February 15, 2002

Mr. Lawrence L. Thompson

General Deputy Assistant Secretary for Policy Development and Research

U.S. Department of Housing and Urban Development

451 7th Street S.W. Washington, DC 20410

RE: Year 2001 Progress Assessment of the PATH Program

Dear Mr. Thompson:

The National Research Council’s (NRC) Committee on Oversight and Assessment of the Partnership for Advancing Technology in Housing (PATH) was established in 2000 to review and comment on the PATH program’s overall goals, the approach proposed to meet the goals, and the likelihood of their being achieved, and to assess the progress made in achieving the goals. (The statement of task is provided as Attachment 1.) The purpose of the PATH program is to increase the development and diffusion of technologies that enhance the performance and reduce the cost of U.S. housing through the synergy of public and private initiatives.

The committee issued its initial report, Year 2000 Progress Assessment of the PATH Program (National Academy Press, Washington, D.C.), in January 2001. The 2000 assessment report made nine recommendations to help guide the further development of the PATH program. (The year 2000 assessment report’s recommendations are reprinted as Attachment 2.) The committee has continued to evaluate the program and is in the process of developing a detailed methodology and criteria for assessing current and future PATH activities. In this interim letter report the committee assesses progress made toward implementing the recommendations given in its 2000 assessment report to the extent that these recommendations continue to apply to an evolving program, and it mentions some of the achievements of the PATH program during 2001.

This 2001 assessment is based on information presented at meetings conducted in March and August 2001. Presentations were made by representatives of the U.S. Department of Housing and Urban Development (HUD), the National Association of Homebuilders Research Center (NAHBRC), the PATH Industry Steering Committee, the U.S. Department of Energy, and the Environmental Protection Agency. The committee reviewed the published reports noted in this letter as well as information posted on the



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February 15, 2002 Mr. Lawrence L. Thompson General Deputy Assistant Secretary for Policy Development and Research U.S. Department of Housing and Urban Development 451 7th Street S.W. Washington, DC 20410 RE: Year 2001 Progress Assessment of the PATH Program Dear Mr. Thompson: The National Research Council’s (NRC) Committee on Oversight and Assessment of the Partnership for Advancing Technology in Housing (PATH) was established in 2000 to review and comment on the PATH program’s overall goals, the approach proposed to meet the goals, and the likelihood of their being achieved, and to assess the progress made in achieving the goals. (The statement of task is provided as Attachment 1.) The purpose of the PATH program is to increase the development and diffusion of technologies that enhance the performance and reduce the cost of U.S. housing through the synergy of public and private initiatives. The committee issued its initial report, Year 2000 Progress Assessment of the PATH Program (National Academy Press, Washington, D.C.), in January 2001. The 2000 assessment report made nine recommendations to help guide the further development of the PATH program. (The year 2000 assessment report’s recommendations are reprinted as Attachment 2.) The committee has continued to evaluate the program and is in the process of developing a detailed methodology and criteria for assessing current and future PATH activities. In this interim letter report the committee assesses progress made toward implementing the recommendations given in its 2000 assessment report to the extent that these recommendations continue to apply to an evolving program, and it mentions some of the achievements of the PATH program during 2001. This 2001 assessment is based on information presented at meetings conducted in March and August 2001. Presentations were made by representatives of the U.S. Department of Housing and Urban Development (HUD), the National Association of Homebuilders Research Center (NAHBRC), the PATH Industry Steering Committee, the U.S. Department of Energy, and the Environmental Protection Agency. The committee reviewed the published reports noted in this letter as well as information posted on the

