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6 Pursuit of Innovation The committee observes that the United States and the world are experiencing rapid technological advance, but that applications to construction have been relatively limited. U.S. construction and design have in the past played an important world leadership role that is now threatened, in part due to society's growing willingness to assign liability on a basis of ability to pay, and in part due to the competition's commitment to progress. In addition to making a greater effort in research and development and enhancing educa- tion and training, the U.S. construction industry must rekindle its enthusiasm for innovation if it is to maintain its place in the global economy. NATURE OF INNOVATION Innovation can occur in a design (e.g., suspension bridge) or in a material (e.g., reinforced concrete). It can occur by a major break- through based on a novel invention that dramatically and suddenly changes what we build (e.g., the need for airports was created by the invention of the airplane). However, innovation is more frequently achieved through many incremental improvements that serve to make a technology useful (e.g., improved roadway paving materials). Most innovations (including those in infrastructure) are the re- sult of absorbing an invention, often after it has been developed for 85

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86 BUILDING FOR TOMORRO W another purpose. In each era, certain primary inventions become the basis for much of the innovation that occurs. At present, a number of new primary inventions are driving change in construction: . Photonics: those inventions that produce coherent light that can be amplified and propagated, such as lasers, masers, and fiber optics. Paths of light will increasingly replace the wires along which messages flow, and lasers have found application in field surveying as well as in factory cutting and welding. Biotechnology: genetic engineering, neuroengineering, and the recoding of macromolecules of living things to produce new or- ganic substances that can have applications in buildings and infras- tructure. Pollution control and hazardous waste disposal stand to benefit greatly. . Materials science: fundamental reformation and fabrication of inorganic materials to provide performance characteristics not found in nature, such as high-strength composites, rapid-flow mem- brane technology, and superconductivity. This latest discovery may have far-reaching impacts on the storage of electricity and transport technology. . . Microelectronics: circuits, switching mechanisms, data stor- age devices, amplifiers, and sensors. Such devices can extend human strength and dexterity through robotics; support data collection and analysis to enhance the speed and effectiveness of human actions; and make possible graphic input and output of data and so begin to substitute a picture for a thousand words. Such innovations may have profound implications for construc- tion. They may change working relationships between designers and constructors. Buildings themselves are becoming more "intelligent" as they have electronic enhancements added to their information and communications systems as well as the controls for mechanical equipment. Robotics and other forms of automation are beginning to provide practical applications for performing difficult or dangerous job-site tasks, and may well alter the economics of much work done on the job. The impressive efforts of Japan's construction industry have been described. European firms as well have undertaken aggressive searches for innovation, particularly in the development of propri- etary construction systems. These new systems are based on exten- sive integration of design, fabrication, and erection processes, all of which are carried out by a single firm. Several large European firms

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PURSUIT OF INNOVATION 87 have succeeded in vertically integrating their business structures to include the management of key materials supplies, design and engi- neering expertise, development know-how, and financing capability. The economic integration into one firm of these functions more eas- ily allows the construction firm to capture the economic benefits of productivity and quality improvements through the adoption of new technologies. Because there is better control of costs, such integrated firms develop a competitive advantage. Firms in the United States continue to take a passive attitude toward construction innovation. Even the largest U.S. firms, which may have the resources to undertake significant research programs, continue to put their faith in the strategy of being "technology fol- lowers." Indeed, many large U.S. construction firms have suggested that by not being committed to any one proprietary technology they are at a strategic advantage in being able to pick and choose among the latest technologies around the world. The comrn~ttee questions the wisdom of this strategy. In a global market, those firms that have developed a proprietary technical advantage are in a position to refuse to grant licenses to firms with which they do not wish to com- pete. Even when the technology is available in principle, individuals and firms are often deterred by the initial intellectual and financial investment required to apply it in practice. There are three ground rules that seem to be needed for any seri- ous effort to encourage innovation in the U.S. construction industry: . For major innovations to take hold and become common, they need to be founded on a confluence of basic research and practical improvements. In other words, they rely as much on basic research (to the extent it is still useful to use that term) as they do on applied engineering. Often the area of basic research used bears no obvious relation to the eventual practical application. . The search for innovation must allow for major breakthroughs followed by incremental advances, and it can include improvements in design as well as materials. During the overall process of invention, various improvements reinforce one another and encourage public demand, in such a way as to promote further innovations. . Mechanisms are needed to capture the potentially sizable payoffs of innovation for those who attempt it. Early American bridge innovations (from the nineteenth century) are a good example, because generous royalties were paid for the use of the ideas that had been granted patents.

