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The Role of Public Agencies in Fostering New Technology and Innovation in Building 4 WHAT SHOULD THE ROLE OF THE FEDERAL AGENCIES BE IN FOSTERING NEW BUILDING TECHNOLOGY? Against this backdrop of the U.S. building-related industries as a whole, the committee considered the question, What should the role of the federal agencies be in fostering new building technology? As a purchaser and user of facilities, as well as a funder and performer of research on building technology, the federal government already plays a substantial role in the field. Should this role change? Opposing trends make it difficult to foresee the place of the building-related industries in the future U.S. economy. Some observers suggest that declining defense expenditures may spur growth in government spending on domestic public works and a shifting of production resources into this field. Others note that U.S. population growth has slowed and the nation's people are aging, which suggests that fewer homes and offices (and consequently less public works infrastructure) will be needed in the future. Some of these latter observers feel that the widespread 1990 U.S. real estate recession is only an initial demonstration of the market's response to gross overbuilding in many regions. The committee noted, however, that regardless of aggregate trends, the geographic distribution of the nation's population is likely to continue shifting. The substantial capital stock of public facilities will continue to provide vital support for the private sector's activities and will need maintenance and periodic refurbishment. Technological advances and rising expectations will continue to warrant the upgrading and replacement of obsolete facilities. Even if their share of the U.S. economy continues to decline as other sectors experience more rapid
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The Role of Public Agencies in Fostering New Technology and Innovation in Building growth, the building-related industries will continue to make important contributions to the quality of life. Some observers suggest that the U.S. industry could be on the brink of major change (Office of Technology Assessment, 1988). This industry will either undergo basic shifts in structure and production processes or lose out to foreign competition. The committee agrees. The technological gap between nations with higher and lower per capita incomes is narrowing in many fields, including much of the building-related industries. Declining relative costs of transportation and communication are likely to continue the trend toward multinational production of goods and services. Business for U.S. construction-related industries will not get any easier. The committee noted that we lack adequate statistics to form a clear and comprehensive historical picture of the development of new technology and innovation in the building-related industries. Nevertheless, on the basis of its review of evidence and the structure of these industries in comparison to others, the committee concluded that for at least the past two decades, the rates of U.S. development of new building technology and innovation have been lower and the role of government has been less positive than they should be, in terms of both the industry's potential capabilities and the nation's welfare. On all counts—to achieve better cost, quality, and performance in its own facilities; to enhance the quality of life in the United States generally; and to enhance U.S. industry's productivity in international markets—government should seek to foster new building technology and innovation. INSTITUTIONAL PERSPECTIVE In contrast to many other countries, there is no single U.S. government agency with explicit responsibility for representing or encouraging enhancement of the nation's construction industry as a whole. The Department of Commerce and the Office of Science and Technology Policy share executive branch concern for the nation's technology and industrial competitiveness, but seldom address issues of construction and facilities. 32 In addition, there is little basis for communication among the agencies that undertake construction or manage facilities as accessories to their primary missions and the policy-oriented 32 A major exception is the focus on the construction industries of Japan and the United States in trade negotiations of the late 1980s and early 1990s.
