5

Ensuring Benefits to the Nation

Technological change is the factor that allows increases in output without corresponding increases in the classical factors of production —land, labor, and capital. Yet technology does not work alone. It is embedded in a larger matrix of cultural predispositions and macroeconomic policies (Landau et al., 1996). A stable, low-inflation macroeconomic regime, for example, encourages investments in physical, human, and technological capital. The opposite conditions would not. The competition resulting from free trade policies encourages the rapid deployment of technological advances. A restrictive trading regime does not. A tax code that favors saving and investment, especially for long-term high-risk projects, provides the capital resources for new technology. But when savings and investment are discouraged, these resources become scarce. Similarly, the legal and social framework influence innovation. Tort law increases the risks of innovation, and anti-trust regulations influence the ability of companies to form research consortia. And the education system at all levels must provide the basic human capital needed for successful innovation.

Thus, the ability of government R&D to contribute to the competitiveness of American companies is only partially dependent on the quality of the research and technology. In larger part, technological competitiveness is interwoven into the fabric of our economy, laws, and society. For this reason (as is detailed in appendix B), it is very difficult to make quantitative assessments of the benefits of a specific government R&D program to U.S. competitiveness.

Nevertheless, it is clear that R&D programs that include outreach to potential stakeholders are more likely to benefit the economy than those that do not. In the course of its investigation into quantifiable links between R&D and economic benefits, the committee found several ways NASA could improve these links.



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Engineering Research and Technology Development on the Space Station 5 Ensuring Benefits to the Nation Technological change is the factor that allows increases in output without corresponding increases in the classical factors of production —land, labor, and capital. Yet technology does not work alone. It is embedded in a larger matrix of cultural predispositions and macroeconomic policies (Landau et al., 1996). A stable, low-inflation macroeconomic regime, for example, encourages investments in physical, human, and technological capital. The opposite conditions would not. The competition resulting from free trade policies encourages the rapid deployment of technological advances. A restrictive trading regime does not. A tax code that favors saving and investment, especially for long-term high-risk projects, provides the capital resources for new technology. But when savings and investment are discouraged, these resources become scarce. Similarly, the legal and social framework influence innovation. Tort law increases the risks of innovation, and anti-trust regulations influence the ability of companies to form research consortia. And the education system at all levels must provide the basic human capital needed for successful innovation. Thus, the ability of government R&D to contribute to the competitiveness of American companies is only partially dependent on the quality of the research and technology. In larger part, technological competitiveness is interwoven into the fabric of our economy, laws, and society. For this reason (as is detailed in appendix B), it is very difficult to make quantitative assessments of the benefits of a specific government R&D program to U.S. competitiveness. Nevertheless, it is clear that R&D programs that include outreach to potential stakeholders are more likely to benefit the economy than those that do not. In the course of its investigation into quantifiable links between R&D and economic benefits, the committee found several ways NASA could improve these links.

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Engineering Research and Technology Development on the Space Station These are not the only possibilities, but they should be included among those considered by NASA as it seeks to make the ISS and other space investments more productive for its stakeholders. The economic benefits of engineering research and technology development on the ISS could be increased in the following ways: The results of government-funded ERTD in the ISS and other government space endeavors could be incorporated in commercial space efforts and in terrestrial applications. This would require strong efforts to market the results of ERTD experiments to government and industry and to assist companies to commercialize capabilities acquired by carrying out NASA contracts. The ISS could be used as a laboratory for commercially-funded ERTD to create new and improved products and processes. Market mechanisms will be needed to encourage private ERTD on the ISS. A cadre of people who are skilled in conducting ERTD in space and who are capable of transferring its benefits to the economy could be organized. This will require enriched educational opportunities for future engineers, scientists, and technicians. DISSEMINATING RESULTS OF GOVERNMENT-FUNDED ISS ERTD Government-funded ERTD on the ISS will result in the acquisition of much knowledge and the development of numerous new technologies that potentially could be adopted by industry, eventually resulting in superior products and a strengthening of the overall economy. In principle, such knowledge and technology also could be adopted by other government agencies or by divisions of NASA, which could use them to perform their missions more effectively. Unfortunately, the results of government-funded R&D are only infrequently adopted by others without help from the sponsoring agency. Many technologies with commercial potential that are developed in government projects probably never reach commercial markets because the companies that could use the technologies do not know of their existence or do not have the skills to turn them into commercial products. Similarly, transfers of technology between (or even within) government agencies often fail to occur because of poor communication or a “not-invented-here” attitude. The results of engineering research also may have little effect outside the sponsoring agency unless they are distributed widely. In order for NASA to help return taxpayer investment through new commercial products and improved efficiencies in government programs, it will need to actively encourage the dissemination of the results of government-funded ERTD to industry and to other government agencies. NASA can support the dissemination of government-funded ERTD results by (1) ensuring that access to the results is made widely available to industry and to other government agencies by a variety