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88 BUILDING FOR TOMORROW OPPORTUNITY IN IN:FRASTRUCTUR1: Within the United States, as in most of the world, there is with- out question an opportunity to increase the performance character- istics of those systems used to transport people and goods, obtain water, remove wastes, supply energy, and facilitate communications. There is also reason to include those buildings used either for public purposes (e.g., schools and hospitals) or built with public funds (e.g., government offices, court houses, and prisons) as a part of the public works infrastructure. Under this broad definition of infrastructure, the United States in 1984 invested $102 billion, 30 percent of its design and construction budgets (see Tables t! to 13~. Development of advanced infrastructure is a challenge, worthy of a cooperative international effort. It will be difficult to structure these developments to match the performance requirements of a soci- ety utilizing advanced science and technology, and make them more than incremental improvements to the present modal technologies. In the developing part of the world, where the most rapid urbaniza- tion is happening, the challenge is to develop technology appropriate to their requirements rather than to impose solutions produced for industrial nations. There are two reasons for the United States to do more about advancing the technology of infrastructure. It would benefit within its own borders from new and higher-performance systems, and it could also have another opportunity for marketing its technology on a global basis. This committee recognizes the urgency of maintaining and extending the existing networks of public works that underlie U.S. cities. However, the nation also needs to develop new and higher-performing technologies to gain the potential market that improved performance makes possible and to avoid an indefinite future drain on the public purse from maintaining the older systems. The existing infrastructure is based on a set of inventions that emerged toward the end of the last century. These inventions pro- duced a second generation of urban systems that provided perfor- mance characteristics substantially different from those previously used in all of human history: . Structural steel frames for buildings. When this method of construction was first introduced in the 1880s in Chicago, it made it possible to erect structures that were taller than the five- or six-floor

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PURSUIT OF INNOVATION TABLE 11 Estimates of Private Construction Volume that Might Be Included Within the Category of Infrastructure (in $million), 1984 Type of Private Construction (by census category) Residential buildings Nonresidential buildings (organized by functions) Industrial Office Other commercial (warehouses, silos, retail stores shopping malls, drugstores, parking art vendee stations. barber Total Infrastructure Valuea Valueb 145,059 13,745 25,940 22,167 =~ ~ _ ~7 shops, dance schools) Religious 2,132 Educational 1,411 1,411 Hospital andinstitutional 6,297 6,297 Miscellaneous 2,455 490 (movie theatres, casinos, health clubs, radio and television stations, including bus and airline terminals, public utility buildings) Subtotal Farm nonresidential buildings Public utilities 74,147 18,198 2,860 (organized by industries) Telephone and telegraph7,1747,174 Railroads3,6713,671 Electric light and power19,47319,473 Gas3,2333,233 Petroleum pipelines271271 Subtotal33,82233,822 All other1,9121,912 (privately owned streets, bridges, parking areas, dams, reservoirs, sewer, water facilities, parks, and playgrounds) TOtalc Source: Bureau of the Census data, with staff extensions, 1984. 257,801 53,932 aValue includes cost of materials, labor, equipment rental, contractor profit, owners' overhead costs, architect and engineer services, miscellaneous charges on owners' books, interest, and taxes during construction. bInfrastructure is defined as including all buildings used for public purposes (e.g., schools) whether paid for privately or publicly, and all construction of "networks" for supporting buildings (e.g., roads). Where exact data are not provided an estimate has been made. CSubtotals may not add to totals because of rounding. 89

