4
Department of Defense Relationships

Charles Trimble, U.S. Global Positioning System Industry Council, served as moderator of the panel. He introduced the topic by mentioning that the session would focus on lessons learned from DOD non-DARPA technology relationships. Panelists included Curtis Peninger, vice president, Coast/ACM, who would be providing perspective on DOD’s Mentor-Protégé program; Jeff Shamma, professor of mechanical and aerospace engineering at the University of California, Los Angeles (UCLA) and principal investigator of the DOD Multidisciplinary Research Program of the University Research Initiative (MURI) Cooperative Control of Distributed Autonomous Vehicles in Adversarial Environments; John Roth, president and chief operations officer at MicroSat Systems, Inc.; and James Ryder, director of technology development, Lockheed Martin.

DOD MENTOR-PROTEGE PROGAM (PROTEGE PERSPECTIVE, COAST/ACM)

Curtis Peninger began by providing a short overview of the Coast/ACM Company and its role in the larger technology arena. He described Coast/ACM as a commodity house that builds transformers and inductors—the small details of larger, big-name projects. The company, founded by a California Institute of Technology graduate, is just over 50 years old. It has facilities at two locations—Los Angeles and Guatemala City, Guatemala. The Los Angeles location has 40 to 45 employees and the facility in Guatemala has 135 to 140 employees, most of whom are high-tech workers. The customer base for the company was originally small (around $2 million in annual sales). However, as a result of the DOD Mentor-Protégé program, the company’s sales increased to approximately $6 million in 2004. Coast/ACM is certified as a small, disadvantaged business (SDB) by the Small Business Administration (SBA). It is the only such business in the country in the high-reliability space marketplace, which is its niche marketplace. The company is also classified as a minority-owned business.

Peninger highlighted the awards the company had won as a protégé in the DOD Mentor-Protégé program, including DOD’s Nunn-Perry Award in 2002 and the Entrepreneurial Excellence Award from the Southern California Regional Purchasing



The National Academies | 500 Fifth St. N.W. | Washington, D.C. 20001
Copyright © National Academy of Sciences. All rights reserved.
Terms of Use and Privacy Statement



Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.

OCR for page 34
Government/Industry/Academic Relationships for Technology Development: A Workshop Report 4 Department of Defense Relationships Charles Trimble, U.S. Global Positioning System Industry Council, served as moderator of the panel. He introduced the topic by mentioning that the session would focus on lessons learned from DOD non-DARPA technology relationships. Panelists included Curtis Peninger, vice president, Coast/ACM, who would be providing perspective on DOD’s Mentor-Protégé program; Jeff Shamma, professor of mechanical and aerospace engineering at the University of California, Los Angeles (UCLA) and principal investigator of the DOD Multidisciplinary Research Program of the University Research Initiative (MURI) Cooperative Control of Distributed Autonomous Vehicles in Adversarial Environments; John Roth, president and chief operations officer at MicroSat Systems, Inc.; and James Ryder, director of technology development, Lockheed Martin. DOD MENTOR-PROTEGE PROGAM (PROTEGE PERSPECTIVE, COAST/ACM) Curtis Peninger began by providing a short overview of the Coast/ACM Company and its role in the larger technology arena. He described Coast/ACM as a commodity house that builds transformers and inductors—the small details of larger, big-name projects. The company, founded by a California Institute of Technology graduate, is just over 50 years old. It has facilities at two locations—Los Angeles and Guatemala City, Guatemala. The Los Angeles location has 40 to 45 employees and the facility in Guatemala has 135 to 140 employees, most of whom are high-tech workers. The customer base for the company was originally small (around $2 million in annual sales). However, as a result of the DOD Mentor-Protégé program, the company’s sales increased to approximately $6 million in 2004. Coast/ACM is certified as a small, disadvantaged business (SDB) by the Small Business Administration (SBA). It is the only such business in the country in the high-reliability space marketplace, which is its niche marketplace. The company is also classified as a minority-owned business. Peninger highlighted the awards the company had won as a protégé in the DOD Mentor-Protégé program, including DOD’s Nunn-Perry Award in 2002 and the Entrepreneurial Excellence Award from the Southern California Regional Purchasing

