2
IOF Program Overview

Since it was established in 1977, DOE's OIT (and its predecessor, the Office of Industrial Programs) has played a key role in providing federal support for industrial R&D. OIT programs traditionally had drawn on input from industry, the professional societies, and other interest groups to determine which areas of technology to pursue. However, many of the projects selected were influenced more by their technological attractiveness than the needs of industry. Although many OIT programs were quite useful, and all were consistent with OIT's fundamental interest in energy efficiency and waste reduction, the overall program lacked a unifying principle for relating R&D to goals with a broad technical scope and wide industry acceptance.

In similar circumstances, some federal agencies have made decisions based on their own technical judgments rather than consulting with their industrial customers. Fortunately, OIT developed an entirely new approach. In 1992, OIT undertook an initiative to identify important energy-intensive industries and to use their R&D goals to leverage the limited funds available from government and private sources. The IOF program began in 1994 when an industry group for the forest products industry was established (see Box 2-1). Although the primary focus of the IOF program was on energy efficiency, the member industries were also large generators of waste and pollutants. Thus, the overall goals of the IOF program where expanded to include reducing the consumption of nonrenewable resources.

With strong support from DOE, OIT approached seven industries, chemicals, petroleum refining, forest and paper products, steel, aluminum, metalcasting, and glass. OIT already recognized that energy-intensive and waste-intensive industries offered the best targets for significant improvements and the best



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2 IOF Program Overview Since it was established in 1977, DOE's OIT (and its predecessor, the Office of Industrial Programs) has played a key role in providing federal support for industrial R&D. OIT programs traditionally had drawn on input from industry, the professional societies, and other interest groups to determine which areas of technology to pursue. However, many of the projects selected were influenced more by their technological attractiveness than the needs of industry. Although many OIT programs were quite useful, and all were consistent with OIT's fundamental interest in energy efficiency and waste reduction, the overall program lacked a unifying principle for relating R&D to goals with a broad technical scope and wide industry acceptance. In similar circumstances, some federal agencies have made decisions based on their own technical judgments rather than consulting with their industrial customers. Fortunately, OIT developed an entirely new approach. In 1992, OIT undertook an initiative to identify important energy-intensive industries and to use their R&D goals to leverage the limited funds available from government and private sources. The IOF program began in 1994 when an industry group for the forest products industry was established (see Box 2-1). Although the primary focus of the IOF program was on energy efficiency, the member industries were also large generators of waste and pollutants. Thus, the overall goals of the IOF program where expanded to include reducing the consumption of nonrenewable resources. With strong support from DOE, OIT approached seven industries, chemicals, petroleum refining, forest and paper products, steel, aluminum, metalcasting, and glass. OIT already recognized that energy-intensive and waste-intensive industries offered the best targets for significant improvements and the best

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BOX 2-1 A Case History: The Forest Products Industry The U.S. forest products industry employs 1.4 million people and produces products valued at more than $200 billion per year. Among the nation's top 10 manufacturing industries, it was the first Industry of the Future to develop a long range vision, Agenda 2020: A Technology Vision and Research Agenda for America's Forest, Wood and Paper Industry (AF&PA, 1994). The vision document was developed by a group of chief technology officers (CTOs) from U.S. pulp and paper companies and endorsed by a working group of chief executive officers (CEOs) for the American Forest and Paper Association. Mr. Robert C. Williams, then CEO of James River Corporation, representing the U.S. industry, signed a compact with DOE, represented by then Secretary of Energy, Hazel O'Leary, in November 1994. This significant event, however, has a rather interesting history. In 1993, OIT conducted a workshop called the "Pulp and Paper Mill of the Future" that was focused on the pulp and paper industry. Representatives of academia, industry, and the DOE national laboratories were invited to attend to discuss the long-term strategic needs of the pulp and paper industry. The emphasis of the workshop was on defining and documenting the long-term needs of the industry and determining how DOE could interact with the industry to address these needs. Although the meeting was informative and provided opportunities for personnel from the national laboratories to become familiar with technology issues in the paper industry, industry representatives seemed to be only lukewarm toward the notion of an "industry research vision." In any case, the industry participants were acting as representatives of their companies and were not organized as a group that could speak for the industry as a whole. A draft report, prepared by DOE-OIT, ''Paper Industry of the Future: Strategic Plan FY1994–1999" was submitted to industry representatives for review in October 1993. In the spring of 1994, Secretary O'Leary attended the Executives Conference of the Institute of Paper Science and Technology, a graduate school and research center supported by, and serving, the U.S. pulp and paper industry. There she met with a number of CEOs and apparently delivered a challenge, ''If you won't help us develop a vision, we will do it for you." Soon thereafter, a group of CTOs, under the auspices of American Forest and Paper Association, came together to develop the industry's vision. The CTOs first took stock of the current forest, wood, and paper industry and then described the desired state of the industry 25 years into