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90 BUILDING FOR TOMORRO W TABLE 12 Estimates of Public Construction Volume that Might Be Included Within the Category of Infrastructure (in $million), 1984 Type of Public Construction TotalInfrastructure (by census category) ValueaValue b Buildings (bv functions) `, , Housing and redevelopment 1,636 Industrial 1,828 Educational 5,5575,557 Hospital 2,03982,039 Other 6,8226,822 (administrative; police, fire, bus, and streetcar stations; subway garages and barns; jails; parking facilities; airport and marine terminals; electric power generating buildings; and so on) Subtotal 17,88314,418 Highways and streets 16,29416,294 Military facilities 2,839 Conservation and development 4,6544,654 (water resource protection and control, fish hatcheries, spillways, pollution control, levees, seawalls, canals, docks, piers, wharves, berths, and reservoirs built other than for potable water supply) Sewer systems 6,2416,241 Water supply facilities 2,6212,621 Miscellaneous 4,6544,654 (recreational facilities, power generating facilities, and other open construction for subways, streetcars, airport runways, parking, and so on) Totalc . . _ Source: Bureau of the Census data, with staff extensions, 1984. 55,186 48,882 aValue includes cost of materials, labor, equipment rental, contractor profit, owners' overhead costs, architect and engineer services, miscellaneous charges on owners' books, interest, and taxes during construction. bInfrastNcture is defined as including all buildings used for public purposes (e.g., schools) whether paid for privately or publicly, and all construction of "networks for supporting buildings (e.g., roads). Where exact data are not provided an estimate has been made. CSubtotals may not add to totals because of rounding.

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PURSUIT OF INNOVATION TABLE 13 Estimates of Private and Public Construction Volume that Might Be Included Within the Category of Infrastructure (in $million), 1984 Type of Construction Total Infrastructure Valuea Value b Public and pnvateC Private sector buildings Public sector buildings Total building components of infrastructure c Privately financed utility systems Publicly financed utility systems c Total utility components of infrastructure 312,987 102,184 18,198 14,418 32,616 33,822 34,464 70,200 Source: Bureau of the Census data, with staff extensions, 1984. aValue includes cost of materials, labor, equipment rental, contractor profit, owners' overhead costs, architect and engineer services, miscellaneous charges on owners' books, interest, and taxes during construction. bInfrastructure is defined as including all buildings used for public purposes (e.g., schools) whether paid for privately or publicly, and all construction of "networks" for supporting buildings (e.g., roads). Where exact data are not provided an estimate has been made. Subtotals may not add to totals because of rounding. 91 limitation of masonry walls that had dominated architectural design for all of prior human history. . . Elevators for moving people and goods vertically in tall build- ings, made possible by the Otis inventions for safety. Elevators re- placed stairways that, because they required human energy to ascend, were not practical beyond the five- or six-floor limitation of earlier designs. . The set of inventions that made possible indoor plumbing devices connected to water and waste systems, which replaced the outhouse, the slit trench, and all of the prior disease-ridden methods of disposing of human waste. . Central heating systems that, especially when they began to use the fluid fossil fuels of oil and gas, changed the logistics of supplying fuel for heat since fuel no longer had to be manually sup- pled to separate stoves and fireplaces located throughout a building (and ashes no longer had to be removed from each separate heating device). The discovery of electricity, and the subsequent invention of

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92 BUILDING FOR TOMORRO W generators, amplifiers, distribution methods, electric motors, and the light bulb, which substituted for the historical use of candles, whale oil, animal power, and so on. The telephone system based on the primary invention of Alexander Graham Bell in 1876 that made voice communications possible across great distances, replacing such ancient methods as town criers, rr~essengers, and mail. . The automobile, or more appropriately the internal combus- tion engine, which substituted a device for the conversion of a fossil fuel to useful energy for the animal power used in all of human history. The subway, or the underground railway, as first introduced in London, which provided for mass transportation within a crowded urban area, without pollution of the air or interference in the ar- rangement of buildings. There are many indications of limitations of the performance capability of this second generation of infrastructure technologies relative to today's demands. Their ability to support the activities of modern industry is sorely taxed. While there is the possibility that the recently completed work of the National Council on Public Works Improvement will stimulate Congress to provide major new support for infrastructure innovation, the committee feels that only through elective public-private partnership can innovation be achieved in practice. . Beyond the obvious plea to be made for increased government funding in the field, the programs of other countries illustrate the value to be gained through true partnership of private and public interests in the U.S. construction industry. This partnership should embrace research and innovation for both domestic productivity and international competitive strength. For example, projects built with government funds can assume the greater commercial risk involved in adopting innovation, as was demonstrated by the introduction of precast concrete segmental tun- nel liners to U.S. transit construction. This technology had been widely used around the world (since 1936 in England), but not in the United States because individual transit companies were reluctant to take the risk of being first. The Urban Mass Transportation Ad- ministration sponsored a research and development project to install concrete segments in one stretch of the Baltimore subway, and sud- denly this became the standard technology for U.S. transit systems. National Science Foundation projects done in cooperation with the

