EXECUTIVE SUMMARY

The National Institute of Standards and Technology (NIST) assists
industry in the development and promulgation of standards for the
calibration of thermocouples. The primary purpose of this case study is
to evaluate the economic impacts on domestic industry for investments
made in this infrastructure technology through the NIST Thermocouple
Calibration Program (TCP).

Thermocouples are electronic sensors for measuring temperature for use
in a wide variety of applications (e.g., medical procedures, scientific
research, automated manufacturing processes, and consumer products)
where temperature is an important parameter in a measurement or control
system. The annual sales of thermocouple products sold by the domestic
thermocouple industry (suppliers of wire and thermocouple assemblies)
into the U.S. market is approximately \$280 million. The incorporation
of these devices into higher levels of product structures across a broad
base of domestic industries affects a much larger portion of the
manufacturing sector, estimated to be on the order of \$81.0 billion.
The demand for thermocouples is expanding because of their importance
for computerized instruments, which are used increasingly for the
monitor and control functions in manufacturing applications to improve
corporate productivity. Therefore, thermocouples have a significant
effect on the current and future competitiveness of U.S. industry.

The NIST TCP generates technical knowledge to improve the calibration
accuracy and efficiency of thermocouple measurements made in industry.
This case study focused on three technical outputs: (1) reference
functions and tables for letter-type thermocouples, (2) primary
calibration services for traceability of standards used in thermocouple
measurements, and (3) technical support to industry. In particular,
standards traceability provides an efficient means for ensuring accurate
measurements across divergent industrial environments, and NIST is the
pinnacle of the traceability structure for national standards linked to
international agreements of temperature scale. Establishing a process
for documenting the accuracy of temperature measurements to national
temperature standards is an essential element in meeting ISO 9000
certification, which is necessary for marketing products
internationally. The standards traceability process through the NIST TCP
provides thermocouple users with an efficient means to comply with the
requirements of ISO 9000 since the burden-of-proof for documented
compliance can be obtained from the wire or thermocouple supplier.

From the technical outputs of the NIST TCP, thermocouple users and
suppliers derive three main types of benefits: (1) efficiencies in
developing and disseminating the technical knowledge needed for
performing thermocouple calibration tests, (2) transactions cost savings
between users and producers engaged in thermocouple commerce, and (3)
improved competitiveness for users of thermocouples through enhanced
product performance and process efficiency. In this case study, the
first two types of benefits were estimated while the third type of
benefit proved to be difficult to quantify. Yet, from a national
competitiveness standpoint, the economic magnitude of the latter benefit
type is significantly greater than the first two benefit types.

The internal rate of return (IRR) from investments in the NIST TCP has
been calculated to be at least 31.8 percent. A number of factors have
been incorporated in this calculation to portray this as a conservative,
lower-bound estimate of NIST's economic impact on domestic thermocouple
users and suppliers. This estimate is based on appraisals of economic
benefits and expenditure data related to the outputs of the NIST TCP.
Net benefits have been estimated from a survey of the domestic
thermocouple industry using a hypothetical, counterfactual experiment.
The resulting 31.8 percent IRR implies that the NIST Thermocouple
Calibration Program is pursuing a socially-valuable activity affecting a
broad range of domestic industries.

Many thermocouple users having requirements of high accuracy rely on
calibration tests performed internally rather than from statements of
accuracy obtained from their suppliers. These users claim that internal
calibration testing is both necessary due to the inconsistent nature of
thermocouple calibrations and an efficient means of maintaining process
control with applications having stringent accuracy requirements.
However, to some extent, the efficiency in the standards traceability
scheme headed by NIST is being degraded since users cannot rely totally
on their suppliers to provide the correct representations of
calibrations for thermocouple products. The root cause of this
non-optimal situation appears to derive from issues about assurances of
product quality from suppliers of wire and thermocouples, and these
issues are not linked directly with measurement-related know-how from
the NIST TCP. However, NIST could use its neutral role to help industry
overcome this problem so that the implementation of the traceability
process can approach greater efficiency.

The survey also revealed that the vast majority of thermocouple users
--- including users with high accuracy requirements --- have attained
few economic benefits in the use of thermocouples calibrated to the
current, internationally agreed upon temperature scale compared to
thermocouples calibrated to the previous temperature scale. As a result,
returns have been poor on investments made by NIST to upgrade the
thermocouple reference tables to be consistent with the newer
temperature scale. Yet, NIST made a sound decision by investing in the
updated reference tables under the circumstances, and U.S. industry
would likely have suffered negative economic consequences if NIST had
not made this investment. However, a positive consumer surplus has not
been achieved due to a mismatch in the timing of when this
infrastructure technology can effectively meet the practical needs of
industry (thermocouple users). Thus, the poor return on investments made
by NIST for updating thermocouple reference tables is rooted in the
decision to change the temperature scale to the ITS-90. Perhaps such
investments would have been more effective if better intelligence were
available on the timing of the economic payoff for industry including
dependency on foreign trade. Hence, the policy implications are that
investments in state-of-the-art technology infrastructure should be more
rigorously coordinated with the realities of industrial demand and,
hence, corporate strategy.

#  introduction

## 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. The internal laboratory research portion of NIST\'s
activities provides this support in the form of various types of
standardization, testing, and laboratory accreditation services that are
needed by industry at several critical stages in the process of meeting
the challenge of the technological state-of-the-art. NIST is the only
Federal laboratory with the primary mission of supporting the 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]

NIST develops a wide range of infrastructure technologies for U.S.
firms\' products and processes --- as well as their attendant products
and services --- which comprise complex systems. Examples of
infratechnology tools include production methods, processing models,
advanced measurement methods, technical databases, 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 to be competitive internationally.

## nist THERMOCOUPLE CALIBRATION PROGRAM

The NIST Thermocouple Calibration Program (TCP) is a part of the NIST
Chemical Science and Technology Laboratory (CSTL). The overall mission
of NIST/CSTL is to provide the chemical measurement infrastructure for
enhancing U.S. industry's productivity and competitiveness, assuring
equity in trade, and improving public health, safety and environmental
quality. Such measurement technology is required for industrial research
and development, product applications, improvements in the design and
manufacturing of quality products, proof of performance, and marketplace
transactions that include the entry of U.S. products into international
markets.

NIST's role as the lead U.S. agency for temperature measurement is to
overcome technical and business barriers that require NIST's special
characteristics: an impartial position, expertise in a wide range of
measurement areas, direct access to complementary national standards,
and the motivation to deliver the technical infrastructure to a wide
range of supplier and user industries. These characteristics permit NIST
to perform functions that individual companies cannot perform:

• Gain access to technical information for resolving industry-wide
measurement problems

• Develop measurement solutions and national reference standards that
benefit the industry as a whole across diverse product and process lines

• Gain acceptance of those solutions by U.S. industry and its customers
so that U.S. products can be sold efficiently both domestically and
abroad

All temperature measurements must ultimately trace back to national
standards to provide consistency and accuracy across disparate
organizations and industries. NIST has the legal mandate in the United
States for providing the national standards that form the fundamental
basis for all temperature measurements made in domestic industry.[^2]
Realizing and maintaining national temperature standards in terms of the
scientific first principles and the constants of nature that define the
International Temperature Scale is difficult technically and requires a
dedicated laboratory capability. NIST/CSTL develops and maintains the
scientific competencies and laboratory facilities necessary to preserve
and continuously refine the basic physical quantities that constitute
the national temperature standard. Further, NIST has the mandate to
apply these basic measurement standards to develop uniform and
widespread measurement methods, techniques and data.

## case Study objectives

Periodic economic studies are conducted at NIST to determine the
qualitative and quantitative impacts of its programs on U.S. industry.
The results of these studies are used for NIST strategic planning and
for characterizing NIST's role as a major source of technology
infrastructure for U.S. industry.

This case study estimates the first-order economic impacts of the
infrastructure technology development on U.S. industry from the
calibration of thermocouples. The analysis examines the impacts of the
infrastructure technology 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 use of thermocouples in U.S. industry

• Identify and describe the infrastructure technology supporting
thermocouple calibrations

• Obtain qualitative and quantitative data on the economic impacts
attributable to the contributions from NIST's infrastructure technology;
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 temperature measurements made with
thermocouples

• Analyze the data and calculate the rate of return on NIST\'s
investments in technical knowledge for thermocouple calibration using
various economic measures

• Prepare a report of the findings, analysis and conclusions

## case study outline

The remainder of this report includes the following:

• Chapter 2 provides a technical overview of thermocouples including a
generic description of their function and their need for calibration

• Chapter 3 describes thermocouples from an industrial context in terms
of:

> --- Types of applications
>
> --- Quality and cost drivers for thermocouple accuracy
>
> --- The industrial structure for commercial trade in thermocouples
>
> --- The scheme for standards traceability that allows industrial users
> to efficiently attain accurate measurement calibrations

• Chapter 4 describes the scope, benefit measures and data collection
strategy used for the analysis in this study

• Chapter 5 identifies findings on the qualitative and quantitative
economic impacts of the infrastructural outputs from the NIST TCP based
on surveys of thermocouple users and suppliers, and lists expenditures
and income for the NIST TCP

• Chapter 6 provides quantitative estimates of the prospective economic
rate of return from investments made in the NIST TCP, and analyzes
certain economic issues that are more qualitative in nature

• Chapter 7 discusses the primary conclusions for this case study

#  technical overview[^3]

## Circuit

A thermocouple is an electronic sensor for measuring temperature.
Thermocouples operate according to the Seebeck Effect, wherein a closed
circuit formed by two dissimilar wires (thermoelements) produces an
electrical voltage when a temperature difference exists between the
contact points (junctions). The electrical potential difference that is
produced is called the thermoelectric electromotive force (emf), also
known as the voltage output of the thermocouple. The Seebeck Effect
occurs due to the difference in the energy distribution of thermally
energized electrons in the material compositions of each thermoelement.
The fact that thermoelectric emfs vary from metal to metal for the same
temperature gradients allows the use of thermocouples for the
measurement of temperature.

A simplified measurement system using a thermocouple is shown in Figure
2-1.[^4] The thermocouple consists of two thermoelement wires *A* and
*B* that are joined at one end *H* (the "hot" junction), but the wires
otherwise are insulated from each other along their lengths. The other
ends *C~A~* and *C~B~* (the "cold" junction) are maintained at a
constant reference temperature *T~0~* which usually is defined as the
melting point of ice (0 ˚C). In practical measurements, the cold
junction does not have to be held at the reference temperature if the
actual temperature is known. The difference between the actual
temperature and 0 ^o^C is usually corrected electronically in the
instrumentation of the measuring system. This adjustment is referred to
as the cold-junction (CJ) compensation.

