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Public-private partnerships between government and industry have been increasingly used as a vehicle for defining and executing R&D activities. Stimulus of smaller technology enterprises in particular is important, and this article explores this topic from the policy level as well as from organizations “on the ground.” The story in brief: challenges and opportunities.

INTRODUCTION

“I’m from the government and I’m here to help” is a phrase often viewed by business with some apprehension. Intervention in the areas of taxation and regulation are faces of government that industry can experience, seldom positively. The area of partnerships in the development and deployment of technology, however, is one in which government can play an important supporting role to industry’s lead.

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Let us first get an overview at a high level based on data provided by the American Association for the Advancement of Science (AAAS).¹ Figure 1 shows how the $759 billion of worldwide R&D was distributed in 2002. Looking specifically at the sources of R&D funds (Figure 2a) and performers of R&D (Figure 2b), it is clear that on a worldwide basis both government and industry have large financial stakes in the process. Note that while industrially funded R&D is a significant portion of the total, trends in the United States, for example, indicate that increasingly it is being focused on product-oriented rather than basic research.²

One mechanism for leveraging government’s contribution to R&D is the formation of government-industry partnerships. These types of arrangements are a worldwide phenomenon and can take a variety of forms. Responding to Japan’s lead in this area in the 1980s, the United States established the framework for collaborative activities through a series of government initiatives beginning with the Stevenson-Wydler Technology Innovation Act and the Bayh-Dole University and Small Business Patent Act. Partnership models have also been adopted in the European community, most recently in the Sixth Framework Programme for Research (FP6); in Canada through Technology Partnerships Canada; and in Australia through government programs such as COMET, Commercial Ready, the Innovation Access Program, and R&D Start. A recent National Research Council study on this topic has investigated in detail some specific U.S. partnerships and has identified best practices.² See sidebar article titled “Government-Industry Partnerships for the Development of New Technologies” for a summary of the report findings.

Often, government-industry partnerships would seem to be the province of large companies. After all, such companies have the infrastructure in place that enables them to effectively work in the large-scale, high-risk projects often characteristic of government-supported activities. These advantages can include political connections, well-equipped and staffed internal R&D labs, the availability of in-kind cost sharing from internal R&D work, deep pockets to absorb the risk of failure and government funding delays, and dedicated contracting departments and staff to handle government paperwork. But there is also a vibrant, if less publicized, culture of partnership with the small business sector; that partnership is the emphasis for this article.

GOVERNMENT-INDUSTRY PARTNERSHIPS FOR THE DEVELOPMENT OF NEW TECHNOLOGIES

“Partnerships constitute a vital positive element of public policy, helping to address major challenges and opportunities at the nexus of science, technology, and economic growth.”2 The National Research Council’s Committee on Government-Industry Partnerships for the Development of New Technologies, under the auspices of the Council’s Board on Science, Technology, and Policy, published a study of the same title focusing on public-private partnerships with a view toward understanding “best practices.” Some of the key findings were: Public-private partnerships, involving cooperative R&D activities among industry, government laboratories, and universities, can be instrumental in accelerating the development of new technologies from idea to market. Partnerships offer a means to integrate the diverse participants in the U.S. innovation system. Partnerships are diverse in structure, mechanisms, and goals. This is one of their advantages. Successful partnerships tend to be characterized by industry leadership, public commitments that are limited and defined, clear objectives, cost sharing, and effective evaluation processes. In terms of both project scale and timing in the innovation process, properly constructed partnerships do not displace private finance. A number of recommendations were made based on the study, and include: Learning from competitive and cooperative experiences in the global economy is vital for effective U.S. policy on partnerships, and foreign policies and programs should be regularly assessed. Partnerships should be created on a case-by-case basis and should draw, where applicable, from prior experience. Regular and rigorous program-based evaluations and feedback are essential for effective partnerships and should be a standard feature. A complete copy of the report is available from the National Academies at books.nap.edu/catalog/10584.html.