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PURSUIT OF INNOVATION 93 construction programs of other federal agencies could play a similar role for introducing innovations into design and construction. Precedent also exists for private-public cooperation in competi- tion for international projects. While the Three Gorges Project in the People's Republic of China was not resolved as the team might have hoped (see Case Study 6), the experience is a valuable lesson demonstrating U.S. ability to emulate the institutional arrangements of British, French, Dutch, or Scandinavian firms and their govern- ments. However, even this precedent is not enough. The U.S. construc- tion industries' 1.2 trillion firms need a stronger and more effective voice in national policy. Existing industry organizations play an important role in representing the particular interests of their mem- bership, but there is no forum for resolving inevitable conflicts and initiating cooperative activity. GLOBAL PARTNERSHIP FOR INNOVATION As the final chapter of this report will discuss, new or altered institutions are needed to make this partnership of private and public interests effective in the United States. The committee feels strongly, however that the oDDortunities for innovation in construction and . . . , , ~ . ~ . . . ~ ~ ~ 1 _ 1 ~ _ _ ~1_ _r _ _~ ~ _ ~ _ ~ ~ ~ the potential world economic ana SOClal DenenL~ Of capturllls ~ll=~= opportunities warrant partnership on a global scale, a partnership to work in the United States as well as abroad. U.S. construction and design firms have found it desirable to rely on comparative advantage and pursue a strategy of cooperation rather than competition, as the examples and case studies gathered by the committee have illustrated. The strategy is a good one for innovation as well. To make the strategy work, however, the U.S. construction industry must strive to maintain its traditional lead- ership in technology, for two key reasons: (1) loss of technological leadership may mean loss of comparative advantage and competitive position and (2) without the strength for good competitive position, meaningful cooperation becomes nearly impossible.

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94 BUILDING FOR TOMORRO W CASK STUDY6: COOPERATIVE EFFORT BETWEEN U S PUBLIC AND PRIVATE SECTORS: PROPOSAL FOR THE THREE GORGES PROJECT IN CHINA For six weeks in 1985 a group of leaders in engineering design and construction sequestered itself in a hastily assembled office in Wash- ington, D C The group* goal was to accomplish a task many might think impossible: create a proposal to design and construct one of the world* largest civil engineering projects the Three Gorges Project in the People* Rep public of China The impetus for this chasten gin g undertaking was an invitation from high-level Chinese officials for the United States to take a lead role in project development The enormousness of the Three Gorges Project and the brute] proposal deadline were complicated by the fact that both the proposal and the work would be done through a combination of U S private and public sector groups The "Team America" effort, as it was dubbed, resulted in much more than a document The undertaking showed that read or per- ceived differences and barriers between U S government agencies and private firms can be surmounted to meet shared goals In the case of the Three Gorges Project, where US involvement would have far-reaching erects for the nation and others, the accomplishment was admirable and one that can serve as a prototype for future cooperative efforts Another less favorable, but equally important, lesson came out of this exercise While the Chinese government accepted the proposal, the work was not pursued due to Jack of fin ancia] support from U S government and/or private industry sources As a result, proposed feasibility studies are now being done by a nation in which the private and public sectors cooperate to best advantage Canada The Three Gorges Project was conceived early in the 1900s by Dr Sun Yat-Sen in his "Plan for Industrialization of China " "It is the Jong-cherished wish for the Chinese to construct the Three Gorges Project Completion of the project wiR be of great significance to the industrialization of the country," wrote Sun, who is stir] hailed as a visionary by his countrymen Nearly a century after Sun's predictions, the powerful Yangtze River frequently ravages the valley below with floods that endanger hundreds of thousands of people and major agricultural and indus- trial bases Forty percent of China's food supply is grown in this

