Panel V

Clustering Around the Lab—
Best Practices in Federal Laboratory
Commercialization

Moderator:
Jonathan Epstein
Office of U.S. Senator Jeff Bingaman (D-NM)

SANDIA NATIONAL LABORATORIES
AS A CATALYST FOR REGIONAL GROWH

J. Stephen Rottler
Sandia National Laboratories

Over the past five years, Sandia National Laboratories in Albuquerque, New Mexico, has expanded its mission well beyond national security, said Dr. Rottler, Sandia’s Chief Technology Officer and Vice President of Science and Technology. “We have built into that mission a significant leadership role in moving technologies from inside the laboratory into the economy,” he said. Sandia has invested considerable time and effort to build partnerships well beyond its traditional relationships with the government and others involved in national security.

Dr. Rottler explained that Sandia began as a spinoff of Los Alamos National Laboratory in the late 1940s. It was then called the “Z Division.” The lab began as a designer of nuclear weapons that went into the nation’s stockpile. In the ensuing 60 years, Sandia’s mission has evolved. Now it is a pre-eminent national security research and development institution with nuclear weapons as a core, defining mission. Its job is to take R&D and translate it into service for the country.

A decade ago, three-quarters of Sandia’s $2.5 billion in annual revenue was devoted to nuclear weapons, Dr. Rottler said. Today, 50-60 percent of revenue is from what Rottler described as the “broader national security enterprise” in the United States. That mainly means developing technology and systems for the Department of Energy, Department of Defense, the intelligence community, and the Department of Homeland Security. “Energy security” is a particular focus.



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Panel V Clustering Around the Lab-- Best Practices in Federal Laboratory Commercialization Moderator: Jonathan Epstein Office of U.S. Senator Jeff Bingaman (D-NM) SANDIA NATIONAL LABORATORIES AS A CATALYST FOR REGIONAL GROWH J. Stephen Rottler Sandia National Laboratories Over the past five years, Sandia National Laboratories in Albuquerque, New Mexico, has expanded its mission well beyond national security, said Dr. Rottler, Sandia's Chief Technology Officer and Vice President of Science and Technology. "We have built into that mission a significant leadership role in moving technolo- gies from inside the laboratory into the economy," he said. Sandia has invested considerable time and effort to build partnerships well beyond its traditional relationships with the government and others involved in national security. Dr. Rottler explained that Sandia began as a spinoff of Los Alamos National Laboratory in the late 1940s. It was then called the "Z Division." The lab began as a designer of nuclear weapons that went into the nation's stockpile. In the ensuing 60 years, Sandia's mission has evolved. Now it is a pre-eminent national security research and development institution with nuclear weapons as a core, defining mission. Its job is to take R&D and translate it into service for the country. A decade ago, three-quarters of Sandia's $2.5 billion in annual revenue was devoted to nuclear weapons, Dr. Rottler said. Today, 50-60 percent of revenue is from what Rottler described as the "broader national security enterprise" in the United States. That mainly means developing technology and systems for the Department of Energy, Department of Defense, the intelligence community, and the Department of Homeland Security. "Energy security" is a particular focus. 101

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102 CLUSTERING FOR 21ST CENTURY PROSPERITY The nuclear weapons program accounts for the other 40-50 percent of rev- enue and is the largest customer, Dr. Rottler said. It also continues to be the raison d'tre of the lab, and "the reason why we are able to make broader contributions to national security." Sandia has three overarching "strategic" or "corporate" capabilities in science and engineering, Dr. Rottler explained. They are high-performance computing and simulation, nanotechnologies and micro systems, and extreme environments. The government, and especially DoE/NNSA, has invested heavily in people and state-of-the-art facilities, some of which are unique to the Labs; These capabilities "cut across all mission elements at our laboratory," he said. Below these capabilities, Sandia has six core "research foundations" that stem from investments over the years in a very broad and deep science and engineering base. Some date from the early days of the laboratory, while others are new: Computer science. Materials. Engineering sciences. Micro systems. Bioscience. Pulsed Power. Sandia's entry into bioscience over the past five to seven years may seem a little far afield for an engineering laboratory, Dr. Rottler noted. But bio-fuels and bio-defense relate to its broader national security mission. Twenty years ago, Sandia began to transfer technology from the lab to the economy, Dr. Rottler explained. Corporate partnerships have been a key part of that strategy. Among the companies with which Sandia has substantive relation- ships are Hewlett-Packard, Procter & Gamble, IBM, Corning, Intel, Lockheed Martin, ExxonMobil, and Goodyear. They began around 15 years ago as "tech- nical exchanges," in which the federal government and companies both put in money. The partnership with Goodyear has been one of the most durable. Sandia and Goodyear collaborated on computational simulation technology that Goodyear wanted in order to improve its tire design and its design and manufacturing processes. After six or seven years, "when Sandia proved it could add value to Goodyear," the relationship grew, Dr. Rottler explained. Goodyear uses Sandia simulation tools to design a wide range of tires.44 Goodyear now fully funds the program and has invested $40 million over 15 years in research at Sandia. 44To read about the Sandia-Goodyear relationship, see Pete Engardio, "Los Alamos and Sandia: R&D Treasures," BusinessWeek, September 11, 2008, .