RESOURCES FOR MATERIALS AND MANUFACTURING TRENDS

While access to specific R&D opportunities and support is certainly an important element for small businesses, it is often useful to step back and take a broader view to help formulate strategic intent. In the materials and manufacturing area there are a number of useful, high-level resources available to provide this sort of perspective. In the United States, the National Academies, specifically through the Board on Manufacturing and Engineering Design as well as the National Materials Advisory Board, have produced a number of excellent publications. A few of the more recent, all available through their web site at www.nationalacademies.org, include: “New Directions in Manufacturing: Report of a Workshop”—This report presents the results of a workshop commissioned by the Department of Commerce. Key challenges that emerged from the workshop and that are discussed include understanding manufacturing trends; manufacturing globalization; information technology opportunities; maintaining innovation; strengthening small and medium-sized enterprises; workforce education; and rising infrastructure costs. “Materials Research to Meet 21st Century Defense Needs”—In order to achieve the revolutionary new defense capabilities offered by materials science and engineering, innovative management to reduce the risks associated with translating research results will be needed along with the R&D. While the payoff is expected to be high from the promising areas of materials research, many of the benefits are likely to be evolutionary. Basic research in physics, chemistry, biology, and materials science will provide the seeds for potentially revolutionary technologies later in the 21st century. “Summary of the Workshop on Structural Nanomaterials”—This report provides a summary of the workshop put together by the National Materials Advisory Board which covered the following areas: synthesis and assembly of nanomaterial building blocks; characterization of nanomaterials; examples of structural nanomaterials currently in use; potential applications of nanomaterials; gaps in understanding of synthesis, assembly, chemical, and physical characterization and the need for interdisciplinary approach; and identification of the “showstoppers”—major barriers to utilization of nanomaterials. “Modeling and Simulation in Manufacturing and Defense Acquisition: Pathways to Success”—The report discusses next-generation evolutionary and revolutionary modeling and simulation capabilities that will support enhanced defense systems acquisition and recommends specific government actions to expedite development and to enable maximum U.S. Department of Defense and U.S. commercial benefit from these capabilities. In the United Kingdom, the Foresight reports offer another valuable store of information. Accessible from the Foresight web site at www.foresight.gov.uk, some particularly pertinent studies include: “U.K. Manufacturing: We Can Make It Better”—The final report of the Manufacturing 2020 panel provides a robust, relevant vision of 2020 which the UK manufacturing industry, encompassing the entire process from market to product delivery, can use as a basis for strategic planning and action “New Materials that Will Shape Our Future”—This report presents a series of case studies on successful new materials start-up companies. “Materials: Shaping Our Society”—The report of the Materials Foresight Panel describes future directions for the UK materials enterprise. In addition to accessing these resources directly from their source, the TMS Public and Governmental Affairs Committee web site provides links to other government reports as well as related literature online at www.tms.org/PGA/Reading.html.

A FOCUS ON SMALL BUSINESS

It is widely recognized that small business is an important component in the economic health and vitality of a nation. In the technology development arena, small businesses have taken on a much greater role than they did in the 1970s, when R&D was dominated by large integrated labs.² Technology policy began to reflect this change and focused on public-private partnerships in which businesses of various sizes could effectively collaborate with government as well as academia. This came from the recognition that “America’s entrepreneurs often harvest crops sown on fields made more fertile by the government’s long-term investments in research and development.”²

Two partnership models that have found wide application among small businesses are industry consortia and innovation funding. In industry consortia, a certain portion and type of a participating company’s R&D is funneled into a separate organization where it is carried out collectively and where the research results are shared among member firms. In a consortium, companies can lower R&D costs or increase efficiency, and government’s roles are to legally enable such collaboration and contribute funding and/or research facilities as appropriate. Through innovation funding, government funding can provide the early-stage support required for small businesses to take on the risks of developing technologies to the point where they can attract private capital.

In the area of innovation funding, one of the most prolific partnership examples is the Small Business Innovation Research (SBIR) Program in the United States. Established in 1982 as a way to channel federal R&D funds to small business (defined as firms with 500 employees or less), the program requires federal agencies whose external R&D expenditures exceed $100 million to set aside 2.5% of their budget for the SBIR program. The program is built on a three phase model. Phase I, which provides grants of up to $100,000 to establish feasibility, is followed by larger Phase II grants if the concept shows potential. Phase III involves commercialization with solely private-sector support. Since the program’s inception, more than $10 billion has been invested in more than 55,000 projects, according to the Small Business High Technology Institute.³ In fiscal year (FY) 2001 alone, the program produced 3,215 Phase I awards and 1,533 Phase II awards for approximately $1.5 billion.⁴ Recent studies indicate that about 40% of Phase II projects will result in a commercialized product or service.⁴

Another program administered by the U.S. Small Business Administration is the Small Business Technology Transfer (STTR) Program, the goal of which is to use public-private partnerships to create joint venture opportunities for small business and the nation’s premier nonprofit research institutions. Structured in a phased manner similar to the SBIR program, small businesses must perform 40% of the work and be in control of the project. From FY 1994–1999, the STTR program awarded more than $300 million to more than 1,700 projects.⁵