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PATH Internet sites discussed later in this report. The committee also consulted with HUD staff in their efforts to revise the PATH goals and strategic plan. (The revised PATH strategic plan is provided as Attachment 3.) Need for PATH PATH was initiated in 1998 when Congress appropriated funds for HUD to stimulate the development of new technologies that could improve the performance and reduce the costs of U.S. housing. (Such technologies include new heating, cooling, and mechanical equipment; construction materials that make homes more energy efficient; and new materials and structural systems that make homes less costly to build and more durable.) The administration set goals for the program and made it a part of HUD’s annual budget request. With the change in administration in 2001 the budget precedent was discontinued, and funding for the PATH program was not included in HUD’s FY2002 budget request. As a result of congressional action, however, funds for PATH were included in the FY2002 budget appropriation signed by the President. Nevertheless, the long-term future of the program remains uncertain. This uncertainty has made planning and administration of multiyear activities difficult. It has also provided an opportunity for significant positive change by facilitating revision of the program’s strategic plan and streamlining of its management. In light of the current uncertainty, the committee reiterates the finding stated in its 2000 report—that the PATH program provides a unique opportunity to further societal goals by encouraging and supporting partnerships between government, industry, and academic institutions—and reaffirms its belief that these partnerships should be continued. Management and Coordination The committee notes recent changes in the management of PATH. The PATH Program Office has been dismantled and the program’s administrative and management responsibilities assigned to the HUD Office of Policy Development and Research (PD&R). The committee believes that this current management organization is more efficient and focused and that it will increase the effectiveness and value of the program over the long term. The involvement of other federal agencies in PATH operations has diminished and the Federal Agency Working Group (FAWG) has been disbanded. This change has not eliminated interagency cooperation but has reduced the involvement of other federal programs in the day-to-day management of the PATH program, an outcome the committee believes has helped to differentiate PATH from other ongoing federal programs as recommended by the 2000 assessment report. The committee does believe, however, that formal coordination of related federal programs is valuable and that a means to facilitate communication among agencies, such as the FAWG, should be resumed, but with a new focus on the PATH program’s revised strategic goals and objectives. PATH has continued its relationships with the home building industry and academic institutions. Although the program’s uncertain future has hampered the development of long-term projects, PATH has managed to maintain ongoing activities and develop plans for the future. The continuation of the PATH Industry Steering

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Committee and PATH/National Science Foundation (NSF)-funded research grants has helped to maintain the involvement of the private sector and the university community. Continuation and expansion of demonstration projects and initiation of studies of technology diffusion and of barriers to the adoption of new technology, as previously recommended by the committee in its 2000 report, will keep the program positioned to advance innovation and new technology for housing in the future. Program Goals The committee noted in its 2000 assessment report that although the goals established for PATH at its inception were laudable targets for increasing the affordability, quality, and livability of American housing, the goals were overly broad and ambitious, were difficult to measure, combined unrelated and possibly conflicting issues, and were influenced by many factors other than technology. The recent changes in the program’s administration have provided an opportunity for the PD&R staff to develop a new strategic plan and to redefine PATH’s mission, goals, and objectives. The committee believes that the revised strategic plan (see Attachment 3) has eliminated the potentially conflicting issues and has refocused attention on PATH’s mission to increase the development and diffusion of technology in housing. Although the committee believes that the goals remain ambitious for the current size of the program, the revised strategic plan provides a focus for future growth. As noted in its 2000 assessment, the committee believes that progress toward achieving the goals and objectives set by PATH must be measurable and tied directly to PATH’s mission and funding. The revised goals focus more directly on the role of technology and make it possible to measure the impact of PATH. The revised strategic plan will be the basis for developing a program evaluation system. The committee recognizes that the advancement of technology for housing involves increasing the rate of innovation and the development of new products and processes as well as increasing the rate of diffusion and adoption of such technology. The committee believes that PATH will be most effective if it emphasizes activities aimed at increasing the rate of diffusion and adoption of technology. Everett Rogers has described diffusion of technology in terms of human interaction. The essence of the diffusion process is the human interaction in which one person communicates a new idea to another person. Thus, at the most elemental level of conceptualization, the diffusion process consists of (1) a new idea, (2) individual A who knows about the innovation, and (3) individual B who does not yet know about the innovation. The social relationships of A and B have a great deal to say about the conditions under which A will tell B about the innovation, and the results of this telling. [Rogers, Everett M., Diffusion of Innovations. New York, Free Press, 1983.] The committee believes that with limited resources, the PATH program should focus on the dissemination of information and the elimination of barriers (such as the lack of data on technology performance, difficulty in gaining acceptance for new technologies by building code officials, and market inertia) that reduce communication and the acceptance of new technologies that can improve the performance and value of housing. This approach places a priority on gaining the benefits of existing technology before investing in the development of new technology. However, investment in R&D for new

