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Strategic Long-Term Participation by DoD in Its Manufacturing USA Institutes (2019)

Chapter: 3 Alternate PublicPrivate Partnership Options

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Suggested Citation:"3 Alternate PublicPrivate Partnership Options." National Academies of Sciences, Engineering, and Medicine. 2019. Strategic Long-Term Participation by DoD in Its Manufacturing USA Institutes. Washington, DC: The National Academies Press. doi: 10.17226/25417.
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3

Alternate Public–Private Partnership Options

The committee reviewed materials presented at the workshop highlighting the features of business models used by other U.S. public–private partnerships and by similar international programs. Of particular interest for consideration in the future of the Department of Defense (DoD) institutes were features in the U.S. models (Table 3.1), including the following:

  • The practice of reviewing programs at prespecified intervals (e.g., 5 years) and deciding to renew, re-compete, or terminate based on results. Programs with a fixed term, such as Industry–University Cooperative Research Centers (IUCRCs), are planned with an increase in industry funding as federal funding phases out.
  • The Other Transaction Authorities used by DoD research and development (R&D) consortia, enabling fast development and a fast transition from prototype to production.
  • The facilitated connections to targeted acquisition programs provided by the Navy Manufacturing Technology (ManTech) Centers.
  • The cost-shared industry-driven agenda used by the precompetitive National Shipbuilding Research Program for research projects benefiting the whole shipbuilding sector.
  • The centralized National Institute of Standards and Technology (NIST) program office and core funding model for the Manufacturing Extension Partnership network.
Suggested Citation:"3 Alternate PublicPrivate Partnership Options." National Academies of Sciences, Engineering, and Medicine. 2019. Strategic Long-Term Participation by DoD in Its Manufacturing USA Institutes. Washington, DC: The National Academies Press. doi: 10.17226/25417.
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  • Technology transfer through students in the National Science Foundation (NSF) Engineering Research Center, IUCRC, and Advanced Technological Education programs.
  • Establishment of University Affiliated Research Centers (UARCs) in areas of DoD technical need and ability for UARCs to work as trusted agents across the full spectrum of technology readiness levels (TRLs) and manufacturing readiness levels (MRLs).

The workshop discussion of foreign models, and the content of Table 3.2, focused on high-level issues of global industrial policy that have been addressed in prior reports of the National Academies of Sciences, Engineering, and Medicine.1,2 Of particular interest in the foreign models (Table 3.2 and Table 3.3) were the following:

  • Prespecified reviews. Similar to the U.S. cases, foreign programs are often reviewed at prespecified intervals (e.g., 5 years); the governing bodies decide to renew, re-compete, merge, or terminate based on the results of these reviews.3
  • Size. Foreign programs tend to be much larger as a share of the nation’s manufacturing gross domestic product (GDP) and often in absolute terms. The programs profiled in Table 3.3 are 8 to 50 times larger as a share of manufacturing GDP than the Manufacturing USA institutes.

___________________

1 National Academies of Sciences, Engineering, and Medicine, 2018, Globalization of Defense Materials and Manufacturing: Proceedings of a Workshop, The National Academies Press, Washington, DC, https://doi.org/10.17226/25101.

2 National Research Council, 1990, The Internationalization of U.S. Manufacturing: Causes and Consequences, The National Academies Press, Washington, DC, https://doi.org/10.17226/1573.

3 For example, “[t]here was a major review of all the Catapults in 2016/17. Different Catapults had different outcomes as you would expect but High Value Manufacturing comprising the seven Centres came through with flying colours and was awarded guaranteed core funding for 5 years on a rising real terms trajectory. I completed my 6 years on the Supervisory Board last summer but I can probably find more detailed figures if you need them” (e-mail from Mike Gregory to Susan Helper and William Bonvillian, January 31, 2019).

Suggested Citation:"3 Alternate PublicPrivate Partnership Options." National Academies of Sciences, Engineering, and Medicine. 2019. Strategic Long-Term Participation by DoD in Its Manufacturing USA Institutes. Washington, DC: The National Academies Press. doi: 10.17226/25417.
×

