applicable, ONCD can streamline efforts, avoiding duplication and ensuring the cybersecurity workforce development approach is aligned with what is already successful in industry. Where necessary, ONCD will work with NIST and industry professionals to ensure these commercial certifications meet federal needs, creating a more cohesive and efficient approach across both government and industry. This integrated public-private strategy will allow ONCD to offer a clear leadership structure and accountability mechanism while respecting and utilizing commercial technology and standards to address the scale and complexity of the cybersecurity workforce challenge.

The Cyber Workforce Action Plan will emphasize strong collaborations with the private sector, including the establishment of a Federal Cybersecurity Curriculum Advisory Board composed of experts from relevant federal agencies and leading private-sector companies. This board will work directly with universities to develop model curricula that incorporate the latest cybersecurity tools, techniques, and threat landscapes, ensuring that graduates are well-prepared for the specific challenges faced by both federal and private-sector cybersecurity professionals.

To provide hands-on learning opportunities, the Action Plan will include a new National Cyber Internship Program. Managed by the Department of Labor in partnership with DHS’s Cybersecurity and Infrastructure Security Agency (CISA) and leading technology companies, the program will match students with government agencies and private-sector companies. An online platform will be developed, modeled after successful programs like Hacking for Defense, where industry partners can propose real-world cybersecurity projects for student teams.

To incentivize industry participation, the General Services Administration (GSA) and DoD will update federal procurement guidelines to require companies bidding on cybersecurity-related contracts to certify that they offer internship or early-career opportunities for cybersecurity professionals. Additionally, CISA will launch a “Cybersecurity Employer of Excellence” certification program, which will be a prerequisite for companies bidding on certain cybersecurity-related federal contracts.

The Action Plan will also address the global nature of cybersecurity challenges by incorporating international cooperation elements. This includes adapting the plan for international use in strategically important regions, facilitating joint training programs and professional exchanges with allied nations, and promoting global standardization of cybersecurity education through collaboration with international standards organizations.

Ultimately, this effort intends to implement a national standard for cybersecurity competencies—providing clear, accessible pathways for career progression and enabling more agile and responsive workforce development in this critical field. 

Recommendation 2. Implement an enhanced CyberCorps fellowship program.

ONCD should expand the NSF’s CyberCorps Scholarship for Service program as an immediate, high-impact initiative. Key features of the expanded CyberCorps fellowship program include:

1. Comprehensive talent pipeline: While maintaining the current SFS focus on students, the enhanced CyberCorps will also target recent graduates and early-career professionals with 1–5 years of work experience. This expansion addresses immediate workforce needs while continuing to invest in future talent. The program will offer competitive salaries, benefits, and loan forgiveness options to attract top talent from both academic and private-sector backgrounds.

2. Multiagency exposure and optional rotations: While cross-sector exposure remains valuable for building a holistic understanding of cybersecurity challenges, the rotational model will be optional or limited based on specific agency needs. Fellows may be offered the opportunity to rotate between agencies or sectors only if their skill set and the hosting agency’s environment are conducive to short-term placements. For fellows placed in agencies or sectors where longer ramp-up times are expected, a deeper, longer-term placement may be more effective. Drawing on lessons from the Presidential Innovation Fellows and the U.S. Digital Corps, the program will emphasize flexibility to ensure that fellows can make meaningful contributions within the time frame and that knowledge transfer between sectors remains a core objective.

3. Advanced mentorship and leadership development: Building on the SFS model, the expanded program will foster a strong community of cyber professionals through cohort activities and mentorship pairings with senior leaders across government and industry. A new emphasis on leadership training will prepare fellows for senior roles in government cybersecurity.

4. Focus on emerging technologies: Complementing the SFS program’s core cybersecurity curriculum, the expanded CyberCorps will emphasize cutting-edge areas such as artificial intelligence in cybersecurity, quantum computing, and advanced threat detection. This focus will prepare fellows to address future cybersecurity challenges.

5. Extended impact through education and mentorship: The program will encourage fellows to become cybersecurity educators and mentors in their communities after their service, extending the program’s impact beyond government service and strengthening America’s overall cyber workforce.

By implementing these enhancements to the CyberCorps program as a first step and quick win, the Action Plan will initiate a more comprehensive approach to federal cybersecurity workforce development. The enhanced CyberCorps fellowship program will also emphasize diversity and inclusion to address the critical shortage of cybersecurity professionals and bring fresh perspectives to cyber challenges. The program will actively recruit individuals from underrepresented groups, including women, people of color, veterans, and neurodivergent individuals.