OCR for page 34
Government/Industry/Academic Relationships for Technology Development: A Workshop Report Council. He stressed that the company considers a partnership in a unique way—almost like a marriage. Because the company is small, only a few individuals are integrated into the manufacturing supply chain at the company’s prime contractors. Most customers like this aspect of the partnership. For example, Coast/ACM is currently the only manufacturer of magnetic components with which Honeywell Space Systems Operations partners. This relationship has lasted 19 years, in part because Coast/ACM components have never failed in flight. Coast/ACM also has a partnership with Northrop Grumman Space Technology, formerly TRW—supplier partnership agreement No. 001. (In other words, Coast/ACM is the top supplier to Northrop Grumman Space Technology). This is significant because Coast/ACM is a small magnetics technology company competing with many other companies that manufacture similar products. The relationship between Coast/ACM and Northrop Grumman has been built over many years. Peninger said that the company was so specialized in surface mount technology that it often passed work in other areas to other companies. Before the merger, TRW had an in-house magnetic manufacturing facility that was well known in the industry. After the merger, owing to the strategic partnership that Coast/ACM had with it, Northrop Grumman closed the TRW facility. It went a step further and now uses Coast/ACM part numbers instead of the old Northrop Grumman numbers. This is not an insignificant turn of events if one considers the exposure this provides Coast/ACM and the associated benefits. This relationship is a direct result of the DOD Mentor-Protégé program. The DOD Mentor-Protégé program, enacted in 1990 with support from Senator Sam Nunn and Secretary of Defense William Perry, provides incentives for major DOD prime contractors (the “mentors”) to help SDBs—organizations that qualify by virtue of being owned by socially or economically disadvantaged individuals (the “protégés”). In the future, two other groups may be allowed to participate in the DOD Mentor-Protégé program—service-disabled veterans and historically underutilized business (HUB) zones. Coast/ACM, along with hundreds of other protégé firms, has been given opportunities that normally would never be given to a small firm. Every department in the federal government, including NASA, has a mentor-protégé program office. (NASA's mentor-protégé program is very strong. Every year, it gives out the prestigious Goldin-Stokes Award.) Peninger went on to describe most of these mentor-protégé programs as credit-only programs, with the only federal department that offers a reimbursable program for mentors being DOD. He also mentioned that most of the prime aerospace contractors, such as Lockheed Martin, Boeing, Northrop Grumman, and Raytheon, have viable mentor-protégé programs in place. One important benefit of mentor-protégé programs is that they assist in the transfer of technology to small businesses, especially SDBs, which would never see this happen without assistance. Small businesses do not have resources to invest in research and product development in the face of other more pressing demands. Through a Department of the Air Force mentor-protégé agreement, the technology for magnetic grid arrays was transferred to Coast/ACM and Northrop Grumman Space Technology. This was a unique project in the Air Force, with Coast/ACM having been the only company ever commissioned to use magnetic ball grid arrays in a transformer. Peninger went on to describe the program further. One of the requirements of the DOD Mentor-Protégé program is that the partnership must be between three entities—a

OCR for page 34
Government/Industry/Academic Relationships for Technology Development: A Workshop Report prime contractor, a protégé, and a minority academic institution. In this specific case, the trio consisted of Northrop Grumman, Coast/ACM, and Florida International University (FIU). FIU performed matrix testing and modeling for the partnership and was reimbursed by Northrop Grumman for the amount of work completed. Funding for the entire 2-year program was almost $900,000. In a reimbursable program such as this, a protégé receives no money from DOD or from the mentor. However, it can be reimbursed for incidentals to extent of 10 percent of the entire program cost. For a university, however, the money would vary depending on the program and the project. The benefits to FIU included the funding of three graduate students, who gained valuable experience working on a real-world problem. Two of them are pursuing Ph.D. degrees and the third is employed by Raytheon. The fabrication capability at FIU was improved and new procedures were developed and documented. Benefits also include relationships developed between the university and its partners that could lead to future work, not necessarily under the DOD’s Mentor-Protégé program. Likewise, the partners received benefits from the academic research group, which identified and recommended materials to minimize stresses on the components used during assembly and determined that the current organic materials would be incompatible with ceramic substrates. Peninger said that FIU had played a very important role in the collaboration by proposing solutions to material compatibility issues predicted through its modeling efforts. By the time the partnership ended, Coast/ACM, with the assistance of Northrop Grumman Space Technology, had developed a surface mount product line that now accounts for approximately 25 percent of its sales. Peninger, in response to the moderator’s comment that the relationships developed assisted in technical issues related to transfer of the technology, said that in most reimbursable DOD Mentor-Protégé programs, the third partner—the academic side of the triangle—is rarely mentioned, even though it is a key element. Molly Macauley began by asking Peninger how the relationship between Coast/ACM and Honeywell and Northrop Grumman ended. Peninger said that for the past 20 years, Coast/ACM had been a legacy supplier to both companies, although before that Northrop Grumman had used approximately 88 suppliers of magnetics for its technology. This number was then narrowed down to four suppliers, only one of which—Coast/ACM—was a minority-owned company. Twenty years ago, the company had never considered becoming involved in the SDB arena. After Coast/ACM became certified by the Small Business Administration as an SDB, a few large companies noticed that partnering with it would help them in meeting their SDB goals. Northrop Grumman was able to bring Coast/ACM into the DOD Mentor-Protégé program, something that could not have been done with any of its other suppliers, and to profit from doing so. Peninger continued by saying that, in fact, it was Coast/ACM that had profited. The same benefits accrued from Coast/ACM’s relationship with Honeywell. Prime contractors are currently interested in ways to meet their social goals, including the use of SDBs. With Northrop Grumman, the partnership was a natural fit because Coast/ACM was nearby, making it possible to meet in person and for engineers, programs managers, and senior scientists to collaborate closely. The partnership with Honeywell did not mature in the same manner, since Coast/ACM was in another state.