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PANEL V 103 "Goodyear talks very openly about how the use of our technology has helped its business," Dr. Rottler said. Sandia also engages in programs to contribute to development of New M exico's economy. They include the Sandia Science and Technology Park; a small- business assistance program in collaboration with the state of New Mexico and Los Alamos National Laboratory; an "open campus" in Livermore, California, dedicated to green energy and transportation; and a program called Entrepreneurial Separation to Transfer Technology. This program supports Sandia employees who want to leave and start a new business, but also want to be able to return should the experience not work out. The science and technology park has enjoyed considerable success, Dr. Rottler said. The park is a public-private partnership conceived 12 years ago. It now has 30 tenants and accounts for nearly 2,000 jobs in Albuquerque. The park's tenants include companies with names like Ktech, ATA, Poly-Flow Engineering, TEAM Technologies, and Emcore, some of which are spin-offs of the lab and that still collaborate with Sandia. The jobs in the science park, moreover, pay salaries that are twice as high as the Albuquerque average. "For a state such as New Mexico, which still tends to rank at the bottom of many national statistics, this is something that the city, the county, the state, and our laboratory are quite proud of," Dr. Rottler said. The park has a "very aggressive" goal to account for 6,000 jobs 10 years from now. Construction has been under way at the park for the past 142 months, he added. The New Mexico Small Business Assistance Program, established 10 years ago, is made possible by state tax credits, Dr. Rottler noted. Sandia and Los Alamos, which pay taxes on gross receipts, each get $2.4 million in credits to support small New Mexico businesses. The program allows small businesses with technical problems to come to the labs for assistance from staff. The assistance program is credited with creating and retaining 1,020 small- business jobs across the state. One study estimated that the assistance program produced a return on investment for the state of $1.34 for every $1 in tax credits. The program has been so successful that a proposal by a legislator to eliminate the credit was defeated, Dr. Rottler said, despite the state's budget crisis. "The bill died without going to the floor." Sandia and Lawrence Livermore National Laboratory are developing another regional cluster around their campuses in California, which have historically been dedicated to nuclear weapons and other national security work. Certain facilities will remain "inside the fence" and focus on national defense, Dr. Rottler said. Other facilities are being converted into an "open campus" that is a partnership between the laboratories and the city of Livermore. It will be devoted to industry partnerships in green transportation and renewable energy. Dr. Rottler said the two labs developed their proposal to create the Livermore Valley Open Campus several years ago. Now it has gotten "sufficient support from the Department of Energy, so we are going forward with this," he said.