To achieve this, the program will partner with organizations like Girls Who Code and the Hispanic IT Executive Council to promote cybersecurity careers and expand the applicant pool. The Department of Labor, in conjunction with the NSF, will establish a Cyber Opportunity Fund to provide additional scholarships and grants for individuals from underrepresented groups pursuing cybersecurity education through the CyberCorps program.

In addition, the program will develop standardized apprenticeship components that provide on-the-job training and clear pathways to full-time employment, with a focus on recruiting from diverse industries and backgrounds. Furthermore, partnerships with Historically Black Colleges and Universities, Hispanic-Serving Institutions, and Tribal Colleges and Universities will be strengthened to enhance their cybersecurity programs and create a pipeline of diverse talent for the CyberCorps program.

The CyberCorps program will expand its scope to include an international component, allowing for exchanges with allied nations’ cybersecurity agencies and bringing international students to U.S. universities for advanced studies. This will help position the United States as a global leader in cybersecurity education and training while fostering a worldwide community of professionals capable of responding effectively to evolving cyber threats.

By incorporating these elements, the enhanced CyberCorps fellowship program will not only address immediate federal cybersecurity needs but also contribute to building a diverse, skilled, and globally aware cybersecurity workforce for the future.

Implementation Considerations

To successfully establish and execute the comprehensive Action Plan and its associated initiatives, careful planning and coordination across multiple agencies and stakeholders will be essential. Below are some of the key timeline and funding considerations the ONCD should factor into its implementation.

Key milestones and actions for the first two years

Months 1–6:

Months 7–12:

Months 13–18:

Months 19–24:

Program evaluation and quality assurance

Beyond these key milestones, the Action Plan must establish clear evaluation frameworks to ensure program quality and effectiveness, particularly for integrating non-federal education programs into federal hiring pathways. For example, to address OPM’s need for evaluating non-federal technical and career education programs under the Recent Graduates Program, the Action Plan will implement the following evaluation framework:

The implementation of these criteria will be overseen by the same advisory board established in Months 1-6, expanding their scope to include program evaluation and certification. This approach leverages existing governance structures while providing OPM with quantifiable metrics to evaluate non-federal program graduates. 

Budgetary, resource, and personnel needs

The estimated annual budget for the proposed initiative ranges from $125 million to $200 million. This range considers cost-effective resource allocation strategies, including the integration of existing platforms and focused partnerships. Key components of the program include:

Potential funding sources

Funding for this initiative can be sourced through a variety of channels. First, congressional appropriations via the annual budget process are expected to provide a significant portion of the financial support. Additionally, reallocating existing funds from cybersecurity and workforce development programs could account for approximately 25–35% of the overall budget. This reallocation could include funding from current programs like NICE, SFS, and other workforce development grants, which can be repurposed to support this broader initiative without requiring entirely new appropriations.

Public-private partnerships will also be explored, with potential contributions from industry players who recognize the value of a robust cybersecurity workforce. Grants from federal entities such as DHS, DoD, and NSF are viable options to supplement the program’s financial needs. To offset costs, fees collected from credentialing and training programs could serve as an additional revenue stream.

Finally, the Action Plan and its initiatives will seek contributions from international development funds aimed at capacity-building, as well as financial support from allied nations to aid in the establishment of joint international programs.

Conclusion

Establishing a comprehensive Cyber Workforce Action Plan represents a pivotal move toward securing America’s digital future. By creating flexible, accessible career pathways into cybersecurity, fostering innovative education and training models, and promoting both domestic diversity and international cooperation, this initiative addresses the urgent need for a skilled and resilient cybersecurity workforce.

The impact of this proposal is wide-ranging. It will not only reinforce national security by strengthening the nation’s cyber defenses but also contribute to economic growth by creating high-paying jobs and advancing U.S. leadership in cybersecurity on the global stage. By expanding access to cybersecurity careers and engaging previously underutilized talent pools, this initiative will ensure the workforce reflects the diversity of the nation and is prepared to meet future cybersecurity challenges.