In the European community’s FP6, the industry consortia model in the form of integrated projects is the approach. Small and medium-sized enterprises, labeled SMEs and, for the purposes of FP6, defined as enterprises employing fewer than 250 people with an annual turnover under €40 million or assets less than €27 million, are expected to play a significant role. Specifically, at least 15% of the budget for FP6’s seven priority thematic areas will be devoted to SMEs, constituting some €2.1 billion. Initial response to the involvement of SMEs in these larger projects has been positive, and it has been noted that “contrary to the fears of some SMEs integrated projects are not only accessible but in fact offer even greater opportunities than previous funding mechanisms.”⁶

SOME CASE STUDIES

With this high-level overview of the technology support structure, it is useful to consider some specific examples of materials-oriented small businesses and their experiences.

Apogee Technology
Apogee Technology is a small business in Pennsylvania focused on the development of technologies for metal treatment, melting, and related applications, particularly for the aluminum industry. Apogee received financial assistance from the U.S. Department of Energy’s Industrial Technologies Program (DOE-ITP) to develop a new melting technology called isothermal melting. The technology held promise for reducing the energy to melt aluminum from 1.35 kW·h/kg to well under 0.45 kW·h/kg, which could have a significant benefit to U.S. industry based on future projections.⁷ A combination of technologies, including scalable, high-flux immersion heaters strategically placed in a multi-bay melting and holding unit based on extensive thermal modeling was developed in cooperation with Drexel University and Commonwealth Aluminum over the three-year period of the project. These efforts have proven the isothermal melting concept, which is now on the threshold of commercial demonstration.⁸

C. Edward Eckert, president of Apogee, notes that the value of government involvement in this program was three-fold: financial, guidance, and profile. While the benefit of financial support in the form of a cost-sharing of the development effort is obvious, the others are perhaps less so. “Apogee views its interaction with DOE-ITP as a partnership, which is germane to establishing a climate for receiving quality guidance from them,” Eckert said.“The guidance may be technical, but frequently functions as an interdepartmental connector and access points to other departments, national laboratories, and academic institutions.” Apogee has also benefited from a raised commercial profile due to its governmental association. Eckert said the DOE-ITP has been“highly intentional in proliferating the demonstrated results of the isothermal melting project, resulting in a dramatic escalation of Apogee’s notoriety and credibility. Such a profile is invaluable, and difficult to acquire for a small entity operating outside of this process.”

Apogee did experience some challenges in adapting its small business infrastructure to comply with government reporting and accounting requirements. Another difficulty was governmental inflexibility regarding financial and invoicing processes. However, the company was pleased with assistance provided by the DOE-ITP contract specialists in these areas. Eckert advocates small entity participation in DOE-ITP programs. “Certainly the income of a for-profit organization must reflect a balance between various revenue sources, but small entities should not categorically exclude the appropriate federal assistance programs from providing support to develop important and potentially profitable technologies,” he said. “Such programs can provide R&D funds that would otherwise require a substantial sales volume to generate. The best place to start is to explore open solicitations appearing in the various government agency web sites.”

MC-21
MC-21 (Metallic Composites for the 21st Century) was founded in 1994 with the goal of reducing the cost of metal-matrix composite (MMC) material production. With the financial assistance of the U.S. Department of Energy’s FreedomCAR program through Pacific Northwest National Lab (PNNL), MC-21 has developed, patented, and demonstrated at commercial scale a proprietary MMC process improvement that achieves much greater efficiency in the mixing operation. This improved mixing technology reduces the time required for uniform incorporation of a wide range of ceramic particle reinforcement volume fractions into aluminum matrices to well under 60 minutes. Batch mixing times of this order allow the mixing to be done in real time in the foundry environment, enabling a modular production unit on the foundry floor to feed molten composite to one or more casting machines.⁹ This eliminates the need for careful remelting of the melt stock currently required for MMC ingot produced by other processes, saving time, minimizing the chance for overheating and ruining of the melt, and reducing energy consumption. In addition, it has opened the opportunity for broader application of MMCs in cost-sensitive application areas.¹⁰

Commenting on the important role of government support in their project, David Schuster, president of MC-21, said “We had many ideas for process improvements which would lower the cost of producing MMCs, but lacked adequate resources to pursue these ideas. Encouragement from the government (PNNL in particular), together with the needed support, when combined with our own resources under a cost-shared program, provided the impetus to push forward to overcome many technical and financial hurdles and to demonstrate the advantages of the new rapid MMC molten metal mixing technology.” MC-21 has since gone on to license technology and provide MMC mixing equipment to major international corporations. Process improvements are now being developed and new equipment is being designed on a continuous basis using MC-21 corporate resources. What about the downside of the government involvement? “Aside from the financial strain inherent in participating in a 50-50 cost-sharing contract and time pressures because we had underestimated the complexity of the project, there were no significant difficulties,” Schuster said.

