economic assessment of the

NIST Ceramic Phase Diagram PROGRAM

February 1998

Prepared for:

The National Institute of Standards and Technology

Program Office

Strategic Planning and Economic Analysis Group

Prepared under:

Contract No. GS-22F-0101B

Prepared by:

Michael L. Marx

Albert N. Link

John T. Scott

Approved by:

John F. Starns

David P. Leech

TASC, Inc.

1101 Wilson Boulevard

Suite 1500

Arlington, VA 22209

TABLE OF CONTENTS

**Page**

executive summary ES-1

1\. introduction 1

1.1 NIST 1

1.2 Materials Science and Engineering Laboratory 1

1.3 NIST/ACerS Phase Equilibria Program 2

1.3.1 History, Purpose, and Objectives 2

1.3.2 Management 4

1.4 Case Study Objectives 5

1.5 Case Study Outline 6

2\. background 7

2.1 Role of Phase Diagrams in Industrial Applications 7

2.2 Industry and Market for Advanced Ceramics 12

2.2.1 Industry Structure 13

2.2.2 Markets 13

3\. evaluation framework and approach 15

3.1 Scope 15

3.2 Methodology for Estimating Economic Benefits 16

3.3 Strategy for Collecting Benefit Data 17

4\. survey results 19

4.1 Qualitative Observations 19

4.1.1 Summary Results 19

4.1.2 Examples of Using the PDFC Volumes 20

4.2 Estimates of Company Benefits 23

5\. economic analysis 25

5.1 Cost and Net Benefit Data 25

5.2 Measures of Economic Impact 26

5.2.1 Internal Rate of Return 27

5.2.2 Implied Rate of Return 28

5.2.3 Benefit-to-Cost Ratio 28

6\. Conclusions 30

**APPENDIX A TECHNICAL OVERVIEW OF CERAMIC PHASE**

**EQUILIBRIA DIAGRAMS A-1**

list of figures

**Figure Page**

1 SiO~2~ - Al~2~O~3~ System 8

2 Burner Port Block Application 8

3 Catalytic Converter Application 9

4 Barium Titanate Capacitor Application 10

5 BaTiO~3~ -- TiO~2~ System 11

6 Complex Silicon Carbide Structures 12

A-1 MgO -- CaO System A-4

A-2 CaO -- SiO~2~ -- Al~2~O~3~ System A-4

A-3 CaO -- SiO~2~ -- Al~2~O~3~ System A-5

list of tables

**Table Page**

1 NIST Phase Equilibria Program Research Expenditures (\$000), 1985-96 5

2 U.S. Markets For Advanced Ceramic Components From 1995-2000 14

3 Participating Companies in the Telephone Survey 19

4 NIST Costs and Net Industry Benefits (current \$000) 25

EXECUTIVE SUMMARY

The National Institute of Standards and Technology (NIST) assists the
ceramics industry by generating technical knowledge to improve the
development and production of ceramic materials. The primary purpose of
this case study is to assess the economic impacts on domestic industry
for investments made in this infrastructure technology through the NIST
Ceramic Phase Equilibria Program.

Phase equilibria relations are fundamental to the development and
utilization of ceramic materials used in advanced applications.
Temperature, pressure and material concentration are the principal
variables that determine the kinds and amounts of phases (primarily,
solid and liquid structures) present under equilibrium conditions. To
ceramists, who must understand the effects of these variables on both
the processing and the properties of finished ceramic products, phase
diagrams provide the necessary information for phase equilibria
relations. A phase diagram is a map indicating the areas of stability
for various phase reactions as a function of external conditions.

The outputs from the NIST Program under examination are technical
evaluations of phase equilibria diagrams. From these outputs, ceramic
component suppliers derive two main types of benefits: (1) avoidance of
duplicative R&D costs in the design of new ceramic materials, and (2) a
means of explaining abnormalities that may arise in the production of
ceramic materials. Phase diagrams are important especially to the
suppliers of advanced ceramic materials. These suppliers serve a
domestic market that is estimated at \$5.5 billion in 1995 and projected
to grow by 9.5 percent per year to \$8.7 billion in 2000.

A hypothetical, counterfactual experiment has been used to evaluate the
outcomes of the NIST Program outputs. The results show that, in lieu of
NIST's investments, ceramic manufacturers collectively would be less
efficient in attaining comparable technical data. Ceramists would incur
greater costs for internal research and experimentation as well as
delays in introducing innovative ceramic materials to market. Such
economic inefficiencies would certainly have an adverse effect on the
international competitiveness of U.S. ceramic component suppliers.

The internal rate of return (IRR) from investments in the NIST Phase
Equilibria Program has been calculated to be at least 33.5 percent. This
calculation is based on a five-year appraisal of prospective economic
benefits and expenditure data related to the outputs of the NIST
Program. Net benefits have been estimated from a survey of the domestic
advanced structural ceramics industry using the hypothetical,
counterfactual experiment. A number of factors have been incorporated to
portray this as a conservative estimate of NIST's economic impact on
domestic industry. Using a similar set of factors and assumptions, the
benefit-to-cost ratio (BCR) is 10.0 to one. The conservative estimates
of the IRR and BCR imply that the NIST Phase Equilibria Program is
pursuing a socially-valuable activity affecting the domestic ceramics
industry and a larger range of downstream industries.

1\. introduction

1.1 NIST

The United States Department of Commerce (US DoC) through the National
Institute of Standards and Technology (NIST) supports U.S. industry's
efforts to develop new technologies, accelerate commercialization of new
products and processes based on these technologies, and achieve global
market penetration to advance the Nation's economic growth and standard
of living. NIST\'s laboratories provide this support in the form of
various types of nonproduct standards, testing, and laboratory
accreditation services that are used by industry in meeting the
challenge of keeping pace with rapid technological change. NIST is the
only Federal laboratory with the primary mission of supporting the
development and commercial application of technology.

NIST\'s laboratories develop and transfer infrastructure technologies to
industry. Infrastructure technologies (infratechnologies) are "tools"
that make the R&D, production, and market penetration stages of the
product cycle more efficient. These tools enable industry to efficiently
develop applications that are based on both generic and proprietary
technologies.[^1] Examples of infratechnology tools include production
methods, processing models, advanced measurement methods, technical
databases, nonproduct standards, product performance tests, and quality
assurance techniques. NIST develops its tools commensurate with the
commercialization needs of U.S. industry, which have become ever more
demanding.

1.2 Materials Science and Engineering Laboratory

The NIST Materials Science and Engineering Laboratory (MSEL) provides
technical leadership and participates in developing the measurement
infrastructure related to materials critical to U.S. industry, academia,
government and the public. The overall mission of MSEL is to foster the
development and processing of safe and efficient products by improving
the quality, manufacturability, and reliability of these materials. This
mission is accomplished through developing and disseminating nonproduct
standards, measurement methods, predictive models, evaluated data and
reference materials, and the scientific, quantitative understanding that
is fundamental to the synthesis, processing, characterization,
properties, and performance of materials. Materials science and
engineering programs at NIST cover a full range of materials issues from
design to processing to performance.

The NIST/MSEL Data Technologies Program develops and facilitates the use
of evaluated databases for the materials science and engineering
communities. Both research- and application-directed organizations
require readily-available, evaluated data to take advantage of the large
volume of materials information developed in public- and
private-sponsored programs. This information, particularly numeric data,
is available in an ever increasing number of worldwide publications. The
necessity to consolidate and allow rapid comparison of materials
properties for product design and process development underlies the
database projects performed within NIST. These projects are conducted in
cooperation with the NIST Standard Reference Data Program Office, and
include compilation and evaluation of numeric data as well as recent
efforts directed at more effective distribution and use of the data.[^2]

1.3 NIST/ACers Phase equilibria program

1.3.1 History, Purpose, and Objectives

More than a 100 years ago, scientists discovered the usefulness of phase
diagrams for describing the interactions of inorganic materials in a
given system. Phase equilibria diagrams are graphical representations of
the thermodynamic relations pertaining to the compositions of materials.
Ceramists have long been leaders in the development and use of phase
equilibria diagrams as primary tools for describing, developing,
specifying and applying new ceramic materials. (For a more detailed
description of ceramic phase equilibria diagrams, see Appendix A).