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PURSUIT OF INNOVATION 95 valley. Industry-the heart of the country* revitalization-is crip- pied as 40 to 60 percent of capacity is idle at any given time due to power shortages. Harnessing the world* third longest river with the Three Gorges Dam wou]~1 provide approximately 1,300 megawatts of hydroeJectric-generating capacity and lead to formation of a nation- wide, Jarge-scaJe electric power pool. Improving navigation on the river is of significant economic im- portance to China, and the project would aid passage of ships the size of ocean-going vessels through narrow channels in gorge areas. Three Gorges would be a concrete gravity dam with a crest height of 510 to 575 It en c] a Jength of 7,200 ft. The dam would include two, four-step shiplocks, and the narrow reservoir would back up 100 miles or more. Following Sun's early vision for the project, plans proceeded slowly over the years due to a variety of changing conditions in China. Pioneering work was done in the 1940s by the Bureau of Reclama- tion * chief design engineer, Dr. John [. Savage. In the decades of the 1950s and 1960s, the Chinese made a detailed comparison of alter- native sites, and in 1979 proposer] the currently favored Sandouping site. In 1984, the State Council approved the project* feasibility re- port and in March 1985, the Chinese compiete`1 a preliminary design report. In May 1985, former Secretary of the Interior William Clark visite<] China on a diplomatic mission that le<:] high-]eve] Chinese dignitaries to invite the United States to propose a lead role in project development. Clark made a comrn~tment for the United States to aid China by defining concrete steps that could be taken to address technical and financial] issues. Upon his return to the United States in June 1985, Clark briefed approximately 50 representatives from a wide array of public en cl private sector engineering groups regarding the Chinese invitation. He challenged the representatives to respond as they saw fit and set a target date of July 15 for reply. The group rose to the challenge. Initial organizing efforts were done by a core group composed of representatives of the U.S. Depart- ment of the Interior, American Consuiting Engineers Council, Na- tiona] Council for U.S./China Tracle, and private engineering firms. A]] interested] parties were invited to donate resources to the ef- fort, with no promise of return on their investment; The official title for the group that evolved was "The U.S. Three Gorges Work- ing Group" but William Clark also chose to christen the effort as

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96 BUILDING FOR TOMORROW "Team America," reflecting the genuine patriotic spirit motivating the group on behalf of the nation 's best interests. Private and public groups contributing to the proposal furnished an estimated $1.5 million to $3 million in human, financial, and in- kind resources to this unique effort, which one participant described as the highlight of his career. Participating firms and agencies called in their top people, many from overseas assignments, to work on a job with a sense of mission for the nation, a job where top managers rolled up their sleeves, hammered out figures, and worked past old rivalries and differences. The team was composed of high-level executives such as chief executive officers, vice-presidents, and agency heads from public en c! private groups often known as competitors rather than cooperators. Side by side they shared their expertise in engineering design, con- struction, management, and financial and economic fields. Most of the participants had 30 years' experience in large-scale clam en c! hydroelectric power projects. Representatives of these private sector firms made up the team: My F. Atkinson Company Bechtel Civil and Minerals Engineering, Inc. Coopers and L`ybrand Merrill Lynch Capital Markets The Morgan Bank Morrison Knudsen Corporation Stone andWebster Engineering Corporation The federal government's contribution came from services pro- vided by the U.S. Department ofthe Interior's Bureau of Reclamation and the U.S. Army Corps of Engineers. Each party made an offering. With 85 years' experience in de- sign and construction of major water resources projects, the Bureau of Reclamation furnished approximately 20 experts in various fields to advance the proposal. Access to vital, existing data was pos- sible through working agreements between the bureau and China and through bureau engineers who were then working at the Three Gorges site. The Corps of Engineers, one of the few existing bases of knowledge in the United States for lock design, provided invalu- able expertise. The private firms contributed experience in preparing proposals and overall know-how on getting a job done on time and within budget.

