Michael McGrath, principal consultant at McGrath Analytics, moderated a discussion of several alternative public–private partnership models. He highlighted Germany’s Fraunhofer and the United Kingdom’s Catapult initiatives, and four panelists shared their experiences with a variety of other models. While each example is distinct, they share important similarities with the manufacturing institutes and can potentially inspire and inform improvements to the institutes.
Fraunhofer-Gesellschaft, founded in 1949, is Germany’s major application-oriented research organization. Fraunhofer served as a key model for the manufacturing institutes, especially with respect to its collaborative research and development (R&D), technology diffusion, and workforce education programs. However, there are some key differences, McGrath noted. While each of Fraunhofer’s 72 institutes is directly connected to a university, German universities, in contrast to American ones, tend to focus more on applied research than on basic science. Fraunhofer is also more integrated into the German industrial base. This integration has been strengthened by a generations-spanning investment in which people involved in Fraunhofer as students enter the industrial workforce and eventually rise to upper management, where they understand the value of the Fraunhofer model, hire other graduates, and facilitate rapid technology transition.
Today, Fraunhofer represents an important contributor to the German and global R&D ecosystem. Institutes undergo frequent reviews, and there is constant evolution as some institutes close and new ones open. Two-thirds of Fraunhofer’s
$2.4 billion budget comes from government, whose strong commitment to core operations funding has been essential to the program’s longevity, McGrath noted.
The seven Catapult Centres are much newer, established in 2012 by Innovate UK, a government-funded group that seeks to drive innovation through business support—in particular, through the adoption of new technologies. The Centres follow a model similar to that of the Fraunhofer Institutes. Workforce training is not yet part of the program, although it is planned for the future, and each Centre has a 5-year review plan. Catapult funding, shared equally by government, Innovate UK, and industry participants, totals $287 million annually.
After McGrath opened with a discussion of international models, he moved on to introducing the panelists and U.S. models they would discuss. McGrath introduced panelists Phillip Singerman, associate director for Innovation and Industry Services at the National Institute of Standards and Technology (NIST) and the Manufacturing Extension Partnership (MEP); Marty Ryan, vice president, Naval Technologies Division of Advanced Technology International (ATI); Bruce Kramer, senior advisor and director of the Advanced Manufacturing Program at the National Science Foundation (NSF); and Thomas Donnellan, Office of the Director at Pennsylvania State University and its previous associate director for Materials and Manufacturing.
THE MANUFACTURING EXTENSION PARTNERSHIP
Phillip Singerman, NIST
At NIST, Singerman is responsible for both the MEP and the Office of Advanced Manufacturing. MEP is a public–private partnership dedicated to serving more than 25,000 small and medium-size manufacturers in every state of the United States and Puerto Rico, helping to increase sales and savings, bring in new investments, and create or retain jobs. Singerman noted that the challenges the manufacturing institutes face in creating a sustainable technology development program in the face of fluctuating budgets and shifting political and industry priorities are in many ways the same challenges NIST has weathered over the years.
MEP was created by the Omnibus Trade and Competitiveness Act of 1988 (which also transformed the National Bureau of Standards into NIST) in response to Japan’s increasing economic competitiveness. It was one of several measures designed to leverage and transfer federal R&D to small businesses, such as the BayhDole Act, the Stevenson-Wydler Technology Innovation Act, the Small Business Innovation Research program, and the Baldrige National Quality Award.
MEP’s original purpose was to improve the transfer of federally sponsored research to manufacturers of any size. While supply chains are the backbone of manufacturing, it is cost-prohibitive, especially for smaller manufacturers, to appropriately fund their supply chain. Supply chain underinvestment can ultimately lead to market failure. To prevent this problem, MEP created regional centers of technology transfer, starting with a handful of pilot programs that were later expanded into national coverage in 1993. The centers offer shop floor productivity enhancements, technical assistance, and careful due diligence on client-based impacts.