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technologies by industry and by partnerships among industry and academic institutions still should be encouraged. PATH Activities PATH activities have grown and evolved continuously in the three years since the program was initiated. The program currently supports activity at every stage of the technology development and diffusion continuum, from basic research and R&D through the various stages a technology goes through until it is successfully incorporated into the market. The following list includes all ongoing PATH activities in 2001. Research and Development Research and development entails technical investigations and creation of new areas of knowledge or actual products, including innovation in housing materials, systems, construction processes, and management techniques. Background Research PATH encourages the development of knowledge about housing applications. Standards and Metrics Research PATH supports major studies to judge the capacities and characteristics of new and existing technologies through partnerships with the National Institute of Standards and Technology (NIST). Applied Research PATH works with government research laboratories to develop unbiased data on housing technologies, bridging the gap between broader background knowledge and performance of developed technologies. Technology Development PATH supports technology development through agreements with trade associations and research groups. Information Dissemination and Outreach PATH links the fragmented interests of the diverse housing industry to facilitate the fruitful sharing of information about innovation at different stages within the PATH continuum. Regulatory Preparation PATH developes resources to ensure that outdated building codes do not keep a product from entering the marketplace. Technology Identification and Market Introduction PATH's Technology Inventory identifies emerging technologies in a wide range of categories to facilitate their speedy market introduction. Technology Evaluation PATH Field Evaluations provide preliminary assessments and market entry points for PATH-identified technologies to encourage adoption and acceptance by the homebuilding industry. Technology Performance and Market Penetration PATH Demonstration Sites and National Pilots provide a platform for testing and evaluation of innovative housing technologies.

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Technology Dissemination PATH collects builders' and homeowners' success stories, providing examples of how advanced and cost-effective technologies perform in real-world applications. Technology Information PATH provides easily accessible and comprehensible information about specific technologies and resourceful building practices through two Web sites, PATHnet.org and ToolBase.org. Technology Awareness and Events PATH provides a calendar of housing-related events around the world; press releases and news updates from PATH, PATH partners, and other industry sources; and informative PATH publications on a variety of housing topics. PATH Planning and Barriers Analysis PATH looks to the future of housing by setting roadmaps for current research; forecasting potential new areas of development; and identifying institutional, cultural, and financial barriers to the introduction of new technologies. Technology Roadmapping PATH's Technology Roadmap workshops have identified—and are building resources for developing—three primary areas on which to focus energy and effort in the housing industry. Technology Forecasting PATH keeps the homebuilding industry informed of global technological changes by monitoring relevant sectors and forecasting potential applications. Technology Reviews PATH supports technology reviews, which are analyses of commercialized technologies that have (or have not) significantly penetrated the market. Barriers Analysis PATH conducts policy studies and market research to identify institutional barriers to housing technology research and the adoption of innovations in the housing market. [HUD (U.S. Department of Housing and Urban Development). PATH Activities and Programs. 2001. Available on the Web at <http://pathnet.org/active/active1.html#info>.] The committee’s 2001 evaluation assesses accomplishments in market research, demonstration projects, information dissemination, technology roadmaps, and PATH-sponsored research. Market Research. The committee believes that the revised PATH strategic plan has better defined the program’s role in supporting market research on builders’ and consumers’ perceptions of new technologies. PATH has undertaken market research on consumers’ perceptions in the study titled Developing Housing Innovations Consumer Survey, prepared under the direction of Anne Sweaney, University of Georgia (final draft report-April 2001). This project developed a survey to measure consumers’ willingness to purchase and use innovative home building products and allow PATH to determine how to increase the diffusion of new technology. The survey is designed to ask how much the buyer would be willing to pay for a number of specific products. The committee believes that the PATH survey method, which measures the elasticity of