TABLE 3.1 Alternate U.S. Public–Private Partnership Business Models

DoD Manufacturing USA 8 Institutes $96 million DoD OTA Consortia ~24, ~$2 billion
Functions Collaborative R&D Precomp. TRL/MRL 47 TRL 29
Technology Diffusion Industry members, IP licensing, DoD programs, MEP Industry teams, collaboration events
Workforce Education and Training K12, 24 year college, graduates, apprenticeships, veterans, government employees, continuing education certificates NA (could accept projects)
Network Across Centers Manufacturing USA, DoD meetings, ad hoc collaboration NA
Funding Core Operations OSD (ramps to zero) states, regions, members, project overhead Government industry dues
Government R&D Projects Federal government (often with cost share), Congress adds Government (cost share possible)
Industry R&D Projects Industry Industry
Contract Type TIAs and cooperative agreements OTA
Term to Renew/Recompete 57 years 320 years
Cost Share Expected As appropriate

NOTE: ATE, Advanced Technological Education; CA, cooperative agreement; DoD, Department of Defense; ERC, Engineering Research Center; IDIQ, indefinite delivery/indefinite quantity; IP, intellectual property; ISO, International Organization for Standardization; IUCRC, IndustryUniversity Cooperative Research Center; ManTech, manufacturing technology; MEP, Manufacturing Extension Partnership; MRL, manufacturing readiness level; NA, not applicable; NIST, National Institute of Standards and Technology; NSF, National Science Foundation; ONR, Office of Naval Research; OSD, Office of the Secretary of Defense; OTA, Other Transaction Authority; R&D, research and development; TIA, technology investment agreement; TRL, technology readiness level; UARC, University Affiliated Research Center.

Suggested Citation:"3 Alternate PublicPrivate Partnership Options." National Academies of Sciences, Engineering, and Medicine. 2019. Strategic Long-Term Participation by DoD in Its Manufacturing USA Institutes. Washington, DC: The National Academies Press. doi: 10.17226/25417.
×
Navy ManTech Centers 8 Centers, $56 million NSF ERCs, IUCRCs NSF Advanced Technological Education DoD UARCs 15 Centers NIST MEP 51 Centers
TRL/MRL 37 TRL/MRL 13 NA TRL 16; higher as directed NA
1. Navy acquisition programs
2. U.S. industry base
Through industry members NA Via DoD sponsors, industry NA
NA Emphasis on undergraduate and graduate education Emphasis on community colleg education Undergraduate, graduate research; specialized courses Continuing education, certificates, ISO 9000, 14000, lean, apprenticeship
ONR coordinated ERC assigned ATE coordinated networks NA (OSD coordinated) NIST MEP network
ONR Government/industry NSF Overhead 50% national MEP
ONR (cost share possible) Government/industry NA Government (cost share possible) 50% state government and
Industry Industry NA Industry (limited) Industry projects
IDIQ contracts Grant/IUCRC CA/ERC Grant IDIQ contract Cooperative agreements
5 years 510 years 310 Years 5 years 5+5 years with annual funding
As appropriate Cash required Officially not allowed None 50%
Suggested Citation:"3 Alternate PublicPrivate Partnership Options." National Academies of Sciences, Engineering, and Medicine. 2019. Strategic Long-Term Participation by DoD in Its Manufacturing USA Institutes. Washington, DC: The National Academies Press. doi: 10.17226/25417.
×
  • Complementary institutions. Foreign programs often benefit from complementary institutions. Germany has a particularly well-developed set of such institutions, including a “dual system” of education that combines theoretical instruction with practical work experience, patient capital, and codetermination. Taiwan’s Industrial Technology Research Institute (ITRI) has developed a powerful ecosystem that integrates university researchers, the ITRI labs, and product development for large and small companies supported further by the facilities of the Hisinchu Science Park. The very close geographical proximity, the well-developed facilities, and the sustained collaborative relationships have helped Taiwan develop deep supply chains, notably in industries such as semiconductors.

  • Core funding. Foreign programs receive significant central and state-level government funding that is not tied to individual projects. This core funding is used for activities such as maintaining up-to-date equipment and facilities; building and participating in networks that include universities, companies, trade associations, etc.; strengthening regional innovation clusters; providing assistance to small companies; and developing training programs. The foreign applied research organizations in Table 3.3 received from 10 to 70 percent of their funding in the form of government funds not tied to the performance of research contracts. Most programs also rely on funding from industrial partners (companies and governments) for projects. The core funding helps create the capability to be responsive to both government and industry needs as expressed in these individual projects.
  • Staff and equipment. Many programs maintain extensive staff and a physical presence (see Table 3.2).
  • Stakeholders. Many programs involve a variety of stakeholders in governance, including companies, universities, labor organizations, and other governments. For the European countries, the military plays a much smaller role in the national budget and in the manufacturing base and thus plays a smaller role in the institutes. The civilian-military interplay for the Chinese Manufacturing Innovation Centers is much more complicated and includes R&D for defense, but the funding levels are not available to the public.
  • Long-term commitment. While individual institutes are periodically reviewed and subject to closure, most countries’ overall programs are seen as an essential part of national competitiveness strategy. For example, the first Fraunhofer institutes were opened in the 1950s and are now reaping the benefit of its first-generation students being national academic and industry leaders who know how to engage with and utilize the Fraunhofer Society for maximum national benefit.
  • Coordination across institutes. Most countries have some provision to coordinate the work of the various institutes. China has formal hierarchical plans, such as “Made in China 2025.” The UK and Germany have more give- and-take among the multiple stakeholders involved.
Suggested Citation:"3 Alternate PublicPrivate Partnership Options." National Academies of Sciences, Engineering, and Medicine. 2019. Strategic Long-Term Participation by DoD in Its Manufacturing USA Institutes. Washington, DC: The National Academies Press. doi: 10.17226/25417.
×