![](media/image2.wmf){width="5.958333333333333in"
height="2.9305555555555554in"}

Figure 2-1 Basic Circuit for Thermocouple Thermometry

A thermoelectric emf (voltage) is generated between junctions *C~A~* and
*C~B~* when the hot junction is exposed to the temperature of interest
*T~1~* and the cold junctions are maintained at the reference
temperature *T~0~*. Identical wires extending from the cold junctions of
the thermocouple transmit the emf to an instrument --- represented in
the figure by a voltmeter at room temperature *T~r~* --- that measures
the thermocouple emf. Theoretically, this measurement depends only on
the temperature difference *(T~1~ -* *T~0~).*[^5] As *T~1\ ~* increases,
the output emf of the thermocouple increases, although not necessarily
in a linear relationship. This correlation of temperature versus emf
permits the establishment of mathematical relationships that are unique
to various wire combinations. These mathematical relationships are
expressed in reference functions and tables which provide the basis for
calibrations used in thermocouple thermometry.

## Types

About 300 combinations of pure metals and alloys have been identified
and studied as thermocouples. Such a broad selection of different
conductors is needed for applications requiring certain temperature
ranges as well as for protection against various forms of chemical
contamination and mechanical damage. Yet, only a few types having the
most desirable characteristics are in general use.

The eight most common thermocouple types used in industry are identified
by letters: base-metal types E, J, K, N, and T; and noble-metal types B,
R, and S. The letter designations were originally introduced by the
Instrument Society of America (ISA) to identify certain common types
without using proprietary trade names, and were adopted in 1964 as
American National Standards. The letter-types are often associated with
certain material compositions of the thermocouple wires. However, the
letter-types actually identify standard reference tables that can be
applied to any thermocouple having an emf versus temperature
relationship agreeing within the tolerances specified in the table,
irrespective of the composition of the thermocouple materials. The
letter-type thermocouples comprise about 99 percent of the total number
of thermocouples bought and sold in commerce.

Thermocouples made from the noble-metal materials (mainly, platinum and
rhodium) are significantly more expensive than those made from
base-metal materials (e.g., copper, iron, and constantan). For example,
prices for 0.015 inch diameter bare wires made of various
platinum-rhodium alloys range from \$25 to \$101 per foot while the
price range of similar base-metal wire is \$0.20 to \$0.24 per foot.[^6]
This significant difference in cost is the primary reason why over 90
percent of the total number of thermocouples sold are base-metal type.
In the United States, several hundred tons of base-metal thermocouple
wire are produced annually.

## Calibration

Thermocouples must be calibrated for accurate temperature determination.
In most cases, calibration involves measuring the thermoelectric emf of
the thermocouple under evaluation as a function of temperature, which is
determined by a reference thermocouple.

The calibration process consists generally of three steps. First,
thermoelectric emf values of the thermocouple are measured either at a
series of approximately uniform intervals of temperature or at certain
fixed points. Second, appropriate mathematical methods are used to fit
the difference between the measured emf values and those of a reference
temperature. Third, the emfs as a function of temperature are expressed
in both a calibration table and their given mathematical relationship.

The reference functions and tables used in calibrations of standard
letter-type thermocouples must relate to a specified temperature scale.
International agreements have been in place since 1927 on scales of
temperature for scientific and industrial purposes. Updated about once
every 20 years, the scale now in use is the International Temperature
Scale of 1990 (ITS-90).[^7]

The extent of thermocouple calibration for practical temperature
measurement depends mainly on the accuracy and stability required for
the particular application.[^8] Wire suppliers typically perform sample
calibrations on short wire lengths from spools containing up to 1000
feet of wire. Sample calibrations of base-metal wire provide tolerances
ranging commonly from +/- 0.25 percent to +/- 0.75 percent of the
temperature versus emf values in the standard reference tables, which
provides sufficient accuracy for a wide variety of technical work.[^9]
However, uncertainties in process control and the need for more accurate
measurements demand additional calibrations by certain suppliers and
users of thermocouples. For example, the stringent accuracy and
stability demands for temperature measurements made in semiconductor
manufacturing processes often require calibration of every thermocouple.

Significant differences in stability and accuracy exist between the
noble-metal and the base-metal types of thermocouples. Noble-metal type
thermocouples tend to have fairly stable calibrations and tight
calibration tolerances. On the other hand, the base-metal types are less
stable (more likely to go out of calibration with frequent use) and have
larger tolerances.[^10] Therefore, the more stringent the stability and
accuracy requirements of the particular application, the more likely
that users pay the higher costs for noble-metal thermocouples.

#  Industrial overview

## applications

The thermocouple is the oldest and the most widely used electronic
temperature sensing device. Other devices, such as thermistors,
resistance temperature detectors, and integrated circuit sensors, can be
substituted for thermocouples, but only over a limited temperature
range. Therein lies the primary advantage of thermocouples, which is
their use in a wide temperature range (-270 ˚C to 2100 ˚C). Other key
advantages are that they provide a fast response and are unaffected by
vibration. They also are self-powered, versatile, inexpensive, and
simple in their construction. Their calibration, however, is affected by
material inhomogeneity (nonuniformity of physical composition) and
contamination, and their operation is susceptible to electrical
interference.

Thermocouples are used in a wide variety of applications (e.g., medical
procedures, scientific research, automated manufacturing processes, and
consumer products) where temperature is an important parameter in a
measurement or control system. Their use in engineering applications has
been increasing steadily because thermocouples, like other types of
electronic measurement sensors, are compatible with microprocessor
instrumentation.[^11] Figure 3-1 shows typical levels of uncertainty for
a variety of products and manufacturing processes that use thermocouples
for temperature measurement.[^12] Applications having the more stringent
requirements of uncertainty have greater needs for calibration knowledge
than those applications having the less stringent requirements.

![](media/image3.wmf){width="6.499305555555556in"
height="4.363194444444445in"}

Figure 3-1 Sample Applications of Thermocouples by Common Requirements
of Uncertainty

Certain industries have applications that are very sensitive to
temperature change. According to various industry representatives, the
four industries having the most stringent accuracy and stability
requirements for temperature measurement are:

• Food, beverage and drug

• Semiconductor manufacturing

• Military/aerospace

• Power utilities

For example, small temperature measurement inaccuracies in burning fuel
for generating electrical power can translate into large inefficiencies
and hence costs. A utility industry representative stated that an
inaccuracy of 1 ˚C would result in an annual \$100,000 loss in pre-tax
profits for a single fossil-fired power generation plant. Also, IBM
reports that a 3 ˚C miscalculation in a sintering process can jeopardize
a furnace load of substrates worth perhaps millions of dollars.[^13]
Additionally, a supplier of gas turbine engines used in aircraft stated
that if the on-board temperature measurements of thermocouples used in
the turbine are inaccurate by 1 °C, then the aircraft would burn two
percent more fuel. Therefore, such thermocouple users with high accuracy
requirements have greater economic sensitivity than the majority of
users.

## cost and Quality drivers for accuracy

According to thermocouple experts, the key factors in obtaining accurate
measurements in thermocouple thermometry are:

• Quality of the components in the temperature measurement system

• Minimizing contamination in thermocouple wires[^14]

• Quality of calibration data that is traceable through standards at
NIST

In addition to absolute accuracy, the precision of a temperature
measurement in a fixed environment (e.g., a furnace) that requires
periodic replacement of thermocouples is also critical in maintaining
process control. Therefore, consistent performance in the
interchangeability of thermocouples is an important feature for
achieving high production yields and reducing costs.

An example in glass forming helps in understanding the combination of
several key concepts: the use of temperature measurement to ascertain
product quality, the need for stringent levels of accuracy in
temperature measurement, and consistent performance required in the
interchangeability of thermocouples. Viscosity of molten glass is the
key technical parameter in forming picture tubes used in televisions
sets. Levels of viscosity are inferred through temperature measurements
made with thermocouples because viscosity cannot be measured directly.
Measuring the absolute accuracy of the glass softening point to within 1
^o^C is important in obtaining the desired mechanical properties of the
glass. Also, uniform levels of viscosity --- via repeatable temperature
measurements with interchangeable thermocouples --- are important in
ensuring consistent quality in manufacturing the glass picture tubes.

Generally, the number of calibrations and the quality of calibrations
generally have been steadily increasing industry-wide.[^15] The major
reason for this trend is the increased number of organizations seeking
higher levels of quality in their products and processes. In particular,
the need for traceability to standards, which is one key requirement for
achieving certification and audit approval in the ISO 9000 quality
scheme, has been a driving force for increases in the quantity and
quality of thermocouple calibrations. The industrial literature also
cites the increased need for tighter measurement tolerances and quality
in applications involving health, safety, hygiene, and process control.

Large differences in sell price between thermocouples made from
base-metals and noble-metals often strongly influence users' willingness
to pay for calibration testing. Most base-metal types of thermocouples
and thermocouple assemblies retail in the range of \$6 to \$100 per
unit.[^16] On the other hand, prices of noble-metal thermocouples range
from \$250 to \$1,000 per unit. Using estimates from commercial
calibration service providers, the cost of performing a calibration test
for most types of thermocouples ranges from about \$40 to \$100.
Therefore, the percentage of total unit price attributable to
calibration is much greater for base-metal thermocouple types than for
noble-metal types. This is the primary reason that some users of
base-metal thermocouples only perform sample calibrations from large
lots. For example, one representative of a thermocouple manufacturing
company stated that few calibrations are performed on thermocouples sold
to the plastic injection molding industry because base-metal
thermocouples are used and temperature sensing requirements are not very
stringent; these industrial users rely on the sample calibration data
provided by the wire supplier, which is sufficient for most plastic
injection molding applications. On the other hand, some industrial users
in the four critical industries noted above require calibration of every
base-metal thermocouple. Obviously, the percentage of sell price
attributable to calibration testing will be higher for this latter class
of users.

##  industrial structure

### Suppliers

The thermocouple industry consists of wire suppliers and thermocouple
suppliers. The downstream customers of the wire suppliers are grouped
into two general categories, thermocouple suppliers and thermocouple
users that fabricate and assemble thermocouples captively. As mentioned
earlier, the wire suppliers typically perform sample calibrations on
each production lot of wire. Depending on the accuracy requirements of a
given application, these sample calibrations may or may not be
sufficient for users of the thermocouple. Therefore, the supplier or
user/producer may perform additional calibrations as necessary.
According to NIST, the three major suppliers of base-metal type wire are
Carpenter Technology, Harrison Alloys, and Hoskins Manufacturing. The
four main suppliers of noble-metal wire are Engelhard Industries,
Johnson Matthey, PGP Industries, and Sigmund Cohn Corporation.

