In 2005, the National Academies recommended to Congress the creation of an organization within DOE like DARPA. In 2007, the America COMPETES Act created a new agency within DOE called ARPA-E. In line with the National Academies’ recommendation, the America COMPETES Act as amended directs ARPA-E to achieve its goals by identifying and promoting revolutionary advances in fundamental and applied sciences, translating scientific discoveries and cutting-edge inventions into technological innovations, and accelerating transformational technological advances in areas that industry by itself is not likely to undertake because of technical and financial uncertainty. As such, ARPA-E officials told us that ARPA-E was designed to sponsor research beyond basic science, yet riskier than what the private sector (See fig. 1.) The National alone or DOE’s applied offices would support.Academies recommended that ARPA-E should not perform research and development itself, but should fund it to be conducted by universities and others in the private sector. In 2009, the American Recovery and Reinvestment Act of 2009 appropriated $400 million for ARPA-E. ARPA-E is an agency with fewer than 30 federal employees, and its eight program directors, who are generally scientists and engineers, create and manage funding programs for the agency. ARPA-E’s program development and award selection process takes 6 to 8 months from start to finish, beginning when the agency hires a program director for a 3-year term and tasks the program director with identifying a gap in energy technology research and developing a program to fill that gap. For example, ARPA-E’s batteries for transportation program, called the Batteries for Electrical Energy Storage in Transportation (BEEST) program, was established to fill a gap in existing federal research programs on batteries for electric vehicles. Identifying these gaps and designing the program involves research; consultation with scientific experts, including a workshop with outside experts; and internal discussion at ARPA-E. From this process, program directors develop funding announcements that describe the technical requirements specific to each program’s technology area that applicants have to meet and the four criteria that ARPA-E uses in its selection process. The four criteria are the Impact of the proposed technology relative to the state of the art. The applicant must demonstrate the potential for a transformational—not incremental––advancement over current technologies. (See fig. 2.) More specifically, the applicant must demonstrate an awareness of competing commercial and emerging technologies and identify how its proposed concept/technology provides significant improvement over these other solutions. Overall scientific and technical merit. The applicant must demonstrate that the work is unique and innovative. The applicant must also demonstrate a sound technical approach to accomplish the proposed research and development objectives. The outcome and deliverables of the program, if successful, should be clearly defined. Specific technical requirements that are unique to each individual ARPA-E program funding announcement must also be addressed. Qualifications, experience, and capabilities. The applicant must demonstrate that it has the expertise and experience to accomplish the proposed project. In addition, the applicant must have access to all facilities required to accomplish the research and development effort. Sound management plan. The applicant must have a workable plan to manage people and resources. Major technical research and development risks should be identified. The schedule and budget should be reasonable. ARPA-E employs the following three-stage application process: Concept paper. Applicants initially submit a 5- to 7-page abstract of their projects. Scientific experts from industry, government, and academia serve as reviewers. Full application. After reviews of the concept paper, ARPA-E encourages some applicants to submit full applications using ARPA-E’s online application system. ARPA-E’s current instructions request that applicants provide, among other things, information about other prior, current, and pending public and private sources of funding, as well as why other funding sources are not willing to fund the projects. Full applications are then reviewed by leading scientific experts in the field, who evaluate them against the four criteria and assign numerical scores. Reply to reviewer comments. After assessing the full applications, reviewers provide comments and questions to the applicants, who then have the opportunity to respond. The applications with the reviewers’ comments are forwarded to a three- person panel beginning the next three phases of ARPA-E’s award funding process, which are as follows: Selection. The three-person panel, usually chaired by the relevant program director, considers the reviewers’ comments and numerical scores, and recommends applications to award. The final decisions on which applicants to select are made by the selecting official, which is usually the ARPA-E Director. Award negotiations. Negotiations proceed for approximately 2 months. Program directors work closely with the award winners to set up a project plan with technical milestones that are to be met during the funding of the award, which are planned to last between 2 and 3 years. Funds are awarded following the negotiations. Monitoring. ARPA-E monitors and supports the project through quarterly reviews and site visits. After about 1 year, the agency decides whether to continue or terminate the project if the agreed-to milestones are not met. In April 2009, ARPA-E started its funding award process by releasing a funding announcement soliciting proposals for all energy ideas and technologies. Following the review process, 36 projects were awarded funds after being selected from 3,700 applications that spanned the technology areas of 10 programs. ARPA-E released additional funding announcements in December 2009, March 2010, and April 2011. (See table 1.) Money appropriated by the American Recovery and Reinvestment Act of 2009 funded ARPA-E’s first three funding rounds. After receiving an appropriation in DOE’s fiscal year 2011 appropriations act, ARPA-E announced a fourth round of funding in April 2011. In addition to applying its four criteria, ARPA-E gives program directors discretion to use additional considerations to award funds to projects, including whether ARPA-E applicants received private funding. Most ARPA-E award winners did not receive prior private funding, but for those that did, most award winners we reviewed did not explain these funds. Of the 20 applications we reviewed for award selection criteria, all contained supporting information addressing the agency’s four criteria. In our analysis of the ARPA-E reviewers’ evaluations from these 20 applications, we noted regular assignment of numerical scores rating applicants on the extent to which they met the criteria. All eight ARPA-E program directors told us they considered or, if they were recently hired, will consider all four criteria, but several focused more heavily on two criteria—the impact of the proposed technology relative to the state of the art and its overall scientific and technical merit. In addition to basing the numerical scores applicants receive on the extent to which they meet the four selection criteria, program directors told us the agency gives them the ability to take other qualitative considerations into account when awarding funds. One of those considerations is to fund a broad range of potential technological solutions with varying levels of risk in solving a given technical problem. Two program directors selected projects to reflect a variety of technologies, and they told us they believe that this approach increases their programs’ overall chances of success. Specifically, one program director told us he chose projects that employed a variety of new battery technologies, a strategy that should increase the likelihood that at least one of them will work. This program director also chose some battery projects with much higher potential storage capacity but with a lower probability of success in achieving project milestones and in ultimately being brought to market. In those cases, ARPA-E provided smaller awards to the projects with the lower probability of success. Several program directors also told us that during the selection process, they considered the applicants’ projects’ proposed project scope and duration, requested funding levels, and technical milestones and negotiated to revise these, if necessary, to better align applicants’ projects with ARPA-E’s program goals. 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. When ARPA-E makes these kinds of adjustments, the agency may also reduce the proposed project scope to fund only what the program directors consider to be the transformational part of the project and to avoid funding applied research or development work that would be outside ARPA-E’s program goals. For example, the agency reduced the award amount and proposed project scope for an energy storage technology project designed to improve energy storage on the electrical grid. The project proposal initially requested nearly $5 million to demonstrate the technology at nearly full scale. During award negotiations, ARPA-E reduced this amount to $750,000 to focus the project only on smaller-scale development and testing of the technology. ARPA-E officials told us the larger-scale demonstration could likely be funded by the private sector. When making award decisions or adjusting the scope of proposed projects, ARPA-E program directors may also consider the identification in applications of sources of private funding and the extent to which that funding might support the proposed projects. This information can help provide program directors with assurance that ARPA-E funds do not overlap with private investment. 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. Of the 18 applications we reviewed from award winners that we identified as having received private venture capital, 14 applied during ARPA-E’s first and second funding rounds. Most of these award winners did not explain why investors were not willing to fund proposed work. ARPA-E program directors and an ARPA-E official, speaking on behalf of the agency, told us they took additional steps to clarify outstanding prior funding questions when ARPA-E was aware that applicants had received private sector funding.