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demand for specific technologies, is best suited to modeling decisions made for remodeling, repair, or retrofit projects undertaken by homeowners. While this research will be valuable in furthering the PATH mission, the committee believes that additional market research that focuses on the impact of new technologies on the market for new homes, particularly those produced by large developer-builders, may contribute significantly to achieving the PATH mission. The committee finds that most of the large national housing construction corporations (e.g., Pulte, Centex, Beaser, and KB Homes) conduct extensive buyer research. The survey methods typically used by corporate home builders use different types of questions from those employed in the PATH survey. The corporate survey questions are designed to simulate the decisions a home buyer would make when purchasing a home. For example, in a home builder’s survey the buyer would be asked, “If you had an additional $1000 to spend would you: (a) upgrade your carpet, (b) purchase tile counters, (c) purchase a more efficient air conditioning system, or (d) purchase a fireplace in the family room.” The committee applauds the PATH program’s current efforts to work with builders and its ability to address diverse segments of the housing industry. While it is imperative that PATH address a diverse audience over the long term, the program should also engage in short-term, focused projects with specific audiences such as corporate builders. The top five home builders construct more than 100,000 homes annually. The committee believes that a partnership in ongoing market research with builders whose volume of home sales is large could expedite the research on both the builders’ and consumers’ perceptions of new technologies and assist in disseminating information on the successes of new technologies and processes. The committee finds that these major builders are an underutilized resource for the implementation of the PATH strategy. Demonstration Projects. The committee was informed that six demonstration projects have been initiated and that more are being planned. The committee also notes that the revised approach to planning demonstration projects—i.e., addressing the long-term impact of the project and dissemination of information about it—should improve the outreach to home builders, architects, engineers, code officials, and the press. The committee finds that PATH efforts to expand the use of demonstration projects are encouraging. The revised PATH strategic plan recognizes the diffusion of technology as a key objective in achievement of the PATH mission. For PATH to succeed, technological advancements must be thoroughly diffused among home builders and consumers. Demand for and adoption of technology depend on development of builders’ and consumers’ awareness and understanding of these technologies. Demonstration projects remain a key program activity to achieve these objectives. Demonstration projects are also important mechanisms that the building community can use to test new technologies and help remove barriers to their adoption. Use of new technologies in demonstration projects helps establish a performance record for products, materials, and systems that have been evaluated in real-life situations. Ideally, consumers, builders, and the regulatory community can use the knowledge

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derived from demonstration projects to achieve a higher level of comfort with new technologies based on their proven performance, and such technologies can then be accepted and deployed more rapidly throughout the industry. Establishing demonstration projects in locations and venues that attract maximum attention by the building community remains important. In the past, PATH has used the level of participation in special events and the number of inquires regarding demonstrations to gauge its success in disseminating the knowledge gained in demonstration projects, but the committee believes that analysis of the effects of demonstration projects on technology diffusion has been grossly inadequate thus far. The proposal for a project to measure housing technology diffusion and diffusion mechanisms (dated May 9, 2001) states: “The quantitative reality eludes us and is desperately needed.” The committee applauds this proposed effort to develop a mechanism by which the PATH program staff can determine the reach and impact of ongoing demonstration projects. The results of such analysis should lead to the planning and design of new demonstration projects that are capable of showcasing new technologies in the most effective way. Information Dissemination. The committee believes that PATH has a major role to play in facilitating the transfer of information about the benefits and problems of innovative housing technology among consumers, regulators, researchers, manufacturers, and the building industry. The revised PATH strategic plan recognizes this pivotal role and the importance of information dissemination to the PATH mission. Although PATH has sponsored conferences and published reports developed as a result of the program’s activities, it relies primarily on the Internet to disseminate information. The Pathnet (http://www.pathnet.org) and ToolBase (http://www.toolbase.org) Web sites are the primary portals through which the building community and others can learn about new PATH programs, technologies, research, and related projects. Because demonstration projects are a key component of the PATH program, the committee believes that the PATH Internet gateways should lead seamlessly to detailed descriptions of the demonstration projects, announce new demonstrations, and illustrate the lessons learned from those already completed or underway. The committee finds that, overall, Pathnet and ToolBase are necessary and valuable mechanisms for dissemination of information and are excellent starting points as technology information portals. As stated in its 2000 assessment report, the committee believes that because information dissemination is critical to the PATH mission, it is important that the quality and content of the information provided and the effectiveness of the program in disseminating it are evaluated continuously. Although the committee recognizes the value of private industry partners in achieving PATH goals, it believes that care should be taken to ensure that the information provided is unbiased and that the Internet sites are seen as representing impartial parties with no stake in the success of a particular product. The committee views information dissemination as a key to the removal of barriers to technology diffusion. Consistent with the committee's emphasis on the