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104 CLUSTERING FOR 21ST CENTURY PROSPERITY In early February, Sandia and Lawrence Livermore announced a tie-up with the city of Livermore to open an innovation hub for advanced transporta- tion excellence, called i-Gate. The state will fund this research center, which will be a public-private partnership focusing on adapting green technologies to transportation. Sandia also promotes entrepreneurship, Dr. Rottler said. The Entrepreneurial Separation to Transfer Technology program allows scientists to apply for "entre- preneurial leave" to help expand or start up a company. If the employee wants to return to Sandia for whatever reason within two years, the laboratory promises to find a similar job to the one he or she left. Usually, he explained, employees' spouses are more worried about the safety net than the employees. "They want to know that if the wild-eyed dream of their spouse doesn't work out, they have a job to go back to," Dr. Rottler said. Since 1994, 138 scientists and engineers have left the laboratories in New Mexico and California to enter business. As a result, 91 companies have been started up or expanded, he said. At least 300 jobs have been created in the past five years, although Dr. Rottler said that number is probably an underestimation. Solar-equipment manufacturer Emcore "represents the integration of all of the programs I am talking about today," Dr. Rottler said. In 1996, a group of Sandia scientists took entrepreneurial leaves to found a company called MODE, which specializes in photovoltaic applications for satellites. MODE was acquired by an out-of-state firm, Emcore, which moved its headquarters to the science park in Albuquerque. Emcore continued to license technologies from Sandia. After several expansions, it now employs 350 people. The company also receives help from Sandia's small business assistance program. Sandia's experience shows that regional innovation strategies can work, Dr. Rottler said. "But there is also much that can be done at the national level," he said. He pointed to legislation in the U.S. Congress that would provide funds for national science parks.45 The House bill was drafted by Representative Martin Heinrich (D-N. M.) and Representative Gabrielle Giffords (D-AZ). Dr. Rottler noted that the original science park legislation was drafted by Jonathan Epstein, the panel's moderator. 45H.R. 4413, the Science Parks Research and Innovative New Technologies Act, was introduced on January 12, 2010. It authorizes the Department of Commerce to offer $7.5 million in competitive grants for feasibility studies for development and construction of new science parks and expansion of existing ones. It also provides construction loan guarantees of up to 80 percent, with a maximum loan of $50 million per project. The companion Senate bill, S. 583, the Building a Stronger America Act, was approved in committee and attached to the America COMPETES re-authorization act in December 2010.

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PANEL V 105 EXPLORATION PARK AT THE KENNEDY SPACE CENTER Robert Cabana NASA Kennedy Space Center Mr. Cabana, director of the Kennedy Space Center (KSC) and a former astronaut, said the Kennedy Space Center has substantive innovative programs under way at the center. Kennedy Space Center is mainly known as the launch site for America's human spaceflight programs, and since 1981, it has been the home base for the processing and launch of the Space Shuttle. The end of the Space Shuttle pro- gram, however, will have a significant impact on the center and its workforce. Several budget provisions will help Kennedy Space Center commercialize technologies. Plans are to renovate the launch complex to support NASA's future exploration programs, as well as commercial space operations. The budget also provides funding to use the International Space Station as a national laboratory for researchers and for technology development. The center has great capabilities with commercial applications, he noted. "The question is: How do we tie all of this together, to where we can bring industry in and really make this beneficial to everyone?" Mr. Cabana said. Kennedy Space Center has a history of developing projects that commercial- ize technology and promote innovation. Exploration Park, located on federal land that once was orange groves, is the hub of these efforts. Exploration Park will support the commercial space industry and spin-offs in related technologies. The park is projected to have 5,000 technicians, engi- neers, and administrative support staff. It will benefit from "a really high-quality workforce that will be transitioning from the end of the Space Shuttle program to the future," Mr. Cabana said. The campus also is near the University of Central Florida, the third-largest university in the United States, with a "superb" engi- neering school. "If we can capitalize on universities, industry, and government partnerships with the state of Florida," he said, "it is amazing what we can ac- complish. I think you get innovation by bringing people with diverse backgrounds together and offering them an environment where they can converse with each other and capitalize on what each other knows." The anchor facility, the Space Life Sciences Lab, already is open. Because it is located inside the security gates of Kennedy Space Center, however, it is diffi- cult for civilians, especially foreign nationals, to enter. Eventually, though, it will be accessible outside the gates of the space center. The 104,000-square-feet life sciences building has 25 fully equipped scientific laboratories with administrative and office support. It was built by the state of Florida in cooperation with NASA, Mr. Cabana explained. The lab will be turned over to the state, and NASA will lease any required space. The Brevard County government is funding design of a road that will bypass the secured perimeter so people can easily get to the park.