Advanced Ceramics Research
A company that appears to have made all the right moves in taking advantage of government support for small technology businesses is Advanced Ceramics Research (ACR). Since 1989, ACR has received nearly $6 million in SBIR/STTR funding that has led to more than $30 million in follow-on funding and an additional $35 million in signed license and technology transfer contracts.¹¹ Through a variety of funding channels and in cooperation with a range of university researchers, ACR has developed capabilities in ceramics-centered technologies, resulting in products such as a novel class of high-strength and high-temperature composites known as fibrous monoliths as well as a suite of products in the rapid prototyping and rapid manufacturing area such as watersoluble tooling, extrusion free-form fabrication, and solid free forming. Not stopping at development alone, these technologies have found their way into a number of industrial and military applications through commercialization partnerships with larger companies.

In testimony before a U.S. Congress House Subcommittee, ACR’s president and chief executive officer, Anthony C. Mulligan, voiced his support for the SBIR program. “I believe Congress established the SBIR program because it recognizes that small business creates most of the new jobs, and is the source of most innovation. This is simply because small businesses are not risk adverse, we have no choice. In order to stay competitive in today’s business climate, we must take risks.”¹² Some of the risks for small businesses, however, especially in connection with government contracting, can be significant. In a presentation before The National Academies, Mulligan noted that with fewer competitions for government funding, they are each viewed as “must win” and the pressures to bid low are intense, which impacts profit margins of the contractor and increases risks and the potential for cost overruns. When contracts are part of a major procurement program and the government or large prime contractor experiences problems, risk mitigation on the part of the small manufacturing enterprise is very difficult, he said.¹³ Mulligan’s suggestions for other small businesses? “My first recommendation for small materials companies is to take time to visit their delegates and key staff to educate them on the industry and their particular business. This does not happen overnight and requires a significant effort on the business’s part. It also requires that the business entity consider stepping up its involvement with and support of its community. We have been regularly briefing congressional members on the importance of the materials industry and our technologies for many years.”

Metal Processing Institute Consortia
In the area of industrial consortia, some of the most successful examples are those organizationally housed in Worcester Polytechnic Institute’s (WPI) Metal Processing Institute (MPI), an industry-university alliance dedicated to advancing the state of the art in the metal processing industry. The mission of the MPI is to carry out research projects identified and planned in collaboration with its industrial partners.¹⁴ Three specific consortia addressing different aspects of metals processing have been established: the Advanced Casting Research Center, the Center for Heat Treating Excellence, and the Powder Metallurgy Research Center. A common theme of these consortia is that they involve areas in which the industry participants tend to be smaller and somewhat fragmented, ideal for an R&D model providing information sharing on precompetitive topics. More than 100 private manufacturers are involved, supporting fundamental and applied research that addresses technological barriers facing the industry. Government funding plays a complementary role in supporting programs of the respective consortia, providing an effective vehicle for the federal and other funding agencies to leverage their R&D investments. This critical mass provides leverage for obtaining funding from other sources. For example, the Powder Metallurgy Research Center receives funding from the Sloan Foundation Industry Centers program, allowing faculty from the business and technical areas to collaborate. Examples of center studies with direct impact on the industry include development of a technical cost model, which provides an accurate cost quote for a powdered metal parts producer. This research is also looking at the development of economic assessment tools that allow managers and design engineers to better analyze and quantify tradeoffs between performance and the economic attributes of powder processing of advanced materials.¹⁵ Diran Apelian, director of the MPI, has been the architect of these consortia and continues to be actively involved in their activities. Government support and involvement is essential to MPI’s consortia, he said.

“The federal government has a pivotal role in supporting research and development (R&D) in fields that are critical to the industrial health of our nation. The fact is that entrepreneurship and innovation take place where the R&D is being conducted. Government’s role is crucial and pivotal as we go forward,” Apelian said. He noted that small businesses face challenges in providing for R&D funding while dealing with government regulation, insurance costs, and other factors.

“It is precisely for these reasons that the manufacturing sector ought to support consortia in critical areas in materials engineering, to advance the knowledge base, and more importantly, to ensure that the needed human resource (the knowledge worker) will be available to lead the industry,” Apelian said. “I am proud to say that the metal casting industry, the powder metallurgy industry, and the heat treating industry have risen to the occasion and are taking a leadership position through their support of the Metal Processing Institute at WPI.”