Thermocouple suppliers purchase wire from the wire suppliers to
fabricate and assemble finished thermocouple products. Steps in
fabricating such products include encasing a thermocouple in protective
sheathing and adding ancillary hardware such as a connector. Myriad
configurations of assembled thermocouples are sold, in turn, to users of
thermocouples. The on-line product database of the Thomas Register of
American Suppliers lists 305 companies selling thermocouple
products.[^17]

### Users

The available information on characteristics of the domestic
thermocouple market is less than complete and current. Also, disparities
exist among the few sources of market data that are available.[^18] The
best available information is in several industry trade periodicals and
newsletters *(Sensor Business Digest, Measurement and Control News,* and
*Sensor Business News)* that cover activities in the thermocouple
industry. Past articles refer to results from a 1992 study on the
temperature sensor industry performed by Venture Development Corporation
(Natick, MA) which includes information on the thermocouple segment of
the industry.[^19] The following market data and forecasts were reported
from this study:

• The total domestic shipments of all electronic temperature measurement
devices (thermocouples, RTDs, thermistors, and IC sensors) was \$402
million in 1991

• US consumption of thermocouples was projected to increase at a
compound annual rate of 2.6 percent from \$126 million in 1991 to \$144
million in 1996

• Consumption of temperature sensing devices is significant in the
following industries:

--- Automotive

--- Chemical

--- Consumer Goods

--- Food/Beverage/Pharmaceutical

--- Glass

--- HVAC (heating, ventilating, and air conditioning)

--- Medical

--- Metals

--- Military/Aerospace

--- Oil/Petrochemical

--- Plastics/Rubber

--- Utilities

• The medical, HVAC and automotive categories were forecast to have the
highest growth rates domestically for temperature sensors

A 1991 report by a German firm, Intechno Consulting AG, on the world
temperature sensors market stated that the world temperature sensing
market had sales of \$2.5 billion in 1991 and was forecast to increase
at a 6.4 percent average annual rate to reach \$4.7 billion in 2001. The
geographical distribution of this market is U.S. (33.4%); Japan (23.7%);
and Europe (42.7%). Regarding thermocouples, Intechno estimated that the
1991 world market was \$1.032 billion, consisting of \$263.5 million in
non-encased thermocouples and \$768.6 million in encased
thermocouples.[^20]

Thermocouples and thermistors are widely used in the health care
industry, particularly for monitoring the core body temperatures of
patients in many situations, such as anesthetized surgery, outpatient
surgery, trauma centers, intensive care, and in pain clinics. Market
Intelligence, Inc. projected in 1991 that the worldwide biomedical
sensor market for disposable thermocouples and thermistors would grow
from \$63.2 million in 1991 to \$115.6 million in 1998 for a 9 percent
compound annual rate during the forecast period.[^21] Actual unit
shipments were estimated at 11.1 million in 1991 and projected to
increase to 22.5 million in 1998. The U.S. market consumed 58.1 percent
of the world revenues in 1991.

### Infrastructure

**[NIST Thermometry Group]{.underline}** NIST/CSTL's Thermometry Group
develops and applies the process of standards traceability for
temperature measurement. The Thermocouple Calibration Program (TCP) is a
part of the Thermometry Group's overall research activities. This Group
is responsible for realizing, maintaining, improving and disseminating
the national standards of temperature. This responsibility is
implemented through the following activities: [^22]

• Determining the accuracy of the national standards of temperature with
respect to fundamental thermodynamic relations

• Calibrating practical standards for the U.S. scientific and technical
communities in terms of the primary standards

• Developing methods and devices to assist user groups in the assessment
and enhancement of the accuracy of their temperature measurements

• Preparing and promulgating evaluations and descriptions of temperature
measurement processes

• Coordinating temperature standards and measurement methods nationally
and internationally

• Conducting research towards the development of new concepts for
standards

• Developing standard reference materials for use in precision
thermometry

The above listing shows that NIST does more than simply maintain
national standards to ensure that industry has a traceable temperature
measurement system. NIST also develops and makes available suitable,
appropriate, and meaningful measurement methods that permit
organizations to correctly use internal instrumentation and reference
standards to perform their needed measurements at the required accuracy.

**[Standards Bodies]{.underline}** Several national and international
organizations sanction standards for practical temperature measurement.
These standards often form the basis of purchase specifications used in
commercial trade between users and suppliers of thermocouples. ASTM and
the ISA are the primary industrial organizations that sanction
thermocouple standards used domestically, and different technical
specifications are covered in the standards documents of each
organization.[^23] The ISA Standard MC-96.1 has been recognized as an
American National Standard, while the related ASTM Standard E-230, which
has been updated to include ITS-90 thermocouple tables and functions, is
presently under consideration as an American National Standard by
ANSI.[^24] IEC 584-1 is the standard used internationally.[^25]

The thermocouple standards from ASTM, ISA, and IEC subsume calibration
reference tables from NIST. The current versions of ASTM E-230 and IEC
584-1 have been updated to include NIST's most recent reference tables
and functions, while the current ISA MC-96.1 standard --- the latest
update was in 1982 --- contains an earlier version of NIST's reference
tables.[^26] Therefore, in practice, the benefits of NIST's reference
tables are diffused to thermocouple users and producers through the
ASTM, ISA, and IEC standards rather than through NIST-published
documents such as Monograph 175.

The ASTM, ISA, and the IEC standards also include other technical
specifications, such as color-coding of the thermoelement wires and the
extension wires, that are needed in the course of commercial trade
between users and suppliers of thermocouple products. NIST contributes
little technical work or engineering data for developing these more
mundane types of specifications since they are not based on leading-edge
measurement technology.

NIST also cooperates with standards laboratories of other countries to
ensure full compatibility on basic measurement standards used in
international trade. While the standards bodies governing various
countries agree on both the International Temperature Scale and NIST's
reference functions and tables for thermocouple calibration,
disagreements often occur on allowable tolerances relative to these
reference tables. Tolerances of the United States are specified in the
ISA and ASTM standards. Developing international consensus on
thermometer tolerances is one part of the charters of the IEC and the
Organization of Legal Metrology (OIML), and NIST participates actively
in both of these international organizations.

**[Commercial Calibration Services]{.underline}** Companies that market
commercial calibration services comprise another facet of the
thermocouple industrial infrastructure. The objectivity of a neutral
third party is often valued in negotiations or disputes between
suppliers and purchasers of thermocouples, and the requirement of
traceability can avoid potential disagreements or misinterpretations of
data. The strength of competitive factors such as pricing, quality, and
turn-around time generally determine whether thermocouple users and
producers seeking third-party calibration testing use these
secondary-level calibration service providers rather than the
primary-level services of NIST. Industry representatives concur that
NIST provides the highest level of standards traceability for achieving
the highest quality calibrations. Yet many are sensitive to the price of
calibration services and perceive the cost of NIST's services as
relatively high for their specific needs. However, one of NIST's major
strategic thrusts is to have its primary standards leverage the private
sector provision of secondary standards.

## traceability of standards 

In the overall hierarchy of standards for thermocouple calibration, NIST
is viewed as the provider of primary standards from which subordinate
reference standards are traced.[^27] The general traceability paths for
thermocouple users, suppliers, and calibration service providers are
depicted in Figure 3-2. For example, a user needs a thermocouple
calibrated to a certain specification for assurance of accurate results.
In the traceability scheme, the user often relies on the proficiency and
cost-effectiveness of suppliers or a calibration laboratory in the
private sector to obtain this calibration. To certify the accuracy of
the relationship between temperature and thermoelectric emf for the
thermocouple, the supplier must have direct access to appropriate
reference standards calibrated in terms of the primary temperature
standards maintained at NIST. The producer or commercial laboratory
maintains these reference standards internally and compares them
regularly with the national standards to achieve traceability.

![](media/image4.wmf){width="5.965277777777778in"
height="4.590277777777778in"}

Figure 3-2 Traceability Paths for Thermocouple Calibration Standards

Organizations that perform internal calibrations of thermocouples employ
several general methods to demonstrate and certify traceability to
NIST's national temperature standards. Sometimes a temperature
measurement is rendered traceable via more than one of these methods. In
the first and most common method, the organization has its thermocouple
materials calibrated against the national (primary) standards maintained
at NIST. These materials then serve as the reference standards
(artifacts) for internal calibration purposes of the organization. The
second established but less common method involves measurement and
certification using test methods and similar quality apparatus employed
by NIST. The third and most recent method for thermocouple calibration
involves the organization's acquisition of a standard reference material
(SRM) from NIST. The SRM is then used as the artifact for internal
calibration purposes.

An approach known as the "expendable standard" is typically employed by
the wire suppliers to perform internal reference calibrations
efficiently. Periodically (about every 1-5 years), a sample length of
wire from a large wire spool is calibrated through the primary
calibration services at NIST. This NIST-calibrated wire sample becomes
the reference standard (the traceable link to NIST's primary standards)
for the organization. Short wire lengths of the spool from which this
reference standard originated are used for subsequent internal
calibration tests. These test lengths, which are traceable to the NIST
primary standards via the reference standard, are the expendable
standards since they are used typically for only one calibration test
and then discarded.

Users of thermocouples employ one or a combination of strategies in the
procurement and calibration of thermocouples depending on their
operating practices and accuracy requirements. As mentioned in Section
3.3.1, users obtain thermocouples by either: (1) purchasing assembled
thermocouples from suppliers, or (2) maintaining captive production
operations by procuring wire from wire suppliers directly and making
thermocouples for internal use. Users in the first group usually rely
completely on calibration data provided by the thermocouple suppliers to
ensure specified levels of quality. One representative of a thermocouple
supplier stated that 95 percent of his customers rely exclusively on the
supplier's calibration data to ensure thermocouple accuracy. Also, these
types of users sometimes send used thermocouples back to the OEM for
recalibration, although disagreement exists among thermocouple experts
on the ability to effectively recalibrate a used thermocouple.

Thermocouple users often perform their own calibrations in-house to
attain certain levels of accuracy beyond the calibration warranties
provided by their suppliers. These internal calibrations are performed
either in the user's metrology laboratory or in situ (in the internal
operating environment of the thermocouple).

#  evaluation framework and approach

## Scope

This section describes the outputs of the NIST Thermocouple Calibration
Program under assessment in this case study.

### Reference Functions and Tables 

NIST has a long history of developing and publishing reference functions
and tables for letter-type thermocouples. NIST has updated this
reference data with the periodic changes in the International
Temperature Scale. The most current reference functions and tables for
the eight standard letter-type thermocouples have been published in NIST
Monograph 175.[^28] This reference data is derived from actual
thermoelements that conform to the requirements of the ITS-90 standard.

As described in Section 3.3.3, NIST's reference functions and tables
have been subsumed in the major industry standards for thermocouple
calibration. Therefore, this infratechnology is used every time a
letter-type thermocouple is calibrated, providing significant and
widespread benefits to thermocouple users and suppliers.

### Primary Calibration Services 

NIST's Thermometry Group provides primary calibration services for the
suppliers and users of thermocouples to achieve levels of measurement
accuracy necessary to attain objectives of quality, productivity, and
competitiveness. These services constitute the highest order of
thermocouple calibration available in the U.S. for customers seeking
traceability and conformity to national and international temperature
standards. NIST provides these services at a charge sufficient to
compensate for the direct costs of the calibration, and certain
surcharges apply to help pay for fixed costs and research.