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Engineering Research and Technology Development on the Space Station of means, and (2) encouraging ISS contractors to transfer the technologies they develop in the course of building and upgrading the ISS to other venues. Transferring Results to Government and Industry Most attempts to transfer government technology have focused on linking technology or engineering-related information developed for a particular purpose with someone who can apply it to another purpose. NASA has obtained positive results through its transfer efforts (including exhibits, newsletters, briefings, lectures, symposiums and conferences, and publications). NASA could, however, improve the effectiveness of its transfer efforts by (1) developing an on-line database of ERTD results, (2) initiating an outreach effort to involve potential users of ERTD results with the conduct of ERTD on the ISS, and (3) encouraging exchanges of experts between NASA, industry, and universities. A comprehensive database containing information about the results of space station ERTD activities would include information on nonproprietary ERTD work performed to assist ISS development as well as information from ERTD experiments. Optimally, the database would be made available on the Internet and would be updated regularly. An outreach effort would include the gathering of feedback from all participants in NASA ERTD, interpreting this feedback, and using it to improve procedures and hardware. The outreach network would also market the ISS capabilities to the technical community. This would be especially important in the early phases of the program, when the community of users would still be small. Finally, the outreach network would seek ways to market the technology developed for the ISS to commercial users, particularly small entrepreneurial companies. It has been said that technology travels best on the feet of individuals who have worked with it. Incentives to increase such travel could include programs to encourage university faculty members to spend sabbaticals at NASA centers, exchange programs involving engineers at NASA centers and institutes and engineers in universities and industry, partially supported opportunities for industrial engineers to work at NASA centers or in university space laboratories for extended periods, and fellowships to enable graduate students to spend an academic year at a NASA center. Helping Contractors Commercialize ERTD Much of the technology developed for the International Space Station does not reside within NASA, but rather with the contractors and subcontractors who are implementing the project. While these companies have a strong incentive to use the technologies they develop for the ISS in bidding for other NASA contracts, some of these technologies could also have value for commercial space uses or in uses unrelated to space. If this value could be captured, NASA would

