Provisions in the CHIPS and Science Act to Watch

Both chambers of the U.S. Congress have recently passed versions of the “CHIPS and Science Act,” a $280B legislative package to support the U.S. semiconductor industry to increase U.S. competitiveness and support national security. CHIPS stands for “Creating Helpful Incentives to Produce Semiconductors” and the bill was amended to the Supreme Court Security Funding Act of 2022, H.R. 4346.

The bill also supports several federal science and technology (S&T) research and development (R&D) programs, with appropriations for the Departments of Energy and Commerce, the National Science Foundation (NSF), plus additional program and policy directives for the National Aeronautics and Space Administration (NASA) and the White House Office of Science and Technology Policy (OSTP).

Currently, the bill is in reconciliation among legislative representatives from the two bodies, but final passage and enactment is highly anticipated. What follows are some of the provisions of the bill most relevant to the federal contracting community.

Research and Development (R&D) Provisions

R&D Funding Authorizations by Agency

Specific R&D Provisions include:

• $11B at Commerce to create 20 geographically distributed “regional technology hubs” to focus on tech development, workforce growth and expand U.S. innovation
• $2B for the Manufacturing Extension Partnership to support small and mid-sized manufacturers with cyber, workforce training and supply chain resiliency
• Establishes the “Carbon Materials Research Initiative,” the “Carbon Sequestration Research and Geologic Computational Science Initiative” and two carbon storage research and geologic computational science centers at DOE to generate, analyze and model subsurface geology data
• $6.3B for the Advanced Scientific Computing Research Program (ASCR) at DOE from FY 2023-2027, including
  • $500M to accelerate quantum network infrastructure
  • $165M to establish the Quantum User Expansion for Science and Technology (QUEST) program to encourage and facilitate access to the United States quantum computing hardware and clouds for research
• $9.7B for the National Institute of Standards and Technology (NIST) at Commerce over the five years
  • Directs NIST to create guidance on the security of the full lifecycle of software and open-source software repositories
  • Establish a program for artificial intelligence-enabled defense research
  • $2.2B for the Hollings Manufacturing Extension Partnership
  • $829M for the Manufacturing USA program
• Requires NOAA to support long-term data stewardship and access, as well as coordinate federal response to ocean and coastal acidification data
• Requires the Subcommittee on Quantum Information Science of the National Science and Technology Council to create a report and federal strategy for quantum networking and communications research
• $75M for five years at DOE to establish a program on microelectronics R&D and establish up to four microelectronics Science Research Centers to address challenges in microelectronics fabrication
• $11.2B at DOE for research, development, and demonstration in advanced materials, renewable power research, industrial emissions reduction technologies, artificial intelligence and information technologies at the Offices of Energy Efficiency and Renewable Energy, Electricity, Nuclear Energy, Environmental Management, Fossil Energy and Carbon Management, and the Advanced Research Projects Agency—Energy
• Requires NASA to continue to conduct research and testing to support the safe integration of unmanned aircraft systems (UAS) into the national airspace system (NAS)
• Authorizes $21M for FY 2023, $22M for FY 2024, and an additional $2M for each subsequent FY to reach $28M for FY 2027 for NOAA ocean acidification research activities
• Authorizes $20B for NSF ocean acidification research activities from FY 2023 through 2027

Information Technology Provisions

• $20B at NSF to create the Directorate for Technology, Innovation and Partnerships (TIP) to accelerate domestic development of critical technologies such as artificial intelligence (AI), quantum computing, advanced manufacturing, 6G communications, energy and material science
• $2B in additional financial incentives for manufacturing of mature technology nodes
• $1.5B for the Public Wireless Supply Chain Innovation Fund at the National Telecommunications and Information Administration (NTIA), to spur movement towards open-architecture, software-based wireless technologies, funding innovative, ‘leap-ahead’ technologies in the U.S. mobile broadband market
• Requires the Office of Science and Technology Policy (OSTP) to establish a blockchain and cryptocurrencies advisory specialist position
• $131M for the Hollings Manufacturing Extension Partnership to create a National Supply Chain Database to assist the businesses with supplier scouting and minimizing supply chain disruptions