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106 CLUSTERING FOR 21ST CENTURY PROSPERITY The space center is also helping NASA use the International Space Station as a national laboratory. The Space Life Sciences Lab already conducts research for the Space Station, Mr. Cabana noted. "If we really are going capitalize on the International Space Station as a national lab, why not use a facility like this to draw in industry and researchers to do that?" he asked. The way to accomplish this is through partnerships, Mr. Cabana says. Even though it mainly is regarded as a launch center, he said, Kennedy Space Center has excelled at applied research and commercialization of technology. "Of all the NASA Centers, KSC has the highest percentage of executed licenses compared to patents issued for the last five years," he noted. Prominent examples of the NASA Innovative Partnerships Program are: Lunar Analog Field Demo of ISRU46 Lunar Prospecting. This is a partnership with Johnson Space Center, Glenn Research Center, Carnegie Mellon University, and the Pacific International Space Center for Exploration Systems run by the University of Hawaii. The program demonstrates systems for prospecting, mining, and develop- ing natural resources on the moon using a simulation of the lunar environment. Desert Research and Technology Studies, otherwise known as Desert RATS. Based in New Mexico, this partnership with Johnson Space Center, Glenn Research Center, ASRC Aerospace Corp., Caterpillar, and the Colorado School of Mines demonstrates equipment for excavating lunar regolith, or the layer of soil and broken rock on the moon's surface, and lunar communication concepts. Light-emitting diodes (LEDs). The Kennedy Space Center is leading studies in LED lighting technology to help plants grow in controlled environ- ments such as space. It also is studying LEDs in different frequencies that pro- duce color and are found to have a direct influence on human performance. Such technology could adjust lighting for certain times of a day to help people work more efficiently, Mr. Cabana said. Although developed for space environments, the technology "has applications here on Earth," he said. Self-healing wire. This is a partnership with ASRC Aerospace Corp. One problem with the Kapton wiring in the space shuttle was that the insulation on the wires cracked as it aged, causing electrical shorts, Mr. Cabana explained. "Through microencapsulation,47 we can have polymers that sense a break and then release polymers that help that wire heal itself," he said. Corrosion control materials. Working in a salty environment on the Flor- ida Coast can be a real problem, he said. Through a partnership with PPG Indus- tries and University of Texas Health Science Center, Kennedy Space Center is helping develop microencapsulated materials that inhibit corrosion in paint. 46ISRU stands for In Situ Resource Utilization Project. Its goal is to develop ways to use resources already on the moon to establish lunar habitats and sustain human life. See . 47Microencapsulation is a process in which tiny particles are surrounded by a coating.

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PANEL V 107 Autonomous Flight Safety System. A partnership with Starfighters, Inc., Florida Institute of Technology and the Defense Advanced Research Projects Agency is developing flight termination range safety systems for commercial space flights. Monitoring of radiation damage to DNA. One problem of traveling long dis- tances in space is dealing with radiation, Mr. Cabana said. This project is developing on-board biological instruments to detect radiation damage to DNA during flights. Dust mitigation. We have developed technology to clean dust and powder off of solar arrays used in space vehicles. A partnership with Florida Solar Energy Center is studying whether such technology would improve the efficiency of solar arrays on Earth. There are several other industry collaborations that go beyond research and development. For example, the Kennedy Space Center is teaming with Florida Power & Light to install a 10-megawatt solar array facility, with capacity to expand. "If we do this right, we hope to attract solar array technology to the Exploration Park," Mr. Cabana said. The space center also is working with Starfighters, Inc., a company that oper- ates a fleet of F-104 jets48 now used for training. In addition to using the planes as trainers for companies planning to offer commercial space flights, the company is working on autonomous range-destruct systems. Currently, humans must watch and track a rocket that is fired on a range, Mr. Cabana explained. The NASA Innovative Partnerships Program provides bridge funding so that many new companies "can get going and progress," he added. In short, Mr. Cabana said, "We really are doing all the right things." The Kennedy Space Center is well prepared for the future, he added. Having an Exploration Park adjacent to the Kennedy Space Center draws on research that NASA is already doing and makes profitable use of excess facilities as the space center makes a transition from the Space Shuttle program to the future. "It is the right time for this to happen," he said. DISCUSSANT Ken Zweibel George Washington University Mr. Zweibel began by drawing from his experience in technology develop- ment at the National Renewable Energy Laboratory (NREL),49 where he had 48The Lockheed F-104 Starfighter is a single-engine, supersonic, interceptor jet used by the U.S. Air Force from 1958 until 1967. NASA used F-104s for test flights until 1994. 49Mr. Zweibel was program leader of the Thin Film PV Partnership Program at the National Renewable Energy Laboratory in Golden, Colorado, until 2006.