The next administration must make the implementation of this plan a national priority. As cyber threats grow more complex and sophisticated, the nation’s ability to defend itself depends on developing a robust, adaptable, and highly skilled cybersecurity workforce. Acting swiftly to establish this strategy will build a stronger, more resilient digital infrastructure, ensuring both national security and economic prosperity in the 21st century. We urge the administration to allocate the necessary resources and lead the transformation of cybersecurity workforce development. Our digital future—and our national security—demand immediate action.

Teacher Education Clearinghouse for AI and Data Science

The next presidential administration should develop a teacher education and resource center that includes vetted, free, self-guided professional learning modules, resources to support data-based classroom activities, and instructional guides pertaining to different learning disciplines. This would provide critical support to teachers to better understand and implement data science education and use of AI tools in their classroom. Initial resource topics would be: 

In addition, this resource center would develop and host free, pre-recorded, virtual training sessions to support educators and district professionals to better understand these resources and practices so they can bring them back to their contexts. This work would improve teacher practice and cut administrative burdens. A teacher education resource would lessen the digital divide and ensure that our educators are prepared to support their students in understanding how to use AI tools so that each and every student can be college and career ready and competitive at the global level. This resource center would be developed using a process similar to the What Works Clearinghouse, such that it is not endorsing a particular system or curriculum, but is providing a quality rating, based on the evidence provided. 

Challenge and Opportunity

AI is an incredible technology that has the power to revolutionize many areas, especially how educators teach and prepare the next generation to be competitive in higher education and the workforce. A recent RAND study showed leaders in education indicating promise in adapting instructional content to fit the level of their students and for generating instructional materials and lesson plans. While this technology holds a wealth of promise, the field has developed so rapidly that people across the workforce do not understand how best to take advantage of AI-based technologies. One of the most crucial areas for this is in education. AI-enabled tools have the potential to improve instruction, curriculum development, and assessment, but most educators have not received adequate training to feel confident using them in their pedagogy. In a Spring 2024 pilot study (Beiting-Parrish & Melville, in preparation), initial results indicated that 64.3% of educators surveyed had not had any professional development or training in how to use AI tools. In addition, more than 70% of educators surveyed felt they did not know how to pick AI tools that are safe for use in the classroom, and that they were not able to detect biased tools. Additionally, the RAND study indicated only 18% of educators reported using AI tools for classroom purposes. Within those 18%, approximately half of those educators used AI because they had been specifically recommended or directly provided a tool for classroom use. This suggests that educators need to be given substantial support in choosing and deploying tools for classroom use. Providing guidance and resources to support vetting tools for safe, ethical, appropriate, and effective instruction is one of the cornerstone missions of the Department of Education. This education should not rest on the shoulders of individual educators who are known to have varying levels of technical and curricular knowledge, especially for veteran teachers who have been teaching for more than a decade.

If the teachers themselves do not have enough professional development or expertise to select and teach new technology, they cannot be expected to thoroughly prepare their students to understand emerging technologies, such as AI, nor the underpinning concepts necessary to understand these technologies, most notably data science and statistics. As such, students’ futures are being put at risk from a lack of emphasis in data literacy that is apparent across the nation. Recent results from the National Assessment of Education Progress (NAEP), assessment scores show a shocking decline in student performance in data literacy, probability, and statistics skills – outpacing declines in other content areas. In 2019, the NAEP High School Transcript Study (HSTS) revealed that only 17% of students completed a course in statistics and probability, and less than 10% of high school students completed AP Statistics. Furthermore, the HSTS study showed that less than 1% of students completed a dedicated course in modern data science or applied data analytics in high school. Students are graduating with record-low proficiency in data, statistics, and probability, and graduating without learning modern data science techniques. While students’ data and digital literacy are failing, there is a proliferation of AI content online; they are failing to build the necessary critical thinking skills and a discerning eye to determine what is real versus what has been AI-generated, and they aren’t prepared to enter the workforce in sectors that are booming. The future the nation’s students will inherit is one in which experience with AI tools and Big Data will be expected to be competitive in the workforce.

Whether students aren’t getting the content because it isn’t given its due priority, or because teachers aren’t comfortable teaching the content, AI and Big Data are here, and our educators don’t have the tools to help students get ready for a world in the midst of a data revolution. Veteran educators and preservice education programs alike may not have an understanding of the essential concepts in statistics, data literacy, or data science that allow them to feel comfortable teaching about and using AI tools in their classes. Additionally, many of the standard assessment and practice tools are not fit for use any longer in a world where every student can generate an A-quality paper in three seconds with proper prompting. The rise of AI-generated content has created a new frontier in information literacy; students need to know to question the output of publically available LLM-based tools, such as Chat-GPT, as well as to be more critical of what they see online, given the rise of AI-generated deep fakes, and educators need to understand how to either incorporate these tools into their classrooms or teach about them effectively. Whether educators are ready or not, the existing Digital Divide has the potential to widen, depending on whether or not they know how to help students understand how to use AI safely and effectively and have the access to resources and training to do so.