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The Role of Public Agencies in Fostering New Technology and Innovation in Building agencies that may include construction, building products and equipment, or facilities themselves (i.e., housing or highways) within their broader purview.33 Institutional analogies have from time to time been drawn between the U.S. farm and construction industries, both characterized by many small producers spread across the country, and proposals have been made that there should be a construction equivalent to the Department of Agriculture or a U.S. government equivalent of other nations' ministries of construction. In a historic example, the national crisis of the Great Depression of the 1930s—during which the total annual rate of construction in the United States dropped to one-third of its average in the late 1920s—fostered creation of the Public Works Administration (PWA). However, the diversity of interests among federal construction agencies and the many organizations active in the private sector have made the construction sector as a whole generally unresponsive or antagonistic to such proposals. Although the PWA survived for some years, its role as builder was largely relinquished to local government or supplanted by special-purpose agencies (Craig, 1984). Other centralized building programs of the era, such as the Works Projects (originally Progress) Administration, were dismantled as the nation went to war in the 1940s. Analogies may also be drawn between the U.S. construction and aerospace or shipbuilding industries. In both of the latter, the purchaser/owner customarily takes delivery of a fully finished aircraft or ship from a single responsible contractor, rather than entering into separate agreements with providers of design, construction, and interior furnishings, fixtures, and equipment. Committee members noted that U.S. shipbuilding 20 to 30 years ago offered many parallels to construction today. In the late 1970s and early 1980s, shipbuilding underwent a "quiet, relatively unpublicized transformation" marked by increasing labor productivity and improved product quality (Marine Board, 1984). The transformation was spurred by loss of competitive commercial shipbuilding awards to foreign shipyards and subsequent actions within the industry to learn why. One major action was the 1976 formation, jointly by government and industry, of the National Shipbuilding Research Program to make Japanese technological advances accessible to U.S. shipbuilders. Some U.S. shipyards had Japanese personnel working side by side with U.S. counterparts to shift U.S. production practices. However, despite some bright spots, the U.S. 33 Again, there are exceptions. The U.S. Army Corps of Engineers, which undertakes a great deal of construction, and the Department of Transportation, primarily a policy-oriented agency, are jointly responsible for exploring magnetic levitation (maglev) technology for high-speed ground transportation.
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The Role of Public Agencies in Fostering New Technology and Innovation in Building industry as a whole has failed to adjust well to global competition and declining military procurements, and has continued to shrink. The committee also considered more recent centralized government R&D programs, such as the Defense Advanced Research Projects Agency, widely credited with sponsoring major technological advances in electronics and guidance systems, but it concluded that such institutions would match poorly with the structure of the industry. Hence, in considering what the precise nature of government's roles in fostering new building technology might be, the committee assumed as a starting point that construction responsibilities will remain distributed among the several agencies now holding these responsibilities. Establishing a new construction agency or centralized construction program, or any substantial consolidation of policy responsibility for the building-related industries, is unlikely to be achievable or appropriate. Such options were given no further consideration. ALTERNATIVE ROLES FOR GOVERNMENT On the basis of its findings described in Chapters 2 and 3 and the assumption that current allocations of agency responsibilities will remain for the most part unchanged, the committee considered the range of strategic roles government might play in fostering new building technology. This range was characterized in terms of three broad options representing increasingly proactive levels of government involvement in the U.S. building sector's innovation processes: Business as usual would represent a continuation of current policies and levels of funding. This is the baseline against which any recommendations for change must be compared. Current events suggest that the proportions of federal agency construction budgets may, in the future, shift toward civilian facilities and decline in absolute terms for at least the next decade. State and local governments could, in aggregate, experience substantial growth in construction for renewal of physical infrastructure, renovation and expansion of educational facilities, and accommodation of increased work loads associated with programs formerly administered at federal levels. Steady federal commitment to building-related R&D is assumed because benefits would accrue to more active state and local governments as well as federal agencies. Active mission-oriented pursuit of new technology would involve agencies taking definite action to encourage the development of new building technology that can be applied in their own facilities projects. General policy actions might motivate the agencies, for example, (1) required "new technology set-asides" in procurement to permit sole-source procurement of new technology and to fund testing and demonstration; (2) required annual progress reports by
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The Role of Public Agencies in Fostering New Technology and Innovation in Building each agency to the Office of Science and Technology Policy; or (3) establishment of presidential awards for new building technology demonstrations. Mechanisms would be developed to overcome fragmentation and encourage common direction among agencies and within the industries. A new commission or institutional focus within an existing agency could be such mechanism. Individual agencies could respond by assigning responsibility and resources to a centralized "building innovation office" or contracting with one of the national laboratories for assistance in identifying promising projects and technologies. Individuals and firms involved in developing and demonstrating new technologies with commercial potential would be given patent and copyright protection to encourage the dissemination of successful new ideas. The return on federal investment would be realized in direct benefits to the agency applying the new technology, and the expenses of inevitable uncertainties and occasional failures would be accepted by the executive branch and Congress as the cost of the program. Establishing a system for evaluating and reporting the results of new