CHIPS And Science Act Makes Available Billions Of Dollars For The United States Science And Technology Sectors – Government Contracts, Procurement & PPP

Infusing billions of dollars into the U.S. semiconductor
industry and appropriating billions more for scientific research
and development, what is now colloquially referred to as
the CHIPS and Science Act of 2022 was signed
into law by President Biden on August 9, 2022. According to the
White House, the Act aims to “strengthen American
manufacturing, supply chains, and national security, and invest in
research and development, science and technology, and the workforce
of the future,” to help America “win the race for the
21st century.”¹ An Act in two parts, the
first, cleverly named “Creating Helpful Incentives to Produce
Semiconductors” (“CHIPS”) section, authorizes
more than $50 billion in federal funding to bolster domestic
semiconductor and microchip manufacturing and research. The
second and larger division, the Research and Development,
Competition, and Innovation Act (now just called the “Science
Act”), infuses $170 billion in new research and innovation
funding to a variety of federal agencies. Many of those funds,
in turn, will be available to contractors and grantees searching
for additional monies to support research and development
initiatives.

The CHIPS Act

The CHIPS Act provides $52.7 billion over five years to
accelerate semiconductor research, development, manufacturing, and
workforce development. The funding has been allocated to select
agencies as follows:

One somewhat controversial aspect of the CHIPS Act is the
claw-back provision included in the tax credit incentive.  The
Act creates a 25 percent tax credit for investments in
semiconductor manufacturing, including the manufacturing of
specialized tooling required for chip production. The
claw-back provision prevents recipients of these incentive funds
from expanding or building new manufacturing capacity or making
other “significant transactions” that support
semiconductor industries in countries of concern (currently defined
to include China, Russia, Iran and North Korea) for ten years, lest
they face enforcement action by Commerce to recover all incentives
provided. Details remain murky, however, as Commerce will need
to enact implementing regulations to define relevant terms and
determine the details around how these guardrails will work.

Priorities for implementation are emerging, as on August 25,
2022, the President issued an 
Executive Order that set forth these priorities, to be
reached through collaboration between the White House; State,
local, Tribal and territorial governments; the private sector;
research universities; labor unions; and our allied
countries. These priorities include:

• protecting taxpayer resources, by ensuring funding recipients
  be held accountable for compliance with funding opportunity
  requirements;




• meeting economic, sustainability, and national security needs,
  including by building domestic microelectronic manufacturing
  capacity;




• ensuring long-term leadership in the microelectronics sector,
  through support for research and innovation;




• catalyzing private-sector investment in production,
  breakthrough technologies, and worker and workforce
  development;




• generating benefits impacting a wide range of stakeholders,
  including the traditionally underserved, through creation of
  well-paying, high-skilled union jobs and opportunities for
  startups, small businesses, and minority-owned, veteran-owned, and
  women-owned businesses and by partnering with State, local, Tribal,
  and territorial governments and with institutions of higher
  education; and




• strengthening and expanding regional manufacturing and
  innovation ecosystems, including by investing in suppliers,
  manufacturers, workforce development, basic and translational
  research, and related infrastructure and cybersecurity throughout
  the microelectronics supply chain.

The Executive Order also established a Steering Council to
coordinate Act-related policy. The Council will be co-chaired
by the Assistant to the President for Economic Policy, the
Assistant to the President for National Security Affairs, and the
Director of the Office of Science and Technology Policy. Other
Steering Committee members will include a wide cross-section of
government agency representatives, including the Secretaries of
State, Treasury, Defense, Commerce, Labor, and Energy; the Director
of the Office of Management and Budget; the Administrator of the
Small Business Administration; the Director of National
Intelligence; the Assistant to the President for Domestic Policy;
the Chair of the Council of Economic Advisers; the National Cyber
Director; and the Director of the National Science Foundation.

The Science Act

The Science Act, heralded as “the largest five-year
investment in public R&D in the nation’s history,”
provides four federal agencies with nearly $170 billion to support
“curiosity driven” and “use-inspired and
translational” research and development.² The
passage of the Science Act marks the reversal of an unfortunate
trend of diminishing federal R&D spending, both as percentage
of GDP and in comparison with other advanced economies. Among
the goals of the Science Act, in addition to general advancement of
research, are the creation of new technology hubs, increasing
participation in research by underrepresented populations and
geographies, and bolstering efforts to combat theft of U.S.
intellectual property. As with the CHIPS Act, where the
Science Act establishes new programs or initiatives, federal
agencies will need to promulgate implementing regulations before
dispensing the authorized funds.

The following chart illustrates the breakdown of new funding for
four recipient agencies:

* The Science Act extends authorization and support for several
existing NASA programs, including the Artemis Moon Program and
International Space Station, but does not authorize new
funding. 

The Science Act creates some new opportunities for government
contractors and grant recipients. Among the potential areas of
R&D funding are:

• A NSF Directorate for Technology, Innovation, and Partnerships
  to invest in strategic translational science, including artificial
  intelligence, quantum computing, advanced manufacturing, 6G
  communications, energy, material science, and other critical
  technologies ($20 billion);




• NSF studies of ocean acidification activities including
  long-term data stewardship and access to ocean and coastal
  acidification data ($20 billion);




• NIST work to advance research and standards in quantum
  information science, artificial intelligence, cybersecurity,
  advanced communications technologies, and semiconductors ($6.9
  billion);




• Tripled NIST funding for Manufacturing Extension Partnership,
  to support small- and medium-sized manufacturers with
  cybersecurity, workforce training, and supply chain resiliency
  ($2.23 billion);




• A NIST National Supply Chain Database to assist the businesses
  with supplier scouting, with the goal of minimizing supply chain
  disruptions;




• Commerce to create 20 regional “regional technology and
  innovation hubs” in areas that are not leading technology
  centers focused on technology development, job creation, and
  expanding U.S. innovation capacity ($10 billion);




• DOE basic energy research programs in artificial
  photosynthesis, energy storage, nuclear matter, and carbon
  materials and sequestration to advance energy technologies ($14.5
  billion);




• DOE research, development, and demonstration in building
  technologies, sustainable transportation, advanced manufacturing,
  industrial emissions reduction technology, advanced materials, and
  renewable power ($11.2 billion);




• DOE High Energy Physics Program ($6.5 billion);




• DOE Advanced Scientific Computing Research Program for high-end
  computing systems and computer sciences research ($6 billion);




• DOE Fusion Energy Sciences Program ($5 billion); and




• DOE Biological and Environmental Research program into earth
  and environmental systems including the development of engineered
  ecosystems ($4.5 billion).

Conclusion

The CHIPS Act marks a shift in federal policy regarding
industrial subsidies. Long averse to the potentially
market-distorting subsidies favored by other countries, the United
States has now embraced the mechanism (at least for this critical
sector of the economy). The Science Act is the most
comprehensive infusion of resources into research and development
in a long while. Significant opportunities for businesses and
research institutions will arise from this legislation. We
will carefully monitor proposed and final implementing regulations,
and track where agencies allocate funding, and what opportunities,
inventions and discoveries can be attributed to these programs.

Footnotes

1. Office of the White House, FACT SHEET: CHIPS and Science Act Will Lower
Costs, Create Jobs, Strengthen Supply Chains, and
Counter China (August 9, 2022).

2. The CHIPS and Science Act Fact Sheet as prepared
by House Leadership

Because of the generality of this update, the information
provided herein may not be applicable in all situations and should
not be acted upon without specific legal advice based on particular
situations.

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