OCR for page 34
Government/Industry/Academic Relationships for Technology Development: A Workshop Report Macauley commented that, from a public policy perspective, multiple objectives of government were achieved here. One such objective is obtaining good, cost-effective, efficient technology. Another such objective is giving minorities and women opportunities they might not otherwise have had. She continued by saying that a mechanism such as a prize would not necessarily achieve these two objectives—a prize would not guarantee minority participation, for instance. Arguably the government could have obtained this technology in a more cost-effective and more efficient manner had there not been a program of this sort, but the government has more than one objective. She then asked Peninger to further explain the credit and reimbursable approaches. Peninger said that in a credit agreement there were no funds. It is not a BAA item. No contract is used. It is nothing more than an agreement that is made between a federal agency (like DOD or NASA), the mentor, and the protégé. The reimbursable approach seems to be more beneficial, especially for the protégé. For example, in the Coast/ACM partnership with Northrop Grumman, the Air Force contracted with Northrop Grumman Space Technology. Northrop Grumman then funded the university. Peninger went on to say that DOD evaluated the program quarterly. DOD wants to know if the technology transfer is actually happening. It is interested in Coast/ACM’s surface mount technology and its enablement of a lighter, cheaper aircraft. Trimble commented that the partnership sounded like a long-term good idea. The Mentor-Protégé program, which is capturing technology of interest to the government and to small companies like Coast/ACM, makes a lot of sense. It rewards the smaller company beyond simply awarding it another contract. Peninger agreed and commented that in the long run the benefits spread across the board. The benefit is accruing not just to Northrop Grumman but also to Coast/ACM, which is learning new technology (e.g., learning about a reflow oven and how to work with ball grid arrays). Peninger said that most of the time, mentors in a mentor-protégé program were training the protégé. In the Coast/ACM case, however, the protégé was teaching the mentor key elements behind the wizardry of the magnetic component application on the ball grid array. Trimble characterized this as an example of removing stovepipes and working across disciplinary boundaries. An attendee commented that the program also allowed small businesses to start gaining and disseminating the ability to manufacture hardware for aircraft or spacecraft, which was normally a very difficult thing for them to do. It is a mechanism that government and large companies can use to help small businesses take that transitional step, thereby spreading capabilities across the country. Macauley asked if Peninger had participated in review programs or other mentor-protégé program activities and if those other efforts had worked as well as the Northrop Grumman effort. Peninger said he had participated in other programs and that some were not as effective. Effectiveness depends on the type of relationship developed. He compared it to a marriage. He also mentioned that small businesses have to worry about payroll and being reimbursed and cannot always afford the narrow, focused vision of a scientist. However, the focus of the Mentor-Protégé program is narrow. When Trimble asked if technology transfer from the large company to the small company was an integral part of the program, Peninger replied that it was. He mentioned, however, that DOD would not be involved if there were no benefit from its perspective.

OCR for page 34
Government/Industry/Academic Relationships for Technology Development: A Workshop Report Peninger went on to say that, although its program was not reimbursable, NASA had also had success with the mentor-protégé concept. The Goldin-Stokes award is just as prestigious as the Nunn-Perry award. Since each agency’s mission is different, working with NASA is simply different from working with DOD. DOD MURI PROGRAM (UNIVERSITY PERSPECTIVE, UCLA) The next panelist, Jeff Shamma from UCLA, began his presentation by providing an overview of the DOD Multidisciplinary Research Program of the University Research Initiative (MURI) program and UCLA’s role in the Cooperative Control of Distributed Autonomous Vehicles in Adversarial Environments MURI. He said that the “M” in MURI was important since it referred to the multidisciplinary nature of the program—research teams whose efforts intersected two or more traditional science and engineering disciplines. The MURI process begins each year with a BAA listing specific topics and the agencies (e.g., the Army Research Office, the Air Force Office of Scientific Research, and the Naval Research Laboratory) that are interested in them. For each topic a point of contact within the organization is given, so that proposers deal directly with specific program directors within these research offices. In the solicitation for the 2005 awards, DOD listed 26 topics of interest for the three participating services. The topic list is diverse. Aerodynamic flow control is one example of a traditional topic. Another Air Force topic is the computational modeling of adversary attitudes, which essentially entails work on social network formation and the modeling of adversarial behavior, both of which are sociology-oriented. Following the solicitation announcement (usually in June), proposers submit a five-page white paper on a specific topic (usually in August). After they receive feedback from the services in September, they must submit a full proposal in November (usually around 15 pages). Winners are announced in February. Feedback from the services is considered confidential in the sense that it is limited in its distribution. The feedback can take many forms including discussing the white paper idea directly with the technical point of contact or program director, who may encourage (or discourage) the idea. Such discussion with the DOD program directors is advocated before finalizing and submitting a white paper, which might be so short that it can be interpreted in many ways. The information shared informally with competing proposers is usually limited to information about teaming arrangements and basic topics. Shamma acknowledged that although he was not sure how a list of topics was developed, it was his understanding that the program directors of the services submitted topics. Higher levels within DOD then decide on the final list. In response to an attendee’s question, Shamma described the program. Proposals for the MURI program are solicited via a BAA to universities and other institutions of higher education in the United States. Each winning proposal receives $1 million a year for 3 years. After the 3-year period, a review is performed to determine if the effort merits a 2-year extension. Typically, teams are composed of 8 to 10 co-principle investigators (PIs) at three or four universities. Usually only one award is made per topic, although sometimes there are two awards. All co-principle investigators share the $1 million. During the award period, the DOD undertakes an annual site visit and review. The