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Engineering Research and Technology Development on the Space Station be able to strengthen its contractor base and benefit the U.S. economy. However, assisting its contractors in applying technology developed for the ISS to commercial uses poses a unique challenge for NASA. This challenge arises from the nature of the government market. To compete successfully, NASA contractors and subcontractors have developed a highly sophisticated understanding of government space markets and specialized skills in competing there. But in some cases this specialization has inhibited them from developing a comparable understanding of the commercial marketplace, especially for nonspace applications. NASA could assist contractors in developing the needed understanding by adapting to this purpose a technique that has proved successful in other government applications: the enterprise growth forum. The term “enterprise growth forum” is a generic one borrowed from a highly successful series of such panels sponsored by the Department of Energy and the National Renewable Energy Laboratory. The concept originated with the Department of Defense, which for many years has used expert panels in assisting entrepreneurs to reach commercial markets with defense-related technology (Tucker et. al., 1994). This approach has been shown to be an effective means of supporting technology commercialization (Winebrake, 1993). It is best suited to smaller companies and entrepreneurial start-ups. Large firms have sufficient resources to provide equivalent services. In general, these panels function in the following manner. A group of qualifying companies, typically smaller businesses or entrepreneurial start-ups, is first identified. In this case, the companies would be drawn from NASA contractors participating in the ISS or related programs. The selected companies are invited to present their concept of a commercial business to a panel of private sector experts. These experts include persons skilled in the relevant technologies, representatives of potential customer companies, venture capital investors and financiers, and experts in the legal aspects of entrepreneurship. The panel members are typically not compensated for their time, but their expenses are reimbursed. Their incentive is the opportunity to meet a pre-selected group of companies and entrepreneurs and the likelihood of establishing mutually beneficial liaisons. In seminar fashion, a representative of each selected NASA contractor would present a business plan for commercial development to the panel, much the way it would be presented to potential venture financiers or customers. The panel would discuss the plan and offer the enterprise a critique and suggestions for improvement. The presenting companies would gain not only from this critique, but also from the opportunity to interact informally with experts in the social gatherings that follow the formal seminar. Indeed, the experience of the Enterprise Growth Forum arranged by the National Renewable Energy Laboratory suggests that these informal contacts are much more than an opportunity for contractors to build an understanding of the dynamics of unfamiliar marketplaces and financing requirements among technology-based entrepreneurs. In some cases, deals are consummated directly as a result of the forum.

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Engineering Research and Technology Development on the Space Station Although a program of this sort suggests a high potential for successful technology transfer, it cannot be applied in a mechanistic manner. It is unclear, for example, how many NASA contractors would be motivated to participate if such a forum were offered. Thus, NASA would have to adapt the forum concept to the business environment and culture of the space contractor industry. NASA might want to begin with a small pilot program, perhaps operated through one or more of the NASA centers. The primary purpose of this experimental program would be to learn which specific approaches work well within the NASA contractor community. Only when these lessons are understood would the full program be launched. In addition to improving access to expertise and private capital, another way to support the commercialization of ISS ERTD would be to modify existing government support programs aimed at similar goals. One such program is the Small Business Innovative Research (SBIR) Program. By encouraging industry participation in Phase I SBIR studies (including subtopic identification and proposal rating cycles), expanding test and validation funding in Phase III, and cutting the concept to application time to one or two years (primarily by reducing the time allowed for proposal evaluation and the time between phases), NASA could reduce the risks of commercial investment and increase the return on investment. Businesses participating in the program would be much more likely to come up with marketable products. Finding 9. The nation will realize greater benefits from ERTD that goes into the development and enhancement of the ISS if contractors commercialize the technologies they develop. Many companies, however, will require assistance in bringing products based on ISS ERTD to the market. USING THE ISS FOR COMMERCIAL ERTD Commercially funded ERTD on the ISS, which would take advantage of the opportunities for R&D created by the large government investment in developing the ISS, has the potential to produce large benefits to the nation through the creation of new and improved products. Commercial use has already been officially recognized as one of the major goals of the ISS. Three of the five operational objectives listed in the space station's “Concept of Operation and Utilization” document (NASA, 1994), for example, refer to support for commercial use of the space station, and the NASA administrator made commercial applications of the space station one of the major considerations of the 1993 redesign of the space station (Goldin, 1993). In support of these goals (as well as other ongoing NASA initiatives to increase the commercial presence in space), NASA has begun to develop a program to support the commercial use of the space station. This program, however, is fundamentally flawed and must be rethought if commercial use of the space station for ERTD is to occur.