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PURSUIT OF INNOVATION 97 An office was set up in Washington, D.C., as the base of opera- tions. The leader of the private sector parties moved to the city for the six-week assignment, while most other participants commuted from their offices around the country. Work days often became work nights as the group propelled itself from its first meeting June 10 to the micI-Ju~y target date. The tight deadline proved to be a great motivator, prompting the team to adopt more flexible, creative working methods than typically used in industry and government. Uncommon events often demand uncommon approaches, and one participant commented that, to his knowledge, a joint pubic-private effort of this magnitude had never before been attempted. The executives were called on to use aR the knowledge and abiii- ties, both technical and managerial, that have made them successful in their organizations. - ~ ~^ ~ ~ l he co-leaders, one trom private industry and one from a federal agency, found they could not manage the group members as they would their own employees. Without the power conveyed by their respective organizations, they had to ex- ercise persona] slims to "motivate the group to accept, support, and carry out shared objectives. The individuals practiced their interper- sona] communication skills by offering constructive critiques as work progressed. Management books on the bestseller list talk about cases such as this that bring out the best in managers to build teams, inte- grate diverse talents, and manage disputes in pursuit of a firs t-ciass product. Man ageria] skills were also required to address the unique or- ganizationa] structure within the People* Republic of China re- lating to design, construction, and management of existing and planned water resource projects. The Chinese government hi en- countered substantial difflcuities in building the Gezbouba Project on the Yangtze River downstream from the proposed site of the Three Gorges Project, mainly due to their complex system of interrelated ministries. The U.S. team worked on devising a more effective, sim- p~ified mechanism to avoid a recurrence of these problems on Three Gorges. The outcome of this intensive effort was a comprehensive pro- posa] including an implementation plan en c] economic study leading to a financia]pJan all completed on schedule and with a great dead of pride. The proposed recommended using China's own technical and human resources to the extent possible to help the nation develop a strong base of knowledge. The effort proposed would foster an

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98 BUILDING FOR TOMORRO W unprecedented level of cooperation and technology transfer between U.S. private anc]pub~ic sectors and the Peopie's Republic. The proposal, with a summary volume in both Chinese and English, was presented to China's Vice Premier Li Peng on July 17 at a setting appropriate for the occasion, the bureau's massive Hoover Dam. Later, in China, the proposal was presented to Madame Minister Qian, head of the Ministry of Water Resources and Electric Power. While the Chinese were quick to embrace the proposal in princi- p~e, the question remained as to who would fund a feasibility study on the project. The government-to-government effort initiated through U.S.-Chinese working agreements and furthered by William C]ark's visit had opened the door to future alliances, but neither the U.S. government nor U.S. private industry was able to surmount the stum- bling block posed by the estimated cost of $6 million to $8 million for the feasibility study. The tote] cost of constructing the project is anticipate<] to be approximately $8 billion. In October 1985, the Can aclian government signed an agreement with the Ministry of Water Resources and Electric Power for joint participation in a feasibility study. The agreement includes a grant from Canada to China to fund the work of Canadian engineers. The cost of the study is estimated at $7.5 million to $8.3 million, and the anticipated completion clate was December 1987. A number of high-]eve] Chinese officials have publicly stated that the Three Gorges Project will be built, but decline to establish specific time frames. Outside analysts predict that work will proceed when major issues are resolved, such as project financing, appropriate height of the dam, and environmental concerns. When asked if they would do it again, executives invo~vecl with Team America answer with a resounding "yes." The participants view the experience as a positive one and a challenge from technical, m anageria], anal political standpoints. The hard hours may have temporarily exacted a toll, but the Jon g-term payoff is an enduring sense of satisfaction on a persona] and a profession e] level. One spin-off of the tearn's work was exposing the stereotypes surrounding government workers in relation to their private sector counterparts. In the trenches, the team members found that ta]- ent, determination, and professionalism exist in many places. The involvement of experience<] senior professionals from the public and private sectors was the key ingredient in producing a quality product on time.

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PURSUIT OF INNOVATION 99 The invitation from the People's Republic of China to prepare this proposal is an indicator of their respect for the technical en c] professional expertise found in U.S. private industry and government. Through other joint projects, the country* best human resources can be melded for a variety of purposes, including technology transfer to help other nations achieve their goals, and enhancing the position of the Uniter] States in international competition.