OCR for page 34
Government/Industry/Academic Relationships for Technology Development: A Workshop Report program manager and others he or she invites usually hold a 1-day meeting. Every year, a 6- to 10-page report provides a synopsis of the work. Clearly, that report does not encompass all the activities under the award in detail, but it does cite published or otherwise presented research results. The funding is geared toward producing results and publishing them. An annual contractor’s meeting is also held at which all PIs present their results. During the third year of the award, a more extensive review is conducted. The report on this review meeting from the program director is assessed at higher levels in the DOD to decide on renewal. Shamma continued by briefly describing the nature of the UCLA-led (partners are the California Institute of Technology, Cornell University, and the Massachusetts Institute of Technology) MURI effort, which was focused on control of multivehicle systems and multiagent decision systems. Managerially, all of the institutions subcontract to UCLA. The effort is in its fourth year, having successfully been renewed during the option period. It concentrates on the computational end of control theory, not so much on hardware and prototype development, although the group has a few hardware test beds that were funded under a DOD Defense University Research Instrumentation (DURI) award, a program specifically designed to help fund special equipment needs. During the MURI effort, members of the UCLA-led team had several opportunities for interaction with each other. Members attended short courses taught by team members from other universities to gain an overview of the research being performed throughout the MURI. Shamma and a few postdoctoral fellows spent time at an Air Force base. Students in the program participated in intercampus student visits, spending anywhere from a week to an entire school quarter at other institutions working with team members. The team performed unified test bed studies to describe results using a unified hardware platform and prototype. This allowed the team to contextualize the results in terms of a particular challenge, whether a simulation challenge or a hardware challenge. Shamma then critiqued his experience in the MURI program as a co-PI and compared it with his experience as a participant on other DARPA, NSF, and NASA proposals or projects. He described the review process as humane. Feedback is provided early in the process, before the proposers have made any large initial investment; usually it comes straight after a phone call to introduce the idea to the DOD program manager and then after the white paper. Given that weeding-out process, only a few groups compete for the final award. In contrast, some NSF solicitations in which Shamma had participated received over 1,000 letters of intent for approximately 30 awards. He also mentioned that in the MURI proposal process, there would always be a front-runner who had assisted the program director in identifying areas of research. However, front-runners are not guaranteed funding. Shamma also mentioned that there was no direct competition with DOD investigators in the MURI process. In contrast, in a NASA solicitation for which he had submitted a proposal, 15 of the 20 winning proposals were NASA proposals—a discouraging result. Shamma said he understood the need to include NASA researchers in the funding but believed it would be better to separate the sources of funding into internal and external sources for the purposes of competition. NASA attendees interjected that this particular outcome had been an artifact of the methods used in the past and was not the way NASA planned to solicit in the future. Shamma insisted that some of the university recipients of the funding had offices at NASA Ames. He called it an unclear competition.

OCR for page 34
Government/Industry/Academic Relationships for Technology Development: A Workshop Report Shamma continued to discuss the cross-fertilization opportunities were part of the mission statement of the MURI program. At the time of this workshop, he was working on a white paper on adversarial modeling in collaboration with a UCLA economist and a sociologist. The time frames for a MURI suit academic research and allow university professors to act like university professors. A project reports annually, not monthly, as required on other federal government contracts. The 3-year base funding also provides security and allows working on questions that will not need an immediate proof of concept or an immediate prototype illustration to show the potential for a large reward. Shamma also mentioned some negative aspects of the program. His main criticism was the large size of the group that partners in the MURI program—such groups could be unwieldy. Multicampus management can be inefficient, and subcontract billing is slow from the subcontractors to the lead university and the lead university to the DOD. An additional one-time fee is also collected by the university administration when a subcontract is set up, but it is a minor expense. Also, the co-PIs do not have any real say about what the other university partners are researching. Shamma can offer advice, but he cannot withhold funding if he does not like the direction in which a partner is going. This lack of control can have a long-term effect and can sour relationships in small research communities. One attendee asked how the team was put together. Is it based on pulling together well-known names and universities to win the contract or on pulling together the capabilities necessary to complete the work? Shamma replied that there were two models. For a given topic, a number of different combinations of universities and PIs can be fielded to submit a competitive proposal. No single research group in the country usually has a monopoly on the expertise for a specific technology. If there is such a monopoly, then it would be obvious where the award would go. This is the model that the UCLA-led team used. The other model involves an individual research group that is very advanced in a specific research topic and that proposes simply to win additional funding. Shamma also said that collaboration could go only so far. He believed that the UCLA-led group had been successful in having genuine collaboration. But, it could be more successful if one person were directing all the other campus partners in their work. Another attendee asked about the exchange of software among team members and if such a practice added intellectual value or was simply a matter of organization and teamwork. He wanted to know what the optimum goal was for the team. Shamma believed the value added came from the conversation and the expertise. For example, the UCLA-led team uses two simulation test beds—a hardware test bed and a software test bed developed at Cornell. All of the other team members use that same software test bed. This is one way to try to align group incentives with individual incentives. Cornell had an incentive of its own for developing the software test bed so that the MURI team and others could use it to motivate and demonstrate research. An attendee asked Shamma if the team felt it had come with up something innovative or if a breakthrough had resulted from the work and if, historically, the MURI program had achieved innovations and breakthroughs. Shamma believed it had happened for his group, but he emphasized that when a breakthrough did happen it was usually not during the first year or year and a half of research. Shamma also mentioned that he wasn’t sure if the same breakthrough would have happened without the group structure. The team