The United States finds itself at a crossroads in the global data boom. Demand in the economic marketplace, and threat to national security by way of artificial intelligence and mal-, mis-, and disinformation, have educators facing an urgent problem in need of an immediate solution. In August of 1958, 66 years ago, Congress passed the National Defense Education Act (NDEA), emphasizing teaching and learning in science and mathematics. Specifically in response to the launch of Sputnik, the law supplied massive funding to, “insure trained manpower of sufficient quality and quantity to meet the national defense needs of the United States.” The U.S. Department of Education, in partnership with the White House Office of Science and Technology Policy, must make bold moves now to create such a solution, as Congress did once before.

Plan of Action

In the years since the Space Race, one problem with STEM education persists: K-12 classrooms still teach students largely the same content; for example, the progression of high school mathematics including algebra, geometry, and trigonometry is largely unchanged. We are no longer in a race to space – we’re now needing to race against data. Data security, artificial intelligence, machine learning, and other mechanisms of our new information economy are all connected to national security, yet we do not have educators with the capacity to properly equip today’s students with the skills to combat current challenges on a global scale. Without a resource center to house the urgent professional development and classroom activities America’s educators are calling for, progress and leadership in spaces where AI and Big Data are being used will continue to dwindle, and our national security will continue to be at risk. It’s beyond time for a new take on the NDEA that emphasizes more modern topics in the teaching and learning of mathematics and science, by way of data science, data literacy, and artificial intelligence. 

Previously, the Department of Education has created resource repositories to support the dissemination of information to the larger educational praxis and research community. One such example is the What Work Clearinghouse, a federally vetted library of resources on educational products and empirical research that can support the larger field. The WWC was created to help cut through the noise of many different educational product claims to ensure that only high-quality tools and research were being shared. A similar process is happening now with AI and Data Science Resources; there are a lot of resources online, but many of these are of dubious quality or are even spreading erroneous information. 

To combat this, we suggest the creation of something similar to the WWC, with a focus on vetted materials for educator and student learning around AI and Data Science. We propose the creation of the Teacher Education Clearinghouse (TEC) underneath the Institute of Education Sciences, in partnership with the Office of Education Technology. Currently, WWC costs approximately $2,500,000 to run, so we anticipate a similar budget for the TEC website. The resource vetting process would begin with a Request for Information from the larger field that would encourage educators and administrators to submit high quality materials. These materials would be vetted using an evaluation framework that looks for high quality resources and materials. 

For example, the RFI might request example materials or lesson goals for the following subjects:

A framework for evaluating how useful these contributions might be for the Teacher Education Clearinghouse would consider the following principles:

Additionally, this would also include a series of quick start guide books that would be broken down by topic and include a set of resources around foundational topics such as, “Introduction to AI” and “Foundational Data Science Vocabulary”. 

When complete, this process would result in a national resource library, which would house a free series of asynchronous professional learning opportunities and classroom materials, activities, and datasets. This work could be promoted through the larger DoE as well as through the Regional Educational Laboratory program and state level stakeholders. The professional learning would consist of prerecorded virtual trainings and related materials (ex: slide decks, videos, interactive components of lessons, etc.). The materials would include educator-facing materials to support their professional development in Big Data and AI alongside student-facing lessons on AI Literacy that teachers could use to support their students. All materials would be publicly available for download on an ED-owned website. This will allow educators from any district, and any level of experience, to access materials that will improve their understanding and pedagogy. This especially benefits educators from less resourced environments because they can still access the training they need to adequately support their students, regardless of local capacity for potentially expensive training and resource acquisition. Now is the time to create such a resource center because there currently isn’t a set of vetted and reliable resources that are available and accessible to the larger educator community and teachers desperately need these resources to support themselves and their students in using these tools thoughtfully and safely. The successful development of this resource center would result in increased educator understanding of AI and data science such that the standing of U.S. students increases on such international measurements as the International Computer and Information Literacy Study (ICILS), as well as increased participation in STEAM fields that rely on these skills.