For over 60 years, NIST and The American Ceramic Society (ACerS) have
collaborated in the collection, evaluation, organization and
republication of phase diagrams for ceramists.[^3] During that time,
over 10,000 diagrams have been published by ACerS through its close
working relationship with NIST. The collaboration between these two
organizations was informal until December of 1982, and successive formal
agreements have extended the program to the present time.

The purpose of this program, known generally as the Phase Equilibria
Program, is to support growth and progress in ceramics industries by
providing qualified, critically-evaluated data on thousands of chemical
systems relevant to ceramic materials research and engineering.[^4] This
information serves as an objective reference for important statistical
parameters such as melting points and chemical reactivity. In short, the
database is a valuable source of infrastructure technology for ceramists
in research- and application-oriented organizations.

The intention of the Program is to overcome problems that researchers
have in using ceramic phase equilibria diagrams that appear in the
various technical journals. For example, the original source of a
diagram is often obscure or not available readily to all ceramists.
Diagrams are also published with inconsistent styles and units, and some
diagrams are published with obvious (to expert ceramists) errors in
thermodynamic data which result in design failures. Maintaining currency
(the constant updating of diagrams) is another concern of ceramists.
Hence, the objective and scope of the NIST/ACerS program is to compile
an accessible, accurate, systematic, and current set of phase diagrams
that have already appeared in the archival literature.

The Phase Equilibria Program benefits the industrial community of
ceramists in a number of ways. The use of accurate, evaluated phase
diagrams --- versus incorrect diagrams --- minimizes design failure,
overdesign, and inefficient processing. Another impact is the reduction
in duplicative research performed by individual ceramists. The savings
in time and resources to search and evaluate the phase diagrams
individually can be directed more productively to applied research on
the material of interest. Also, the ready access of qualified diagrams
can spur the insertion of ceramic materials into new applications. For
example, the availability of high-quality diagrams is credited with the
rapid development of ceramic materials used in the cement and metals
processing industries.

The primary output of the NIST/ACerS Phase Equilibria Program has been
the compilation of evaluated data. These data have been published as
*Phase Diagrams for Ceramists (PDFC)*, mostly in printed form but also
in electronic form in recent years. The current set of PDFC consists of
14 major volumes and 11 smaller compilations, and each PDFC document
encompasses a particular niche of ceramics. ACerS estimates that over
45,000 individual copies of the 14-volume set have been sold since 1933.

1.3.2 Management

The Phase Equilibria Program is managed under the Phase Equilibria
Program Committee of ACerS. Committee membership includes Society
members, the ACerS Executive Director and the Chief of the Ceramics
Division of NIST/MSEL. Other Society and NIST employees serve as
important resources to the Committee. Selection of diagrams from the
available technical literature is one of the tasks of this Committee.
The diagrams selected for evaluation and compilation are meant to: meet
the pressing needs of researchers, students and industry; have economic
importance; and promote advanced technology.

Under the current joint arrangement, NIST administers the technical
aspects of the Program and ACerS oversees the publication of data.
Organizationally within NIST, the Phase Equilibrium Program is a project
within the Data Technology Program described in Section 1.2, above. NIST
provides overall coordination and technical guidance, ensures quality
data coverage and evaluation with expert commentary, and develops the
prototype software configurations of the phase diagrams.[^5] Oftentimes,
the actual evaluation is performed by reviewers from academia, industry
and government laboratories outside of NIST as well as by consultants.
ACerS is responsible for preparing, disseminating and operating database
outputs in electronic and printed forms. These responsibilities are
carried out through full-time research assistantships at NIST.

The Phase Equilibria Program is funded by a combination of sources.
ACerS contributions come from a mix of endowment income and net proceeds
from sales of PDFC volumes. NIST provides funding from the NIST/MSEL
Standard Reference Data Program and the Ceramics Division. Table 1 shows
annual expenditure data for NIST from 1985 to 1996.[^6] NIST's research
efforts during this time have been incorporated in nine PDFC volumes,
six of which pertain to advanced ceramics.

Table 1 NIST Phase Equilibria Program Research Expenditures (\$000),
1985-96

  ----------------------- -----------------------------------------------
  Year                    NIST Research\
                          Expenditures

  1985                    420

  1986                    420

  1987                    382

  1988                    294

  1989                    255

  1990                    265

  1991                    87

  1992                    94

  1993                    103

  1994                    105

  1995                    97

  1996                    136
  ----------------------- -----------------------------------------------

1.4 case Study objectives

This case study provides an estimate of the first-order economic impacts
on U.S. industry from NIST's contribution to the NIST/ACerS Phase
Equilibria Program. NIST's infrastructural outputs are examined in terms
of the affected industrial activities, the qualitative nature of the
impacts on the behavior of relevant industries, and the quantitative
impacts on the competitive performance of these industries. The specific
objectives established at the onset of the study were to :

• Describe the practical use and economic importance to ceramists of
phase diagrams and the corresponding infrastructure technology developed
by NIST

• Analyze the affected industry structure and marketing strategies

• Characterize technical barriers encountered by industry which have
been addressed by NIST via the development of infrastructure technology

• Obtain qualitative and quantitative data on the economic impacts
attributable to the infrastructural outputs from NIST; these economic
impacts include assessments of the benefits and costs from the
perspectives of users, producers, and other organizations that influence
and are influenced by products made with ceramic materials

• Analyze the data and calculate the rate of return on NIST\'s
investments in this infratechnology using various economic measures

• Prepare a report of the findings, analyses and conclusions

1.5 case study outline

The remainder of this report includes the following:

• Chapter 2 describes both the role of ceramic phase diagrams in
industrial applications, and the domestic advanced ceramics industry
which is the segment of the broader ceramics industry under focus in
this case study

• Chapter 3 describes the scope, benefit measures and data collection
strategy used for the analysis in this case study

• Chapter 4 identifies findings on the qualitative and quantitative
economic impacts of the infrastructural outputs from the NIST Phase
Equilibria Program based on a survey of advanced structural ceramic
producers

• Chapter 5 provides quantitative estimates of the prospective economic
rate of return from investments made in the NIST Phase Equilibria
Program

• Chapter 6 discusses the primary conclusions for this case study

• Appendix A provides a technical overview of ceramic phase diagrams

2 background

2.1 Role of phase diagrams in industrial applications[^7]

The evaluation and availability of phase diagrams are extremely
important for the economic well-being of the ceramic industry. In the
past, industry representatives have estimated that the lack of readily
available compilations of evaluated phase diagrams costs industry many
millions of dollars per year due to:

• Product failures resulting from materials based on unreliable
thermodynamic data

• Unnecessary overdesign and waste

• Inefficient materials processing

• Needless duplication of research and development which occurs when the
data sought have already been generated but published in obscure
journals

The remainder of this section provides examples of the importance to
ceramists of phase diagrams and the NIST/ACerS Phase Equilibria Program.

The manufacture of refractories (ceramic materials that are resistant to
melting at high temperature) depend on accessible and accurate phase
diagrams. Figure 1 shows a phase diagram of silicon dioxide and aluminum
oxide. This particular diagram is significant to the ceramics industry
because many refractories are made from combinations of these common
materials. Figure 2 shows an industrial example, a burner port block,
which was composed of a 65 percent aluminum oxide refractory, degraded
and deformed in a gas-fired furnace after only a few months of use. The
operating temperature in the block was found to exceed 1,595 degrees
Celsius (^o^C). As the phase diagram indicates, a certain amount of
liquid phase develops in this material which explains the easy
deformation of this refractory. By using a material with higher alumina
content, that is, between 70 and 80 percent, only solid phases exist at
temperatures around 1,600 ^o^C. Such material is more stable against
deformation and degradation and has a longer useful lifetime. This is a
prime example of how phase diagrams have been used in the design of
ceramic applications.