OCR for page 34
Government/Industry/Academic Relationships for Technology Development: A Workshop Report members asked themselves the same question and concluded that there had been benefits from their give-and-take. It is unclear whether the exchange was more cross-disciplinary than would normally have been expected. Shamma went on to discuss another negative aspect of the large team approach. He observed that cliques formed within teams. If there are team members at four campuses, say, two sets of two campuses might be working together. If you are on the same campus as a team member from another discipline, then the odds of working in a truly collaborative way with him or her are higher. It helps being on the same campus, not to mention in the same building. The degree to which collaborative cross-disciplinary opportunities are exploited by the DOD is unclear. It depends on the individuals involved and the degree to which the DOD program manager needs that to happen. Another attendee asked Shamma his view on nonproductive team members. Shamma said that in the MURI structure it was not easy to withhold funding from nonproductive team members, because it is the results of the entire team that are examined, not those of individual team members. In contrast, he was once involved with a DARPA project in which the program manager told him that one of his subcontractors was not producing. In a MURI project, the program manager might be subtler. He might say, “We think you are working on interesting individual problems, but we don't see the integration," whereupon the team has to prove that integration does exist. An attendee spoke of the situation at NASA, whose researchers have the reputation of partnering only with universities that will return some of the money to NASA via subcontracts. He suggested that historically NASA partnered with entities that gave it the most “bang” for its “buck.” Some of these arrangements began many years ago. The attendee went on to describe the tension that arises when a new researcher lacking connections to the NASA researchers in the laboratory feels disadvantaged. Hopefully the extramural process at NASA will open up opportunities for partnering that did not exist before. Shamma told of another experience he’d had as a subcontractor to a business and said he would never again become involved in that same manner. There was a real conflict of interest in that the business was more interested in the bottom line and the university was more interested in publication. The importance of continuity in funding was also mentioned. It is hard to tell a student in midyear that the funding is gone. It is even harder to tell a foreign national postdoctoral fellow that his or her funding has been cut. There are implications, both personal and intellectual. Shamma went on to quote an unnamed colleague who was working with a company that warned, "Never put a university in a critical path." Shamma admitted that might sometimes be true but contended that universities needed to be able to behave like universities. They should be used in a different way to optimize their impact. An attendee suggested that maybe the best way for universities to work with companies was to do precompetitive research. Another issue with the large teams typical of MURI is the smaller amount of funding that each PI receives once the joint funding is disbursed. The money goes to both students and faculty in forms such as graduate stipends or summer salaries. Group size tends to become inflated during the proposal process. Shamma believed that six or so individuals at maybe two campuses would be an ideal size.

OCR for page 34
Government/Industry/Academic Relationships for Technology Development: A Workshop Report Michael Marlaire, an attendee from NASA Ames Research Center, discussed the University-Affiliated Research Center in the University of California (UC) system—basically, one large research contract for over $330 million over the next decade. More than 100 individuals from the system are working on the contract. A third of them are inside the fence on the original grounds at NASA Ames Research Center and a third are in the NASA Ames research park. Money flows through the entire UC system. This arrangement could be described as a hybrid of what Shamma had been discussing earlier—a combination of business subcontracts and university grants. Individual PIs are still involved, as are teams from the other campuses in the UC system. Another attendee suggested that this model could be more effective since, instead of individuals or groups serving as subcontractors to a prime contractor, all such individuals or groups were funded directly by NASA. Marlaire felt that NASA should continue to support this model. Shamma again brought up the matter of proposals with inflated numbers of people. He had never heard of a program manager saying, “You have great ideas but too many people.” So the idea is to promise a lot of results in the proposal even if this allows only $50,000 per PI. An attendee commented that one of the motivations for inflating the number of people might be that it made the proposal more attractive politically because the funds were spread around more. Shamma interjected that proposals with a lot of ideas seemed to get a reviewer’s attention. Another attendee suggested that it helped to include individuals with solid reputations in specific technology areas. Shamma mentioned another criticism he had of the MURI program—the interaction of the university teams with the DOD national laboratories. He described the interaction as flexible; however, “flexible” could also mean unstructured. It is to the MURI’s benefit to work on problems that are traceable and strongly motivated by DOD’s immediate concerns but not necessarily on near-term prototypes. Shamma believed that the MURIs could use more guidance from the DOD on what DOD is actually interested in—this would entail more than just brief, annual feedback. He also believed that the choice of topics—26 per year—could be restricting. Twenty-six topics is certainly not all-encompassing (and should not be), but either your research is covered by that a year's worth of MURI solicitation topics or it is not. Shamma suggested two alternatives: annual themes and smaller groups of PIs. SMALL BUSINESS PERSPECTIVE (MICROSAT SYSTEMS) John Roth from MicroSat Systems began by saying everyone knows that DOD contracting is not always problem free. His company, formed in 2001, designs, builds, and will eventually operate satellites. The company is a direct contractor to DOD organizations rather than a subcontractor. It is an unusual kind of business model. The company was awarded the first OTA contract implemented by the Space Vehicles directorate of the Air Force Research Laboratory (AFRL) at Kirtland Air Force Base. Roth recalled the earlier discussion of the OTA contracting mechanism, first used by DARPA and then embraced by other organizations. ARFL decided to use it on its first contract with MicroSat Systems, but it did not work quite as smoothly as the textbook had suggested.

