Prizes! Innovating, Risk Shifting, and Avoiding Contracts and Grants

Abstract

This short piece introduces prizes (or prize contests), which have become the darling of the Obama administration. Public managers increasingly find prizes more attractive than the more conventional and heavily regulated vehicles that they replace, contracts and grants. The paper explains some of the advantages of this increasingly popular approach and signals a cautionary note, particularly to contestants. Unfortunately, the government has not yet provided a straightforward means for contestants to obtain meaningful review if and when disputes arise. Accordingly, the authors suggest that, while shifting risk to the private sector is fair game, contest-sponsoring agencies should respect the private sector’s valuable intellectual capacity and scarce resources, and incorporate dispute resolution clauses into their competition guidelines. The authors anticipate publishing more extensive research on this topic in the near future.

Keywords: contracts, grants, prizes, contests, challenge, gov, innovation, dispute resolution

JEL Classification: H57, K23, L33, O31