![](media/image1.emf){width="4.7756944444444445in"
height="3.1951388888888888in"}

Figure 1 SiO~2~ - Al~2~O~3~ System

![](media/image1.emf){width="2.970833333333333in"
height="4.498611111111111in"}

Figure 2 Burner Port Block Application

Another example of the impact of phase equilibria is the catalytic
converter used for automotive emission control. In the center of the
catalytic converter, shown in Figure 3, is the ceramic catalyst support
produced by Corning, Incorporated. This honeycomb material is frequently
made from a magnesium aluminum silicate (shown in the highlighted
portion of the phase diagram) because of its characteristics for low
thermal expansion and high use temperature. Manufacturing is difficult
because, as the figure indicates, this material has a steep liquid-solid
curve whereby only small changes in composition produce an excess of the
liquid phase. To manage these physical changes, the firing temperature
and processing composition of this material must be controlled
accurately. This control requires a very accurate phase diagram in the
vicinity of the desired composition.

![](media/image1.emf){width="5.263194444444444in"
height="3.4298611111111112in"}

Figure 3 Catalytic Converter Application

In fact, the PDFC volumes played a critical role in establishing this
product technology into an important business for Corning. Accurate
phase diagrams were essential for developing the most durable material
composition. Corning estimates that the ceramic catalyst support has now
been installed in 500 million automobiles and small trucks world-wide,
and this product has played a major role in reducing environmental
pollution.

Phase diagrams are especially important to manufacturing new ceramic
products, such as the ceramic fibers and coatings made from combinations
of silica and boria which have been developed with sol-gel process
technology. In these processes, the ceramic materials are made from two
very different precursor materials. The sophisticated products made from
ceramic materials, such as the thermal insulation used on NASA's Space
Shuttle, continue to provide solutions for practical engineering
problems.

Accurate phase diagrams are also important in the area of electronic
ceramics. The titanium oxide, calcium oxide, barium oxide phase diagram
shown in Figure 4 includes the most common material, barium titanate,
used for ceramic capacitors. The complex phase diagram shows that small
additions of calcium oxide have large effects on the phase composition
and the physical parameters of the capacitor material. Therefore,
accurate phase diagram information allows developers to understand the
changes occurring in materials properties, and, in turn, to better
understand capacitor performance.

![](media/image1.emf){width="5.4875in" height="3.6104166666666666in"}

Figure 4 Barium Titanate Capacitor Application

Electronic ceramic capacitors are also produced from combinations of
barium oxide and TiO~2~. Using Figure 5, efforts to develop a
temperature-stable capacitor based on the compound at 80 percent TiO~2~
ignored the compound to the right because it did not exist in the old
phase diagram literature. But subsequent investigations into the phase
fields of higher TiO~2~ content produced the superior material required
for temperature-insensitive capacitor materials. This work has proved
important to the market for reliable, temperature-stable electronics for
satellite communications. AT&T Bell Laboratories credits the
availability of an accurate and improved phase diagram in obtaining a
patent on this material which provided AT&T with a competitive advantage
in developing reliable satellite systems.

![](media/image1.emf){width="5.94375in" height="3.9027777777777777in"}

Figure 5 BaTiO~3~ -- TiO~2~ System

Silicon carbide and silicon nitride are the primary materials for a
market in advanced ceramic materials estimated to total \$20 billion
during the next 15 years. Figure 6 shows two examples of dense silicon
carbide in the complex shapes needed for these future technologies. The
part on the left is a stator (a stationary component enclosing rotating
parts) for an automotive gas turbine engine and the large structure on
the right is a section of a ceramic heat exchanger tube array. Accurate
phase diagrams are extremely important for fabricating these new,
high-technology materials. Furthermore, accurate phase diagrams of these
materials in combinations with oxides and combustion gases will be
important for understanding their performance in the potentially
corrosive environments that they are designed to endure.

![](media/image1.emf){width="5.916666666666667in"
height="3.888888888888889in"}

Figure 6 Complex Silicon Carbide Structures

2.2 Industry and market for Advanced ceramics

Ceramic materials are divided into two general categories: traditional
and advanced. Traditional ceramics include clay-base materials such as
brick, tile, sanitary ware, dinnerware, clay pipe, electrical porcelain,
common-usage glass, cement, furnace refractories and abrasives. Advanced
ceramics are often cited as enabling technologies for advanced
applications in fields such as aerospace, automotive, and electronics.

Advanced ceramic materials constitute an emerging technology with a very
broad base of current and potential applications and an ever growing
list of material compositions. Advanced ceramics are tailored to have
premium properties through application of advanced materials science and
technology to control composition and internal structure. Examples are
silicon nitride, silicon carbide, toughened zirconia, aluminum nitride,
carbon-fiber-reinforced glass ceramic, and high-temperature
superconductors. This section describes the domestic industry and market
for advanced ceramic materials, and, in particular the structural
segment of this industry, which is the focus of the industrial survey
for this case study.

2.2.1 Industry Structure

According to Business Communications Company (BCC), a market research
firm that follows the advanced ceramics industry, over 450 U.S.
companies (including foreign-owned subsidiaries) are involved in the
business of advanced ceramics. Of this total, approximately 125 firms
produce structural ceramics. Firm size ranges from the job shop to huge
multinational corporations, and considerable variation also exists among
individual firms regarding their degree of manufacturing
integration.[^8]

Current trends in this industry are for greater emphasis on the systems
approach for the commercialization of new products. The systems approach
comprises the full spectrum of activities necessary to produce the final
system or subsystem, including production of raw materials, product
design, manufacturing technology, component production, integration into
the subsystem or system design and final assembly.

The systems approach has resulted in new corporate relationships in the
advanced ceramic industry. More consolidation of efforts between
companies is occurring due to the following factors: complex technical
requirements; the level of sophistication necessary to manufacture
advanced ceramics; the advantages in pooling technology, personnel
and/or company facilities; and the finite amount of business that can
support these suppliers. Indications of this consolidation are the 180
acquisitions, mergers, joint ventures and licensing arrangements
identified by BCC from 1981 to 1995 for firms in the advanced ceramics
business.

Research and developmental activities are carried out typically by large
companies and institutions. However, a number of small start-up
companies also attempt to commercialize products.

2.2.2 Markets

Based on estimates from BCC, Table 2 summarizes the market size for the
various advanced ceramic market segments in the United States. The total
market value of U.S. advanced ceramic components for 1995 is estimated
to be \$5.5 billion, and the year 2000 market is forecast to be \$8.7
billion for an average annual growth rate of 9.5 percent. Electronic
ceramics has the largest share (about 75 percent) of this market in
terms of sales, although the structural ceramics market is expected to
have the largest growth rate in terms of massive use.

Table 2 U.S. Markets For Advanced Ceramic Components From 1995-2000

  -------------------------- ----------------- ----------------- -----------------
                             1995\             2000\             AAGR\
                             (\$M)             (\$M)             1995-2000\
                                                                 (%)

  Structural Ceramics        500               800               9.9

  Electronic Ceramics        4,215             6,573             9.3

  Environmental/Industrial   240               400               10.8

  Ceramic Coatings           575               940               10.2

  Total                      5,530             8,713             9.5
  -------------------------- ----------------- ----------------- -----------------

AAGR - Average Annual Growth Rate

Note: All dollar values are in current U.S. dollars

Source: BCC

The market for U.S. advanced structural ceramics is expected to grow
from \$500 million in 1995 to \$800 million in 2000 with a growth rate
of 9.9 percent. Such materials are used for high-performance
applications in which a combination of properties such as wear
resistance, hardness, stiffness, corrosion resistance and low density
are important. Major market segments are cutting tools, wear parts, heat
engines, energy and high-temperature applications, bioceramics, and
aerospace and defense-related applications. The largest market share is
for wear-resistant parts such as bearings, mechanical seals and valves,
dies, guides and pulleys, liners, grinding media, and nozzles.