All types of thermocouples, including both letter-designated and
non-standard types, can be calibrated by NIST from -196 °C to 2,100 °C.
Customers provide samples (either bare wires or complete thermocouples)
to NIST's laboratory. NIST calibrates these samples on the ITS-90 using
one or a combination of different test methods depending on the
thermocouple type, the temperature range, and the required accuracy. The
calibrated thermocouple is then shipped back to the customer along with
a "NIST Report of Calibration" containing the test procedures and the
results of the calibration. The sample and the data from the NIST Report
constitute the traceable link to national temperature standards. For
example, customers of NIST's primary calibration services can use their
calibrated artifact and the accompanying calibration data from the NIST
Report of Calibration as the secondary standard for internal quality
control purposes. This secondary reference standard links subsequent
calibrations made within the customer's metrology regime to the primary
standards maintained by NIST, and, thereby, to the measurements of other
organizations. Such traceability to standards allows the highest level
of fidelity for the organization's internal calibrations.

The technical knowledge that forms the foundation for NIST's calibration
services is upgraded continuously to improve the traceability
process.[^29] These improvements are generally in the forms of research
on test methods and procedures as well as upgraded equipment,
instrumentation, and facilities.

### Technical Support to Industry 

Experts at NIST are available regularly to assist in solving specific
technical problems of industrial organizations. Such problems usually
pertain to performing thermocouple calibrations or using thermocouples
in a temperature measuring system. Direct help is available over the
telephone --- NIST estimates that each of its staff members receives
about 20 to 25 telephone calls per week --- and by visits to the
Thermometry Group's laboratory at Gaithersburg, MD.

NIST's specialized expertise in calibration test methods and procedures
is particularly sought by industry. Organizations with internal
metrology laboratories often seek technical know-how from NIST in
establishing and maintaining sound test methods for thermocouple
calibrations. These organizations benefit from the research invested by
NIST to establish the primary calibration services discussed above. To
achieve high levels of traceability internally, some organizations
perform secondary-level calibrations by replicating test techniques and
similar apparatus used at NIST.

Periodically, NIST gives tutorials on thermocouple calibration at
conferences and seminars. These tutorials provide education and promote
good measurement practices at all levels throughout industry. NIST also
provides advice and assistance on problems in thermocouple measurement
and calibration as a part of a precision thermometry workshop held twice
a year in the NIST laboratories at Gaithersburg, MD. Additionally,
technical papers regarding NIST research in the measurement field are
disseminated at conferences organized by various scientific and
engineering groups.

## Benefit Measures

Based on background interviews with NIST and several thermocouple users
and suppliers, the working hypothesis for the case study was that the
infrastructural outputs attributable to the NIST TCP provide users and
suppliers with three main types of benefits:

\(1\) *Efficiency in developing the infrastructure technology necessary
for calibrating thermocouples.* Industry has relied on NIST as the
single organization for the outputs described in Section 4.1, above.
This reliance has obviated the need for duplicative research by
individual companies and industrial consortia.

\(2\) *Cost and time savings in resolving disputes between users and
suppliers involved in thermocouple commerce.* These efficiencies are
based on industrial agreements for the technical bases of standards
established through NIST. These agreements are due mainly to industry's
recognition of NIST's (1) high quality outputs, and (2) impartial
competitive posture.

\(3\) *Improved competitiveness for domestic thermocouple users in the
forms of better marketability (e.g., compatibility with international
product standards), production efficiencies (e.g., process yields) and
product features (e.g., performance and reliability).* These
competitiveness benefits are based on the high degree of calibration
accuracy attainable via standards traceability from NIST.

## Comparison Scenarios

The approach for evaluating the economic benefits associated with the
NIST TCP has been adopted from evaluations of other public investments
in infratechnology.[^30] NIST's actual costs are compared to an estimate
of net benefits using a hypothetical, counterfactual experiment. The
experiment assumes that the first-level economic benefits associated
with the NIST TCP can be approximated in terms of the additional costs
that industry would incur in the absence of NIST's services. In other
words, these are the costs avoided by industry due to the existence of
the NIST TCP.

The counterfactual experiment is used because this case study lacks a
comparable business baseline prior to the development of NIST's
infratechnology outputs. NIST, through its legal mission, has been the
sole provider of these infratechnology outputs to U.S. industry for many
years. With respect to the reference tables, no substitute or
near-substitute set of outputs exists. Conflicting proprietary tables
were in use from the 1920s through the 1940s, but that situation no
longer exists as industry has relied on NIST for reference tables for
letter-designated thermocouples. Therefore, a recent "pre-NIST" baseline
for reference tables is not available to compare the behaviors of
industry in the "post-NIST" scenario.

For primary calibration services, a similar situation exists because
NIST has operated since at least the 1960s --- based on the
recollections of NIST TCP personnel --- as the provider of such services
for domestic users seeking high quality calibrations. The commercial
calibration services mentioned in Section 3.3.3 are not a comparable
substitute since these commercial organizations rely on the laboratory
capabilities of NIST for primary measurement standards.

Without an actual state-of-practice from an earlier period, a
significant part of the economic analysis framework is based on the
hypothetical scenario of how industry would respond if NIST ceased to
provide its thermocouple infratechnology outputs. Postulating such a
counterfactual scenario was deemed the most feasible approach for
analyzing a significant part of NIST's economic impact for this case
study, although having a realistic baseline to draw from would have been
preferable.

## benefit Data

Two surveys have been conducted for gathering information to determine
the economic benefits associated with NIST-supported infratechnologies
for thermocouple calibration. In both cases, telephone interviews were
deemed preferable to mailed surveys. This decision has been based on
previous case study experience which shows that certain economic
concepts (e.g., transaction cost savings) are conveyed most effectively
in a semi-structured, interactive phone conference.

### Survey of Thermocouple Users

A brief survey was conducted from the perspective of thermocouple users
to obtain anecdotal evidence of the economic impact from the NIST TCP.
Users derive considerable economic benefits from the NIST TCP since
accurate temperature measurements from thermocouples are important in
achieving downstream product quality and process efficiency. Yet, these
benefits have not been quantified across all domestic industrial users
for two reasons. First, the economic effect of NIST's infrastructure
technology is more direct and quantifiable on the wire suppliers and
thermocouple suppliers, and more indirect and difficult to quantify for
the users. Based on the pre-survey results, users can identify the
general engineering and business reasons for employing accurate
thermocouples, but they have difficulty in disentangling the economic
benefits attributable to more accurate and frequent calibrations from
other factors affecting product performance and process efficiency.

Second, extrapolating the benefits from a representative sampling of
user respondents to the large and diverse population of thermocouple
users was not feasible within the budgeted resources of the study. The
difficulty is due to the greater scope and complexity in the conceptual
framework for quantifying net product/process improvements among the
diverse industrial user segments in comparison to the more
straight-forward framework for quantifying efficiencies for conducting
research for the infrastructural outputs and reducing transaction
costs.[^31] Therefore, the linkage between the economic benefits of
users' products/processes and the NIST TCP is more difficult to discern,
much less to quantify. Thus, while the collective economic benefits to
"second tier" industries are likely substantial, the data collection
effort focused on the "first tier" industry, suppliers of wire and
thermocouples.

### Survey of Thermocouple Industry

A survey of the thermocouple industry was determined to be the feasible
focus for gathering data associated with the primary benefits in the
hypothetical experiment. The prospective benefit data, which are
presented in Section 5.2 and used in the calculation of economic impact
measures in Chapter 6, are based on telephone interviews of seven major
domestic wire suppliers and twelve major thermocouple suppliers. Based
on aggregate levels of domestic market share, these samples effectively
represent the entire domestic thermocouple industry.

Consideration was given to conducting a retrospective analysis of net
benefits for the hypothetical experiment. However, from a data
collection standpoint, experience in previous case studies shows that
scientists and engineers are better able to forecast events than to
create hypothetical situations retrospectively.

#  survey results

## Thermocouple users

A telephone survey of 10 thermocouple users has been conducted to attain
qualitative insights on their calibration practices and their perception
of the value received from the NIST TCP.[^32] This survey of
thermocouple users preceded the survey of the thermocouple suppliers
(discussed in Section 5.2) to enhance the quality of the latter survey.
Data obtained in the users' survey has not been incorporated in
calculations of evaluation measures which are presented in Chapter 6.
The remainder of this section provides observations from the results of
this survey.

### Calibrations Performed Internally

Many users rely on assurances of thermocouple accuracy from calibration
tests performed internally rather than from statements of accuracy from
their suppliers. This reliance on internal calibrations is not due to
concerns about the process of standards traceability via the NIST TCP.
Users have confidence in both NIST measurement and standards
capabilities and in the ability of suppliers to calibrate thermocouples
that are traceable to national temperature standards. Instead, three
general factors regarding the stated accuracy of calibration data from
suppliers cause concern. The first factor regards practical aspects of
calibrations for thermocouple wire and assembled thermocouples in user
applications. The emf versus temperature relationship of two given
thermoelements can change by several degrees during the process of
fabricating these wires into a thermocouple with sheathing. This change
in the calibration of the thermocouple often is not stated (warranted)
by the supplier, and the variation from thermocouple to thermocouple can
be significant. Users control this variation in their instrumentation by
establishing offset values that correlate with reference standards
calibrated to NIST's primary standards. Many users feel that this random
variation in calibration tolerances of thermocouples is accounted for
most efficiently through internal calibrations. As a result, many firms
have corporate polices of calibrating the majority, if not all,
thermocouples purchased from suppliers. This is done because the use of
faulty thermocouple products in user applications could result in
incorrect temperature measurements which lead invariably to losses in
productivity that greatly exceed the cost of a calibration test.

The second factor regards users' concerns on the quality of wire
procured from wire suppliers. Wire suppliers typically fabricate each
production lot of wire in one large spool that is divided subsequently
into smaller spools for sale to thermocouple suppliers and users with
captive production capabilities. The supplier calibrates wire lengths
from the ends of each spool. Oftentimes the calibrations of wire within
the spool deviate beyond an allowable tolerance range from the
calibrations performed on the end lengths. Such deviations have made
some users unwilling to rely on the supplier's sample calibrations as
representative of the entire wire spool, which results in users
performing additional calibrations internally. According to one user,
substantial oversight of the operations of a wire supplier would be
required before both putting greater trust in the supplier's claims on
product quality and subsequently lessening its (the user's) in-house
validation testing.

The third factor regards user concerns about supplier quality that are
not measurement related. Several users claim that their suppliers have
made errors in material handling that result in misrepresentation of
thermocouple accuracy: (1) incorrect labeling or color-coding of the
wires (for example, reversing the positive and negative thermoelements),
and (2) making a thermocouple with two identical wires. The occurrence
of such errors has driven some firms to increase its policies for the
validation testing of incoming thermocouple products.