MEP was given federal seed funding with the understanding that independent organizations and state governments would take over after a sunset provision. In 1998, federal legislation created a cost-share requirement of 2:1, nonfederal to federal funding. However, the unequal cost share was found to be impeding progress and was later revised to 1:1. Although MEP enjoys broad congressional support, it is subject to 5- and 10-year reviews to ensure that it is continuing to meet the needs of its centers, providing continuity in operations, and hiring capable staff to ensure continued performance.
The 1:1 cost share means that MEP is not always able to reach smaller companies, especially start-ups, rural companies, or those who need workforce education. However, it does enable MEP to be responsive to industry needs, and overall MEP has provided much-needed expertise to smaller manufacturers and continues to evolve its offerings in response to industry and stakeholder interest.
Singerman highlighted several outcomes and lessons learned from the MEP experience. Under the American Response and Recovery Act of 2009, MEP successfully scouted new domestic suppliers so that manufacturers and government agencies could use Buy America waivers. More recently, MEP has provided cybersecurity expertise that enables small manufacturers to meet federal requirements.
MEP’s ability to recognize market failure and make improvements has sustained the program through many upheavals, Singerman emphasized. In addition, its large and diverse national network allows the entire collaborative to thrive, even as individual centers’ performance varies in response to business cycles or fiscal challenges. This diversified-portfolio model helps MEP weather variations in time, geography, or performance.
Congress supports MEP because of the rigorous, systematic, independent, and ongoing documentation of performance impacts. Other programs may make simi-
lar claims, but MEP is the “gold standard,” Singerman noted. The entire national security community recognizes that enhancing the resiliency of the United States’ domestic supply chain is a critical national security asset to combat both economic and military threats, he concluded.
COLLABORATION MODELS IN THE NAVY AND ELSEWHERE
Marty Ryan, Advanced Technology International
Advanced Technology International helps the government manage R&D collaborations. Ryan detailed three collaboration models that are particularly relevant to the manufacturing institutes: Other Transactions (OTs) from the Other Transaction Authority (OTA)-based collaborations,1 the Navy Manufacturing Technology Program (Navy ManTech), and the National Shipbuilding Research Program (NSRP). He discussed each program’s collaborative processes, funding sources, motivations, and facilities.
Like the institutes, these programs were intentionally created to meet specific goals. The OTA was created to increase Federal Acquisition Regulation speed. Navy ManTech’s goal is to increase the rate of major acquisition platform implementation, and NSRP’s goal is to foster collaboration among shipbuilders, a crucial defense industry base.
Other Transaction Authority
OTA programs are large collaborations of technology providers, from 200 to as many as 1,000 members, who pay a low yearly membership fee. They conduct biannual meetings to discuss sponsoring agencies’ technology requirements, meet with original equipment manufacturers (OEMs), and form collaborative teams to address technology requirements, often with a high success rate. These meetings streamline the contracting process between industry and government because collaborators have the flexibility to create the contracts themselves and can adapt them for the specific product or technology.
1 Other Transactions are legally binding instruments that may be used to engage industry and academia for a broad range of research and prototyping activities. OTs are typically defined by what they are not: they are not standard procurement contracts, grants, or cooperative agreements. As such, they are generally not subject to the federal laws and regulations that apply to government procurement contracts (e.g., Federal Acquisition Regulations/Defense Federal Acquisition Regulations). An OT agreement comes in a variety of forms and is typically distinguished according to whether its purpose is for research or a prototype. See U.S. Air Force, “Other Transaction Authority (OTA) Review,” at https://www.transform.af.mil/Projects/Other-Transaction-Authority, accessed April 20, 2019.
OTA contracts, which are called OTs, do not require a cost-share agreement, especially if nontraditional companies participate. Small businesses were recently reclassified as “nontraditional,” making this requirement much easier to accomplish, Ryan noted. This simplified process also encourages sponsors to reinvest, which in turn results in more industry and academic partners joining, further enhancing a program’s ability to meet sponsor needs.
The speed of the contracting process makes OTA programs attractive for businesses, but companies also find the collaborative approach to be very positive, Ryan said. However, OTAs do not have facilities—teams must use company facilities or outside suppliers. This keeps program costs down but can increase the workload for teams who may have to locate specific equipment.