Conclusion

The field of education is at a turning point; the rise of advancements in AI and Big Data necessitate increased focus on these areas in the K-12 classroom; however, most educators do not have the preparation needed to adequately teach these topics to fully prepare their students. For the United States to continue to be a competitive global power in technology and innovation, we need a workforce that understands how to use, apply, and develop new innovations using AI and Data Science. This proposal for a library of high quality, open-source, vetted materials would support democratization of professional development for all educators and their students.

Retiring Baby Boomers Can Turn Workers into Owners: Securing American Business Ownership through Employee Ownership

The economic vitality and competitiveness of America’s economy is in jeopardy. The Silver Tsunami of retiring business owners puts half of small businesses at risk: 2.9 million companies are owned by someone at or near retirement age, of which 375,000 are manufacturing, trade, and distribution businesses critical to our supply chains. Add to this that 40 percent of U.S. corporate stock is owned by foreign investors, which funnels these companies’ profits out of our country, weakening our ability to reinvest in our own competitiveness. If the steps to expand the availability of employee ownership were to address even just 10% of the Silver Tsunami companies over 10 employees, this would preserve an estimated 57K small businesses and 2.6M jobs, affecting communities across the U.S. Six hundred billion dollars in economic activity by American-owned firms would be preserved, ensuring that these firms’ profits continue to flow into American pockets.

Broad-based employee ownership (EO) is a powerful solution that preserves local American business ownership, protects our supply chains and the resiliency of American manufacturing, creates quality jobs, and grows the household balance sheets of American workers and their families. Expanding access to financing for EO is crucial at this juncture, given the looming economic threats of the Silver Tsunami and foreign business ownership.

Two important opportunities expand capital access to finance sales of businesses into EO, building on over 50 years of federal support for EO and over 65 years of supporting the flow of small business private capital to where it is not in adequate supply: first, the Employee Equity Investment Act (EEIA), and second, addressing barriers in the SBA 7(a) loan guarantee program.

Three trends create tremendous urgency to leverage employee ownership small business acquisition: (1) the Silver Tsunami, representing $6.5T in GDP and one in five private sector workers nationwide, (2) fewer than 30 percent of businesses are being taken over by family members, and (3) only one in five businesses put up for sale is able to find a buyer. 

Without preserving Silver Tsunami businesses, the current 40 percent share of foreign ownership will only grow. Supporting U.S. private investors in the mergers and acquisitions (M&A) space to proactively pitch EO to business owners, and come with readily available financing, enables EO to compete with other acquisition offers, including foreign firms.  

In communities all across the U.S., from urban to suburban to rural (where arguably the need to find buyers and the impact of job losses can be most acute), EO is needed to preserve these businesses and their jobs in our communities, maintain U.S. stock ownership, preserve manufacturing production capacity and competitive know how, and create the potential for the next generation of business owners to create economic opportunity for themselves and their families.

Challenge and Opportunity

Broad-based employee ownership (EO) of American small businesses is one of the most promising opportunities to preserve American ownership and small business resiliency and vitality, and help address our country’s enormous wealth gap. EO creates the opportunity to have a stake in the game, and to understand what it means to be a part owner of a business for today’s small business workforces. 

However, the growth of EO, and its ability to preserve American ownership of small businesses in our local economies, is severely hampered by access to financing.   

Most EO transactions (which are market rate sales) require the business owner to first learn about EO, then to not only initiate the transaction (typically hiring a consultant to structure the deal for them), but also to finance as much as 50 percent or more of the sale. This contrasts to how the M&A market traditionally works: buyers who provide the financing are the ones who initiate the transaction with business owners. This difference is a core reason why EO hasn’t grown as quickly as it could, given all of the backing provided through federal tax breaks dating back to 1974.

More than one form of EO is needed to address the urgent Silver Tsunami and related challenges, including Employee Stock Ownership Plans (ESOPs) which are only a fit for companies of about 40 employees and above, and worker-owned cooperatives and Employee Ownership Trusts (EOTs), which are a fit for companies of about 10 employees and above (below 10 is a challenge for any EO transition). Of small businesses with greater than 10 employees, those with 10-19 employees make up 51% of the total; those with 20-49 employees make up 33%. In other words, the vast majority of companies with over 10 employees (the minimum size threshold for EO transitions) are below the 40+ employee threshold required for an ESOP. This underscores the importance of ensuring financing access for worker coops and EOTs that can support transitions of companies in the 10-40 employee range.