technology applications would assume that this return on investment is recognized and favorable. Enhanced federal research, development, and demonstration support activities would be coordinated and possibly expanded (or new ones created). Effort would be made to draw more effectively on state and local governments and the private sector. A national program, based perhaps on the model of the National Science Foundation or the Strategic Highway Research Program, both congressionally funded, or the Army's Construction Productivity Advancement Research program, would provide focus and leadership. A coordinated effort could be made to optimize return—from a national perspective—on the R&D and demonstration investment of mission-oriented construction agencies. Tax disincentives that discourage private investment in new building-related research and development could be reduced and actions taken to decrease the costs of the tort liability system, limit the diversity and restriction of building regulations, and generally lessen the regulatory and administrative impediments to the application of new technology (e. g., restrictive codes and guide specifications), consistent with the protection of safety, health, and environmental integrity. The problems of public policy toward technological innovation are exceedingly complex, as illustrated by several potential paradoxes (David, 1986). First, efforts to speed the rate of innovation in industries supplying capital goods may create expectations of more rapid obsolescence for those users who consider adopting new technology when it first appears, thus encouraging a "wait-and-
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The Role of Public Agencies in Fostering New Technology and Innovation in Building see'' attitude that actually delays broad adoption.34 Second, tax and other subsidies for research and development can reduce the cost of initiating new ideas and thus diminish the value of being first to develop or adopt new technology, when there are many competitors in the same business. Finally, delaying introduction of technical standards to facilitate continuing R&D investment can retard effective application of technologies whose benefits depend on compatibility and system integration. Through such paradoxical effects, policy initiatives may have exactly the opposite of their intended impact. The case for encouraging wider adoption of new technologies in any particular area must therefore be considered primarily within that particular context. Policies and programs that will encourage the development of new construction materials, for example, could be totally ineffective in fostering innovation in building electrical systems. The committee determined that a ''top-down" consideration of broad strategic directions would be a useful first step in formulating recommended government action to foster new building technology, but only a first step. Specific recommendations for action would have to be considered in the context of the agencies called on to act. EVALUATION OF STRATEGY OPTIONS As noted in Chapter 2, the committee identified at least three key reasons why government, in general, and the federal government in particular, might seek new technology and innovation in building, and determined that the federal government should, on all three counts, seek to foster new building, technology and innovation. These reasons become then the objective to be achieved by government strategy to foster new technology. The committee considered strategy proposals in terms of their likely contribution to these three objectives: better cost (initial or over the course of a building's life cycle), quality, and performance in government facilities; enhanced quality of life in the United States generally (and world-wide), through encouraging better cost—initial or life cycle—quality, and performance in private sector building; and enhanced U.S. industrial competitiveness in international markets. 34 Problems such as building obsolescence and design actions that can be taken to avoid these problems are the subject of another Federal Construction Council-sponsored Building Research Board study.
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The Role of Public Agencies in Fostering New Technology and Innovation in Building The private and social costs of achieving these objectives must be both affordable and in reasonable proportion to the benefits of achievement. Table 4-1 summarizes the results of the committee's discussion of the range of strategy options in terms of the increasingly proactive levels of government involvement. The committee agreed that "business as usual" is likely to lead to increasing penetration of foreign building products, equipment, and technology into the U.S. market, with resulting losses of employment and output for U.S. companies. To the extent that displaced sales and jobs are replaced in other sectors of the economy, and as long as conditions of international trade make it possible for U.S. builders and consumers to purchase foreign technology without paying significant penalties, the negative consequences of this strategy may be limited. However, experience in manufacturing suggests that the "new" jobs created are lower skilled and lower paid. Moreover, government agencies may suffer particular hardship if restrictions on the purchase of foreign goods and services limit the agencies' ability to obtain performance and costs available in the private sector. Agencies may gain some benefits by taking action to encourage the development of new technology to be applied in government building programs. Such action might be similar to current support for technology advancement in areas with defense applications. However, as has sometimes been the case in defense, foreign holders of advanced technology may be the only reasonable recipients of such support and the primary beneficiaries of consequent innovation.35 In addition, broader public benefit will be realized only to the extent that effective transfer of new technology to the private sector is accomplished. Increases in federal support for new building technology development in general would have to be substantial to make a significant impact on innovation rates overall. In the current political climate of sizable government deficits at all levels and federal disengagement from activities that can be distributed to state or local levels, major growth in funding for building-related R&D or demonstration projects seems unlikely. However, modest increases of 15 to 25 percent may be possible, and targeting of particular technologies could increase the likely return on this investment. Research centers such as those established to focus on cement technology and large-scale structures are one proven method for accomplishing this targeting effectively. 35 For example, Japan's Hoya Corporation received $8 million in U.S. research funds for the development of high-purity glasses for use in large lasers. The techniques they are perfecting make the company a strong competitor in the markets for television and photolithography lenses (the latter are used for microchip manufacture) (Eisenstadt, 1991).