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108 CLUSTERING FOR 21ST CENTURY PROSPERITY worked from 1980 through 2006, and prior to his current post as director of the George Washington University Solar Institute. That federal laboratory has a com- mercial mission, he explained, in that it develops new technology and then tries to see that it is successful in the U.S. market. Therefore, NREL is organized in a way that is not traditional for a national laboratory. NREL used a model that essentially "reversed the technology-transfer idiom," Mr. Zweibel explained. Instead of the federal laboratory transferring technology to a private company, the lab supported companies that were leading their own R&D programs. This arrangement had the effect of eliminating confu- sion over whether the scientists' chief job was to do research for the government or for private industry. "The scientists were clear on the mission they were hired for, which was to support this kind of commercialization," Mr. Zweibel said. "They didn't have an issue with having a different mission or different view of themselves. So we were able to harness the personnel and the equipment to help move these technologies forward." NREL helped universities, foundations, and companies develop proofs of concept for solar cells. The lab also had contracts with companies such as Uni- Solar, First Solar, and Sun Power "that now are the difference between the United States being a follower and being a leader in the world in terms of technology in photovoltaics," he said. Without that leadership, "we would have nothing in PV module manufacturing." Currently, Chinese-made crystal silicon photo voltaic products "are wiping the slate clean worldwide because of their low-cost ad- vantage." The only reason the United States enjoys any edge in photovoltaics is technology that NREL helped nurture, he said. NREL can be regarded as a success story for clusters, Mr. Zweibel said. Rather than being limited to a region, however, photovoltaic products are a national cluster. While there were several Colorado-based spin-offs from NREL, "that was just as accident because it was a national program," he said. DISCUSSION Mr. Zweibel began the discussion by noting that national laboratories don't have great reputations for commercialization. They do have reputations for per- forming their national security missions. "So why should the zebra change stripes now?" he asked. Dr. Rottler responded that while he can only speak for Sandia, he thinks that leaders of all of the other labs would agree that "what they have and what they manage for the government represents a unique asset." He noted that many national labs were founded in the past 30 to 60 years with concrete missions. Sandia started with a focus on nuclear weapons but broadened in the 1970s to the energy program. In the past 10 years, it has widened its definition of national security, as have other labs. "Each of these institutions recognized 20 years ago that in order to survive

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PANEL V 109 they had to rethink the way they contribute for the country," Dr. Rottler said. Sandia decided it should move technologies into the economy. For Sandia, the shift toward commercialization was a natural move, he said. The lab "really sits at the interface of research and application," he explained. "If you visit us and watch us, what you will observe is a pretty deep and broad investment in science, but an investment with an end in mind." Sandia also creates intellectual property that is useful for other applications. "So for us, we saw it as a strategic contribution we can make to the country in a way that not only can further the ambition and reputation of the laboratory but also expands our ability to have a high impact," he said. He noted that Sandia's slogan, "exceptional service in the national interest," was taken from a letter President Harry Truman wrote to the president of AT&T in the late 1940s, when that company was asked to take over management of Sandia. It is hard to work at Sandia without having that concept "pretty deeply engrained into your DNA," Dr. Rottler said. "For us, we saw this focus on moving technolo- gies into the commercial sector as a way to further provide exceptional service in the national interest. For national laboratories to continue to have relevance, I think it is necessary that they do so." Mr. Cabana of the Kennedy Space Center sees himself as "a steward of a critical resource for our future, and I want to make sure that it is maintained so that we have the ability to explore." Even though the International Space Station has only been functioning as a national laboratory for a year, when three more crew members were added, it already is making social contributions. Mr. Cabana said that as a result of research conducted on the station, scientists believe they may have discovered a vaccine for salmonella. Now that the station has six crew members, there is more time for dedicated research, he added. Mr. Cabana said he wants to improve access to the space station. He wants the Space Life Sciences Lab to help develop experiments and host researchers who can work on microgravity environments and bring payloads into orbit. The United States has to think about its role in space, Mr. Cabana said. Other countries highly subsidize their commercial space programs. "It is not a pure commercial effort," he said. "And I think we have a role to play to ensure that our commercial companies are successful." Mr. Zweibel observed that when he was in a national lab, directions change when administrations and policies change in Washington. Even with the best of intentions, that can lead to dislocations at the lab. There also are complexi- ties with the way Congress thinks and develops law. He asked Dr. Rottler and Mr. Cabana if lab management, the DoE, and other federal agencies fully support commercialization, or whether they get "mixed messages." Dr. Rottler said he thinks the current Administration is very supportive of commercialization and moving research and development to the private sector. "For me, it's important for us to capitalize on that and use it to our advantage," he