Navy Manufacturing Technology Program
Navy ManTech consists of seven technology-specific Centers of Excellence that advance the overall goal of improving the naval manufacturing base by speeding the creation of new technologies or components and facilitating their implementation into weapons systems. Cost sharing is encouraged but not required, and members are a mix of major platform OEMs and suppliers.
The Major Acquisition Platforms program, which streamlines acquisition of new technologies, is a large part of Navy ManTech’s success, but collaboration is also essential to each center, Ryan said. Collaboration creates a critical mass of funding support and talented staff, both of which are needed to ensure that the program meets requirements and can steer projects appropriately.
OEMs devote employees to Navy ManTech projects because they know they can rely on the funding support, Ryan noted. Program offices are therefore very involved, and this focused approach nets Navy ManTech a 90 percent implementation rate. Three Centers of Excellence do not have facilities, but the other four have sophisticated research laboratories. However, there are times when specific equipment or technology must be located before researchers can pursue projects.
National Shipbuilding Research Program
The NSRP program is a collaboration of 12 U.S. shipbuilding companies who, normally fiercely competitive, come together for precompetitive technology development. NSRP was founded to support collaboration among shipbuilders, whose work is critical to national defense, with technological implementation as a secondary priority. Through NSRP, members decide what technology development will benefit their industry and then work toward those goals, ultimately disseminating new technologies across the entire domestic shipbuilding industrial base.
NSRP requires 1:1 government–industry cost sharing for the program as a whole, but this ratio is not necessarily required for each individual project. Although Navy experts may offer guidance or support, the companies are in control of the projects. NSRP is entirely virtual, and projects are undertaken at the shipbuilding worksites.
PARTNERSHIP MODELS AT THE NSF
Bruce Kramer, NSF
Kramer highlighted NSF’s experiences with several decades-spanning public–private partnership models: Engineering Research Centers (ERCs), Industry–University Cooperative Research Centers (IUCRCs), and Advanced Technology Education Centers (ATECs). Each program blends industry and academia to enhance applied engineering education.
U.S. universities successfully present the theoretical underpinnings critical to applied engineering work, but completing projects often requires an ultimate departure from them, Kramer said. The goal of these programs is to create a richer engineering education by offering a more thorough understanding of the interplay between theory and practice. These collaborative programs benefit both industry and academia, Kramer stressed. Industry participants benefit from university-developed tools that students use to create cutting-edge products when they become employees, and universities benefit from practitioners demonstrating the techniques or equipment that students need to become productive employees.
Engineering Research Centers
The 19 ERCs are joint government, industry, and academic partnerships that began in 1985 in response to increased global engineering competition. The NSF provides an initial $6 million in yearly funding, which is gradually reduced to zero, at which point funding to maintain an ERC becomes the responsibility of industry sponsors.
Industry is expected to match NSF funding before this ramp-down, although at varying rates (usually from $1-5 million) depending on the industry and the specific ERC. ERC research agendas are defined collaboratively and vary widely. Some are university-driven basic science pursuits that then recruit industry sponsors, while others are application-driven industry-focused programs that attract university participation.
The Center for Compact and Efficient Fluid Power is one example. The center has several university partners and was started by the National Fluid Power Association (NFPA), an organization of several hundred hydraulics and pneumatics
companies. Realizing that competition from electric power was hurting its industry’s business and that fluid power was poorly understood, the NFPA reached out to universities and research groups to conduct fluid power studies with the express goal of creating an ERC. The NFPA also established a foundation to sustain the ERC beyond its NSF funding.
Industry–University Cooperative Research Centers
The 60 IUCRCs, established in 1973, were the NSF’s first academia–industry collaborative programs. They were inspired by and configured for academics wanting to see their research utilized in the real world. Initial NSF funding ramps down over the course of three 5-year phases, while industry funding ramps up accordingly. Industry members vote on projects to pursue, and university researchers and students conduct them.