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Engineering Research and Technology Development on the Space Station Allocation of a Public Good NASA currently supports an embryonic “commercial” space industry through its Centers for the Commercial Development of Space (CCDS). In this arrangement, NASA's Office of Space Access and Technology (OSAT) provides free access to space and resources in orbit for experiments at the proof-of-concept level. NASA also provides a large share (typically about 30 percent) of the funding for most of these experiments. Investments by the companies involved usually range from tens of thousands to hundreds of thousands of dollars, much of it in labor or in-kind expenses. The other participants, which are usually state governments or universities, put up additional money and in-kind support. Most of the experiments being selected by OSAT under this program appear to be intended to lead to the manufacturing of products in space for use on Earth. Few, if any, are in the ERTD area. OSAT has done some advance planning to continue such commercial activities on the ISS and has found that—assuming it continues its current policies —demand for space station flight opportunities, as well as demand for future funding for the experiments, will outstrip the available supply. OSAT plans to ration available capacity by analyzing candidate experiments and selecting the ones that, in its judgment, will best serve the goal of increasing the commercialization of space. Although this may allow NASA to weed out poor projects, it may also result in the rejection of worthwhile projects, if NASA does not perceive that they will achieve the goal that has been set. The problem is that NASA has taken upon itself the job of determining which commercial products are most likely to succeed. As a government agency, however, NASA is probably not the best kind of organization to carry out this task. NASA's view that the best commercial programs are those that may one day lead to manufacturing in space—an endeavor that has been called into question in previous NRC reports (NRC, 1988; NRC 1995) and has been unable to raise capital from the financial community—may be a revealing example of how government can go awry by trying to pick commercial winners. A better solution would be to let the commercial market itself decide which projects are most likely to be successful. There are a number of ways of letting this happen, but all would require that the “ willingness of the experimenter to pay” be relied upon more as a criterion for resource allocation and that NASA relax some control over decisions for ISS manifesting and resource allocation. It is important to note that this new approach should not be applied to the entire space station. It should only be applied to the portion of the space station resources dedicated to commercial programs. Allocating ISS Resources to Commercial Users To let the market select ISS projects, NASA must make ISS resources (including payload accommodations, electric power, crew time, and communications)

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Engineering Research and Technology Development on the Space Station available to the companies that are most willing to pay for them. This could be achieved either by selling resources at a set price or by auctioning them to the highest bidder. Setting prices for ISS resources would raise two problems, however. First, the amounts that commercial companies would be willing to pay for these resources is not known, and NASA might be faced with under- or over-subscription if its demand estimates were incorrect. Second, periodic price adjustments would be needed to respond to changes in demand. These adjustments would also require guesses about commercial demand, which could be influenced by political or institutional interests. Periodic auctions of ISS resources would avoid these problems, since prices would adjust to demand. To simplify the process, NASA could auction large resource blocks (such as entire racks or pallets) rather than individual accommodations (such as single drawers in an express rack). The winning bidder would then be able to use the resources itself or sell individual drawers or other resources to other users. This approach would free NASA from the task of marketing ISS resources to large numbers of individual users, instead putting the task into commercial hands. For the auction to work, however, the pricing structure for ISS resources could not be undercut by more generous government-subsidized pricing on other space platforms (such as the Space Shuttle). One concern that arises in auctioning resources originally paid for by the government is whether the resources will be used in a way that meets the government's goals. Although NASA intends to create a commercial space industry, it is not clear whether the agency is willing to support an industry built on selling items without any scientific value, such as stamps for collectors or billboards on the outside of the ISS. NASA could ensure that commercial ERTD and other scientific experiments were not squeezed out by such payloads by “zoning” commercially auctioned resources to ensure a majority of scientific and engineering payloads. Finding 10. NASA's plans for commercial use of the ISS do not include ERTD and seem more likely to support projects that require subsidies for the foreseeable future than to result in commercial use of the station. To enable commercial ERTD on the ISS, NASA must stop trying to pick commercial “winners” and use market-based mechanisms to select commercial experiments instead. EDUCATING NEW ENGINEERS AND SCIENTISTS ERTD on the ISS could benefit the nation by motivating and training a new generation of engineering and technology students. Over the course of their professional lives, these students will infuse the knowledge and skills they acquire into government and commercial space programs, as well as into terrestrial applications. NASA has recognized the importance of educating the next generation

