1 Introduction The idea of increasing the quantity and quality of technological innovation in the United States has wide acceptance; this committee has sought the views of industry on one of the potentially important new means of achieving that increase--by promoting partnerships between the federal labs and private industry. There has been much talk about industrial competitiveness in the past few years. It has been put forth on all levels as a noble goal by those encouraging govemment, industry, and university when legally possible to work together. New laws have been written and much funding has been placed under the banner of partnerships with government to promote technology transfer and to improve our industrial competitiveness. This can be expected to continue and increase through the 1990's as America continues to deal with the lower price/performance ratio of off shore goods and the shift in U.S. employment to R&D and service roles. Improving America's industrial competitiveness is indeed a noble goal. Right now, there is a rush to partnering, to the development of newly "flexible" Cooperative Research and Development Agreements (CRADAs), and to infusion of funds to promote industry-laboratory partnering. At the outset, I think it is important to observe that promoting research partnerships is not a universal panacea. It should be undertaken where appropriate-which is not everywhere. Indeed, the new administration in their technology paper has taken a critical look at the industry-federal labs issue and has proposed examining three additional approaches to utilizing the federal labs resource: consolidation and restructuring of existing labs • more aggressive promotion of the labs' resources to industrial "consumers" conversion of some labs' missions to new directions This statement address's the more currently intriguing notion of rapidly increasing the number of partnerships between the labs and private industry, and particularly, to focus on problems and impediments to the creation of such partnerships. There is some confusion in the public and private sector on this matter. That is the presumption that the pursuit of industrial competitiveness is also primary motivator for American industry to do partnering in R&D with the national labs. It is time to talk straight about technology problems and solutions. It is in that spirit that I put forth an observation that I believe to be generically true: There are only two primary motivators for an industrial concern to do partnering with the bureaucracy that is a federal laboratory: ⚫ leveraging external funds into the company's R&D base to produce products at costs lower than internally funded investments ⚫ survival - especially in an environment where competition is driving firms out of existence as is true in the present time (e.g., semiconductors and consumer electronics) If we accept this premise, balancing these motivators against the numerous cultural and legal "demotivators" (see Figure 1 on page 6) can be discussed in an analytical fashion perhaps leading to some logical conclusions and recommendations. John R. DeMember Digital Equipment Corporation Page 4 Figure 1. Motivating Factors Affecting Business Partnerships John R. DeMember Digital Equipment Corporation Page 5 It is evident from Figure 1 why the process of technology transfer is difficult. The motivation for external dollars and survival must overcome these numerous cultural and legal demotivators. In the following I describe the cultural and legal problems associated with industrial cooperative work with the national labs. In the process I address the points in your invitation of funding (section 3.2, page 8), authority and accountability (section 3.4, page 8). 2 Statement of the Culture Problem For the past several years there has been significant discussion of the cultural differences that make federal laboratory to industry technology transfer a difficult problem. They are shown in Figure 1 as "cultural demotivators" and are differences in: · the conception of time and speed between industry and federal labs • attitude and practices for keeping costs down and enhancing productivity for a profit enhancing structure the need to own and get credit for the entire process often referred to as not-invented-here (NIH) • bureaucracy • political whimsy In fairness, the negative impacts of these demotivators not only affect the national labs, but also are shared in many instances by industry. The problems on the industrial side will not be discussed in this testimony. 3 Discussion and Recommendations - Cultural Demotivators 3.1 Time to Work 3.1.1 Discussion The national labs have done outstanding things in their technology efforts but, since the Manhattan Project, clearly they have rarely felt the pressure that an industrial concern feels when they must produce a new upgrade or product to survive. Although, they are obviously forced to meet deadlines, their deadlines are not as all encompassing and unforgiving as industrial pressure to get a product out. 3.1.2 Recommendation This problem can be managed by carefully stating the expectations of the industrial partners in partnership with the federal labs. The measurables and deliverables expected from participating parties must be explicitly stated in any agreements. Failure to meet deadlines by any party should permit termination of agreements without penalty. 3.2 Cost to Work 3.2.1 Discussion The portion of the federal R&D investment slotted for cooperative work with industry is very low relative to the amount necessary to make a difference in American competitiveness. The DOE lab directors, for example, each only have about $1M in discretionary spending for technology transfer activities for FY92. I have heard directly from staff members at DOE technology transfer offices that, with present funding levels, they are not and will not be able to cope with the popularity that the National Technology Initiative has created for federal lab technology transfer. They are forced to be very selective and are having difficulty handling the demand from industry. In the past the national labs have been at liberty to spend what ever is necessary to achieve their mission and often no expense was spared to provide sophisticated solutions to any scientific problem. Especially in the present economy, most industrial concerns are forced to be more austere in their R&D investments and they cannot be as liberal with sophistication. Often in industry, the simple inexpensive route gets the job done. 3.2.2 Recommendation We fully supports the recommendation for increased funding at the 10% level that is proposed in the recently released Council on Competitiveness (COC) report, "Industry as a Customer of the Federal Labs". Certainly this amount of funding will not redirect the main mission of the federal labs but it will permit an interaction of substance with industry allowing the federal labs to match the demand created by the NTI and the resulting interest from industry. Without this increased funding the interest of most industrial concerns for CRADAs will be fleeting and the goals of the NTI will not be met in the long term. Fulfillment of this recommendation will directly add momentum to the two primary motivators show in Figure 1 (see also Section 1 page 3) and encourage CRADA-activity. Management of costs can be watched over by all participants and any trends toward over spending should be addressed immediately. Budgets for expenses in the partnerships must be agreed to by all participants in advance. 3.3 Not Invented Here Syndrome 3.3.1 Discussion Working in groups and sharing solutions does not come naturally in our culture. The tendency for independent and individual excellence has led to an unparalleled standard of performance in America's scientific community. But the complexity of moving ideas from conception to product and the increasing complexity of most engineered products requires a proportionally increasing amount of group and inter-group interplay and productivity in order to produce prod ucts. 3.3.2 Recommendation Program funding must be contingent upon the effective cooperation and productivity of the partnership. Metrics should be the agreement to and production of deliverables in the projects joint work statement. Eligibility for funding for future projects must be tied to performance on past projects. John R. DeMember Digital Equipment Corporation Page |