DEPARTMENT OF 

ENERGY

Advanced Research 

Projects Agency-Energy 

Could Improve Its 

Collection of Information 

from Applications

Statement of Frank Rusco, Director 

Natural Resources and Environment

Testimony 

Before the Subcommittee on 

Investigations and Oversight, Committee 

on Science, Space, and Technology, House 

of Representatives

For Release on Delivery 

Expected at 2:00 p.m. EST

Tuesday, January 24, 2012

GAO-12-407T

United States Government Accountability Office

GAO
 

Page 1 GAO-12-407T 

Chairman Broun, Ranking Member Tonko, and Members of the 

Subcommittee:

I am pleased to be here today to discuss our work on the Department of 

Energy’s (DOE) Advanced Research Projects Agency-Energy (ARPA-E). 

As you know, in 2007, the America Creating Opportunities to Meaningfully 

Promote Excellence in Technology, Education, and Science (America 

COMPETES) Act established ARPA-E within DOE to overcome the longterm and high-risk technological barriers in the development of energy 

technologies.1

Since first receiving an appropriation in 2009 in the American Recovery 

and Reinvestment Act of 2009, ARPA-E has awarded $521.7 million to 

universities, public and private companies, and national laboratories to 

fund 181 projects that attempt to make transformational—rather than 

incremental––advances to a variety of energy technologies, including 

high-energy batteries and renewable fuels.

ARPA-E borrows from the model of the Defense Advanced 

Research Projects Agency (DARPA), an agency created within the 

Department of Defense (DOD) in 1958 to direct and perform advanced 

research and development projects.

2 Award winners must meet 

cost share requirements, through either in-kind contributions or outside 

funding sources.3

ARPA-E is required by statute to achieve its goals through energy 

technology projects that, among other things, accelerate transformational 

technological advances in areas that industry by itself is not likely to 

undertake because of technical and financial uncertainty. At the same 

 

1

Pub. L. No. 110-69, § 5012 (2007).

2

ARPA-E has released a total of four funding announcements—meaning the 

agency was accepting project proposals for a set period of time—in April 2009, 

December 2009, March 2010, and April 2011. ARPA-E generally uses 

cooperative agreements to make funding awards, which involve the transfer of a 

thing of value to the recipient to carry out a public purpose authorized by law. 

Cooperative agreements differ from grants because substantial involvement is 

expected between ARPA-E and the recipient.

3

The cost share requirement for award winners is generally at least 20 percent of 

total allowable costs, although under section 988(b)(3) of the Energy Policy Act 

of 2005, ARPA-E has reduced the cost share requirement for certain applicants, 

such as universities, to 5 percent or 10 percent for all of the funding rounds 

except the first. Award winners’ cost share must be provided by a nonfederal 

source.

 
 

Page 2 GAO-12-407T 

time, the Director of ARPA-E is required to ensure, to the maximum 

extent practicable, that ARPA-E’s activities are coordinated with, and do 

not duplicate the efforts of, programs and laboratories within DOE and 

other relevant research agencies.

My testimony today focuses on the key findings and recommendations 

from a GAO report on ARPA-E being released today by the 

subcommittee.4

We conducted this work in accordance with generally accepted 

government auditing standards. More detailed information on the scope 

and methodology from this work on which this testimony is based can be 

found in appendix I of the report.

For that work, you asked us to examine (1) ARPA-E’s 

use of criteria and other considerations for making awards and the extent 

to which applicants identify and explain other private funding information, 

(2) the extent to which ARPA-E-type projects could have been funded 

through the private sector, and (3) the extent to which ARPA-E 

coordinates with other DOE program offices to avoid duplicating efforts.

In summary, the agency uses several selection criteria in making awards 

though its requirements for information on private sector funding could be 

improved. Also, our review suggests that most ARPA-E projects could not 

have been funded solely by the private sector. Finally, ARPA-E officials 

have taken steps to coordinate with other DOE offices to avoid 

duplication.

• ARPA-E uses four selection criteria—the impact of the proposed 

technology relative to the state of the art; the overall scientific and 

technical merit of the proposal; the qualifications, experience, and 

capabilities of the applicant; and the quality of the proposed 

management plan—in awarding funds. ARPA-E’s eight program 

directors, who are generally scientists and engineers, create and 

manage funding programs for the agency and apply these selection 

criteria when reviewing applications. Of the 20 applications we 

reviewed for award selection criteria, all contained supporting

information addressing the agency’s four criteria. In addition to 

applying its four criteria, ARPA-E gives program directors discretion to 

 

4

GAO, Department of Energy: Advanced Research Projects Agency-Energy 

Could Benefit from Information on Applicants’ Prior Funding, GAO-12-112 

(Washington, D.C.; Jan. 13, 2012).
 