While the market for advanced ceramics is expected to grow significantly
into the next century, certain technical and economic issues have to be
resolved to realize this potential. Such issues include high cost,
brittleness, need for increased reliability, repeatable production of
flawless components and stringent processing requirements for pure and
fine starting powders with tailored size distribution. The advanced
ceramic market, and in particular the structural ceramics market, could
grow even further if these problems can be overcome by industry. U.S.
government agencies, including NIST, will continue to have significant
roles in resolving these problems to assist U.S. companies in achieving
early commercialization of innovative ceramic technologies developed in
this country.

3\. evaluation framework and approach

3.1 Scope

At the onset of the study, the TASC study team both reviewed the
available literature and held discussions with NIST technical personnel
and industry representatives. The main purpose of this fact-finding
exercise was to understand the general use of phase diagrams in industry
for determining the scope of the economic impact analysis. This exercise
provided several pertinent, generalized facts:

• Phase diagrams are used primarily by ceramic component manufacturers,
not at all by the suppliers of raw materials, and somewhat by systems
manufacturers (generally, the customers of the component manufacturers)

• Available phase data obviate the need for industrial firms to gather
these data separately, for which they may not have the required internal
resources (time, equipment and expertise)

• The primary benefits of evaluated phase diagrams in the PDFC volumes
are avoidance of R&D costs in the development of new ceramic materials,
and, to a lesser extent, explaining abnormalities that may arise in the
production of ceramic materials

• The legacy diagrams published many years ago by ACerS continue to have
significant usage by industrial ceramists (verified by an ACerS' staff
member who stated that Volume 1 of PDFC is still their best-seller)

• Ceramists in the four major market segments of advanced ceramic
materials differ in their reliance on phase diagrams for product
development activities; the order of reliance is as follows: structural,
electronics, environmental, and coatings

• When necessary, ceramists readily use non-evaluated phase diagrams
that do not appear in the PDFC volumes

• Standards do not apply to ceramic phase diagrams, and, typically,
systems manufacturers do not specify particular phase diagrams in
procurements with their suppliers of ceramic components

Using this information, the study team decided that the advanced
structural ceramics industry would be the focus for collecting benefit
data. Firms in this industry group use phase diagrams from PDFC volumes
that were generated from a relatively recent period (since 1985). As
such, these particular volumes became the outputs to be evaluated for
economic impact. While industry realizes significant benefits from the
earlier volumes, difficulties in obtaining credible cost data
attributable to these outputs --- from as far back as the 1930s --- led
to the decision of not quantifying benefits for such outputs.

Obviously, NIST's research efforts for the outputs under consideration
diffuse beyond the target benefit group, the advanced structural
ceramics industry. The downstream systems manufacturers benefit from
performance improvements in ceramic componentry based on the know-how
from the phase diagrams. Also, from a horizontal industrial perspective,
the other segments of the advanced ceramic industry benefit in ways
similar to firms in the structural ceramic industry. However, due to
limitations of time and budgets for the study, the structural ceramics
industry was determined to be an appropriate population for assessing
benefits. Limiting the study scope to this population provides a basis
for a lower bound estimate of industry benefits.

3.2 METHODOLOGY FOR estimating ECONOMIC BENEFITs

The approach for evaluating the economic benefits associated with NIST's
research outputs has been adopted from evaluations of other public
investments in infratechnology.[^9] Specifically, research costs are
compared to an estimate of the benefits received by industry using a
hypothetical, counterfactual experiment. The hypothesis for this
experiment is that industry would have incurred additional costs in the
absence of the NIST-conducted research. In other words, these are costs
avoided by industry due to the existence of the NIST-conducted research
and its availability through the PDFC volumes.

The counterfactual experiment is used because this case study lacks
comparable baseline observations. Based on initial interviews with
industry representatives, all firms in the advanced ceramics industry,
broadly defined, appear to rely mainly on evaluated phase diagrams
emanating from research conducted at NIST. If some firms relied on phase
diagrams from alternative sources, then the production-related
efficiencies between the two groups of industrial firms could be
compared to ascertain a first-order measure of the added value
attributable to the NIST-conducted research. Historically, all
manufacturers in the industry appear to have access to the PDFC volumes
and have had such access for years. Stated alternatively, the
development and manufacture of structural ceramic materials and products
has taken place in an environment based primarily on evaluated phase
diagrams from NIST.

3.3 strategy FOR collecting benefit data

Previous experience in gathering information related to economic
benefits associated with NISTís research programs suggests that the most
efficient means of collecting benefit data is through semi-structured,
interactive telephone interviews. Hence, that mode of data collection
was chosen for this case study.

A telephone interview guide was prepared and pre-tested with several
industry representatives, and later formally approved for data
collection by the Office of Management and Budget. In summary, this
interview guide was designed to elicit the following information:

• Examples in which the PDFC volumes were important in the
commercialization of advanced ceramic products

• Likely action(s) that would have been taken if the appropriate phase
data had not been found in the PDFC volumes

• Estimate of the economic impact from solving technical problems in
lieu of the available PDFC volumes

• With respect to the use of phase diagrams, an estimate of how
representative the example applications are compared to the firms' total
commercialized products

• The frequency of use and handling of non-evaluated phase diagrams

Based on input from BCC and NIST, a sample size of 32 advanced
structural ceramics firms was identified for contact. This group is
representative of the broader population of manufacturers of structural
ceramics products that directly utilize, through the PDFC volumes,
NISTís evaluation research. According to BCC, these 32 companies
represent about 60 to 70 percent of the domestic structural ceramics
industry as measured in terms of annual sales.

NIST and ACerS identified a contact individual for each of the 32
companies. Each individual was initially contacted by NIST in order to:

• Briefly describe the purpose of the evaluation study as part of a NIST
internal planning process

• Solicit their participation in a survey designed to identify economic
benefits associated with the technical information in the PDFC volumes

• Introduce the TASC study team

• Assure each participant that individual survey responses would be kept
confidential by the TASC team and only aggregate information would be
provided to NIST for planning purposes

4\. survey results

Twenty-eight of the 32 representatives in the industry sample were
interviewed by telephone. These 28 companies are listed in Table 3.

Table 3 Participating Companies in the Telephone Survey

+----------------------------------------+-----------------------------+
| > • Advanced Cerametrics               | > • Engineered Ceramics     |
+----------------------------------------+-----------------------------+
| > • Allied-Signal                      | > • ESK Engineered Ceramics |
+----------------------------------------+-----------------------------+
| > • AlSiMag Technical Ceramics         | > • Ferro Corporation       |
+----------------------------------------+-----------------------------+
| > • APC International                  | > • Greenleaf Technical     |
|                                        | > Ceramics                  |
+----------------------------------------+-----------------------------+
| > • A.P. Green Refractories            | > • Ispen Ceramics          |
+----------------------------------------+-----------------------------+
| > • Blasch Precision Ceramics          | > • Kennametal              |
+----------------------------------------+-----------------------------+
| > • Ceradyne                           | > • Lucent Technologies     |
+----------------------------------------+-----------------------------+
| > • Ceramatec                          | > • Norton                  |
+----------------------------------------+-----------------------------+
| > • Ceramco                            | > • PPG                     |
+----------------------------------------+-----------------------------+
| > • Corning                            | > • 3M                      |
+----------------------------------------+-----------------------------+
| > • Delphi Energy and Engine           | > • Textron                 |
| > Management Systems                   |                             |
+----------------------------------------+-----------------------------+
| > • Dow                                | > • Vesuvius                |
+----------------------------------------+-----------------------------+
| > • Du-Co Ceramics                     | > • WESGO                   |
+----------------------------------------+-----------------------------+
| > • DuPont                             | > • Zircoa                  |
+----------------------------------------+-----------------------------+

4.1 qualitative observations

4.1.1 Summary Results

About half of the respondents followed the interview guide in a
methodical fashion while the other half preferred to discuss the role of
evaluated phase diagrams in a more unstructured manner. This mix in
response styles created difficulty in characterizing the qualitative
observations of the survey statistically. In lieu of a statistical
analysis, several stylized facts on the general use of phase diagrams in
the structural ceramic industry are described as follows:

• Phase diagrams are used most frequently during the research stage of
the product cycle; product design/development was the next stage
mentioned most frequently for the use of phase diagrams.