TABLE 3.2 Governance Structures of Leading Research Organizations

Direct Supervisory Authority Fraunhofer None ITRI Ministry of Economic Affairs IRAP National Research Council of Canada Catapult Technology Strategy Board Carnot National Agency for Research
Form of Entity Private notforprofit association Governmentowned research institute Government program Various private and public organizations Public research institutions
Geographic Footprint Widely distributed across Germany One main site in Hsinchu, one beta site in Tainan Widely distributed but heavily concentrated in Quebec and Ontario Plans for distribution across the UK Distributed across France
Prototype Development for Companies Yes Yes No ? Yes
Pilot Lines/Simulation Platforms on Premises Yes Yes No Yes Yes
Company Personnel Can Work Onsite and Use Laboratory Facilities Yes Yes N/A Yes Yes
Spinoffs Yes Yes No Yes
Number of Institutes 69 1 18a 7 34
Staff 20,000 5728 4,000 Evolving 19,000
Patents 6,131 17,569 NA NA 880/year
Annual “Core” Government Funding (millions of dollars)b 723 300 90 65 79

a IRAP integrated into 18 institutes of the National Research Council of Canada.

b Converted to dollars at prevailing rate, December 12, 2012.

NOTE: IRAP, Industrial Research Assistance Program; ITRI, Industrial Technology Research Institute.

SOURCE: National Research Council, 2013, 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program, The National Academies Press, Washington, DC, https://doi.org/10.17226/18448.

Suggested Citation:"3 Alternate PublicPrivate Partnership Options." National Academies of Sciences, Engineering, and Medicine. 2019. Strategic Long-Term Participation by DoD in Its Manufacturing USA Institutes. Washington, DC: The National Academies Press. doi: 10.17226/25417.
×

TABLE 3.3 Characteristics of International Public–Private Partnerships

Attribute Manufacturing USA Fraunhofera
Owner Government agencies Fraunhofer Society
Type of governing organization Nonprofit Nonprofit
Country USA Germany
Estimated 2017 GDP (US$ billions) $19,417 $3,423
Percent GDP from manufacturing 12% 23%
Number of institutes 14 69
Year started 2012 1949
Estimated total budget/year (US$ millions) $330 $2,482
Index: Investment per manufacturing GDP 1.0 22.3
Government direct support after fifth year 0% 33%
Government indirect support (competitive projects) Unavailable 33%

a The Fraunhofer funding model is difficult to capture in a simple table. As a 2013 report notes: “A widespread misimpression exists that the Fraunhofer’s primary funding source is the private sector. In fact, onethird of Fraunhofer’s funding consists of ‘core’ money provided by the German federal and state governments, roughly another third comes from research contracts with government entities, and onethird is provided through research contracts with the private sector—which are frequently supported by government grants and other financial assistance” (National Research Council, 2013, 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program, The National Academies Press, Washington, DC, p 232).

b High Value Manufacturing (HVM) Catapult is an institute within the Catapult system of 11 institutes.

NOTE: A*Star, Agency for Science, Technology and Research; GDP, gross domestic product; IMEC, InterUniversity Micro Electronic Center; ITRI, Industrial Technological Research Institute, Taiwan; MIC, China’s Manufacturing Innovation Centers.

  • Index/Manufacturing GDP is a comparison of the program funding to the manufacturing portion of GDP, where the U.S. investment in Manufacturing USA is 1.
  • Low levels of core funding were found to lead to focus on shortterm projects and services.
  • Currency conversions dated December 31, 2017; for ITRI, 1 NTD = 0.03242 USD.