Page 3 GAO-12-407T 

use additional considerations to award funds to projects, including 

whether ARPA-E applicants received private funding. Identification in 

applications of sources of private funding and the extent to which that 

funding might support the proposed projects can help provide 

program directors with assurance that ARPA-E funds do not overlap 

with private investment. We identified 18 out of 121 award winners 

through ARPA-E’s first three funding rounds that had received some 

prior private sector investment, and ARPA-E took steps to identify and 

understand how this funding was related to proposed projects. During 

the first two funding rounds, ARPA-E required that applicants identify 

relevant private investors if the applicant believed these funds were 

related to the proposed project. When applicants provided little prior 

funding information, ARPA-E’s program directors spent time and 

resources to determine the extent of such funding for proposed 

ARPA-E projects. According to our review of ARPA-E data from the 

first three rounds of funding, the agency reduced requested award 

amounts by 5 percent or more on 31 out of 121 projects, for a total of 

$59 million below total requested award amounts for these rounds.5

• Our review suggests that most ARPA-E-type projects could not be 

funded solely by private investors. This finding is based on our 

Beginning with the third funding round, ARPA-E began requiring that 

applicants explain why private investors were not willing to fund 

proposed projects. However, ARPA-E did not provide applicants with 

guidance, such as a sample response, to assist them in completing 

this requirement, and responses were generally limited. Some 

applicants provided general information about prior research but did 

not specifically explain why private investors would not support their 

projects. One applicant included a letter from its venture capital 

investor to explain why the investor was not willing to fund the work 

proposed to ARPA-E, an approach the National Institute of Standards 

and Technology uses as a check in its funding applications for 

advanced research but that ARPA-E currently does not use. Also, 

ARPA-E officials said that they have considered but have not used 

venture capital data to identify applicants with prior private investors. 

Examining such data allowed us to quickly cross-check applicants’ 

prior private funding.

 

5

ARPA-E can reduce the proposed project scope to fund only what the program 

directors consider to be the transformational part of the project to avoid funding 

applied research or development work that would be outside ARPA-E’s program 

goals. 
 

Page 4 GAO-12-407T 

interviews with representatives of venture capital firms and our 

analysis of subsequent funding received by contingently selected 

APRA-E applicants—those applicants that met ARPA-E’s selection 

criteria but were not selected for an award.6

• First, venture capital firms generally do not fund projects that rely on 

unproven technological concepts or lack working prototypes 

demonstrating the technology. Data from ARPA-E on award winners 

show that 91 out of 121 ARPA-E projects from the first three funding 

rounds had technological concepts that had not yet been 

demonstrated in a laboratory setting.

The representatives we 

spoke with from six venture capital firms indicated that they generally 

do not fund the types of projects that ARPA-E looks to fund for three 

reasons.

7

• Second, venture capital firm officials told us that they focused closely 

on the timeliness of investment returns, with one firm noting that the 

industry tended to invest in technologies that could be commercialized 

in less than 3 years and that would potentially exhibit exponential 

market growth in approximately 5 to 7 years. However, we found that 

nearly all of the 13 ARPA-E award winners and most of the 22 

contingently selected applicants we spoke with estimated that their 

projects were 3 or more years away from potential 

commercialization.8

• Third, venture capital firms may not be comfortable investing in new 

energy technologies, noting the historical lack of successful venture 

capital investments in these types of projects. Venture representatives 

said that venture firms were more comfortable investing in software 

companies or other businesses with higher potential profit margins 

and less costly product development than new energy technologies.

 

6

According to ARPA-E officials with whom we spoke, these applicants would 

have been selected for an award had additional funds been available. 

7

These data showed that most ARPA-E award winners were at or below 

technology readiness level (TRL) 3. TRL 3 represents a level where potential 

technologies are still unproven.

8

On the basis of the initial testing of our questions, we determined that these 

estimates may be optimistic, given that respondents are invested in attempting to 

bring a technology to market as soon as possible.
 

Page 5 GAO-12-407T 

The 18 award winners we identified as having received prior private 

venture capital told us that with the ARPA-E funding, they were generally 

able to pursue the development of energy technologies with greater 

scientific or technical uncertainty than they had when they were working 

with their private funding. About two-thirds of these award winners told us 

that the ARPA-E funding has allowed them to develop prototypes or to 

prove basic technology concepts on more advanced ideas than their prior 

work—6 of these award winners said this was for completely new 

research and 7 said it was for major advancements to prior research. A 

few of these award winners also told us they were able to work on 

projects with outstanding scientific research questions that private 

investors would not have funded. Five of these award winners reported 

that they would likely have been able to pursue some research similar to 

their ARPA-E projects, but it would have taken years longer without 

ARPA-E funding. In addition, officials from two public companies we 

spoke with that were awarded ARPA-E money told us that although their 

companies had internal resources devoted to research and development, 

they were not able to internally fund the projects they proposed to ARPAE for two following reasons. First, existing product lines placed heavy 

demands on their internal research and development budgets, and there 

is continuous pressure from existing customers and competitors to 

improve existing products. Second, these companies told us that internal 

investments had to meet minimum investment return thresholds, and that 

ARPA-E-type projects were not able to meet these thresholds.9 In 

addition, we found that few contingently selected applicants found funding 

from private investors or public sources. Eighteen of the 22 ARPA-E 

contingently selected applicants we interviewed sought funding after 

being turned down for ARPA-E funds. Of the 18 that sought funding 

elsewhere, 13 submitted project proposals to government sources, such 

as other DOE offices, the National Science Foundation, or nonprofit 

academic research institutes, and the remaining 5 submitted proposals to 

private investors such as venture capital firms.10

 

9

Officials from one company told us that the rate of return on investment required 

by its management was at least 20 percent per year. 