• When queried about the examples mentioned during the interview as to
what action(s) would have been taken if appropriate evaluated phase
diagrams were not available in the PDFC volumes, the responses were
varied, but, two options were mentioned consistently:

> \(i\) Search for non-evaluated equilibria data from other sources/
> publications, or
>
> \(ii\) Perform internal experimentation to determine the appropriate
> phase relations. In only one case did a respondent note a situation
> where a research project was halted.

• Regarding the perceived economic consequences associated with
alternatives to the evaluated phase diagrams in the PDFC volumes,
respondents were of the opinion uniformly that both certainty associated
with the performance of the final product would decrease and the
research or product design/development stage would lengthen by about six
months (the median response).

• While ceramic researchers generally have greater confidence in
evaluated diagrams in comparison to non-evaluated diagrams, they
scrutinize all phase diagrams carefully in the area of the diagram of
interest --- whether it is an evaluated diagram or a non-evaluated
diagram.

4.1.2 Examples of Using the PDFC Volumes

The survey respondents provided various examples of the practical use
and economic importance of evaluated phase diagrams during the research
or design/development stages of product development. Most of these
examples were developed and commercialized many years ago --- most going
back to the 1970s --- as most the respondents were reluctant to describe
ceramic products developed and produced within the past five years, as
requested. Hence, many of the examples technically are not considered
advanced structural ceramics. Several testimonials from the interviews
are paraphrased below to illustrate the breadth of applications and the
importance of the PDFC data in product development.

• A respondent from 3M:

Our products are typically derived from knowledge of chemical solutions
rather than melting points (melts). Products made from solution are
superior to products made from melts due to the presence of far less
contamination, although products developed with the former method are
more expensive. The phase diagrams allow us to determine the appropriate
material properties from a chemical solution.

For example, the PDFC diagrams have helped in the development of a
product family of abrasive materials produced from solutions rather than
melts. These materials are used to make sandpaper and grinding wheels.
The research on abrasives began in 1971, the first product was
introduced by 1980, and we\'ve continued to develop it. Our first
product was developed with magnesium oxide, and subsequent products have
been made with aluminum oxide modified with various elements. We
manufacture abrasives in the tons per day which is converted into miles
of sandpaper. Our abrasive product line has been reformulated
extensively in the last five years, all with the use of the PDFC
volumes; overall, about 60 percent of our ceramics product line uses the
PDFC data. In lieu of the evaluated NIST data, we would perform (1)
internal experimentation to determine the appropriate phase relations,
or (2) \"Edisonian\" development or design of experiments without phase
relation data.

Another example of our solution-derived materials is a zirconia silica
fiber used for high temperature insulation and metal-matrix composites.
These materials are used typically in aerospace applications such as the
tiles, insulation, door seals and much more for NASA's Space Shuttle. We
make hundreds of pounds a day of this material.

• A respondent from APC International:

In our business, we develop and sell products made from lead zirconate
titanate, a transducer material that can change electrical energy to
mechanical energy and vice versa. These ceramic products are used in
ultrasonic-based applications (e.g., sonar, medical, flow and level
control, and non-destructive testing and evaluation of materials). Our
products are also found in diverse end-products such as ultrasonic
cleaning equipment, welding equipment and chiming devices (e.g., the
buzzer that rings for the seat belt in a car, or the ringer that signals
that a washing machine has finished its cycle).

Essentially, one phase diagram in the PDFC is pertinent to our work in
lead zirconate titanate products. A sensor material developed recently
illustrates the use of this phase diagram. This material can be used to
measure liquid flow through pipes, and it needs to have certain
electrical properties and efficiencies in the transferring of mechanical
to electrical energy. We began research on this product about three
years ago, and the relevant PDFC diagram was important in understanding
the structural phase boundaries in different situations. The product was
commercialized about one year ago.

Similarly, the rest of our lead zirconate titanate product line refers
to the PDFC data. Without the availability of the PDFC diagram we would
have had to incur additional in-house research costs for experimentation
to generate the relevant phase diagram, and the commercialization of our
material would have been delayed at least six months and maybe as long
as two years.

• A respondent from Dow Chemical:

Our company produces tungsten carbide powder materials which involves an
understanding of recent phase diagrams. To illustrate, we developed
three powders having very fine sizes: 0.2, 0.4, and 0.8 microns. These
materials are intended for new applications (e.g., high speed drills for
circuit board manufacturing) requiring very high strength. The phase
diagrams helped us learn how to process the tungsten carbide powder. In
the absence of the PDFC volumes we would have searched for non-evaluated
phase diagrams rather than generate them ourselves. We would work with
these non-evaluated diagrams knowing that they may be less accurate. To
handle this risk, we conduct additional process development to gain a
level of confidence for a reliable product.

• A respondent from Norton:

We manufacture a family of materials made from silicon nitride. These
ceramic materials are used in applications that include ball bearings
and engine components. The ceramic balls are used for bearings in dental
drills, machine tools and rocket exhaust systems. Our balls when used as
bearings have long operational lifetimes under stressful conditions. One
of our recently developed ceramic ball materials was recognized by the
American Ceramic Society with its corporate Technical Achievement Award.

We use the PDFC volumes for research and development of new material
formulations to improve properties such as toughness, high temperature
strength and creep resistance. We investigate the interactions between
different oxides, as an example. Our research results in a continuous
improvement of materials used in our products. As product and market
opportunities develop, we can select from our portfolio of materials to
meet the needs of our customers.

The use of the PDFC is almost continuous through the various stages of
the product life cycle, and they are used most often in the early
stages. About 90 percent of our new product developments benefit from
the PDFC data. In lieu of the PDFC volumes, we would search the
technical literature for non-evaluated equilibria data. We could not
afford the other options, such as internal experimentation, since we
would need an army of people. The evaluated phase diagrams are very
useful, and we hope that NIST continues with its Phase Diagram program.

• A respondent from Vesuvius:

The first product example involves ceramic refractories used in ferrous
and nonferrous molten-metal applications. The key to developing this
product involves understanding the temperature at which liquid forms in
silicon nitride-based materials. The PDFC volumes have been used in all
aspects of the product life cycle (research, new product selection,
product design/development, and failure analysis). Research started on
this product in 1992, the first prototypes were developed in 1994, and
the product was introduced to market in 1996. Without the PDFC, this
product likely would have arrived on the market three years later.
Moreover, about 50 percent of our refractory ceramics have benefited
similarly from the PDFC Volumes.

The second product example involves using silicon nitride in the
chlorination process for purifying and refining gold. Chlorine reacts
with the several contaminates of gold (copper, lead, nickel, zinc,
cadmium, silver, etc.) to form a variety of chlorides (e.g., copper
chloride). Some chlorides become volatile at gold melting temperature
and others become liquid, resulting in slag formation. Understanding the
interactions between silicon nitride and the chloride slag is the key to
developing this process. Much of this data is compiled in the phase
diagrams. We first spent several days looking at the older diagrams
(first four PDFC volumes) that show combinations of various compounds
with only one or two anions. But, we ultimately found more data in the
recent PDFC volumes that show phase diagrams with a wide variety of
combinations of oxides, chlorides, nitrides, metals, salts, and gases.

We need the recent PDFC volumes for failure analyses in our current
projects to improve the products we are selling. Our most recent work
begins to address new formulations that could benefit from even more
PDFC volumes as we\'re moving into difficult, uncharted territory with
certain chlorides, oxides, nitrides, sulfides, carbides, and different
compounds of these anion groups. This work is not thermodynamically
pure, but the phase diagrams would be useful on an experimental basis.

The PDFC volumes are our most fundamental reference and all of our
engineers use them. Without the phase diagrams we would be shooting in
the dark in most of our problem-solving efforts. One of the benefits of
the phase diagrams is that we can eliminate unnecessary experimentation.
In lieu of the evaluated diagrams, we would need an extra person for the
duration of every major project to account for such additional
experimentation. Across all of our corporate activities, this would
translate to five or six extra engineers every year.