Without action, we are at risk of losing the small businesses and jobs that are in need of buyers as a result of the Silver Tsunami.

via Project Equity

Across the entire small business economy, 2.9M businesses that provide 32.1M jobs are estimated to be at risk, representing $1.3T in payroll and $6.5T in business revenue. Honing in on only manufacturing, wholesale trade and transportation & warehousing businesses, there are an estimated 375,000 businesses at risk that provide 5.5M jobs combined, representing $279.2B of payroll and $2.3T of business revenue.

Plan of Action

Two important opportunities will expand capital access to finance sales of businesses into EO and solve the supply-demand imbalance created in the small business merger and acquisition marketplace with too many businesses needing buyers and being at risk of closing down due to the Silver Tsunami.

First, passing new legislation, the Employee Equity Investment Act (EEIA), would establish a zero-subsidy credit facility at the Small Business Administration, enabling Congress to preserve the legacy of local businesses and create quality jobs with retirement security by helping businesses transition to employee ownership. By supporting private investment funds, referred to as Employee Equity Investment Companies (EEICs), Congress can support the private market to finance the sale of privately-held small- and medium-sized businesses from business owners to their employees through credit enhancement capabilities at zero subsidy cost to the taxpayer.

EEICs are private investment companies licensed by the Small Business Administration that can be eligible for low-cost, government-backed capital to either create or grow employee-owned businesses. In the case of new EO transitions, the legislation intends to “crowd in” private institutional capital sources to reduce the need for sellers to self-finance a sale to employees. Fees paid into the program by the licensed funds enable it to operate at a zero-subsidy cost to the federal government. 

The Employee Equity Investment Act (EEIA) helps private investors that specialize in EO to compete in the mergers & acquisition (M&A) space.

Second, addressing barriers to EO lending in the SBA 7(a) loan guarantee program by passing legislation that removes the personal guarantee requirement for worker coops and EOTs would help level the playing field, enabling companies transitioning to EO to qualify for this loan guarantee without requiring a single employee-owner to personally guarantee the loan on behalf of the entire owner group of 10, 50 or 500 employees. 

Importantly, our manufacturing supply chain depends on a network of tier 1, 2 and 3 suppliers across the entire value chain, a mix of very large and very small companies (over 75% of manufacturing suppliers have 20 or fewer employees). The entire sector faces an increasingly fragile supply chain and growing workforce shortages, while also being faced with the Silver Tsunami risk. Ensuring that EO transitions can help us preserve the full range of suppliers, distributors and other key businesses will depend on having capital that can finance companies of all sizes. The SBA 7(a) program can guarantee loans of up to $5M, on the smaller end of the small business company size. 

Even though the SBA took steps in 2023 to make loans to ESOPs easier than under prior rules, the biggest addressable market for EO loans that fit within the SBA’s 7(a) loan size range are for worker coops and EOTs (because ESOPs are only a fit for companies with about 40 employees or fewer, given higher regulatory costs). Worker coops and EOTs are currently not able to utilize this SBA product. 

The legislative action needed is to require the SBA to remove the requirement for a personal guarantee under the SBA 7(a) loan guarantee program for acquisitions financing for worker cooperatives and Employee Ownership Trusts. The Capital for Cooperatives Act (introduced to both the House and the Senate most recently in May 2021) provides a strong starting point for the legislative changes needed. There is precedent for this change; the Paycheck Protection Program loans and SBA Economic Injury Disaster Loans (EIDL) were made during the pandemic to cooperatives without requiring personal guarantees as well as the aforementioned May 2023 rule change allowing majority ESOPs to borrow without personal guarantee.

There is not any expected additional cost to this program outside of some small updates to policies and public communication about the changes. 

Addressing barriers to EO lending in the SBA 7(a) loan guarantee program would open up bank financing to the full addressable market of EO transactions.

The Silver Tsunami of retiring business owners puts half of all employer-businesses urgently at risk if these business owners can’t find buyers, as the last of the baby boomers turns 65 in 2030. Maintaining American small business ownership, with 40% of stock of American companies already owned by foreign stockholders, is also critical. EO preserves domestic productive capacity as an alternative to acquisition by foreign firms, including China, and other strategic competitors, which bolsters supply chain resiliency and U.S. strategic competitiveness. Manufacturing is a strong fit for EO, as it is consistently in the top two sectors for newly formed employee-owned companies, making up 20-25% of all new ESOPs. 