SO MANY OPPORTUNITIES, SO LITTLE TIME

Some small companies have become adept at navigating the government technology support system while others have gained a collective benefit from government-assisted consortium membership. However, many experience significant challenges in trying to access government support for technology development and manufacturing assistance. One of the barriers is the overwhelming amount of information to contend with. As a starting point, it is useful for small business to understand the underpinnings of the needs and directions of government as well as future trends in the broad sense. This type of information is available through studies conducted by organizations such as the National Academies in the United States and Foresight in the United Kingdom (see sidebar article titled “Resources for Materials and Manufacturing Trends”).

Then there is the challenge of identifying and qualifying the specific opportunities provided by the many arms of government. In the United States, for example, at the federal level there are the SBIR and STTR grants discussed previously, which are available from no fewer than 11 departments and agencies. Within the Department of Defense alone, there are nine different branches that provide SBIR funding opportunities with three separate solicitations for proposals during a given fiscal year. There are also agency-specific opportunities such as those through the Department of Energy discussed in the case studies previously. There are federal-level manufacturing assistance programs such as the National Institute of Standards and Technology Manufacturing Extension Partnership that are deployed regionally or locally. Opportunities to work with federal laboratories through Cooperative Research and Development Agreement arrangements or other mechanisms exist as well. A similar structure exists in the United Kingdom through the Technology Programme coordinated through the Department of Trade and Industry.

Moving to the state and local level, the state of Pennsylvania, where TMS is headquartered, provides an example of an additional set of opportunities. Through the Department of Community and Economic Development, a number of groups are active in supporting technology development. The Innovation Partnership is a consortium of economic development and business assistance organizations located throughout Pennsylvania to help early-stage technology companies secure federal funding opportunities. They focus on emerging areas such as biotechnology, nanotechnology, advanced manufacturing, and communications technology that show early signs of commercial success. Organizations within this consortium include the Ben Franklin Technology Partners, which provides state funding for technology development, and Industrial Resource Centers, which provide technical assistance to small and mid-sized manufacturers by applying advanced manufacturing management and production philosophies and techniques. In Pittsburgh, TMS’s home city, there are local branches of state and federal organizations such as the Catalyst Connection and Innovation Works to provide R&D funding as well as assistance to small businesses in technology development along with management and financial support.

Understanding this plethora of options and identifying the relevant few can be a major challenge for a small business without the time and infrastructure of a large firm. Once promising options are identified, the task of accessing these opportunities, including preparing proposals, awaiting response, and then executing a program, can present some further obstacles.

THE ROLE OF PROFESSIONAL SOCIETIES

While the role of many organizations at all levels of government is to aid small business, they often have a broader portfolio and mission than simply helping materials-oriented enterprises. It is in this latter area where organizations aligned with particular areas of technology can provide more targeted support.

An example of the role that a professional society can play in assisting small business in materials-related fields is provided by the Institute of Materials, Minerals, and Mining (IOM³) in the United Kingdom. By working with the UK’s Department of Trade and Industry (DTI), IOM³ provides a suite of services that are particularly focused on assisting SMEs. One of these services is the Materials Information Service (MIS). Begun in 1988 with DTI funding support, MIS was formed to provide technical information and support to SMEs. Self-sustaining since 1996 and incorporated as part of IOM³’s Industrial Affiliate Scheme, the MIS answers roughly 300 inquiries a month and has served 400 members, 95% of which are SMEs, over its life. Another key role of IOM³ is to facilitate the Foresight studies in the materials area as well as visiting more than 900 SMEs to identify their future needs. Current efforts include support for spin-out companies, specifically in the area of linking start-up companies and financing opportunities, and serving as technology translators in the materials-oriented portions of the U.K. Faraday programs that link academia and industry. Stuart Preston, manager of materials information and library services at IOM³, likens the process of information dissemination to water moving through a filter bed, with their role being to facilitate the flow. Certainly IOM³ provides a valuable service that can serve as a model for other organizations.

CONCLUSION

Small businesses have a substantial and important role as a technological engine of innovative product and process development. Government has a vested interest in supplying high-quality fuel to power this engine through financial support, quality advice, and, in some cases, provision of a market. While the challenges to small businesses in accessing government resources can sometimes be a barrier, the direct experience of some selected materials-oriented organizations indicates that it can be perhaps less daunting that it would appear at first sight. Moving forward, the ability of supporting organizations such as professional societies to assist small businesses in connecting with government in field-specific areas such as materials science and engineering can be a valuable contribution to the enterprise.

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