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the future. They divided their long-range technology vision and research agenda into six areas that would advance the entire industry and that were suitable for precompetitive and cooperative activities. The high-priority areas were: sustainable forest management; improved capital effectiveness; environmental performance; energy performance; sensors and controls; and recycling. Each area was relevant to all three industry segments—forestry, wood products, and pulp and paper products. After the compact between the U.S. pulp and paper industry and DOE was signed, six working groups were formed (one for each area), and they, in turn, created subcommittees of representatives of industry and academia. These subcommittees independently began to develop long-range visions of the industry (in their area) and to generate lists of their technology needs. Several of the groups got off to a quick start on their high-priority research needs because of similar activities sponsored by the Technical Association of the Pulp and Paper Industry (TAPPI, 1992, 1996). Not all committees started at the same time, and some members were uncertain as to what was expected of them, especially because of immediate pressure from DOE to propose projects for possible funding. Eventually, however, each working group developed a vision for the industry and each developed and delivered a portfolio of "Research Pathways." opportunities for leveraging government R&D funds. Large companies, which have significant R&D capabilities, had to be involved, but if only individual large companies were represented, OIT would not be able to attain a broad industry consensus. In sharp contrast to many federal R&D programs, the IOF program solicited broad industrial participation through industry associations rather than individual companies. In fact, some industries are represented in the program by two or more associations. Motivation OIT's motivation to move ahead with the IOF program arose in part from earlier experiences with government-industry R&D partnerships. Although a number of interesting and worthwhile projects had been pursued over the years, integrating OIT's mission and industry priorities posed a continuing problem. In some cases, government engineers and managers used responses to proposal solicitations to choose projects, identify interested industry groups and to secure partial funding. Sometimes proposals came from academic and other outside

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sources, which frequently generated a "technology push" to pursue technically attractive, sometimes visionary, projects. In other cases, industry groups had put forward proposals of their own. An example was the Steel Initiative, a major program originally championed by the American Iron and Steel Institute (AISI) intended to carry out research on methods of producing iron and steel without using coke. Because of the size (in terms of membership) and economic importance of AISI, the project received political recognition, leading Congress to enact the Steel and Aluminum Energy Conservation and Technology Competitiveness Act of 1998 (P.L. 100-680; 15 U.S.C. 5101 et seq.), generally referred to as the Metals Initiative. Although many of OIT's industrial R&D programs prior to IOF were successful, the forms they had taken were not appropriate to the political climate of the 1990s. To continue to thrive, OIT had to carry out its mission in ways that would attract support, including funding, from major industry groups, without becoming (or being perceived as) a form of "corporate welfare." To do this, OIT had to accomplish two tasks: (1) to engage the interest and support of corporate leaders at the highest levels; and (2) to present a logical and workable structure to DOE, the Administration, and Congress that could effectively leverage federal R&D funds. IOF Program Strategy The IOF strategy was to develop working relationships, first with industry associations and, through them, with the CEOs and other high-ranking officers of the member companies. This highly innovative approach differs dramatically from the usual contacts between government technologists and their industry counterparts. The strategy was intended to encourage a sense of "ownership" of the program by industry leaders. Industry would lead and own the process, commit its own human and material resources to the R&D, and benefit from the technological advancements. The key to industry support was that the "necessary" R&D would be identified by industry itself. OIT would act as a facilitator, responsible for bringing together producers, suppliers, customers, stakeholders, and outside experts; easing access to other government agencies with interests parallel to those of the IOF; coordinating participation by other government technical and scientific organizations; and participating in R&D through selective cost-sharing. The essential quality of OIT's role would be its constant readiness to assist without trying to micromanage IOF activities. IOF Process Once an industry association and the CEOs have been bought into the IOF process, they prepare a "vision document" outlining the industry's desired future

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for approximately 25 years. Generally, the industry association takes the lead role, and in some industries more than one association was involved in creating the vision document. Industry CEOs provide broad guidance, reinforce the sense of industry ownership, and communicate their commitment to the IOF process to the trade association and their own companies. The CEOs empanel a committee of technical experts, backed by consultants and academic authorities, to discuss the vision and draft the document for their approval and the approval of the industry association. When the vision document is complete, the industry and DOE sign a compact establishing a research partnership. The compact briefly sets forth a framework for joint R&D technology demonstration and addresses specific, as well as crosscutting, technology needs in the general areas of energy efficiency, recycling, and waste minimization. Individual companies, industry associations, government agencies, universities, and other research institutions, acting in collaboration can carry out the research. Significantly, the program is explicitly intended to benefit the industry as a whole. Some research collaborations already under way are reinforced, rather than replaced, by the IOF program. The next step in the IOF process is for an industry to prepare a "technology road map," with OIT acting as a facilitator. Industries may develop more than one road map to encompass multiple technologies and products. In contrast to the vision document, which is intended to describe an industry's desired future, strategic objectives and goals, and major challenges and barriers as revealed by situation analysis, the road maps are expected to be comprehensive, setting a technology strategy with milestones leading to realization of the vision. The road maps specify technical requirements, assess existing technologies, evaluate barriers and options, set technology priorities and paths to be followed, and establish targets and major milestones on the way to their realization. Vision documents typically take from one to three years to complete, but ideas for the road maps are usually formulated during the process. Road maps are usually prepared through industry workshops, with OIT participation and the assistance of professional workshop management groups, and drafts are submitted for industry comment and approval. Some industries require more than one workshop; others divide the task among teams. The implementation of the IOF strategy for each participating industry is detailed in Chapter 4. Throughout the IOF process, OIT continues to evaluate other industries. If an industry meets the OIT criteria (energy use and waste generation) and is committed to the process, it may be included in IOF. In late 1996, an industry team was formed for the agriculture industry. In September 1997, the board of directors of the National Mining Association (NMA) voted to become part of IOF and to begin working on a vision document. Once an IOF industry sets its research priorities, solicitations for research proposals based on those priorities are issued. The solicitation processes differ

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among the IOF groups. Regardless of the approach, however, OIT is responsible for the final funding determinations. To this point, the IOF program appears to be carefully thought out and efficiently managed. As road maps are completed and the pace of solicitation increases, however, OIT's management workload will necessarily increase. Two new industries (agriculture and mining) have joined the program, and other industries are being considered. For the program to remain successful, OIT must (1) adhere to its criteria for including new industries, and (2) develop an outreach program to communicate IOF results to industry.