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importance of removing regulatory barriers, dissemination of information to regulators and local officials should be a priority. The committee believes that PATH should continue its successful programs for dissemination of information to industry and consumers and expand them to provide information directed to state and local governmental bodies. PATH partnerships with housing programs in university-based cooperative extension services could help disseminate information to governmental bodies as well as builders and consumers. The procedures used by states and local building code officials in the acceptance of new and innovative technologies are critical to technology diffusion in the housing market. The delivery of information on efficient, collaborative administrative procedures coupled with education and training of building officials can enhance the diffusion of technologies. The committee believes that PATH should increase dissemination of information gained through its partnership with the National Evaluation Service and continue to invest in the development of procedures for the inspection and evaluation of new products. Dissemination of information gained through demonstrations and case studies that document the process used by jurisdictions that have approved innovative technologies will help reduce building officials’ perceived risk. A variety of media, including the Internet and information resources frequently accessed by state and local officials (e.g., established meetings and publications of model code organizations), could be used to reach this important audience. Technology Roadmaps. The committee believes that PATH has been effective in the roadmapping of technologies and technology-related issues, and in involving the public and the housing industry in the roadmapping process (roadmapping is a form of technology planning). This is a critical activity in the identification of priority technologies that can improve key aspects of U.S. housing. To date, PATH has completed four roadmapping exercises to address issues related to (1) whole house and building process redesign, (2) advanced panelized construction, (3) information technology to accelerate and streamline home building, and (4) energy efficiency in existing homes. The committee underscores the importance of the roadmapping process because it believes that PATH’s primary mission is not to actually develop new technologies but rather to identify and define problems that can be addressed by new technologies, and communicate these opportunities to the appropriate parties that fund and develop them. Appropriate performance measures of the rate and level of technology development need to be developed to track the impact of PATH roadmaps and the success of PATH’s efforts to advance housing technology. PATH-Sponsored Research. In its 2000 assessment report, the committee expressed concern about the use of federal funds to carry out research and development for proprietary products, and it continues to believe that product R&D should be left to the PATH industry partners. The committee considers that the real potential for successful government-sponsored research is in identifying and exploring the means for reducing

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the technical, behavioral, and regulatory barriers that limit the ability of industry to commercialize new products and innovations. Government funding can also play an important role in the development and establishment of credible test methods and evaluation tools that will assure builders, building officials, and consumers that new products and technologies will, in fact, perform as expected. PATH’s partnerships with the National Institute of Standards and Technology durability research program and the National Evaluation Service technical assistance efforts are contributing to the establishment of credible test methods and evaluation tools. Research supporting the development of additional test methods and evaluation tools should also be maintained. Another potential role for government-funded research, as exemplified by the roadmapping effort, is the monitoring of trends and the identification of societal needs that can help focus the direction of future research. PATH’s revised objectives for R&D (see Attachment 3) are expected to lead to positive contributions to advancing technology in housing. However, the objectives should be clearly defined and should be targeted to identifying technical, regulatory, and behavioral barriers at all levels and seeking new ways to develop partnerships that break down these barriers. Furthermore, the revised goals suggest that PATH will support background and applied research as well as technology development activities in the housing industry. The committee believes that the specific goals and objectives should be further refined to define more clearly the kinds of activities that are appropriate for government-funded research and development. The committee notes that PATH has already had a significant impact on research on technology for housing. The research objectives dealing with forecasting, roadmapping, post-commercialization evaluation, and long-term analysis of specific technologies are helping to focus the direction of future research endeavors of private partners such as the National Association of Homebuilders Research Center, Manufactured Housing Research Alliance, and North American Steel Framing Alliance. The PATH/National Science Foundation research grant program has helped to stimulate university investigation of housing technology issues. PATH coordination of research in federal agencies (e.g., the Environmental Protection Agency, Department of Agriculture, Department of Energy, and Federal Emergency Management Agency) has improved the transfer of information and reduced overlap among federal programs. Ongoing Evaluation PATH is an active and evolving program, and the committee believes that much progress has been made to improve its effectiveness. The committee is continuing its task to evaluate PATH’s approach to meeting its goals and to evaluate the likelihood that the program will attain its goals. To accomplish these tasks, the committee is developing an evaluation plan that links the PATH objectives and activities to their outcomes and impact on the stated goals. The process will include developing performance measures and applying these to the program in 2002. The committee also intends to develop target measures that can be used to guide and evaluate PATH in the future. The committee notes the continuing need to develop baseline data to provide a reference for evaluating the future impact of PATH.

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The committee looks forward to working with the HUD PD&R staff and PATH partners in the coming year. Sincerely, C.R. Pennoni, Chair Committee for the Oversight and Assessment of PATH Attachments • Statement of Task • Year 2000 Progress Assessment of the PATH Program Recommendations • PATH 2001 Strategic Plan