OCR for page 34
Government/Industry/Academic Relationships for Technology Development: A Workshop Report MicroSat Systems was a spin-off from a research and development company called ITN Energy Systems, which had been in business for a number of years. ITN had succeeded at both creating new technologies that were licensed to large companies and at creating companies to market those new technologies. MicroSat Systems is an example of the latter—the third spin-off company that resulted from ITN’s contract with the Air Force TechSat-21 program to build three satellites. The TechSat-21 concept was to employ groups of small satellites to do the job of very large satellites by using distributed aperture processing and formation flying technology. MicroSat Systems was created when ITN unexpectedly won the contract but found itself unable, according to Roth, to execute the contract with its existing organization and capabilities. A spin-off company was created from the core group of employees that had worked on the ITN proposal. The Air Force used an OTA contract since one of TechSat-21’s requirements was a cost-share commitment. In addition, the Air Force was convinced, Roth said, that the concept of small, low-cost satellites was going to be disruptive to the large satellite business and would have huge commercial potential. Investors were asked to cost-share to the extent of $10 million, which was paired with $26 million of government funds. The OTA agreement itself was good, according to Roth. It was very flexible, allowing the company to negotiate terms and conditions different from those normally allowed under the FAR regulations. It enabled the new company to own all of the intellectual property rights for technology developed using the money that the private investors were providing. A unique clause in the contract, allowed by OTA’s flexibility, gave MicroSat Systems ownership of the satellites after one year of operation in space. After the government had finished testing the satellites, which had synthetic aperture radars, the company could use them for high-resolution imagery. This was an opportunity for the company to recoup part of its investment through newly owned assets. The OTA began to look like a wonderful opportunity for the company. After 1 year, MicroSat Systems was able to grow the value of the contract to $42 million when the government decided to fund all the program’s subcontracts under the company (in effect, MicroSat Systems became the prime contractor). Unfortunately, 2 years into the contract, a change in leadership at AFRL led to cancellation of the program. The old administration, which had thought this program was a great idea, moved out. In its place came a new administration that did not own the program. At the time, TechSat-21 was the largest program being funded at AFRL and looked like a great place to obtain funding for other projects the Air Force leadership wanted. By the second year of the contract, MicroSat Systems had invested $4 million of its own money and TechSat-21 accounted for over 90 percent of the company’s activity. The company immediately went from a highly favorable situation (a large, multiyear government contract) to a really dire situation (90 percent of the business was lost because of one customer’s decision). Roth believed it was a credit to the company that it had survived. Through the SBIR program and some other opportunities, the company was kept alive and recovered, winning three other Air Force contracts to build satellites. Roth recounted important lessons learned from the experience. One lesson for small business is that government decisions can be very powerful. Large companies, when they are talking about investing in dual-use technology, have the luxury of evaluating programs based on their return on investment, and they may decide to invest only if

OCR for page 34
Government/Industry/Academic Relationships for Technology Development: A Workshop Report commercial applications will result. For a small company, it often comes down to whether it wants to stay in business. A small company cannot afford to walk away from work, so when the government asks it to cost-share in projects, the company has no alternative to keep it going. In such a case, the company will decide to share the cost with the government, making little or no profit, because the power is on the government’s side. Roth cautioned NASA, and anyone else looking at dual-use concepts, to remember that investment decisions were often a matter of life or death to small companies. He hoped that NASA would not place pressure on small companies to provide cost sharing. A change of direction in government programs is also very difficult for small business. On the DOD side, individuals tend to be rotated out of positions every 2 to 3 years. According to Roth, one of the strengths of DARPA—and, at the same time, one of its weaknesses—was frequent leadership turnover. It is very hard to maintain continuity over a long period of time. New employees and program managers arrive and have very different ideas than their predecessors. Such changes are difficult for a small company, which tries to align its internal research and development with what its customers are paying it to do. If all of a sudden the customer shifts direction, it is very hard for a small business to redirect all its activities and its internal research and development funding in that same direction. Roth said that small businesses were less flexible than large businesses. This may allow small companies to be more innovative than large companies since they are able to do things faster and are many times willing to take more risks. Small businesses are often able to respond to changes dictated by a customer much faster than large businesses. Small businesses also tend to subcontract more work to other small businesses to gain cost and time advantages. In the satellite business, there are essentially only two customer bases—the Air Force and NASA. Few government agencies procure satellites and only a few nongovernment customers do so. Unlike other commercial businesses with many customers to please, the satellite business is not very flexible. These issues should be kept in mind when developing government programs that work with small businesses. One attendee suggested that large companies wanted technical security from small companies, but this was impossible. As a result, cost-sharing with a small company is not always an appropriate indicator of whether an idea is promising or not. Rarely is a small company able to cost-share at the $10 million level. Of course, it remains to be seen if MicroSat Systems investors will recoup their investment. Throughout the TechSat-21 program with AFRL, the effort shrank from a three-satellite effort at $52 million to a study of what could be done for $200,000. According to Roth, one of the complications was that the government had an option to cancel the contract with MicroSat Systems at any time without explanation. The cost-share portion of the contract was based on a month-to-month commitment of funds from MicroSat Systems. While such an arrangement might seem to be acceptable, the investment capital for such an effort is raised by the company all at once, not monthly. Another attendee asked Roth if he thought the investment community would be willing to underwrite the pursuit by small companies, large companies, and universities of prizes such as the Ansari X prize, knowing that no up-front funding was available for technology development. Are there investors willing to pursue technologies with such