As of September 2011, 

we found that 2 out of the 22 contingently selected applicants secured 

funding from venture capital firms for work that was very similar to their 

10One of the 5 contingently selected applicants that sought funding from a private 

investor also sought public funding.
 

Page 6 GAO-12-407T 

ARPA-E project proposals.11 We also found that 4 contingently selected 

applicants secured funding from a government or nonprofit source for 

their projects.12

• According to ARPA-E officials and documents, agency officials have 

taken steps to coordinate with other DOE offices in advance of 

awarding ARPA-E funds to help avoid duplication of efforts. These 

coordination efforts can be categorized into three areas: (1) 

prefunding coordination, (2) coordination of application reviews, and 

(3) participation in official DOE coordination groups. For prefunding 

coordination, ARPA-E officials told us that program directors engage 

with officials from related DOE offices in advance of announcing the 

availability of ARPA-E funds. For example, ARPA-E officials told us 

that directors use the workshops and other meetings to identify 

research areas that other DOE offices are not working on, and the 

other DOE officials provide insights on funding areas where they are 

not active. For coordination of application reviews, some ARPA-E 

program directors told us that they have recruited officials from other 

DOE offices to review applications submitted to ARPA-E and that 

these officials made up as many as one-third of the reviewers for one 

director. ARPA-E has also used application reviewers from other 

federal agencies, such as the Department of Defense. One program 

director told us that these reviewers have also helped avoid funding 

projects similar to those potentially funded elsewhere. Finally, ARPAE is also a participant in official DOE coordination groups. For 

example, ARPA-E is a participant in DOE’s SunShot Initiative within 

the Solar Energy Technologies Program. The SunShot Initiative is an 

effort to coordinate solar energy research across DOE’s Office of 

Science, four national laboratories, the National Science Foundation, 

and ARPA-E, with the goal of achieving costs of $1 per watt for solargenerated electricity. Additionally, the ARPA-E Director created the 

The 4 contingently selected applicants that secured 

funding from a government or nonprofit source modified their ARPA-E 

proposals to be more focused on basic science research, rather than on 

developing a commercial technology.

 

11In addition, our review of venture capital funding data for the other 11 

contingently selected applicants with whom we did not speak did not show that 

any had received venture capital funding since not being awarded ARPA-E 

funds.

12Three contingently selected applicants that submitted proposals to government 

or nonprofit sources were still awaiting responses at the time of our review.
 

Page 7 GAO-12-407T 

Panel of Senior Technical Advisors (PASTA), which is a group of 

high-level DOE managers that meet periodically to discuss current 

and future DOE research efforts. ARPA-E officials told us that PASTA 

is an attempt to avoid duplicating efforts within DOE. PASTA meeting 

attendees have included officials from DOE’s applied and basic 

science offices. We were not able to directly evaluate the 

effectiveness of ARPA-E’s efforts to coordinate with other DOE 

offices. Nevertheless, on the basis of our interviews with ARPA-E 

award winners and contingently selected applicants, we found that 4 

award winners and 2 contingently selected applicants had received 

prior funding from other DOE offices.13

On the basis of these findings we recommended that ARPA-E:

According to these award 

winners and contingently selected applicants, the prior funding was 

either for more proven technologies or was focused on more basic or 

foundational research than was the ARPA-E funded project.

• provide guidance with a sample response to assist applicants in 

providing information on sources of private funding for proposed 

ARPA-E projects,

• require that applicants provide letters or other forms of documentation 

from private investors that explain why investors are not willing to fund 

the projects proposed to ARPA-E, and

• use venture capital funding databases to help identify applicants with 

prior private investors and to help check information applicants 

provide on their applications.

ARPA-E commented on a draft of the report being released today and 

concurred with these recommendations.

Chairman Broun, Ranking Member Tonko, and Members of the 

Subcommittee, this concludes my prepared statement. I would be 

pleased to respond to any questions that you may have.

 

13These award winners included those in our nonprobability sample of 13, as well 

as the 18 we identified with VentureDeal data. 
 

Page 8 GAO-12-407T 

For questions about this statement, please contact Frank Rusco at (202) 

512-3841 or ruscof@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this statement. Individuals making key contributions to this statement 

include Tim Minelli, Assistant Director; Karen Keegan; Rob Marek; and 

Jeanette Soares. Key contributors for the work that this testimony is 

based on are listed in appendix V of the report being released today.

GAO Contact and 

Staff 

Acknowledgments 

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