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Engineering Research and Technology Development on the Space Station of scientists, engineers, and technicians, and currently supports a wide range of education initiatives aimed at target groups ranging from kindergarten and high school students to university faculty. ERTD on the ISS could contribute to this effort by giving students the opportunity to have their experiments performed on the ISS. These experiments need not necessarily be focused on ERTD because they will, necessarily, involve a good deal of engineering research and technology development. An effective program to fly student experiments on the ISS would include the following: Assistance in designing experiments for space should be provided. The contact organization described in chapter 4 would be well-suited to providing necessary advice and assistance. Integration requirements should be simple. The Space Shuttle's Get Away Special and Hitchhiker programs, as well as the ISS express racks and pallets, are useful examples of payload accommodations with simple integration requirements. Inexpensive accommodations on the ISS should be available. NASA will need to devote a small fraction of the ISS payload accommodations to student experiments. Students cannot afford the true costs of space experimentation, and some form of support from NASA will be required. This support could be used as an incentive to encourage high-quality experiments. Students also could learn by participating in the NASA-, university-, industry-, or government-led teams that would develop and conduct ERTD experiments on the ISS. Internships funded by NASA or industry, perhaps awarded in a competition, could encourage experimenters to include students in their projects. The level of student participation in a project could also be a consideration during review of NASA-funded ERTD proposals. RECOMMENDATIONS Recommendation 6. NASA should enhance its efforts to transfer the results of space station ERTD to industry and other agencies by developing an on-line database of ERTD results, initiating an active outreach program to improve links between ISS ERTD and potential users, and encouraging exchanges of experts among NASA, industry, and universities. Recommendation 7. To broaden the range and strengthen the effectiveness of its technology transfer activities, NASA should begin a pilot program to explore how the “enterprise growth forum” concept can be applied to small companies and entrepreneurs within the NASA contractor community. The forum concept should include multidisciplinary review panels that would emphasize both immediate feedback on business plans and giving participating companies an opportunity to make beneficial contacts with potential investors, customers, and partners.

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Engineering Research and Technology Development on the Space Station Recommendation 8. A certain percentage (perhaps 15 percent) of U.S. ISS resources—including both internal and external sites—should be auctioned in two or three lots to the highest bidder. The winning bidders would then have the right to use the resources themselves or to market them to other commercial users. The majority of these resources should be “zoned” for scientific and technical uses. All of them would have to meet ISS safety requirements. Recommendation 9. NASA should ensure that ERTD on the ISS helps to educate the next generation of scientists and engineers. This might involve reserving some internal and external ISS payload accommodations with simple interfaces for student experiments or encouraging NASA-funded ERTD projects to use undergraduate and graduate research assistants. REFERENCES Goldin, D. 1993. Redesign Considerations. Memorandum to the NASA Deputy Associate Administrator for Space Flight. March 12, 1993. Landau, R., T. Taylor, and G. Wright, eds. 1996. The Mosaic of Economic Growth. Stanford: Stanford University Press. NASA (National Aeronautics and Space Administration). 1994. Concept of Operation and Utilization, International Space Station Alpha Program. Volume 1: Principles. SSP-50011-01 Rev B. Washington, D.C.: National Aeronautics and Space Administration. NRC (National Research Council). 1988. Industrial Applications of the Microgravity Environment. Space Applications Board, National Research Council. Washington, D.C.: National Academy Press. NRC (National Research Council). 1995. Microgravity Research Opportunities for the 1990s. Space Studies Board, National Research Council. Washington, D.C.: National Academy Press. Tucker, T.R., L.E. Aitcheson, and J.W. Reynolds. 1994. The technology applications review: A catalyst for commercialization of defense technologies. Presented at the 1994 Technology Transfer Society Annual Meeting, June 1994. Huntsville, Alabama. Winebrake, J.J. 1993. A study of technology transfer mechanisms for federally funded R&D. Journal of Technology Transfer. 17(4): 54–61.