### ISO 9000

The calibration requirements (in terms of tolerance levels or frequency
of calibrations) of thermocouple users generally have stayed the same or
increased slightly over the past five years, and compliance with the ISO
9000 quality control scheme has been the driving force for most
increases in calibration requirements. Certification to ISO 9000
standards is particularly important in commerce with European and Asian
countries. Establishing a process for documenting the accuracy of
temperature measurements to national temperature standards is an
essential element in meeting ISO 9000 certification. The standards
traceability process through the NIST TCP provides thermocouple users
with an efficient means to comply with the requirements of ISO 9000
since the burden-of-proof for documented compliance can be obtained from
the wire or thermocouple supplier.

### ITS-90

Users have realized few net economic benefits from thermocouples
calibrated to the ITS-90 compared with the previous temperature scale,
the IPTS-68. The ITS-90 is more accurate than the IPTS-68, and this
improved accuracy has been incorporated into the latest reference tables
and functions from NIST.[^33] However, users generally have not gained
improvements in product performance or process efficiencies to offset
the costs to incorporate the new calibration standards based on the
improved NIST infrastructure technology. In fact, some users have
processes that are not sensitive enough to changes in the new scale to
warrant the costs of changing their instrumentation to the new
standards.

These findings corroborate the views of several thermocouple suppliers
during the pretest of the survey. One supplier estimates that 99 percent
of all users would be unable to discern the difference in their
applications between ITS-90 and IPTS-68 calibrations, and the greater
accuracy incorporated in the ITS-90 calibrations would probably benefit
less than one percent of users having thermocouples calibrated to the
IPTS-68. Further, many of the thermocouple users undergo the conversion
in their internal metrology infrastructure in order to maintain just one
set of standards even though they are aware that this conversion will
not provide a positive economic effect.[^34]

### Transaction Costs

NIST's role in the standards traceability process reduces transaction
costs with suppliers of thermocouple products since procurement disputes
between thermocouple users and producers seldom occur.[^35] Also, having
NIST make the more technically-difficult, highly-accurate temperature
measurements in the standards traceability scheme allows thermocouple
users to establish and maintain practical (working-level) calibration
standards with equipment and techniques of much lower cost than those
used at the NIST Laboratory.[^36]

### Other

Quantifying the economic effect (increased productivity or product
performance) in applications involving a change in calibration
requirements is very difficult. For example, a producer of aluminum
products in the aerospace industry described a new aluminum alloy that
saved one-third of the weight of the external tank on NASA's Space
Shuttle. Improved temperature measurements in the aluminum melting
process were significant in developing and manufacturing this new
material. However, this was only one of many process and design factors
contributing to the improved material, and quantifying the specific
contribution in weight savings attributable to improved temperature
measurement capabilities was difficult to estimate.

The perceived quality of the NIST Thermocouple Calibration Program has
no effect on the substitution of thermocouples for other temperature
measurement devices since the decision to use thermocouples in lieu of
other devices is based on physical factors regarding the specific
application; calibration factors are not a part of this decision. Also,
thermocouple users receive significant benefits from the technical
support available from the NIST Program.

## thermocouple Industry

Based on self-reported market share information, the sample of seven
wire suppliers represents nearly 100 percent of the estimated \$160
million domestic industry, and the sample of twelve thermocouple
suppliers represents over 90 percent of the estimated \$120 million
domestic market.[^37] Since over 300 domestic thermocouple suppliers
actively market thermocouple products, as noted in Section 3.3.1, the
industrial base of thermocouple suppliers appears to be distributed very
unevenly with a few large companies and many more smaller firms.[^38]

### Wire Suppliers

Opinions of the seven wire suppliers were mixed regarding their
company's reaction to the hypothetical counterfactual scenario of NIST
ceasing to provide primary calibration services. Four of the seven
thought that their company would rely on foreign laboratories for
similar calibration services provided by the NIST TCP. Two believed that
over time an industry consensus on measurement methods would develop
through a private laboratory or industry association; the emerging
entity would then assume NIST's current role in providing primary
calibration services. One company had no opinion.

Respondents believed that interactions with a foreign laboratory would
incur additional, permanent transaction costs under the counterfactual
experiment. Based on previous interactions with foreign laboratories,
these costs would be associated with both the administrative "red tape"
and inaccessibility to scientists in the foreign laboratories. Although
the quality and price of the calibration services from those
laboratories are deemed comparable to NIST, the red tape and the delays
in receiving services would be significant.

Those respondents anticipating that an industry consensus would develop
over time --- the mean time of response was five years --- also
anticipated during this interval that: (1) a greater number of
measurement disputes would arise between their company and their
customers in the "chaotic" business environment that would ensue, and
(2) company resources would have to be devoted to the process of
reaching industry consensus. Consequently, additional personnel would be
needed during this five-year time interval until the domestic industry
reached consensus about acceptable calibration measurements. Examples of
the expected types of additional administrative costs included auditing,
changes in calibration procedures, and overseas travel. The total for
all respondents of the additional costs that would be needed to address
all transaction costs issues, absent the NIST TCP, was \$325.0 thousand
in 1996 dollars.[^39]

In additional to calibration services, the NIST TCP also provides
telephone technical support to industry. Absent NIST's services, wire
suppliers would purchase similar expertise from consultants, and the
total annual cost for all wire suppliers for these substitute benefits
was estimated to be \$146.5 thousand.[^40]

Thus, based on the collective opinion of the seven wire suppliers, which
effectively represent the entire domestic industry, if NIST's TCP ceased
to provide calibration services, this segment of the thermocouple
industry would incur \$471.5 thousand of additional personnel costs
annually to continue operating at the same level of measurement
accuracy.

### Thermocouple Suppliers

Similar hypothetical cost data were collected from twelve thermocouple
suppliers. Regarding an alternative measurement source in the absence of
NIST's calibration services, only two respondents thought that their
company would rely on foreign laboratories for calibrations. The other
10 respondents believed that an industry consensus would eventually
emerge, and similar to the mean reply from the wire suppliers, the mean
length of time for achieving industry consensus was estimated to be five
years. One respondent mentioned that an organization "like ASTM" would
eventually take on the role of the NIST TCP.

The total additional cost during the adjustment interval for all firms
in the survey was estimated to be \$1,543.4 thousand.[^41] Also, the
total additional cost for market alternatives to the technical support
received from NIST is \$172.5 thousand annually.[^42] Thus, based on
interviews with the 12 thermocouple suppliers which effectively
represents the domestic industry on a market share basis, if the NIST
TCP ceased to provide calibration services then this segment of the
industry would incur \$1,715.9 thousand in additional annual costs to
continue operating at the same level of measurement accuracy.

### Summary

Viewing the wire suppliers and thermocouple suppliers together as the
first-level industry beneficiaries of NIST's calibration activities
through its Thermocouple Calibration Program, the economic benefits
associated with these services can be approximated in terms of the
additional costs that the thermocouple industry (users and producers)
would incur in the absence of such services. Based on extensive
telephone interviews with representatives of the dominant suppliers in
the two industry segments, the total annual economic benefits were
estimated to be \$2,187.4 thousand in 1996 dollars. In other words, if
NIST continued to provide its current annual level of industry support,
then the current annual cost savings (i.e., additional transaction costs
avoided) to society is \$2,187.4 thousand.

Based on qualitative responses in the survey, thermocouple consumers are
very unresponsive to price changes since no close substitute products
exist domestically.[^43] The interpretation of these responses in
economic terms is that the market demand for wire and thermocouples is
highly inelastic. In the absence of calibration services provided
through the NIST TCP (the counterfactual experiment for this case
study), the wire and thermocouple suppliers collectively would incur
\$2,187.4 thousand in additional costs annually to pursue alternative
calibration services.

#  economic analysis 

## cost and net benefit data

### NIST Annual Expenditures and Income[^44]

Table 6-1 shows NIST's expenditures associated with the outputs
described in Section 4.1 from government fiscal years (FYs) 1990 through
1996.[^45] The line item for reference tables and functions (FY90 to
FY93) accounts primarily for research on the basic physical properties
that underlie the measurement science to incorporate the change from
IPTS-68 to ITS-90. For this effort, NIST led the development of, and
shared the costs with the standards laboratories of eight other
countries. NIST's costs accounted for about 60 percent of the total
expenditures required to generate the updated reference tables. Also,
costs for technical support are accounted in the line item for
calibration services due to the multi-disciplined nature of work
performed by personnel in the NIST TCP.

Table 6-1 also shows income from fees received for calibration services.
The significant decrease in the line item for calibration income from
FY91 to FY92 was due to the loss of a significant customer that set up
its own calibration laboratory. Also, included in the Table as income
are moneys (\$135,000 in FY92 and \$80,000 in FY94) associated with
NIST's Calibration Services Development Fund (CSDF). The CSDF is derived
from surcharges on calibration services, and has been used for upgrading
NIST's calibration laboratories, initiating new calibration services,
and providing other improvements.

Table 6-1 Expenditures and Income for The NIST TCP FY 1990 -1996
(current \$)

  ------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
                            **FY90**   **FY91**   **FY92**   **FY93**   **FY94**   **FY95**   **FY96**

  **Calibration Services    0          0          135,000    0          80,000     0          0
  Development Fund**                                                                          

  **Calibration Income**    159,608    149,776    88,848     89,648     84,083     81,948     117,674

  **Total Income**          159,608    149,776    223,848    89,648     164,083    81,948     117,674

  **Reference Tables and    58,053     173,439    184,143    41,283     0          0          0
  Functions**                                                                                 

  **Test Methods and        19,317     6,455      21,024     19,306     7,587      7,853      8,067
  Upgrades**                                                                                  

  **Calibration Services**  143,019    145,992    278,015    205,992    198,524    203,988    166,646

  **Total Costs**           220,388    325,886    483,182    266,581    206,111    211,841    174,713
  ------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------

### Data for Economic Impact Analyses

Table 6-2 shows the data used for the economic impact analyses. Total
expenditure data from NIST for fiscal years 1990 through 1996 have been
reproduced from Table 6-1. NIST's costs are associated with the
development of the ITS-90 reference tables and functions, maintenance
and upgrade of test methods and test equipment, and calibration
services. Since this case study uses a prospective basis for the
economic evaluation, the costs to maintain the current level of
calibration services in the future are forecast from 1996 costs using a
six percent rate of increase to account for the expected increase in
labor costs at NIST.[^46]

Table 6-2 NIST TCP Costs and Net Industry Benefits (current \$000)

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

  1990                    \$220.4                 \-\--

  1991                    325.9                   \-\--

  1992                    483.2                   \-\--

  1993                    266.6                   \-\--

  1994                    206.1                   \-\--

  1995                    211.8                   \-\--

  1996                    174.7                   \-\--

  1997                    185.2                   \$2,296.8

  1998                    196.3                   2,411.6

  1999                    208.1                   2,532.2

  2000                    220.6                   2,658.8

  2001                    233.8                   2,791.8
  ----------------------- ----------------------- -----------------------

Government fiscal year 1990 has been selected as the appropriate first
year of NIST's investments for this analysis. As explained in Section
2.3, 1990 is the year of the most recent update of the international
agreements on the scale of temperature (the ITS-90) for use in science
and industry, and the current technical state of thermocouple
calibration measurement is based on the development of reference tables
beginning in that year. NIST began its share of investments in new
research in FY90 for upgrading thermocouple reference tables to ensure
that U.S. firms could trace their thermocouple products accurately to
the ITS-90. While pre-1990 NIST expenditures have certainly enriched the
broadly-defined state of current technical knowledge for thermocouple
calibrations, the most relevant aspect of this knowledge is linked to
conducting and applying post-1990 research.[^47] Hence, 1990 was
selected as a logical starting point for the comparison of NIST's costs
to net industry benefits.