Architecture, Engineering and Construction (AEC) Provisions

• $184M from FY 2023-2027 at DOE to construct a radioisotope processing facility to grow radiochemical processing capabilities
• $800M in total funding for deferred maintenance, critical infrastructure needs, and modernization activities across Energy’s National Laboratories for each of fiscal years 2023 through 2027

Science and Technology Policy Provisions

Requires the Office of Science and Technology Policy (OSTP) to develop the following science and technology (S&T) strategies and processes:

• Develop and submit to Congress a 4-year comprehensive national S&T strategy, focused on economic security
• Develop and periodically revise a national security-focused S&T strategy to support the current National Security Strategy
• Conduct a quadrennial review of the S&T enterprise and describes specific requirements for the scope and contents of each quadrennial review

Research and Supply Chain Security Provisions

• $6M from FY 2023-2027 for NSF Research Security efforts to protect federal R&D investments
  • Requires the NSF to maintain a Research Security and Policy Office to identify potential security risks, conduct outreach and education to the research community, establish procedures and policies on research security for NSF, and conduct risk assessments of applications and disclosures
  • Creates an online resource/portal for institutions and researchers to receive NSF guidance and information on security risks and best practices and requires federal research awardees to complete annual training on research security
  • Creates a Research Security and Integrity Information Sharing Organization that would serve as a clearinghouse for institutions and researchers to identify improper and illegal efforts to compromise research security
    • Companies that receive federal financial assistance through the CHIPS program are prohibited from certain material expansions of semiconductor manufacturing in the People’s Republic of China or in other countries of concern
    • The restrictions would apply for ten years after the receipt of financial assistance
    • Companies would also be required to notify the DOC of planned transactions in countries of concern
• Directs the Office of Science and Technology Policy (OSTP) to issue guidance clarifying that researchers working on federally supported research projects must disclose participation in foreign talent recruitment programs in their federal research award proposals. Further, federal research agency personnel are prohibited from participating in foreign talent recruitment programs and grants are prohibited to individuals participating in malignant foreign talent recruitment programs

Other Relevant Provisions

• Provides the Department of Commerce with other transaction authority to enable efficient execution of CHIPS awards
• Authorizes $125M from FY 2023-2027 at DOE to provide small business vouchers to perform research, development, demonstration, technology transfer, skills training, or commercial application activities at the national laboratories
• Directs NASA to establish a Moon to Mars Office within the Exploration Systems Mission Directorate
• Requires NASA to develop the Exploration Upper Stage (EUS) of the Space Launch System (SLS) rocket in time for the Artemis IV lunar mission
• Extends International Space Station (ISS) operations through 2030
• Requires NASA to implement a Near-Earth Object survey to detect, track, catalogue, and characterize near-Earth objects, and that NASA should develop and launch a space-based infrared telescope to detect potentially hazardous near-Earth objects
• Supports increased participation of economically disadvantaged individuals in the semiconductor workforce, in part to support the participation of minority-owned businesses, veteran-owned businesses, and women-owned businesses in CHIPS-funded projects
• Provides $39B for a 25 percent tax credit incentive for new semiconductor manufacturing facilities, including $19B in FY 2022 and up to $6B for direct loans and loan guarantees

Implications

In addition to the financial and regulatory implications for U.S. semiconductor producers, the bill impacts participants in federal S&T R&D programs, whether as research grant award recipients or as contracted solutions providers. While the provisions focus mainly on efforts at DOC, DOE, NASA, NSF and OSTP, the acquisition and policy impacts will have ripple effects in areas of interagency collaboration with the Department of Defense (DOD), the Intelligence Community and others. The bill notes that several of its provisions are directly related to implementing elements in the FY 2021 National Defense Authorization Act (NDAA).

These departments and agencies will have some work to do to implement many of the supporting mechanisms and IT capabilities required by the bill, pending the reconciliation process, and it is possible that they may look to industry support in building out and integrating these capabilities.