Identifying talent is a key motivation for companies to join IUCRCs, as they are excellent training grounds for future employees. In addition, industry is motivated to join because IUCRCs provide a refreshing, stimulating experience for employees to step away from their daily work and be inspired by emerging technologies. Companies also are attracted to the centers as a neutral space where they can talk amicably, share information, and network with competitors, Kramer noted.
Advanced Technology Education Centers
ATECs were created in 1992 by a congressional mandate to provide technical education at community colleges. Although the NSF was initially a reluctant participant, the organization now considers ATECs among its most successful initiatives, Kramer noted. There are now 31 ATECs, each with $1.5 million in yearly NSF funding. The ATECs define and implement technical training curricula through close collaboration with companies, who often fund laboratories and equipment in the hopes that students will become skilled users of this equipment and eventually recommend it to their future employers. The programs are free for students and rely on these in-kind contributions from industry partners.
Lessons and Cautions
Kramer closed with several insights relevant to the manufacturing institutes. First, he said, goal setting is paramount, and a key goal should be workforce development. The institutes’ goal is to strengthen the defense manufacturing infrastructure, and while that includes technology, the workforce—the “human capital supply chain”—is more important.
Employees need the type of thorough, efficient engineering education that comes from these university–industry collaborations. Engineering education is really an apprenticeship, a trial-and-error process to instill essential teachings. In addition to supporting this process, NSF’s public–private partnerships have ensured their own longevity by delivering valuable results. When students become workers, they apply what they learned from these programs in their daily work, turn to them with challenges, and are committed to sustaining them, especially as they become industry leaders who trust the process and value the benefits—a cycle similar to the pipeline effect that has been key to the success of the Fraunhofer Institutes, Kramer noted.
In closing, Kramer cautioned attendees against an over-reliance on metrics, which can have severe limitations in evaluating large, ambitious programs. While metrics are useful in identifying failed or ineffective management and can encourage marginal programs to raise themselves up to the standards, they can also be gamed and distract from the overall goal. Metrics are not a replacement for a passion to envision innovations and implement effective strategies that can distinguish the institutes and create sustained value. For the same reason, an overly rigid focus on best practices can inhibit innovation and stifle creativity, especially if they are mandated, Kramer concluded.
UNIVERSITY AFFILIATED RESEARCH CENTERS
Thomas Donnellan, Pennsylvania State University
Donnellan, a senior associate director for Pennsylvania State University’s University Affiliated Research Center (UARC), the Applied Research Laboratory, described the UARC model. UARCs were established in the mid-1990s to provide DoD with ready access to essential R&D engineering capabilities in critical technology areas. Six existing research groups with long-standing DoD relationships became the first UARCs, and the newest centers are only a few years old. There are now 14 in total: 4 Army UARCs, 5 Navy UARCs, 3 UARCs in Office of Strategic Defense divisions, 1 UARC in the Missile Defense Agency, and 1 UARC in the U.S. Strategic Command.
The University Research Center Management Plan covers the creation of, appropriate work assignments for, and DoD applications of UARCs. The centers must be formally approved by the Undersecretary of Defense for Research and Engineering (USD[R&E]), be housed at universities, and have not-for-profit status. A UARC is founded when a DoD division, the primary sponsor, examines its essential engineering needs and recruits university research teams to create those capabilities and deliver them to DoD.
A successful UARC has broad, deep knowledge of its core competencies, maintains an up-to-date understanding of its sponsor’s needs and DoD’s overall needs, and produces relevant work, Donnellan said. UARCs work across the full R&D spectrum, with some centers being more research-oriented while others are specializing in program management or operational prototyping. Because they serve the public, to garner appropriate trust they must remain independent and objective, carefully documenting that they are free of real or perceived conflicts of interest.
UARCs are permitted to enter sole-source contracts with DoD. They have 5-year task order contracts and at least $11 million in annual support from their sponsoring agency, which must also complete comprehensive reviews every 5 years. The reviews solicit feedback from UARC task recipients; determine if the core competency is still relevant; and study the technical aspects, overarching goal, and cost of the work processes. A successful review initiates a new 5-year contract.