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110 CLUSTERING FOR 21ST CENTURY PROSPERITY said. It doesn't matter if administrations come and go. "If what you are doing is relevant, and you deliver a quality product at a fair price, you will continue to do what you do," he said. Whatever the lab does must be relevant for the future, criti- cal to the nation's success, and present opportunities for growth. "If you structure yourself correctly, the right things are going to happen," he said. Mr. Cabana said changes in administrations are a reality. "We accept those cycles as a natural part of our great republic, and what we try to do is sustain an institutional commitment to this," he said. "We think about our goal of moving technologies into the economy and ensuring our labs think more about how to use relationships and partnerships with other government agencies, industry, and universities to meet national priorities." John Epstein, an advisor to U.S. Senator Jeff Bingaman (D-NM), was asked to give his opinion from the perspective of Congress on the national labs and their mission. Mr. Epstein replied that one problem is that the DoE's approach to com- mercialization at federal laboratories has been disorganized. The 2005 Energy Policy Act50 had several provisions to promote technology transfer by national labs, including appointment of a coordinator within the DoE. Mr. Epstein says he believes that person has finally been appointed. "So we have good hope," he said. "But as Reagan said, `Trust but verify.'" Senator Bingaman sees technology transfer by national labs as a "two-way street," Mr. Epstein said. Research parks can be built next to federal laboratories to help create clusters. While that is good, "at the end of the day it's important to look at the reverse osmosis," he said. "Many times these spin-off companies come up with good ideas outside the fence that then go back inside the fence." From the federal government's perspective, "it's important to have pretty free thinkers outside the fence so that they can expose the lab to fresh ideas." Brian Darmody, president of the Association of University Research Parks, noted that not all national labs have good commercialization programs. Some, like Sandia, are privately managed.51 Others, such as the National Institutes of Health (NIH), are government-operated and tend to be less flexible. He said it would be great if NIH had an entrepreneur leadership program such as the one at Sandia. Mr. Darmody asked what can be done to spread best practices between federal laboratories so that the $25 billion they spend on R&D is used more efficiently. Mr. Epstein said the principle issue that must be considered is conflict of interest. The dilemma is that a federal employee "is working under the taxpayer's 50Title X, Sections 1001, 1002, and 1003 of the Energy Policy Act of 2005 (P.L. 109-58) contained several provisions to promote technology transfer and commercialization by federal laboratories, including establishment of a technology transfer coordinator at the Department of Energy, a working group of laboratory directors, an energy commercialization fund, a technology infrastructure program, and a small-business assistance program. 51Sandia National Laboratories is managed by Sandia Corporation, a company owned by Lockheed Martin, under contract with the DoE.

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PANEL V 111 dollar and making decisions on how taxpayer dollars are spent." Although Mr. Epstein said he thinks there is support in Congress for the idea of letting federal researchers enter private industry, the issue must be managed very care- fully. "The public puts trust in that employee," he said. While there is support at the policy level for the practice, he added, "the devil is in the details." Dr. Rottler said that Sandia has managed to build sustained support for such practices from its main customers, the DoE and the National Security Adminis- tration. Sandia also has enjoyed strong support from its congressional delegation of two Senators and three U.S. Representatives. He noted that Mr. Epstein of Senator Bingaman's office has been very supportive and authored the legislation now before the Senate and House. It also helps to have sustained leadership within the laboratory to support creative thinking, he added. "We started with a commitment to make this a part of the lab's strategy for the future," Dr. Rottler said. "But many of the things I showed you today were not part of some grand plan, where we said 20 years from now we want this, this, and this done." Rather, these programs evolved over time. Partnerships are the key. "It's about building relationships to help you think about creative opportunities, like we did with New Mexico." "It wasn't like we walked up to our state legislature and said, `Hey, how about a tax credit of $4.8 million for two national laboratories that are fully funded by the federal government.' They had to see this was going to provide a positive return to the state." Audience member Mary Ann Hammond of Business Oregon, the state of Oregon's economic development agency, commented that the state would like to expand its work with the Pacific Northwest National Laboratory (PNNL). "It is a key asset for us, but because it is funded by the feds and state funds are limited, it's tough not only to explain to legislators what the value prospect is, but also what we bring to the table when we meet with PNNL." She said that discussions generate "a lot of good feelings," but defining deliverables and how the partner- ship will work is difficult. Mr. Zweibel offered some advice based on his experience at NREL. The lab dealt with the state of Colorado. The lab has "collaborative research agreements" with private companies in which both parties do research in their own labs in parallel. Neither the lab nor the companies give money to each other. One way to facilitate such a partnership is for the state to give money to one of the parties. "In that way, you have an in-state company that wants to do work in an area that seems important," he said. At Sandia, Dr. Rottler explained, it was a matter of the laboratory going to the state and federal administrations with an idea. It requires commitment on both sides. It helps to make such proposals during the high point of an economic cycle "because you are not struggling to make ends meet when you have to take a little bit of risk," he said. Also, he said such proposals have to be about a relationship,