Enabling private investors in the M&A space to proactively pitch EO to business owners, and come with readily available financing will help address these urgent needs, preserving small business assets in our communities, while simultaneously creating a new generation of American business owners.

This action-ready policy memo is part of Day One 2025 — our effort to bring forward bold policy ideas, grounded in science and evidence, that can tackle the country’s biggest challenges and bring us closer to the prosperous, equitable and safe future that we all hope for whoever takes office in 2025 and beyond.

Frequently Asked Questions
How many employee-owned companies are there in the U.S. today?

There are an estimated 7,500+ EO companies in the U.S. today, with nearly 40,000 employee-owners and assets well above $2T. Most are ESOPs (about 6,500), plus about 1,000 worker cooperatives, and under 100 EOTs.

How much of the Silver Tsunami risk could these supports for employee ownership financing potentially address?

For every 1% of Silver Tsunami companies with more than 10 employees that is able to transition to EO based on these recommendations, an estimated 5.7K firms, $60.7B in sales, 260K jobs, and 12.3B in payroll would be preserved.

How much support has Congress and the federal government provided for employee ownership and small business access to capital in the past?

Congress and the federal government have demonstrated their support of small business and the EO form of small business in many ways, which this proposed two-pronged legislation builds on, for example:



  • Creation of the SBIC program in the SBA in 1958 designed to stimulate the small business segment of the U.S. economy by supplementing “the flow of private equity capital and long-term loan funds which small-business concerns need for the sound financing of their business operations and for their growth, expansion, and modernization, and which are not available in adequate supply [emphasis added]”

  • Passage of multiple pieces of federal legislation providing tax benefits to EO companies dating back to 1974

  • Passage of the Main Street Employee Ownership Act in 2018, which was passed with the intention of removing barriers to SBA loans or guarantees for EO transitions, including to allow ESOPs and worker coops to qualify for loans under the SBA’s 7(a) program. The law stipulated that the SBA “may” make the changes the law provided, but the regulations SBA initially issued made things harder, not easier. Over the next few years, Representatives Dean Phillips (D-MN) and Nydia Velazquez (D-NY), both on the House Small Business Committee, led an effort to get the SBA to make the most recent changes that benefitted ESOPs but not the other forms of EO.

  • Release of the first Job Quality Toolkit by the Commerce Department in July 2021, which explicitly includes EO as one of the job quality strategies

  • Passage of the WORK Act (Worker Ownership, Readiness, and Knowledge) in 2023 (incorporated as Section 346 of the SECURE 2.0 Act), which directs the Department of Labor (DOL) to create an Employee Ownership Initiative within the department to coordinate and fund state employee ownership outreach programs and also requires the DOL to set new standards for ESOP appraisals. The program was to be funded at $4 million in fiscal year 2025 (which starts in October 2024), gradually increasing to $16 million by fiscal year 2029, but it has yet to be appropriated.

I’ve never heard about EO transitions using a worker coop or an Employee Ownership Trust. How widespread is this?

EO transitions using worker cooperatives have been happening for decades. Over the past ten years, this practice has grown significantly. There is a 30-member network of practitioners that actively support small business transitions utilizing worker coops and EOTs called Workers to Owners. Employee Ownership Trusts are newer in the U.S. (though they are the standard EO form in Europe, with decades of strong track record) and are a rapidly growing form of EO with a growing set of practitioners.

Why does there need to be a specialized program to capitalize EO funds?

Given the supply ~ demand imbalance of retiring business owners created by the Silver Tsunami (lots of businesses need buyers), as well as the outsized positive benefits of EO, prioritizing this form of business ownership is critical to preserving these business assets in our local and national economies. Capital to finance the transactions is central to ensuring EO’s ability to play this important role.

What is the scale of the SBA’s 7(a) loan program?

The SBA 7(a) loan program has been and continues to be, critical to opening up bank (and some CDFI) financing for small businesses writ large by guaranteeing loans up to $5M. In FY23, the SBA guaranteed more than 57,300 7(a) loans worth $27.5 billion.

What are the SBA’s 7(a) loan program’s general rules for personal guarantees?