OCR for page 34
Government/Industry/Academic Relationships for Technology Development: A Workshop Report funding mechanisms? Discussion continued on this topic. Others in the audience believed that a small company would pursue such a prize if it knew it could develop the technology for, say, one tenth the amount of the prize. Another attendee said there might be technologies that cost more to pursue than could be recouped by winning a prize, and she was curious whether the investment community would want to be involved. Other attendees felt that equity markets would not fund small businesses to pursue prizes but that individual investors would. Investors would have to be sold on specific ventures. A small business might be able to raise money from a certain kind of investor, who would feel that he or she was participating in an exciting new venture. Most investors would not want to structure an entire company based on that type of funding, but others might be interested despite the risk. The biotechnology industry is one example of an area in which a lot of investors are taking risks. LARGE INDUSTRY PERSPECTIVE (LOCKHEED MARTIN) Jim Ryder from Lockheed Martin began by mentioning several ideas that would be good ones to discuss in this format and setting. He believed that large companies were not all that different from small companies in many respects. From a large company perspective or a small company perspective, technology development is similar: It is competitive. The technology has to be vigorously connected to the business and must have a good effect on the bottom line. It must bring a new capability to bear that dramatically alters cost or performance or simply helps to solve a difficult problem. What is different for a large company is that it must balance its responsibility to its shareholders with the role it plays as a national resource. Ryder maintained that small businesses broadened the resources of the United States and helped utilize the skills of the best and brightest. Ryder went on to directly answer several of the focusing questions provided to the panelists by the steering committee. His remarks were based on discussions with several staff members at Lockheed Martin. The first question asked of large businesses concerned the appropriate use of competitive and noncompetitive awards. Ryder replied that, from the large business perspective, competitive solicitations and awards should be used in the event of multiple, legitimate, capable, and credible bidders and when the procurement schedule permits. After all, he said, the companies and their employees were taxpayers who ultimately wanted to receive the best value for their money. Competition can do that by bringing out good ideas. Noncompetitive awards are appropriate when there is a clear concentration of capability, whether that be an intellectual capability or a physical facility. Another question was whether government organizations or centers should compete directly against industry. If so, what guidelines and constraints should apply? Ryder believed that government and industry should not compete for the same funding but should instead work together. He mentioned an example of a successful partnership between NASA Marshall Space Flight Center, industry, and academia on an important problem internal to NASA. In this situation, Lockheed Martin is teaming with industry and universities, not competing to win. Ryder mentioned the inverse situation, in which large companies competed with small ones but incorporated the university and NASA center perspective.

OCR for page 34
Government/Industry/Academic Relationships for Technology Development: A Workshop Report Another attendee agreed with Ryder, saying that far too often it was pointless to submit a proposal to compete for a federally solicited award. In the end, a company has to respond to its shareholders, not to NASA or DOD. He went on to discuss the legitimate roles of the various stakeholders. If the aerospace community could better define these roles, issues related to competition might disappear. Ryder mentioned that Lockheed Martin works with many universities but tries to avoid involving them in the critical path of technology development. The work of universities lends itself to being reported on once or twice a year, not weekly or monthly, like other projects. Another question involved legitimate barriers to information sharing. In this connection, Ryder recalled the DOD space-based laser program, which had involved Boeing, Lockheed Martin, and Northrop Grumman. The program ultimately collapsed. One reason was that the technology was not mature enough. A review of the program and the companies revealed that all three were withholding their best work. Ryder said this happened when a company was forced to cooperate with other companies during preliminary technology development that might or might not lead to a prime contract being awarded to one of the cooperating companies. The winner in this type of situation is the company that in the end provides the best price to the government. According to Ryder, this forced cooperation during the precompetitive phase was something that the government should avoid. It is a waste of taxpayer money. International cooperation and the use of foreign companies were also discussed. Lockheed Martin works with a number of companies in England and some in France. Ryder believed that it was easier to work with global companies now than it had been 3 or 4 years ago, but a lot harder than 10 to 15 years ago. From the large company perspective, this is an area that calls for improvement. The impetus for this improvement must come from the top levels of DOD and NASA. Ryder went on to say that our country’s leadership must understand that if our country is isolated from its allies, problems will develop. A lot of capability exists outside the United States. Ryder suggested that the committee study the number of companies in France that had once had U.S. owners. For example, Equitable Life, a longstanding American-owned firm, is now owned by the French. Ryder asserted that our nation must move now to develop technology for human and robotic exploration if it is to have a long-term, successful effort in space exploration. He said the scientific and technical community continued to disagree on the International Space Station and the space shuttles, but he believed we might be giving up on something before we had actually done anything with these capabilities. The country has not completed the station’s construction but already it is looking at newer projects that will be more difficult over the long term. According to Ryder, the country should “not give up when the going gets tough” and should have plans for instances when things are not working as originally anticipated. Other countries have great capabilities that we need to use. Lockheed Martin, as a company, has been concerned about international relationships the last 2 years. Ryder believed that what made this country powerful was that it allowed people from other countries to come here to work and contribute. He was afraid that if the country were to continue down the present path of restrictions on immigration and green cards it would suffer. We might already be seeing negative impacts. The United States