SOURCE: Data from Hauser Report (The Current and Future Role of Technology and Innovation Centers in the UK, 2010), and United Nations National Accounts Main Aggregates Database, value added by economic activities, at current prices—U.S. dollars. GDP data source is Statistics Times, “List of Countries by Projected GDP,” http://statisticstimes.com/economy/countiresbyprojectedgdp.php, accessed November 29, 2017.

Suggested Citation:"3 Alternate PublicPrivate Partnership Options." National Academies of Sciences, Engineering, and Medicine. 2019. Strategic Long-Term Participation by DoD in Its Manufacturing USA Institutes. Washington, DC: The National Academies Press. doi: 10.17226/25417.
×
Catapultb HVM IMEC A*Star ITRI MIC
Innovate UK Nonprofit Government of Singapore Nonprofit Government of China
Nonprofit Nonprofit Autonomous government Nonprofit Government
UK Belgium Singapore Taiwan China
$2,496 $426 $292 $566 $11,795
10% 14% 20% 29% 23%
7 9 18 6 8
2010 1964 1991 1973 2016
$287 $426 $163 $714 Unavailable
8.1 50.4 19.8 30.7 Unavailable
33% 15% 15%100% 25% Unavailable
33% Unavailable Unavailable 0% Unavailable
Suggested Citation:"3 Alternate PublicPrivate Partnership Options." National Academies of Sciences, Engineering, and Medicine. 2019. Strategic Long-Term Participation by DoD in Its Manufacturing USA Institutes. Washington, DC: The National Academies Press. doi: 10.17226/25417.
×
Page 42
Suggested Citation:"3 Alternate PublicPrivate Partnership Options." National Academies of Sciences, Engineering, and Medicine. 2019. Strategic Long-Term Participation by DoD in Its Manufacturing USA Institutes. Washington, DC: The National Academies Press. doi: 10.17226/25417.
×
Page 43
Suggested Citation:"3 Alternate PublicPrivate Partnership Options." National Academies of Sciences, Engineering, and Medicine. 2019. Strategic Long-Term Participation by DoD in Its Manufacturing USA Institutes. Washington, DC: The National Academies Press. doi: 10.17226/25417.
×
Page 44
Suggested Citation:"3 Alternate PublicPrivate Partnership Options." National Academies of Sciences, Engineering, and Medicine. 2019. Strategic Long-Term Participation by DoD in Its Manufacturing USA Institutes. Washington, DC: The National Academies Press. doi: 10.17226/25417.
×
Page 45
Suggested Citation:"3 Alternate PublicPrivate Partnership Options." National Academies of Sciences, Engineering, and Medicine. 2019. Strategic Long-Term Participation by DoD in Its Manufacturing USA Institutes. Washington, DC: The National Academies Press. doi: 10.17226/25417.
×
Page 46
Suggested Citation:"3 Alternate PublicPrivate Partnership Options." National Academies of Sciences, Engineering, and Medicine. 2019. Strategic Long-Term Participation by DoD in Its Manufacturing USA Institutes. Washington, DC: The National Academies Press. doi: 10.17226/25417.
×
Page 47
Suggested Citation:"3 Alternate PublicPrivate Partnership Options." National Academies of Sciences, Engineering, and Medicine. 2019. Strategic Long-Term Participation by DoD in Its Manufacturing USA Institutes. Washington, DC: The National Academies Press. doi: 10.17226/25417.
×
Page 48
Suggested Citation:"3 Alternate PublicPrivate Partnership Options." National Academies of Sciences, Engineering, and Medicine. 2019. Strategic Long-Term Participation by DoD in Its Manufacturing USA Institutes. Washington, DC: The National Academies Press. doi: 10.17226/25417.
×
Page 49
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To effectively mature and transition DoD manufacturing science and technology advances into production, DoD must have access to a robust and responsive U.S. industrial base which is often driven by advanced manufacturing technologies. The Manufacturing USA institutes are considered crucial and game-changing catalysts that are bringing together innovative ecosystems in various technology and market sectors critical to DoD and the nation.

Since 2012, DoD has invested $600 million directly in its Manufacturing USA institutes with the understanding that the initial federal investment included (1) core funding and (2) one-time, start-up funding to establish the institutes within a period of 5 to 7 years. As the institutes now begin to reach year five, DoD is evaluating the effectiveness of the institutes in fulfilling their goals and the best on-going roles for the federal government, including on-going funding options, to ensure optimal benefit to U.S. competitiveness. This report reviews the role of DoD’s investment to date in establishing its eight institutes as public–private partnerships and its engagement with each institute after it has matured beyond the start-up period.

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