The SBA 7(a) loan program’s current rules require that all owners with 20% or more ownership of a business provide a personal guarantee for the loan, but absent anyone owning 20%, at least one individual must provide the personal guarantee. The previously mentioned May 2023 rule changes updated this for majority ESOPs.

What would the SBA use in place of the personal guarantee?

Just as with the ESOP form of EO, the SBA would be able to consider documented proof of an EO borrower’s ability to repay the loan based on equity, cash flow, and profitability to determine lending criteria.

But isn’t it risky to lend without a personal guarantee?

Research into employee ownership demonstrates that EO companies have faster growth, higher profits, and that they outlast their competitors in business cycle downturns. There is precedent for offering loans without a personal guarantee. First, during COVID, the SBA extended both EIDL (Economic Injury Disaster Loans) and PPP (Paycheck Protection Program) loans to cooperatives without requiring a personal guarantee. Second, the SBA’s May 2023 rule changes allow majority ESOPs to borrow without personal guarantee.

Why is the largest addressable market for the SBA 7(a) loan within EO transitions for worker coops and EOTs?

The overlap of the EO transaction value with the $5M ceiling for the 7(a) loan guarantee has the largest overlap with transaction values that are suitable for worker coops and EOTs. This is because ESOPs are not viable below about $750K-$1M transaction value due to higher regulatory-related costs, but the other forms of EO are viable down to about 10 or so employees.


A typical bank- or CDFI- financed EO transaction is a senior loan of 50-70% and a seller note of 30-50%. With a $5M ceiling for the 7(a) loan guarantee, this would cap the EO transaction value for 7(a) loans at $10M (a 50% seller note of $5M alongside a $5M bank loan). If a sale price is 4-6x EBITDA (a measure of annual profit) at this transaction value, this would cap the eligible company EBITDA at $1.7-$2.5M, which captures only the lowest company size thresholds that could be viable for the ESOP form.

Why is the SBA 7(a) loan especially important in the context of preserving supply chain resiliency?

Supply chain fragility and widespread labor shortages are the two greatest challenges facing American manufacturing operators today, with 75% of manufacturers citing attracting and retaining talent as their primary business challenge, and 65% citing supply chain disruptions as their next greatest challenge. Many don’t realize that the manufacturing sector is built like a block tower, with the Tier 1 (largest) suppliers to manufacturers at the top, Tier 2 suppliers at the next level down, and the widest foundational layer made up of Tier 3 suppliers. For example, a typical auto manufacturer will rely on 18,000 suppliers across its entire value chain, over 98% of which are small or medium sized businesses. In fact, 75% of manufacturing businesses have fewer than 20 employees. It is critical that we preserve American businesses across the entire value chain, and opening up financing for EO for companies of all sizes is absolutely critical.

How important is the manufacturing sector to the overall American economy?

The manufacturing sector generates 12% of U.S. GDP (gross domestic product), and if we count the value of the sector’s purchasing, the number goes to nearly one quarter of GDP. The sector also employs nearly one in ten American workers (over 14 million). Manufacturing plays a vital role in both our national security and in public health. Finally, the sector has long been a source of quality jobs and a cornerstone of middle class employment.

Why didn’t the SBA in its May 2023 ruling expand this option for worker coops and Employee Ownership Trusts?

Though we aren’t certain the reasoning, it is most likely because ESOPs have the largest lobbying presence. Given the broad support by the federal government of ESOPs through a myriad of tax benefits designed to encourage companies to transition to ESOPs, it is the biggest form of EO, enabling its lobbying presence. As discussed, their size threshold (based on the costs to comply with the regulatory requirements) put ESOPs out of reach for companies with below $750K – $1M EBITDA (a measure of annual profit), which leaves a large swath of America’s small businesses not supported by the SBA 7(a) loan guarantee when they are transacting an employee ownership succession plan.

Why can’t the SBA just make a rule change for its 7(a) loan guarantee program?

Likely, the lack of lobbying presence by parties representing the non-ESOP forms of employee ownership has resulted in the rule change not applying to the other forms of broad-based employee ownership. However, the data (as outlined above) clearly shows that worker cooperatives and EOTs are needed to address the full breadth of Silver Tsunami EO need, given the size overlap of loans that fit the size guidelines of the 7(a) loan guarantee and the fit with the form of EO. As such, legislators that are focused on American business resiliency and competitiveness are in the good positions to direct the SBA to mirror the ESOP personal loan guarantee treatment for worker cooperatives and EOTs.