OCR for page 34
Government/Industry/Academic Relationships for Technology Development: A Workshop Report has always had strong scientific and technical relationships with Japan, England, Australia, France, Germany, and Italy. Those relationships were eroding, he said, because it was difficult for those countries to work with the United States under the present restrictions. Another question from the steering committee centered on incentives and cash fees. Ryder admitted he was unsure about their use. The company has rewarded its employees based more on the success of an overall program than on individual success. Ryder manages tens of millions of dollars of internal corporate R&D funds as well as funds for other parts of the corporation. Large sums are set aside each year for incentives to promote new ideas, using mechanisms that resemble small businesses within the company. Many researchers work with outside universities and small businesses using these funds, which range from $20 to $100 million. Large companies could easily move away from real innovation, Ryder said. Small companies, on the other hand, have trouble finding the money to do things. Incentives fit into this picture somewhere, and the issue becomes the roles of various stakeholders. Ryder believed that DOD and NASA might have moved away from what they really do best—risky, high-reward technology (such as the space elevator). He did not see an immediate means to manufacture hundreds of miles of material to make the space elevator concept work, but the concept would have incredible results if it could be achieved. Large companies would not take the risk since the ultimate payoff might be 100 years away. But some smaller companies might be willing to compete to design and produce the smaller components and mechanisms that would drive the entire system. Someone has to consider the high risks, however. Ryder declared that if the country was going to continue human exploration of space, it was time to seriously identify the high-risk technology problems that needed to be solved and to work with universities and companies on a means to do this. One attendee asked if there was anything to learn by looking at how the Europeans and Japanese handled global issues. Are they more open or less protective of their work? Is there something our country can learn from them? There is a weakness in our present system that we must get beyond. Ryder believed that these countries had dealt with the issue of terrorism for a much longer time than the United States. European countries have already developed security systems to protect themselves and yet they have not closed their borders. The United States tends to shut its borders in a protective mode and to not look beyond this for solutions. Has our government even asked the Europeans how they solved similar issues? We have asked them to cooperate, but we may not have asked them how they actually solved problems. Another attendee asked about technology issues. How do companies in other countries protect their intellectual property? Ryder replied that one could gain a technological advantage by simply developing new technology at a faster pace than other companies. Someone else commented that part of the problem with ITAR was that it had been relatively successful during the cold war in keeping component technology out of the Soviet Union. This success makes it even more difficult to change the regulations now. The United States seemed to have forgotten what the purpose of ITAR was, Ryder said. Is that same purpose still serving the country now? Similarly, is the country evaluating whether its institutions are serving it as well as they once did? Newman

OCR for page 34
Government/Industry/Academic Relationships for Technology Development: A Workshop Report replied that technology was like an ice cube in the desert—you got temporary value out of it. Another attendee asked if ITAR might only seem to have been successful because the funding of research and technology at universities was greater during the cold war? Funding is harder to obtain now, so universities cannot move as fast in their technology development as before. Ryder said that Lockheed Martin sent a good amount of money to universities. He worried that universities were unable to attract the breadth of talent necessary. Companies have a problem when they cannot talk to students about technology owing to ITAR restrictions. Ryder, however, believed that ITAR would force some of the better foreign students to return to their home countries. One attendee said that the country was awarding Ph.D.s to foreigners but not allowing them to work so they could stay in the country. We were creating our own competition overseas, he contended. The participants continued to discuss incentives. Ryder commented that the earlier discussion on incentives had applied not only to internal efforts to incentivize but also to subcontractors and suppliers. Large companies are working to find ways to treat such incentives as investments and hoping that the DOD will do the same. While there are still pay raises and bonuses to reward individual work, the team approach could work if the team is rewarded as a group. Ryder did not know whether the prize mechanism discussed earlier would have the same motivating effect as pay raises and bonuses, but he did know that government needed to find incentives. The technology community needs to find ways to help people take risks, and prizes might be good in certain cases. Venture capital investment might be one way to incentivize a small company, but this might not work with large companies or government laboratories.