Also shown in Table 6-1 are annual estimates of net industry benefits
for 1997 through 2001. These data are based on the 1996 estimate of net
industry benefits totaling \$2,187.4 thousand (see Section 5.2.3). This
1996 benefit estimate was extrapolated for five years into the future
using a five percent annual increase to reflect the projected costs of
fully-burdened labor.[^48] The five-year forecast was selected for two
reasons. First, five years represents the average amount of time that
respondents projected for the thermocouple industry to reach a consensus
on an alternative to NIST's calibration services in the hypothetical
experiment. Second, although some respondents believed that the
additional transaction costs would exist forever if companies relied on
foreign laboratories and although market-based consulting substitutes
for NIST's technical assistance would similarly be continuous,
truncating such net benefits to five years provides a conservative
adjustment for the social return on the investments made through the
NIST TCP.

## measures of economic impact

The return that industry receives from investments made through the NIST
Thermocouple Calibration Program has been calculated using three
widely-accepted measures of economic impact. These evaluation measures
are the internal rate of return, the adjusted internal rate of return
and the benefit-to-cost ratio.

### 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/image5.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/image6.pct){width="218.0in" height="33.0in"}

and,

![](media/image7.pct){width="147.0in" height="33.0in"}

Based on the stream of cost and net benefit data for fiscal years 1990
through 2001 in Table 6-1, the calculated value of *r*^\*^ that equates
NPV to zero is 0.318 (rounded).[^49] In other words, 0.318 is the value
of the discount rate that equates the present value of benefits to the
present value of costs. This implies an internal rate of return of 31.8
percent for NIST\'s investments in thermocouple calibration activities.

### Adjusted Internal Rate of Return

Under an alternative set of assumptions, an adjusted internal rate of
return (AIRR) is calculated from the data in Table 6-1.[^50] For
example, if all of NIST's costs are referenced to 1990 using a nominal
discount rate of 8.78 percent as recommended by the Office of Management
and Budget, the 1990 present value of NIST's costs is \$2,015.3
thousand.[^51] When all industry benefits are referenced to the year
2001 using the same 8.78 percent discount rate, the 2001 present value
of industry benefits is \$15,000.7 thousand. Using the AIRR, the NIST
TCP is viewed as a single calibration project where an initial net
investment of \$2,015.3 thousand generated, after 11 years, a consumer
surplus equaling \$15,000.7 thousand. Thus, the annual compounded rate
of return corresponding to such an initial investment in 1990 that
culminates in 2001 is based on the value of *i^\*^* that satisfies the
following relationship:

\$2,015.3K (1 + *i^\*^*)^11^ = \$15,000.7K

In this case, the calculated value of *i^\*^* equals 0.200 which means
that the AIRR for the NIST TCP is 20.0 percent.

### Benefit-to-Cost Ratio

A benefit-to-cost ratio (BCR) relates the present value of NIST TCP
costs to resulting industry benefits. Costs and net benefits are
deflated to 1990 using an 8.78 percent rate as in the AIRR calculation.
The BCR is 2.95 using 1990 present values of costs (\$2,015.3K) and
benefits (\$5,943.9K).

## Measure of economic importance

One way of approximating the economic importance of thermocouples in the
U.S. economy is to use the U.S. Department of Commerce (DoC) Standard
Industrial Classification (SIC) system and Input/Output statistics.
Based on SIC descriptions, three 4-digit industries (3823, 3824, 3829)
include thermocouple producers. The composite sales in 1987 for these
SIC codes were \$3.6 billion in components and \$4.0 billion in capital
equipment.[^52] These components and equipment, in turn, were inputs for
the manufacture of \$2.462 trillion of manufacturing output.

A quantification of the economic importance of thermocouples on domestic
industry is made by using the 1996 estimated total domestic market value
(\$280 million) for wire and thermocouple assemblies and the 1987
Input/Output data. If the input/output relationship between the
aggregate industries in SICs 3823, 3824, and 3829 and total
manufacturing output hold for the more narrowly defined industries that
they compose, then thermocouple products could affect as much as \$81.0
billion in manufacturing output.[^53]

## economic return for upgrading reference Tables to its-90

The survey provided evidence that the vast majority of thermocouple
users --- including users with high accuracy requirements --- have
attained few net benefits in using thermocouples calibrated to the
ITS-90 compared to thermocouples calibrated to the IPTS-68.[^54] Since
the upgrade of thermocouple reference tables and functions to facilitate
the conversion from IPTS-68 to ITS-90 is one of the outputs being
evaluated in this case study, a follow-up analysis was performed to
determine if insights could be gained for future strategic planning at
NIST.

Two sets of investments have been made in the conversion of standards
for thermocouple calibration that are consistent with the improvements
in the technical state-of-the-art of the international temperature scale
from IPTS-68 to ITS-90. The first set of investments has been made
collectively by agreements among NIST and the standards laboratories of
eight other countries, and these investments led to the upgrade of the
reference tables and functions for thermocouples calibrated to
ITS-90.[^55] The second set is the costs incurred by all organizations
(users and suppliers involved with thermocouple measurements) that
converted internal measurement infrastructures to the ITS-90. Using the
anecdotal results from the survey of thermocouple users in this case
study, the intrinsic payback on both sets of investments has been poor.

The investment decision by NIST to upgrade the reference tables was
driven completely by international agreements on the change in the
temperature scale. While the economic returns to industry on this
investment to date have not been significant, the original decision must
be assessed relative to the economic consequences of not having made the
investment. In other words, for the purpose of this case study, the
evaluation of economic impact is posed in terms of the likely scenario
and qualitative outcome on domestic industry if NIST hypothetically had
not invested and participated in upgrading the thermocouple reference
tables to ITS-90.

The remainder of this section describes four primary reasons offered by
NIST TCP personnel to justify the original investment decision. These
views have been corroborated by representatives in the thermocouple
industry in follow-up interviews.

### International conformity to the temperature scale

The primary motivation for NIST's original investment decision made
cooperatively with the standards organizations of the eight other
countries was to keep all the world's thermocouple users and producers
on the same temperature scale. This decision contributes to consistency
in the national standards for temperature among the U.S. and other
industrialized countries that seek leading-edge measurement technology
to augment advanced technology products.

Under the hypothetical scenario of NIST not participating in the joint
investment, U.S. companies would likely have risked being unable to sell
their products into certain international markets. U.S. firms would
still be using thermocouples calibrated to the ITS-68 while the other
industrialized countries would require products conforming to national
standards based on the ITS-90. The likely consequence is that U.S.
firms' products incorporating temperature measurements with IPTS-68
thermocouples would not be welcomed as imports into foreign markets
having temperature specifications linked to the ITS-90.[^56] For
example, most foreign companies now specify ISO 9000 product standards
which require ITS-90 compliance. Therefore, maintaining national
standards consistent with those of other countries that use high
technology products provides significant competitive advantages
internationally.

### Other Temperature Measuring Devices

The ITS-90 affects all devices for measuring temperature. Many
organizations that use thermocouples also use other types of temperature
measuring devices for internal applications. Given the over-arching
acceptance of the ITS-90, the temperature measurement community has
agreed that investments in upgraded calibration knowledge were necessary
for all temperature measurement devices. If such investments were not
made for every device, then users of would be faced with making in-house
temperature measurements with more than one temperature scale.
Certainly, the use of more than one temperature measurement system
simultaneously would not be rational economically or practically for
user organizations. Therefore, the decision to make the investment in
upgrading the thermocouple reference tables was made for consistency
with similar upgrades of calibration know-how for other temperature
measuring devices.

### Long-Term Benefit Horizon

A long-term "benefit horizon" is always assumed in investment decisions
by NIST. Part of NIST's charter is to predict infrastructure technology
for the future, not just for meeting current needs of users.
Accordingly, NIST regularly undertakes investments for increasing the
technical state-of-the-art with the understanding *a priori* that many
users will not (or be unable to) take advantage of the improved
measurement technology until they need or obtain better control over
their internal product and process capabilities. Determining when these
needs arise is difficult to predict, so the ready availability of the
NIST-developed infrastructural know-how overcomes this problem.

Another reason for early insertion of advanced infrastructure technology
is that typically a significant amount of time and resources is needed
for both conducting the requisite R&D and implementing block changes in
the standards agreement process. In the case of developing the improved
reference tables calibrated to ITS-90, a three-year effort on the part
of NIST was required to develop the R&D followed by one year for
incorporation into the ASTM standards.

### R&D Leadership Role

NIST's lead role in developing the improved infrastructure technology
provides domestic thermocouple users and suppliers with certain benefits
not shared by their counterparts in other countries. Since most of the
technical work was performed and promulgated through NIST, which has a
stellar reputation for quality and independence, the domestic
thermocouple community has assurances of a sound technical foundation
for the infrastructure technology outputs. Alternatively, this community
might have less acceptance of similar outputs derived from foreign
laboratories having technical capabilities that are not as firmly
established. Sponsorship of similar infrastructure technology from
foreign laboratories that are comparable technically with NIST could
have negative effects on the competitiveness of the domestic
thermocouple industry.[^57]

#  Conclusions

## Economic importance of thermocouples

The analysis in Section 6.3 shows that thermocouples comprise a
relatively small percentage of cost in higher product structures but
their economic importance has a large rippling effect in the overall
manufacturing economy. In other words, thermocouples provide an
efficient means for performing the temperature measurement function that
is essential in many industrial applications, and thermocouples are
relatively inexpensive compared with other component items in
higher-level assemblies of products and processes that incorporate
thermocouple calibration know-how. Since temperature is the most
widely-used indicator in industrial processes, the implication is that
thermocouples are significantly important in the domestic manufacturing
economy.[^58]

The relatively low cost of thermocouples is attributable, in part, to
the effectiveness of the NIST Thermocouple Calibration Program. This
case study has proven that both industrial users and suppliers of
thermocouples believe that the NIST TCP provides the most efficient
means for incorporating the complex technology embedded in practical
measurements of temperature made with thermocouples. Therefore, society
realizes significant benefits from investments made by NIST which result
in the relatively low costs for both thermocouple products and
measurements made with thermocouples.

