A Web-based model for procurement contests

Blogger Steve Kelman believes drug company Eli Lilly has developed a sound approach to funding research and developments via online challenges.

A number of years ago, when I first became interested in contests as a procurement technique, I cut out a little story from a magazine about a startup -- nurtured originally by drug maker Eli Lilly, to crowdsource research and development (R&D) -- called Innocentive.com. With interest in using contests in government increasing, I decided to check out the Web address to see whether this startup still existed. Several years later, it still does! Indeed, in the old clip they claimed 100,000 inventors had signed up to enter contests; now they claim 200,000.

I checked out the Innocentive website, and this looks to me like something government agencies should be considering. Indeed, though Innocentive doesn't mention the names of any specific users, the site specifically includes "the public sector" as potential users.

The basic idea of Innocentive is that a "seeker" posts a research and development "challenge" on the site in one of any number of categories, ranging from "computer/information technology" to "chemistry" to "engineering/design." The challenge explains what the seeker wants, the deadline is for submitting solutions and the prize is for the best solution.

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I was surprised that these generally were not huge, multimillion-dollar challenges. Most challenges gave a deadline of several months out, with prizes typically ranging from $5,000 to $50,000. The challenges, generally, were focused on operations. In the IT area, one seeker wanted "to automate an image file reformatting and manipulation process. Currently, a wide range of image files supplied by clients must be manually transformed to a specific file format and manipulated. Software code or a validated software application is required." The prize is $50,000.

In trolling the current challenges on the site, I actually came across one from NASA, called "Augmenting the Exercise Experience with Audio-Visual Inputs." The summary was that 'NASA is looking for a system that augments the exercise experience and captures psychological and physiological measures while the individual crew member is participating in prescribed exercise regimens. This virtual, interactive system will serve as a countermeasure by enhancing the exercise experience." The deadline for entries is July 27 (the challenge was posted May 27), and the prize is $20,000.

R&D, almost by definition, is an area where the government, or any funder of research, often pays money without getting results. In conventional R&D procurement, it is essentially unheard of to establish a performance requirement. Instead, contractors are paid for effort. In the Innocentive approach, an organization pays for R&D when they get a result.

Furthermore, given the modest nature of most of these challenges (and prizes), this is not exactly a high-cost approach for the government to experiment with.

Have any other agencies used this? Shouldn't this be something government gives a try? Please give us your thoughts.