Periodically, we get involved with non-evaluated phase diagrams,
particularly in dealing with patent claims. In some cases, an
experienced engineer can quickly resolve the uncertainties of such
diagrams. In other cases, we have expended considerable time and money
on consultants and in-house research in the assessment of these
non-evaluated diagrams to resolve certain business issues.

4.2 Estimates of company benefits

An estimate was made of the additional annual cost each company would
incur in steady state for adjusting to the hypothetical counter-factual
environment in which no evaluated phase diagram information existed.
These estimates were based on lengthy discussions with each company
respondent about the cost of pursuing the described R&D projects in the
absence of the PDFC volumes and the frequency of such occurrences. In
most cases these estimates were formulated during the interview so that
the accuracy of the estimate could be verified. The following situation
typifies the nature of these conversations:

> Company XYZ uses the PDFC volumes in about 40 percent of its research
> activity and product design/development activity. In the absence of
> such evaluated data (e.g., in the absence of any future research to
> evaluate phase diagrams at NIST), one to two additional person-years
> of effort would be needed each year to maintain the same quality of
> product and the same production schedule. Valuing a ceramics
> researcher at the fully-burdened rate of \$200,000 per year, this
> company would incur a permanent increase in cost of \$300,000
> (\$200,000 x 1.5 person-years) to maintain the status quo.

Many respondents of small as well as large companies stated that, in all
likelihood, their firm could not carry such additional costs. Therefore,
quality, reliability and/or new product introductions would fall.

The estimates to this hypothetical counter-factual question ranged from
a low of \$3,000 per year to a high of \$1.7 million per year in
additional labor and equipment costs. For 22 of 28 companies that were
willing to engage in this estimating exercise, the sum of the
steady-state additional annual costs is \$6.467 million. These 22 firms
account for about 50 percent of the sales in the structural ceramics
industry. Accordingly, the estimated sum of additional annual costs for
the 22 companies has been extrapolated to the structural ceramics
industry as a whole. Thus, \$12.934 million is a point estimate of
benefits for this industry. This estimate is fundamental to the
formulation of total industry benefits (cost savings) associated with
NISTís research in evaluating ceramic phase diagrams.

Based on information from the interview process, the 22 firms in the
sample size apply the PDFC volumes in a manner representative of the
remaining firms that constitute the structural ceramics industry.
Regardless of the size of the firm, phase diagrams are used in
approximately the same product stages and with the same intensity. Also,
regardless of firm size, typically only one or two engineers/scientists
in each firm make use of the phase diagrams. Based on this information,
albeit subjective, the benefits of the sample group have been
extrapolated to the entire industry based on a sales-related coverage
ratio of 50 percent. While an argument can be made that a benefits
extrapolation based on numbers of firms rather than on sales and market
share is more reasonable, the latter method of extrapolation provides
conservatism to the estimate of industry benefits. Further, many of the
firms in the sample size also market products in the other three market
segments (electronics, environmental, and coatings) of the advanced
ceramics market. The benefit data obtained in the survey appears to
extend over the products for these markets.

5\. economic analysis

5.1 cost and net benefit data

Table 4 shows the data used for the economic impact analyses. Total
expenditure data from NIST for fiscal years 1985 through 1996 have been
reproduced from Table 1. According to the management of the Phase
Equilibria Program, the portion of research costs related specifically
to advanced ceramics are inseparable from the total Program
expenditures. Thus, these cost data include the costs of outputs beyond
the scope of the study. These inflated cost data provide a downward,
conservative bias for the calculated metrics.

Table 4 NIST Costs and Net Industry Benefits (current \$000)

  ---------------------- ---------------------- -------------------------
  **Fiscal Year**        **NIST Costs**         **Industry Benefits**

  1985                   420                    \-\-\-\-\-\-\-\-\--

  1986                   420                    \-\-\-\-\-\-\-\-\--

  1987                   382                    \-\-\-\-\-\-\-\-\--

  1988                   294                    \-\-\-\-\-\-\-\-\--

  1989                   255                    \-\-\-\-\-\-\-\-\--

  1990                   265                    \-\-\-\-\-\-\-\-\--

  1991                   87                     \-\-\-\-\-\-\-\-\--

  1992                   94                     \-\-\-\-\-\-\-\-\--

  1993                   103                    \-\-\-\-\-\-\-\-\--

  1994                   105                    \-\-\-\-\-\-\-\-\--

  1995                   97                     \-\-\-\-\-\-\-\-\--

  1996                   136                    \-\-\-\-\-\-\-\-\--

  1997                   0                      12,934

  1998                   0                      13,241

  1999                   0                      13,556

  2000                   0                      13,878

  2001                   0                      14,207
  ---------------------- ---------------------- -------------------------

Also shown in Table 4 are estimates of annual industry benefits
associated with avoiding additional resources to maintain the same
product quality and production schedule in the absence of NISTís
evaluated data in the PDFC volumes. The data are based on the 1997 point
estimate of net industry benefits totaling \$12.9 million (see Section
4.2) which has been extrapolated through 2001. This five-year time frame
for forecasting cost savings is not arbitrary. A number of the
respondents who had institutional knowledge about their company stated
during the telephone interviews that their companyís product mix had
tended to change over the course of about five to ten years. Thus, a
five-year projection to define steady state appears reasonable.[^10]
These yearly benefits have been increased by an annual inflation factor
of 2.375 percent.[^11]

For evaluation purposes only, zero economic benefits to industry have
been assumed over the years 1985 to 1996. Obviously, this is an
unrealistic assumption based not only on common sense but also on the
survey responses. To illustrate, one survey respondent noted the recent
use of the PDFC volumes:

Our company makes ceramic materials that are manufactured into
wear-resistant parts by our customers. The phase diagrams contain
important information correlating melting points with the wear
resistance properties. Our research began in 1991, the prototype
appeared in 1992, and the product was introduced to the market in 1993.

However, no quantifiable information emerged from the survey interviews
to facilitate an estimate of benefits prior to 1997. The omission of
these pre-1997 benefits provides downward bias for the economic
analysis.

Certain costs associated with the diffusion of NIST's research outputs
are not included in this economic analysis. An implicit assumption is
made that the publishing costs incurred by ACerS, as noted in Section
1.3, are offset by the revenues that ACerS receives from the sale of the
PDFC volumes to the population of ceramics researchers. As stated
previously, the focus of the economic analysis is to quantify the
economic benefits attributable to NIST's evaluations net of ceramists'
costs to purchase the related volumes.

5.2 measures of economic impact

The return that industry receives from investments made through the NIST
Ceramic Phase Equilibria Program has been calculated using four
widely-accepted measures of economic impact. These evaluation measures
are the internal rate of return, the implied rate of return, net present
value and the benefit-to-cost ratio.

5.2.1 Internal Rate of Return

By definition, the internal rate of return (IRR) is the rate of discount
that causes a series of costs and receipts to approach proportionate
equivalence. Applying this concept to the evaluation of research
projects, the IRR is the discount rate that reduces the net present
value (NPV) for a stream of expenditures and net benefits to zero.
Mathematically, the IRR is the discount rate *r*^\*^ that satisfies the
equation:

![](media/image2.pct){width="200.0in" height="28.0in"}

where (B*~t~* - C*~t~*) represents net benefits in year *t*, and *n* is
the number of years for the research project. Reducing NPV equal to zero
is comparable to a benefit-cost ratio of one (the break-even point),
which allows comparisons of IRRs among projects of different sizes. The
IRR equation is then rewritten as:

![](media/image3.pct){width="218.0in" height="33.0in"}

and,

![](media/image4.pct){width="147.0in" height="33.0in"}

Based on the stream of cost and net benefit data for fiscal years 1985
through 2001 in Table 4, the calculated value of *r*^\*^ that equates
NPV to zero is 0.335 (rounded).[^12] In other words, 0.335 is the
lower-bound value of the discount rate that equates the present value of
benefits to the present value of costs. This implies a lower-bound
internal rate of return of 33.5 percent for NIST\'s investments in
evaluations of ceramic phase diagrams.