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The Role of Public Agencies in Fostering New Technology and Innovation in Building Table 4-1 Evaluation of Strategy for Fostering New Building Technology Anticipated Achievement of Objectives Levels of Involvement Better Cost, Quality, and Performance in Government Facilities Enhanced Quality of Life Enhanced U.S. Industrial Competitiveness Business as usual: Baseline; continuation of current policies and levels of funding More rapid foreign technology growth may put government at a disadvantage because of "Buy America" raising costs or reducing performance compared to today's levels Increased introduction of foreign technology could maintain U.S. quality life U.S. building industries likely to be under increasing pressure of foreign competition Achievement Relative to Base Case Active mission-oriented technology pursuit: Agencies take definite action to encourage new building technology applied in their own projects Short-term program costs may increase to cover testing, evaluation, and less successful demonstrations; public benefit will increase to the extent that successful technology is transferred Likely to have limited effect industry innovation rates; hence little impact overall Likely to have limited effect, unless on programs are restricted to U.S. firms; effect likely to be restricted to major products and project types for which U.S. firms compete overseas, such as transportation facilities, construction management, and equipment sales Increased federal research, development, and demonstration support: Expanded or new funding of building-related research and development activities Substantial increase in funding required to have significant impact; targeting of specific technologies may increase likely payoff Could increase innovation rates in targeted technologies To the extent that domestic innovation rates are increased for exportable technologies, competitive position of U.S. firms will be enhanced
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The Role of Public Agencies in Fostering New Technology and Innovation in Building Because of government agencies' leadership role in the construction sector and became agency programs are a primary means for effecting government policy, the committee agreed that government-wide "business as usual" is not an acceptable option. Federal agencies have a definite responsibility and role in fostering new building technology and should take action to do so. However, variations among agencies' missions and resources preclude adoption of a single prototype strategy for all agencies. The committee concluded that each agency must tailor activities to foster innovation to the specific characteristics of its programs . Each agency may then, in principle, continue with business as usual on many projects, while at the same time pursuing new technology in areas likely to yield greatest benefit to that specific agency and others sponsoring research and technology transfer efforts. In addition, even business as usual can be carried out in ways that encourage agency staff, designers, constructors, and suppliers to demonstrate new technology. The committee's recommendations for government action, presented in Chapter 5, thus include three elements of strategy at increasing levels of proactive involvement: Federal agencies responsible for developing and operating facilities should seek to encourage innovation in their own projects. These agencies, with the assistance of broader government programs that span the gulf between agencies, should undertake broader activities to enhance the effective transfer of technology from government applications to the private sector. Agencies should work together and separately to support targeted efforts to develop and transfer new technology in specific high-priority areas. Government's role in fostering new building technology will depend on the participation of a variety of agencies. Effective coordination may be needed in some areas, and monitoring of progress will be important overall, to ensure that government resources are well utilized. Chapter 5 discusses the committee's recommendations for implementing this strategy to enhance building innovation. REFERENCES Craig, L. 1984. The Federal Presence: Architecture, Politics, and National Design. Cambridge, Mass: MIT Press. David, P. A. 1986. Technology diffusion, public policy, and industrial competitiveness. In The Positive Sum Strategy: Harnessing Technology for Economic Growth, Landau, R., and N. Rosenberg, eds. Washington, D.C.: National Academy Press.
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The Role of Public Agencies in Fostering New Technology and Innovation in Building Eisenstadt, G. 1991. Watch out, Coming. Forbes (August 19): 64–68. Marine Board, National Research Council. 1984. Toward More Productive Naval Shipbuilding. Washington, D.C.: National Academy Press. Office of Technology Assessment. 1988. Technology and the American Economic Transition: Choices for the Future. Washington, D.C.: U.S. Government Printing Office.
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