## economic impact of the NIST TCP

Economists and policy makers generally use internal rate of return
measures to estimate the social rate of return (SRR) for on-going or
completed research projects in the public sector. In this case study, if
the 31.8 percent IRR calculated in Section 6.2.1 is above NIST\'s hurdle
rate (minimum acceptable rate of return) then the investments in NIST
thermocouple calibration 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.[^59]

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

Several factors have been incorporated in this study to characterize the
31.8 percent IRR as a conservative estimate of NIST's economic impact on
industry. These factors are:

\(1\) Industry benefits pertinent to thermocouple suppliers are
underestimated since the reported benefit data from the 12 sample
suppliers (having about 90 percent cumulative market share based on
self-reported data) was not extrapolated to the many other firms (having
10 percent cumulative market share) in the industrial base.

Indeed, according to recent internal records of the NIST TCP, at least
32 additional thermocouple suppliers have paid for calibration services
from NIST. Benefits related to these smaller suppliers have not been
accounted since the estimate of total benefits is based on market share
-- not total number of companies. Potentially, these smaller suppliers
collectively would incur significant costs under the hypothetical
experiment used in this analysis.

\(2\) Only the first two major types of benefits (research efficiencies
and transaction cost savings) have been included in this IRR calculation
because these economic impacts were more direct and easier to quantify.
Disregarding the third type of benefit (users' product and process
improvements) also underestimates industry benefits.

\(3\) The 1997 starting point also adds to a conservative benefit
estimate since industry attains benefits from NIST's investments in
prior years (1990-1996) of the economic framework for this study. The
1997 starting date was selected because of the study's prospective
methodology as explained in Section 4.4.2.

\(4\) The "bottom line" annual costs of the NIST TCP are much less than
the reported expenditures since the policy of NIST is to charge user
fees to recover the marginal costs of calibration services.
Additionally, surcharges have been applied through the CSDF to help pay
for the underlying research and equipment for improved thermocouple
calibration know-how.

Offsetting NIST's costs with these income items would result in an
attribution of all the social benefits to only a portion of the total
costs in this case study. Therefore, conservatism is built into the
calculations of the economic measures since NIST's costs have not been
offset by its income. From a more liberal economic viewpoint, the
estimated return on NIST's investments would be higher if expenditure
data were offset with income.

Therefore, the 31.8 percent IRR is a lower bound estimate of the
industry benefits attributable to NIST's investments in thermocouple
calibration.

## Potential improvement in the traceability process

The findings in Section 5.1.1 show that many thermocouple users having
requirements of high accuracy rely on calibration tests performed
internally rather than from statements of accuracy obtained from their
suppliers. Many users claim that internal calibration testing is both
necessary due to the random nature of thermocouple calibrations and an
efficient means of maintaining process control with applications having
stringent accuracy requirements. However, there is ample evidence that,
to some extent, the efficiency in the standards traceability scheme
headed by NIST is being degraded since users cannot rely totally on
their suppliers to provide the correct representations of calibrations
for thermocouple products. This is a sign of market failure in
thermocouple commerce due to redundant calibration testing being
performed by certain users on purchased lots of wire or finished
thermocouples that are calibrated previously to standards by the
supplier.[^60]

The root cause of this non-optimal situation appears to derive from
issues about assurances of product quality from suppliers of wire and
thermocouples, and these issues are not linked directly with
measurement-related know-how from the NIST TCP. However, NIST could use
its neutral role to help industry overcome this problem. Possibly,
assistance from the NIST Manufacturing Engineering Laboratory would
identify ways for industry to improve product uniformity so that the
implementation of the traceability process can approach greater levels
of efficiency. An analysis should be performed to determine the economic
payoff to users for investments in manufacturing technology that would
enhance the quality of thermocouple products.

## lessons-learned from implementing ITS-90

The situation described in Section 6.4 regarding the conversion to the
most current international temperature scale, the ITS-90, provides some
interesting insights on the timing of investments in leading-edge
infrastructure technology. All of the reasons provided by NIST for the
investment in upgraded reference tables have economic validity with
respect to their intended objectives, but a net economic gain has not
resulted from the overall investment because the key benefits (improved
product performance and process efficiency) affecting thermocouple users
have not been realized. However, NIST made the correct decision to
invest in the innovative measurement technology (the updated reference
tables) in response to an international agreement to change the
temperature scale. U.S. industry would likely have suffered negative
economic consequences if NIST had not made this investment. The failure
to realize net positive economic benefits resulted from a mismatch in
the timing of when this infrastructure technology can effectively meet
the practical needs of industry (thermocouple users).

In retrospect, the proper course of action might have been to delay the
international agreements on updating the International Temperature Scale
until industrial users' products and processes would be projected to
absorb more-readily this innovation in infrastructure technology. In
turn, the investments in updating calibration technology --- such as the
thermocouple reference tables --- could have been postponed. From an
economic perspective, such investments would be more effective if better
intelligence were available on the timing of the economic payoff
including dependency on foreign trade. Such an analysis would have
included estimates on the number of users expecting to benefit from the
improved ITS-90 based calibrations and the timing of when such users'
requirements would emerge. In other words, investments in
state-of-the-art technology infrastructure must coincide as closely as
possible with the evolution of industrial demand and, hence, corporate
strategy.

[^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) (forthcoming); and
    Albert N. Link and Gregory Tassey, *Strategies for Technology-based
    Competition,* (Lexington Books), pp. 16-21, 1987.

[^2]: Congress passed The Organic Act of 1901 identifying the National
    Bureau of Standards (NBS) as the responsible organization for
    providing measurement standards to industry. Subsequent legislation
    under the Omnibus Trade and Competitiveness Act of 1988 transferred
    this responsibility from NBS to the renamed NIST.

[^3]: This chapter is based primarily on the following: G.W. Burns and
    M.G. Scroger, *The Calibration of Thermocouples and Thermocouple
    Materials*, NIST Special Publication 250-35, April 1989; H. Dean
    Baker, et al., *Temperature Measurement in Engineering*, (Omega
    Engineering: 1975); G. W. Burns, et al., *Temperature-Electromotive
    Force Reference Functions and Tables for the Letter-Designated
    Thermocouple Types Based on the ITS-90*, NIST Monograph 175, April
    1993; *The Temperature Handbook*, (Omega Engineering: 1995); and,
    D.D. Pollack, *The Theory and Properties of Thermocouple Elements*,
    ASTM STP 492, 1971.

[^4]: The scale of the conceptual measurement system represented in the
    figure varies widely depending on the application. In reality, the
    overall distance from *T~1\ ~* to *T~r~* may range from 2 feet to
    2,000 feet.

[^5]: If, however, the wires *A* and *B* are not homogeneous, then the
    thermoelectric emf may not be correct. Herein lies the principal
    limitation in the use of thermocouples for accurate temperature
    measurement. In practice, obtaining perfectly homogeneous wires has
    been impossible. Moreover, the degree of starting homogeneity is
    degraded to some extent after the wire materials are first heated.

[^6]: Based on a range of catalog prices for thermocouple wire as quoted
    in *The Temperature Measurement Handbook*, Vol. 29, Omega
    Engineering, Inc.

[^7]: The International Temperature Scale of 1990 (ITS-90) was adopted
    during the 1989 meeting of the International Committee of Weights
    and Measures in accordance with the request embodied in Resolution 7
    of the 18th General Conference of Weights and Measures of 1987. This
    scale supersedes the amended edition (1975) of the International
    Practical Temperature Scale of 1968 (IPTS-68) and the 1976
    Provisional 0.5 K to 30 K Temperature Scale.

    Temperature values on the ITS-90 (expressed as *t~90~*)are defined
    in terms of thermodynamic equilibrium states of pure substances (the
    defining fixed points), thermometers for interpolating between the
    fixed points, and equations that relate the measured property to
    *t~90~*.

[^8]: Stability refers to the ability of a thermocouple to achieve
    repeatable temperature versus emf characteristics with successive
    temperature measurements. An unstable thermocouple can go out of
    calibration or "drift", which is a serious fault because of the
    resulting incorrect reading of temperature.

[^9]: Certain suppliers of noble-metal wire claim to provide even
    tighter tolerances, ranging from +/- 0.1 to +/- 0.33 percent.

[^10]: Material composition of the wires is the driver for stability.
    Increases in temperature creates greater molecular movement in
    alloyed metals than with pure materials. As a result, noble-metal
    wire is more stable due to the greater purity in material
    composition in comparison to the metal alloys used in base-metal
    wire.

[^11]: A temperature measure in the form of a digital output is useful
    in computer-based engineering applications. An electronic
    temperature sensor generates an electrical output in direct response
    to a change in temperature, and this electrical output is adaptable
    to a microprocessor. By contrast, a traditional dial thermometer
    produces a non-electrical output, which requires a gauge reading by
    an operator to obtain the measurement.

    The industrial demand for electronic temperature sensors is
    significant and expanding as the monitoring function of various
    control systems becomes more computerized to improve productivity
    and quality as well as to reduce operator error. Intechno Consulting
    AG reported that the world temperature sensing market had sales of
    \$2.5 billion in 1991 and was forecast to increase at a 6.4 percent
    average annual rate to reach \$4.7 billion in 2001.

[^12]: NIST uses the term "uncertainty" as the quantitative measure of
    inaccuracy.

[^13]: "Temperature Control is the Key in IBM's Sintering Process,"
    *Intech*, May 1997.

[^14]: For example, contamination in the wires of a thermocouple due to
    human perspiration and fingerprints is a major source of measurement
    error in many applications requiring high temperature accuracy. For
    this reason, many thermocouples are manufactured in clean room
    environments.

[^15]: Estimating the annual number of calibrations performed by
    thermocouple users and producers is impractical due to variations in
    quality requirements across industries and firms.

[^16]: Based on a range of catalog prices for thermocouples quoted in
    *The Temperature Measurement Handbook*, Vol. 29, Omega Engineering,
    Inc.

[^17]: Thomas Register of American Suppliers,
    http://www.thomasregister.com, September 28, 1996. Many industry
    representatives consider the Thomas Register to be the most complete
    and reliable listing of thermocouple suppliers. However, most of the
    firms listed in the Thomas Register are small, specialized producers
    or repackager s of other firms' products.

[^18]: Such disparities in data among different market research firms
    are common.

[^19]: For example, see "Dartmouth Researchers Invent Improved
    Temperature Sensor Array," *Sensor Business Digest,* March 1994.

[^20]: Ibid.

[^21]: "Tayco's Temperature Sensors Solve Challenging Applications,"
    *Sensor Business Digest,* July 1993.