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112 CLUSTERING FOR 21ST CENTURY PROSPERITY not just a financial transaction. The state has to see some value in having a rela- tionship with the institution, and the other way around. The state must help financially, Dr. Rottler added. Each national laboratory is a full-cost recovery organization. "The federal government is not going to fund us to work for businesses in the state that are not consistent with the mission of the institution," he said. Some government funding has been critical to developing partnerships with large corporations. Goodyear, for example, likely never would have entered its relationship with Sandia had the federal government not put in some money up front, he said. The funding helped give Goodyear time to understand the relation- ship and see what it could get out of it. This is especially true for small companies. One example is the work Sandia has done for health spas in New Mexico. The spas are small businesses that take advantage of the state's natural resources. One spa in northern New Mexico had trouble maintaining the right temperature, Dr. Rottler explained. "They didn't have an understanding about how to engineer their system from a thermal man- agement perspective," he said. Sandia provided an engineer who quickly cor- rected the problem and helped the business. Dr. Rottler also cited Sandia's help for a small grower and processor of green chilies, a major crop in southern New Mexico. The company had a machine for cutting the stems off chilies that kept clogging and breaking down. "From an engineering perspective, it was not a great problem but for them it meant the difference between being solvent and insolvent," he said. Sandia assigned an engineer, who solved the problem. Such companies cannot afford to hire Sandia, whose services are quite ex- pensive, Dr. Rottler said. "Our people are highly paid, are some of the smartest people on the face of the earth, and have capabilities that exist only in our facil- ity," he said. "The only way this happened was for the state to put money into it through the tax credit. Financial resources are a must." One questioner noted that labs such as Sandia have contractual agreements with their contractors to be engaged in economic development. She asked whether national labs should be required to make development part of their mandate. Dr. Rottler was cautious. "I am always suspicious of mandates, especially if they come to us in a way that is a bit orthogonal to the mission, the thing the government pays us to do," he said. "I also am very skeptical when they come to us without funding. That always leads to a dilution of mission. It results in the institution itself generally not being too enthusiastic, and as a result it often turns out badly for all involved." On the other hand, he said, labs like Sandia recognize that, as institutions, they are quite well off now. They have large revenue streams, and their e mployees are relatively highly paid. "So we are extremely sensitive to not being seen as carpet baggers," he said, as a federally funded institution that spends a lot of pub- lic money but whose staff just lives there and move on at the end of their careers.

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PANEL V 113 It is important to be a contributing member of the community. While Dr. Rottler said Sandia believes economic development should be part of the lab's commit- ment, "how it gets funded and the terms and conditions around how that is created is a very sensitive issue because we don't want it to end badly. We want it to be successful. So we want it to be incentivized in the right way." Dr. Wessner asked Mr. Epstein to assess the odds of congressional passage of the bills to promote science parks. Bills have floated around Congress in various forms since 2004, Mr. Esptein observed, before adding that "the climate for this is pretty good right now. It is just a question of the initiative of elected officials," he said. Legislators are very concerned now about the recession and creating jobs. Federal labs should show them how many jobs science parks create, he said, and bills should be attached to a larger legislative package, "as long as they are not extravagant."