5.2.2 Implied Rate of Return

Under an alternative set of assumptions, an implied rate of return is
calculated from the data in Table 4.[^13] For example, if all of NIST's
costs are referenced to 1985 using a nominal discount rate of 9.375
percent as recommended by the Office of Management and Budget, then the
present (1985) value of NIST's costs is \$1.94 million.[^14] When all
industry benefits are referenced forward to the year 2001 using the same
9.375 percent discount rate, the terminal (2001) values of industry
benefits are \$81.4 million (lower-bound) and \$195.9 million (upper
bound). Using the implied rate of return, the NIST TCP is viewed as a
single calibration project where an initial net investment of \$1.94
million generated, after 16 years, a consumer surplus equaling \$87.4
million (lower bound) and \$195.9 million (upper bound). Thus, the
annual compounded rate of return corresponding to such an initial
investment in 1985 that culminates in 2001 is based on the value of
*i^\*^* that satisfies the following lower-bound relationship:

\$1.94M (1 + *i^\*^*)^16^ = \$81.4M

In this case, the calculated value of *i^\*^* equals 0.263 which means
that the lower-bound implied rate of return for the NIST research
activity on ceramic phase diagrams is 26.3 percent

The IRR is often confused with the implied rate of return. Both measures
are used in financial analyses but the type of cash flow pattern
associated with the implied rate of return occurs neither in an R&D
project, in general, nor in the case of NIST research and activities
related to phase diagrams, in particular. Therefore, the implied rate of
return is not directly comparable to the IRR discussed in the economics
literature.

5.2.3 Benefit-to-Cost Ratio

A benefit-to-cost ratio (BCR) relates the present value of NIST research
costs to resulting industry benefits. The calculation of a BCR is based
on the following formula:

![](media/image3.pct){width="218.0in" height="33.0in"}

For this case study, costs and net benefits are deflated to the base
period (1985) using a 9.375 percent rate as in the implied rate of
return calculation. Using 1985 present values of costs (\$1.94 million)
and the percent value of lower-bound benefits (\$19.4 million), the
calculated BCR is 10.0 to 1.

6\. Conclusions

This case study provides evidence on the economic importance to the
domestic ceramics industry of NIST investments for evaluating ceramic
phase equilibria diagrams. Industrial representatives provided an array
of anecdotal insights on the practical use of phase diagrams throughout
the product life cycle.

The hypothetical, counterfactual experiment shows that, in lieu of
NIST's investments, ceramic manufacturers collectively would be less
efficient in attaining comparable technical data. Ceramists would incur
greater costs for internal research and experimentation. These
additional costs would likely be passed on to downstream manufacturers
and ultimately, to the consumers of ceramics-based products. Also,
delays of six months or more would occur in introducing innovative
ceramic materials to market. Such economic inefficiencies would
certainly have an adverse effect on the international competitiveness of
U.S. ceramic component suppliers.

Several factors have been incorporated in this study to characterize the
lower bound estimates of the IRR, BCR and implied rate of return
calculated in Section 5.2 as conservative estimates of NIST's economic
impact on industry. These factors are:

• The scope of the study did not account for benefits realized by other
firms in the industry structure (horizontally and vertically) external
to the advanced structural ceramics industry

• Extrapolation of benefits from the sampled firms to the larger set of
firms in the structural ceramics industry was based on sales and market
share data rather than a multiplication of the average benefits per firm
from the sample times the number of firms in the industry

• Due to imprecise accounting records, NIST's cost data includes
expenditures for outputs beyond the scope of this case study, thereby
biasing the results downward

• The 1997 starting point adds to a conservative benefit estimate since
industry attains benefits from NISTís investments in prior years
(1985-1996) of the economic framework for this study

Economists and policy makers use IRR measures to estimate the social
rate of return (SRR) for on-going or completed research projects in the
public sector. If the 33.5 percent IRR in this case study is above
NIST\'s hurdle rate (minimum acceptable rate of return), then the
investments in NIST's research and related activities are worthwhile
from a social perspective. Also, in comparison to the average hurdle
rate of about 12 percent for corporate technology projects, investments
in the NIST TCP are beneficial from a general economic standpoint.[^15]

**APPENDIX A**

TECHNICAL OVERVIEW OF\
ceramic phase equilibria diagrams

description[^16]

An understanding of phase equilibria relations (the positions in phase
diagrams where various points, lines, or surfaces of phase reactions
occur under equilibrium conditions) is basic in the development and
utilization of ceramic materials used in advanced
applications.[^17]^,^[^18] Phase equilibria address the flexibility and
constraints dictated by forces of nature on the evolution of phase
assemblages in ceramics. Phase boundaries also assist in the evaluation
of the service stability of a ceramic material, both in the long and
short time frames. Thus, knowledge of the stability of a ceramic
component in high-temperature or high-pressure environments can often be
obtained from an appropriate stable or metastable phase diagram.

Phase diagrams yield important information on key processing parameters
of ceramics. The chemical and physical properties of ceramic products
are related to the number, composition, and distribution of the phases
present. Temperature, pressure, and material concentration are the
principal variables that determine the kinds and amounts of the phases
present under equilibrium conditions. To ceramists, who must understand
the effects of these variables on both the processing and the properties
of finished ceramic products, the necessary fundamental information of
phase equilibrium relations is often provided from phase diagrams.

The phase diagrams provide reference data that represent the phase
relations under a certain, limited set of conditions (for example,
constant pressure). A ceramist conducting new materials research will
invariably conduct experiments under different conditions than those
that underlie the phase diagram. The reference data in the phase diagram
provides the user with a logical place to begin experimentation for new
research and to bypass certain paths that would lead to dead ends. This
practical use of the diagrams helps explain why the PDFC volumes just
show the actual diagram and a brief textual description without any
accompanying tabular data.

Figure A-1 shows a simple binary diagram that depicts the phase
relations between magnesia and lime, or calcia. A binary phase diagram
plots temperature on the vertical axis and composition, or the
percentage of the two material components, on the horizontal axis. The
diagram is basically a simple graphic representation of a large amount
of chemical thermodynamic data.[^19]

One of the primary inferences from the phase diagram is the phases
present at a given temperature and composition. For example, pure
magnesia melts in excess of 2,800 degrees centigrade (^o^C) and lime
melts in excess of 2,600 ^o^C. However, if magnesia and lime are in
contact with each other at temperatures as low as 2,400 ^o^C, then the
phase diagram shows that the two solids are unstable and they will react
to form a liquid phase. This kind of information is extremely useful in
understanding the compatibility of materials, particularly at high
temperatures, and is one of the main reasons why phase equilibria are so
important to ceramics since they are used primarily at elevated
temperatures.

Most ceramic systems tend to be considerably more complex than the
previous system described. Figure A-2 shows a projection of the liquid
surfaces of the calcium oxide, silica, aluminum oxide
(CaO-SiO~2~-Al~2~O~3~) system. This diagram shows the complexity that
exists in real ceramic systems. For example, several binary compounds
exist between each of the end-points along the edges of the ternary
triangle, and several compounds are within the interior of the ternary
diagram. This particular diagram, known as "the million dollar diagram"
in the ceramic industry, is important because of its preeminence to the
cement and refractory industries. The highlighted portion of the same
CaO-SiO~2~-Al~2~O~3~ diagram shown in Figure A-3 represents a wide range
of refractory compositions used in all metals industries, glass
production, and nearly every thermal insulation application. The ability
of the refractories used in these furnaces to withstand high
temperatures depends strongly on accessible and accurate phase diagrams.

![](media/image1.emf){width="2.997916666666667in"
height="4.529166666666667in"}

Figure A-1 MgO -- CaO System

![](media/image1.emf){width="4.998611111111111in"
height="3.372916666666667in"}

Figure A-2 CaO -- SiO~2~ -- Al~2~O~3~ System

![](media/image1.emf){width="5.028472222222222in"
height="3.2777777777777777in"}

Figure A-3 CaO -- SiO~2~ -- Al~2~O~3~ System

METHODS OF Determination [^20]

Ceramic phase equilibrium diagrams are the product of experimental
studies of phase relations in a selected
pressure-temperature-composition region of a system. These studies are
categorized by two general methods: (1) static, and (2) dynamic. Static
methods, such as quenching, use a specimen held under constant
conditions at high temperature until equilibrium is reached, when the
number and composition of the phases present are analyzed by microscopy
at room temperature. Dynamic methods tests, such as thermal analysis or
high temperature x-ray diffraction, characterize the appearance or
disappearance of phases in the specimen directly during the heat
treatment. Yet, typically, no one technique of studying phase equilibria
in a system is completely satisfactory; rather, the final phase diagram
is often based on information derived from several methods.