[^22]: National Institute of Standards and Technology, "Thermometry
    Group Mission," http://www.cstl.nist.gov, October 31, 1996.

[^23]: ASTM is the American Society for Testing and Materials, and ISA
    is the Instrument Society of America.

[^24]: ANSI is the American National Standards Institute.

[^25]: The IEC is the International Electrotechnical Commission.

[^26]: According to several industry representatives, this discrepancy
    between the ISA and the ASTM standards has often caused confusion
    and disputes in domestic thermocouple commerce.

[^27]: In the context of measurement science, the system of providing a
    thoroughly documented, "unbroken chain" of references to a
    measurement authority is known as traceability. Many motivations
    exist for this system in industrial commerce, ranging from the need
    for compliance with stated contractual requirements to the desire
    for using the best possible practices in measurement. Traceability
    also provides an efficient means for ensuring accurate measurements
    in industrial environments.

[^28]: G. W. Burns, et al., NIST Monograph 175, April 1993.

[^29]: Detailed technical descriptions about NIST's thermocouple
    calibration services are published in *NIST Special Publication 250*
    and its supplements. These documents augment the "NIST Report of
    Calibration" and encompass the following topical areas:
    specifications for the service, design philosophy and theory,
    description of the NIST measurement system, NIST operational
    procedures, assessment of measurement uncertainty, and NIST internal
    quality control procedures.

[^30]: See Albert 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.

[^31]: An alternative approach of quantifying the economic impact on one
    or a few individual industries (or industry segments) that use
    thermocouples was considered, but this approach proved to be too
    difficult because of problems in identifying the population of users
    within a given industry and the scarcity of appropriate market data.

[^32]: The respondents in the survey of 10 thermocouple users include
    representatives from the utility, military/aerospace, food and
    beverage, aluminum, and commercial electronics industries.
    Thermocouple users in these industries having applications with high
    accuracy requirements (+/- 1-2 ^0^C) were determined to be best
    informed about the impact of thermocouple calibration practices on
    downstream products and/or processes. Such sophisticated users have
    the most at stake by relying on NIST for standards traceability to
    obtain accurate temperature measurements. Upon request, a listing of
    industry representatives of this type was provided by NIST TCP
    personnel based on their previous professional contacts.

    The functional disciplines of the respondents include operational
    users of thermocouples in production and development environments as
    well as test engineers in central corporate laboratories who provide
    working-level calibration standards of thermocouples to operational
    users employing thermocouples in a wide range of product and process
    technologies across their organizations. Most of the respondents had
    general knowledge in all business and technical aspects of
    thermocouples used in their organizations. All of the respondents
    use thermocouples in manufacturing processes, both in R&D and
    production environments; additionally, one respondent described an
    application in which the thermocouple is used as a component in a
    product that the company sells to a downstream customer. Two of the
    firms purchase all of their assembled/sheathed thermocouples from
    thermocouple producers, two other firms fabricate all of their own
    thermocouples from bare wire, and the other six have a mixture of
    both purchasing finished thermocouples and fabricating thermocouples
    in-house.

[^33]: The greater accuracy in the ITS-90 in comparison to the IPTS-68
    is due primarily to the greater number (17 versus 12, respectively)
    of fixed points used to define the temperature scale. The fixed
    points refer to thermodynamic equilibria of naturally-occurring
    phenomena that occur reproducibly at the same temperature.

[^34]: Interestingly, many firms in the steel industry currently employ
    a number of large melting processes that use thermocouples
    calibrated to a standard temperature scale that is obsolete across
    other industries. The change in the international temperature scale
    from the ITS-48 (the International Temperature Scale established in
    1948) to IPTS-68 was significant, but the steel industry determined
    during the changeover period that altering their processes to
    conform to the IPTS-68 was not economically rational. For similar
    reasons, the steel industry did not adopt the subsequent change in
    the temperature scale, the ITS-90. As such, vendors still supply
    thermocouples calibrated with older temperature standards to certain
    firms in the steel industry. Further inquiry shows that no other
    industry appears to demand this obsolete specification.

[^35]: In the one reported case, NIST was instrumental in settling a
    dispute between a thermocouple user and its downstream customer over
    relevant specifications of thermocouple calibration. In this case,
    the customer requested thermocouples of extreme accuracy in
    applications involving high temperature ranges (generally, greater
    than 1000 ^0^C). NIST personnel were enlisted to help in resolving
    the issue, and, subsequently, NIST convinced the customer that the
    accuracy being sought was not attainable within the technical
    state-of-the-art. The customer eventually dropped its original
    requirement for the more stringent specifications.

[^36]: The traceability scheme is especially cost-effective in the
    stringent military/aerospace environment which requires a
    proportional method for achieving acceptable levels of accuracy for
    thermocouples in end-use. In this method which is a part of the
    Mil-Standard regimen, a 4:1 ratio for accuracy is required in each
    link from an end-use specification to the primary temperature
    standard at NIST. For example, if the end-use is a field application
    requiring a +/- 16 degree accuracy, then the system supplier has to
    warrant a thermocouple with +/- four degrees accuracy, which, in
    turn, is traceable to calibration measurements at NIST which are
    accurate to +/- one degree. Since the cost to calibrate to +/- one
    degree is much greater than at +/- four degrees, the traceability
    process provides a more cost-effective solution for each system
    supplier and their customers.

[^37]: Wire suppliers and thermocouple suppliers were defined for this
    study as the first-level users of NIST's calibration services, and
    hence were defined as the relevant survey population for collecting
    primary benefit data. The respondents, seven major domestic wire
    suppliers (three base-metal wire and four noble-metal wire) and
    twelve of the major thermocouple suppliers, were identified and
    contacted by NIST TCP personnel to ensure their participation in the
    data collection phase of this study.

    In the course of each interview, information was requested on the
    size of the wire and thermocouple markets, the importance of NIST's
    calibrations services, and how the industry would adjust to the
    hypothetical counterfactual situation in which NIST ceased to
    provide calibration services through its Thermocouple Calibration
    Program. An interview guide was prepared to ensure that all of these
    points were covered during the course of the conversations.

[^38]: In the course of the interviews with thermocouple suppliers,
    several respondents noted that a large number of so-called suppliers
    in the industry are actually either small, specialized producers or
    simply repackagers of other firms' thermocouples.

[^39]: Each wire supplier was asked to approximate, in current dollars,
    the additional person years of effort required to cope with the
    additional transaction costs that would be expected in the absence
    of the NIST TCP. Each respondent was also asked to value a
    fully-burdened person-year of labor within their company. Two
    respondents did not offer an estimate of the value of such expected
    transaction costs, but both did acknowledge that such costs would
    exist. The mean value reported by the other respondents, by wire
    type, was imputed to these two.

[^40]: Each respondent was queried about the frequency with which they
    took advantage of this service, and on average it was used five
    times per year (the range of responses was zero times per year to
    once a month). Each respondent was also asked about the cost to
    acquire and utilize this form of NIST information, and in general
    the response was that the cost was minimal. The economic evaluation
    literature refers to such costs as "pull costs."

[^41]: Again, no quantitative response was offered by two of the
    respondents, so the mean dollar value provided by the other
    respondents was imputed for these two.

[^42]: Such interactions occur on an average of four times per year,
    with a range in responses from zero to once a month.

[^43]: In each of the nineteen interviews, company representative were
    asked their opinion about how responsive their consumers would be to
    an industry-wide increase in price. No supplier mentioned that their
    customers would substitute to foreign made wire or thermocouples.

[^44]: Information in this section was obtained from personnel in the
    NIST Thermocouple Calibration Program.

[^45]: NIST's expenditures include (1) direct, fully-burdened labor of
    laboratory personnel, and (2) costs of capital equipment,
    facilities, and maintenance that are expensed in the year incurred.
    Operating funds from other government agencies are negligible, and
    inter-governmental customers do not receive discounts on calibration
    services fees which otherwise would decrease NIST's costs.

[^46]: This six-percent growth factor has been widely used in other
    economic impact analyses at NIST, and has been verified as a
    reasonable estimate by the NIST Program Office.

[^47]: The investment in any technical innovation starts with a
    preexisting stock of knowledge, and the attainment of that knowledge
    is a sunk cost.

[^48]: This factor was obtained during industry interviews.

[^49]: 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.

[^50]: The adjusted internal 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 AIRR, 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.

[^51]: See: "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
    Gross Domestic Product. Based on data from the Federal Reserve Board
    over the last four available quarters, the implicit price deflator
    is 1.78 percent which is used to convert the real discount rate of
    seven percent to a nominal rate of 8.78 percent.

[^52]: Based on a phone conference with a representative of the DoC
    Bureau of Economic Analysis. The Input/Output data is based on 1987,
    the most recent year that such statistics are available.

[^53]: Using ratios of total direct requirements: \$7.6 billion in
    components and capital equipment is to \$2,462 billion in
    manufacturing output, as \$250 million in thermocouple products is
    to *x* dollars in manufacturing output. Solving for *x* equals
    \$81.0 billion. It is recognized that this analysis is somewhat
    faulty due to the use inconsistent data because the \$250 million
    figure is based on 1996 dollars while the other data is based on
    1987 dollars, which is the most currently available data from the
    USDOC.

[^54]: Theoretically, the greater accuracy embedded in the improved
    temperature scale (ITS-90) would allow thermocouple users with high
    accuracy requirements to obtain enhanced product performance and
    process efficiencies since the ITS-90 is more accurate
    thermodynamically than the IPTS-68.

[^55]: NIST took the lead role for technical work involved in the
    conversion process, and the other countries contributed calibration
    test results.

[^56]: The consequences are much greater for the population of
    thermocouple users in comparison to the smaller population of
    domestic wire suppliers and the thermocouple suppliers since the
    product sales outside of the U.S. for the latter set of producers
    are not significant.

[^57]: One user respondent suggested that, in lieu of the NIST TCP, many
    domestic users would buy thermocouple products from firms in the
    country of the lead standards organization instead of from U.S.
    firms because of the technical intricacies involved between a
    standards organization and the first-tier thermocouple producers.
    Obviously, this procurement posture would not bode well for the
    supply side of the domestic thermocouple industry.

[^58]: The thermocouple is the most widely-used among other electronic
    devices (RTDs, thermistors, etc.) for sensing temperature.
    Temperature, in turn, is the most widely-used among other indicators
    (force/displacement and optical radiation) for physical sensing.
    Physical sensing, in turn, is the most prevalent among the other
    classes of sensors (chemical, biosensor, and microsensor). See
    Richard C. Dorf, ed., *The Engineering Handbook*, (IEEE Press),
    1996, pp. 1484-1489.

[^59]: J. Poterba and La. Summers, "A CEO Survey of U.S. Companies' Time
    Horizons and Hurdle Rates," *Sloan Management Review*, Fall 1995.

[^60]: In the economic literature, the term "market failure" refers to a
    malfunction in private-sector activity that results in a suboptimal
    allocation of resources.