The diagrams represent the results of difficult and extensive
experimental observations and analyses. For example, a binary system
takes about one man-year of experimental effort, assuming the timely
availability of the required equipment and the investigator is
reasonably experienced. A ternary diagram can involve several thousand
observations over a two-three year period after knowledge of binaries is
reasonably complete. More complex systems require more extensive time
and effort.

The "quality" of a phase diagram is affected by several factors. One
factor that skews the results of the diagram is the level of experience
and education of the experimentalist. Diagrams are also strongly
dependent on both the type of experimental data accumulated and the
sophistication of the instrumentation utilized. Another factor is that
the original experimentalist may only be concerned with some limited
region of composition, temperature, and pressure. When the experimental
effort has been concentrated in that particular area, the other parts of
the phase diagram are often determined with much less precision and
detail.[^21] For all these reasons, a phase equilibria diagram for a
given system tends to change over time. Diagrams are subject to constant
revision as additional measurements are made by subsequent researchers.
As more and better data are accumulated by subsequent experimentalists,
the diagram becomes more representative of the true equilibrium
conditions.

A user of a phase diagram needs an explicit description of the
experimental basis employed by the originator of the diagram. Such
knowledge of the original methods used in determining the diagram and
conducting measurements is especially important for users with critical
and high-accuracy applications.

[^1]: The role of infrastructure technology within the construct of
    product development is discussed in: Gregory Tassey, *The Economics
    of R&D Policy,* (Quorum Books, 1997; Chapter 8); and Albert N. Link
    and Gregory Tassey, *Strategies for Technology-based Competition,*
    (Lexington Books), pp. 16-21, 1987.

[^2]: The 90th Congress passed PL 90-396, HR 6279 on July 11, 1968
    identifying NIST as the responsible organization for providing the
    collection, compilation, critical evaluation, publication and sale
    of standard reference data.

[^3]: This collaboration began in the late 1920\'s and early 1930\'s
    between Herbert Insley of the National Bureau of Standards (NIST's
    organizational name prior to 1988) and F.P. Hall of Pass and
    Seymour, Inc. (Syracuse, New York). Their initial monograph \"A
    Compilation of Phase-Rule Diagrams of Interest to the Ceramist and
    Silicate Technologist\" was published in the October 1933 issue of
    the *Journal of the American Ceramics Society*, ACerS\' main
    technical journal.

[^4]: Richard M. Spriggs and Stephen W. Freiman, "ACerS/NIST Phase
    Equilibria Update," *The American Ceramic Society Bulletin*, Volume
    75, No. 1 January 1996.

[^5]: NIST personnel in the Ceramics Division conduct research on the
    development of new phase diagrams, but this research is not within
    the scope of the NIST/ACerS Phase Equilibria Program.

[^6]: This expenditure data was obtained from personnel in the NIST/MSEL
    Ceramics Division. NIST's expenditures include (1) direct,
    fully-burdened labor of laboratory personnel, and (2)
    consultants/subcontractors. Operating funds from other government
    agencies are negligible.

[^7]: This section is based mainly on excerpts from the unpublished
    manuscript by Dick Spriggs, "ACerS Phase Diagram Program," July
    1988.

[^8]: Thomas Abraham, "U.S. Advanced Ceramics Market Growth Continues,"
    Ceramic Industry, October 1996.

[^9]: See Tassey, 1997; Albert N. Link, *Evaluating Public Sector
    Research and Development,*(Praeger: New York, 1996); and Gregory
    Tassey, *Rates of Return from Investments in Technology
    Infrastructure,* NIST Planning Report 96-3, June 1996.

[^10]: In the extreme case of assuming this benefit stream would last
    continuously, the capitalized estimate of benefits in steady-state
    is \$86.2 million. This estimate is based on an opportunity cost of
    15 percent ñ a hurdle rate characteristic of the private sector.

[^11]: An approximation of inflation is based on the implicit price
    deflator of the chain-type weighted Gross Domestic Product (GDP)
    Price Index. Based on data from the Bureau of Labor Statistics, the
    implicit price deflator is 2.375 percent.

[^12]: The data in the first year of the benefit-cost stream are
    referenced to time t=0 in the IRR equation as well as for the other
    economic measures.

[^13]: The implied rate of return is similar to the overall rate of
    return suggested by Rosalie R. Ruegg and Harold Marshall, *Building
    Economics: Theory and Practice,* (Van Norstand Reinhold: New York,
    1990). An example of the implied rate of return, also known as the
    compound rate of return, is the annual yield earned on a \$100 bank
    deposit. Interest is earned each year on the original \$100 plus
    compounded interest.

[^14]: "Guidelines and Discount Rates for Benefit-Cost Analysis of
    Federal Programs," Office of Management and Budget (OMB), Circular
    No. A-94, 29 October 1992. OMB recommends both a seven percent real
    rate of discount for federal project evaluations and an
    approximation of inflation based on the implicit price deflator of
    the chain-type weighted Gross Domestic Product (GDP) Price Index.
    Based on data from the Bureau of Labor Statistics, the implicit
    price deflator is 2.375 percent which is used to convert the real
    discount rate of seven percent to a nominal rate of 9.375 percent.

[^15]: J. Poterba and L. Summers, "A CEO Survey of U.S. Companies' Time
    Horizons and Hurdle Rates," *Sloan Management Review*, Fall 1995.

[^16]: This section is based on the following: Clifton G. Bergerson and
    Subhash H. Risbud, *Introduction to Phase Equilibria in Ceramics*
    (The American Ceramic Society), 1984, p.1; Floyd A. Hummel,
    *Introduction to Phase Equilibria in Ceramic Systems* (Marcell
    Dekker), 1984; and The McGraw-Hill Encyclopedia of Science and
    Technology, 7th edition, 1992.

[^17]: Phase equilibrium is a general field of physical chemistry
    concerning the various situations that occur with the coexistence of
    two or more phases in thermodynamic equilibrium, the nature of the
    transitions between these phases, and the effects of temperature and
    pressure on these equilibria. A phase is any physically-homogeneous
    portion (state of aggregation) of a system which is bounded by a
    surface that is separable mechanically from any other portions
    (phases) of the system. The term "system" refers to an isolated part
    of the material universe for considering changes that occur under
    varying conditions. From a thermodynamic standpoint, a system that
    has a minimum of free energy available for doing work is at
    equilibrium.

[^18]: Ceramics are inorganic, nonmetallic materials that are produced
    typically by using clays and other minerals from the earth, forming
    these materials into a desired shape, and heat treating in order to
    obtain a rigid, finished product. They are typically crystalline in
    nature (the exception being glasses) and are compounds formed
    between metallic and nonmetallic elements such as oxides, nitrides
    and carbides. Also, they are typically insulated to the passage of
    electricity and heat, and are more resistant to high temperatures
    and harsh environments than metals and polymers. Regarding
    mechanical behavior, ceramics are very strong in compression but
    weak in tension --- they are very hard but tend to be brittle.

[^19]: Dick Spriggs, "ACerS Phase Diagram Program," unpublished
    manuscript, July 1988.

[^20]: This section is derived mainly from the unpublished manuscript by
    Robert S. Roth, "Experimental Determination of Phase Equilibria
    Diagrams in Ceramic Systems," 1988.

[^21]: According to Roth, "Oftentimes, the exactness of the information
    presented in all parts of the diagram is not included in the
    summarization descriptions that accompany the diagram. As a result,
    a user can rely often on the general configuration of a given
    diagram, but the exact temperatures and compositions of individual
    lines or points on the diagram may not be totally reliable."